State Workers' Strike Addressed Wrong Problem
In the just-settled strike, the state of Minnesota and its employee unions fought each other instead of joining forces for a simple change in federal law to revolutionize health care costs.
by Jerome F. Winzig
In the strike that was just settled yesterday, the state of Minnesota and two state employee unions fought each other over the cost of health care. Overlooked in the strike were two key issues. First, the health care benefits provided by the state re already considerably more generous than those available to most employees in the corporate and non-profit sectors. Second, the state and its workers should have worked together for a simple but significant change in federal law -- providing the same tax break for individually-purchased health insurance that is provided for employer-provided health insurance.
A recognition of where the state's benefits stand in comparison to those in other sectors would have provided a more realistic assessment of the issues involved. A joint effort on changing federal law would have had the potential of providing a more permanent solution to the health care dilemma.
Instead, we have an embittered state work force and a state government trying fruitlessly to solve the health care problem by spending more money.
Let's begin by examining the first issue -- how the state's health insurance compares with those of other employers. Next year, for those who choose the lowest-cost providers, the state's plan calls for a $5 co-pay for each office visit (waived for preventative care) and a zero co-pay for hospital stays. The annual deductible is $100 for individuals and $200 for families. The total non-drug out of pocket maximum for the year is $500 for individuals and $1600 for families. The prescription drug co-pay is $12 to $25, with a maximum of $300 for individuals and $600 for families.
By comparison, next year this writer's family's coverage, for those who choose the lowest-cost "in-network" providers, calls for a $20 co-pay for each office visit (including those for preventative care). Hospital visits require a 10 percent payment after the deductible. The annual deductible is $390 for individuals and $780 for families. The total non-drug out of pocket maximum for the year is $1,950 for individuals and $3,900 for families. The prescription drug co-pay is $5-12, plus -- in some cases -- the difference between the local purchase price and the discount price. There is no maximum cap on out-of-pocket expense for drugs for the year.
Clearly, there are huge differences in health insurance expectations between the public sector and the private and non-profit sectors, yet the public sector inexplicably feels slighted.
The second issue, however, is even more significant. Under today's tax laws, only employer-provided health insurance is tax-deductible. If employees don't like their employer's health plan, they cannot go elsewhere and buy one they like.
Congress could change this by creating a universal health care tax credit available to all Americans, regardless of where or how they buy their health insurance. This would empower individual Americans to choose the health insurance plan best for them. Employees could once again chose health care providers based on location or personal preference. They could chose health care plans suited to their families' circumstances. They could chose less-expensive health care plans and pocket the difference.
Seventy-six years ago, Friedrich Hayek, winner of the 1974 Nobel Prize in economics, wrote an article explaining why socialism and central control couldn't work. He pointed out that almost all important information is decentralized. That is, it exists in the minds of millions of participants in an economy. In a free market, each person can use the particular information he or she possesses. Hayek called this the "knowledge of the particular circumstances of time and place."
If this basic principle were applied to health care, the competition and choice it would engender would revolutionize health care in America. It's too bad the state of Minnesota and its workers didn't pursue this option.