Saturday, September 13, 2003

Business competitiveness

California seems to be moving towards mandatory health insurance for all employers with more than 20 employees.  Accompanied by the usual hand-wringing about some California company will see labour costs increase, hurting them competitively.

Continuing my anti-media rant, here are two aspects to this story I expected to see mention of in the article, but didn't.

First is that California (and probably plenty of other places too) is undergoing a shift from manufacturing to service jobs. Service jobs by and large deliver services locally. So while some pizza chain whines about having to sell 150,000 more pizzas to cover the insurance cost, so will his competitors. Somehow I don't think they'll all be able to increase the number of pizzas they sell, but worry not, they can all raise the price of their pizzas by a buck or so and not have to worry overmuch that UPS will start bringing in out-of-state pizzas.

Actually, maybe if they all start covering health insurance, they can sell more pizzas total. 80 odd years ago Henry Ford realised that paying his workers more would allow them to spend more, drive more money into the economy, and increase the number of cars he could sell. If pizza workers are spending less on health care, chances are they'll spend more on services (including pizzas either first or second hand). Perhaps the pizza chain in question won't sell 150,000 more pizzas, but they will likley see some increase.

But anyway, there is no competitive challenge to increased labor costs in a largely service based economy.

The second missing point is that research indicates that universal health care covers everyone for less total money than the current US helathcare system. This sounds insane, but the administration costs of the current US system factor as a relatively large fraction of the total bill. I mean costs associated with the multiplicity of insurance companies, variations betwen plans, doctors harassing insurance to get paid, etc ...

The $1,059 per capita spent on health care administration was more than three times the $307 per capita in paperwork costs under Canada’s national health insurance system ... [accounting for] at least 31 percent of total U.S. health spending in 1999 compared to 16.7 percent in Canada.

"Hundreds of billions are squandered each year on health care bureaucracy, more than enough to cover all of the uninsured, pay for full drug coverage for seniors, and upgrade coverage for the tens of millions who are under-insured"
I don't know ... it seems to me that the drive to required health coverage is a good thing. The current proposal falls short, though. To achieve the savings of the Canadian model, they'd have to extend health coverage to *everyone*, employed or not, along with rationalisations of plans and administration. Central administration saves effort for the administrator, and the doctor/hospital/pharmacy. The current California initiative increases coverage, but not enough to achieve the savings of universality.

All this having been said, in IT the services are in fact delivered remotely. My industry will be affected, even if the bulk of services is not. But I don't care, universal coverage still makes sense, and more sense than the current bills.  Of course, I'm an alien.

[Comments from my previous blog]

1. a reader left...
Wednesday, 25 February 2004 11:11 am
are you talking about having health coverage like other countries do? That everyone has coverage, employed or not for free. I like that idea. I just spoke with my Pennsylvania insurance company, and you wanna know how expensive health coverage is. That's y im on here now, looking for something cheaper

joe []

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