A conference on Cape Cod this weekend concluded that the US' dependence on employer-sponsored health care is "fundamentally flawed, as it restrains productivity and leaves too many people without health coverage." I could not disagree more.

Before we enter the debate, a few take-aways from the conference. Panelists noted the benefits of employer-sponsorship which include a drive for innovation and purchasing power together with the enormous costs of "de-coupling the employment link" (63% of non-elderly Americans are insured through their employers) make it quite difficult to shift away from the employer-sponsor system.

Sponsored by the Federal Reserve Bank, notables including Alain Enthoven of Stanford, Henry Farber of Princeton, and Henry Aaron of the Brookings Institute all view the link between employment and health insurance as a significant problem, with Enthoven noting "The employment basis of health insurance is hopelessly flawed." Among these flaws are:

1. "companies are not in the business of managing health." They are motivated to produce their particular good or service, and the "responsibility" of providing health coverage is a burden.
2. "Job-based insurance leads to distortions in the labor markets…The availability of health care influences whether people stay in the labor force or stay in particular jobs," Brigitte Madrian, an economist specializing in financial gerontology at the Wharton School of the University of Pennsylvania, said at the conference in Chatham, Massachusetts."
3. "a lack of access to health care for the self-employed "hurts the entrepreneurial spirit."
4. not mentioned but also critical is the decision by many employers and employees to forgo health insurance. This drives employees to seek coverage under Medicaid, increasing the tax burden.

After decrying the problems inherent in our system (of which there are indeed a plethora), the participants appeared to conclude that there is little that can be done to change the financing system due to the infrastructure, tradition, and frictional costs of changing to another system, along with the public's low appetite for government-run programs.

While the panelists may all be erudite, highly intelligent and incredibly well-respected scholars and leaders in this field, they have missed the point entirely.

Health care is the only economic good that has measurable inputs but no attempt to measure the output. Therefore, it is impossible to engage in any meaningful economic debate about health care, for without a consensus on the result, the discussion of how to obtain a result is meaningless.

I continue to be amazed that the national debate on health care misses this fundamental point. And because they do, these experts have come to a fatally flawed conclusion, for effective health care should be measured by its impact on productivity. Functionality is the measurement by which health care should be judged.

And functionality drives productivity, which is of paramount importance to American industry and government. Therefore, the linkage between employment and health insurance is indeed a vital part of our economic success. Unfortunately, few employers have understood this linkage, and fewer still have molded their health insurance programs around this basic precept.

What does this mean for you?

Until and unless these experts, and our nation for that matter, start focusing on the output of health care, the debate is pointless. Always ask your insurer, HMO, or consultant what impact your investment in health care has on productivity. They will look at you blankly, but keep asking.