© 2008 Delmar Cengage Learning. Chapter 13 Employers and Health Care: A Sick Business Cathy Jo Martin.

© 2008 Delmar Cengage Learning.

Chapter 13

Employers and Health Care:

A Sick Business

Cathy Jo Martin

© 2008 Delmar Cengage Learning.

2

The Central Paradox of Private Welfare Provision

• Private firms seek to maximize efficiency, while welfare schemes seek to ameliorate the conditions of the least fortunate– And, therefore, least “efficient”

• Employer-sponsored welfare benefits thus effectively subsidize the “inefficient”

© 2008 Delmar Cengage Learning.

3

“Welfare Capitalism”: Cause and Effect of the Failure of National

Health Insurance

© 2008 Delmar Cengage Learning.

4

“Welfare Capitalism” and NHI

• Private health benefits serve to plug holes left by incomplete system of public benefits

© 2008 Delmar Cengage Learning.

5

“Welfare Capitalism” and NHI

• At the same time:– Rise of private system prompted the

development of a vast array of vested interests– Have served to stymie attempts to expand

coverage nationally

© 2008 Delmar Cengage Learning.

6

“Patchwork” nature of benefit schemes has imposed inflationary

pressures on health care system as a whole

© 2008 Delmar Cengage Learning.

7

A Patchwork Knit with Inflation

• Business initially placed faith in managed care as panacea to rising health care costs

• As market matured, big employers lost leverage over plans to negotiate discounts– Costs continued to rise

© 2008 Delmar Cengage Learning.

8

A Patchwork Knit with Inflation

• Many firms stopped offering coverage

• The hospital visits of the uninsured, in turn, feeds back into the system in the form of inflation

© 2008 Delmar Cengage Learning.

9

Local business-state coalitions have formed to bring about lower health

care costs, with limited success

© 2008 Delmar Cengage Learning.

10

Coming Together: Coalitions for Cost Control

• In some cases– Business banded together in attempt to

squeeze productivity gains through quality controls, leverage lower prices

© 2008 Delmar Cengage Learning.

11

Coming Together: Coalitions for Cost Control

• In others:– State government organizations leaned on

local businesses to unite in the name of lower health care costs

© 2008 Delmar Cengage Learning.

12

Coming Together: Coalitions for Cost Control

• As in the case of managed care:– Most such schemes led to cost shifting, and

not cost reduction, causing continued increases in overall health care costs

© 2008 Delmar Cengage Learning.

13

With equally limited success, big business has lobbied for national

health care reform

© 2008 Delmar Cengage Learning.

14

Employers and National Reform

• Many representatives of big business initially supported Clinton reform plan

• Incremental nature of plan led firms to calculate just how much they stood to gain or lose relative to other companies– Support soon evaporated

© 2008 Delmar Cengage Learning.

15

Employers and National Reform

• National Chamber of Commerce blasted by conservative Republicans for initial position on reform

© 2008 Delmar Cengage Learning.

16

Employers and National Reform

• Post-Clinton reforms:– Businesses have continued to be divided when

it comes to reform– Have formed a series of national coalitions in

attempts to address the issue

© 2008 Delmar Cengage Learning.

17

Chapter 13 Summary

• Paradox lies at the heart of private employer-based welfare provision

• Development of “welfare capitalism”– Kept (public) national health insurance from

emerging– While also serving as an effect of the lack of a

public safety net

© 2008 Delmar Cengage Learning.

18

Chapter 13 Summary

• Employers have tried many cost-containment schemes– Changing the health care landscape in the

process

© 2008 Delmar Cengage Learning.

19

Chapter 13 Summary

• Local coalitions have enjoyed some success in reforming health care in the community– Though such groups have failed at the national

level

• Business community has attempted to push reform through national legislation– With little success