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Health care and productivity

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

3 thoughts on “Health care and productivity”

  1. I concur on one point and dissent on another.
    It makes sense to try to measure the effect of an employer’s economic investment in health care on productivity and/or the success of achieving company goals, but how many employers today even look at the effect of wages, job security and employee morale on productivity? The effect of technology on productivity is so strong that it has masked a decline in productivity that has occurred simultaneously through the actions of employers that treat employees like inanimate objects, lines on a spreadsheet, disposable at will. It’s no wonder, at a time when the cost of health insurance is increasing ever more rapidly, especially for the employee, that the net effects of an employer’s “investment” here are not discussed or even measured.
    As for the tangible outcomes of the national investment in health care, looking at the international data measuring things like life expectancy and infant mortality, we are falling behind the rest of the world in real terms as well as in benefit per dollar spent.
    Clearly something needs to be done. I think a combination of private and public activities, with coverage for all Americans is necessary.

  2. Joe, the problem you are trying to address is a problem that needs tools and measurement techniques that are 20 years in the future. The problem the experts are trying to address (the reason for uninsurance and high costs) have had solutions around for 40 years — employment-based health care the way it works in the US is a major impediment to solving them. However, in Japan and Germany they have a form of hihgly regulated employment based health care that solves the uninsurance and cost problem….

  3. I have no wish to pick a fight with Matthew Holt, but this must have been made in an unguarded moment:
    “in Japan and Germany they have a form of hihgly regulated employment based health care that solves the uninsurance and cost problem….”
    Uninsurance problem? Yes, solved.
    Cost problem? Solved? No freakin way. During the 1990’s Both Germany and Japan have seen their health care costs grow faster than in the U.S.
    Until I see persuasive arguments that health care costs can be contained, I have absolutely no faith in “solutions” that rest on some kind of insurance mechanism.
    That’s my story, and I’m stickin to it.

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Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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