Rapidly rising costs have put health insurance in the crosshairs and are making the current private insurance system unsustainable. Critically, firms that offer health insurance subsidize those that don't. The uninsured workers and their families still get health care, often at high-cost emergency rooms. Because firms who don't provide insurance don't pay those expenses, health-care providers, the government, and insurance companies get stuck with the bill.
What happens to those higher insurance costs? The insurers don't eat them. Instead, they are passed to companies who provide insurance, who then ask their workers to cough up higher premiums and co-pays. Because insured firms and their employees pay their bills and some of the uninsureds' bills, there is enormous incentive to reduce health-insurance expenses as much as possible.
A company that cuts coverage, shifts costs to workers, or eliminates insurance completely can gain a cost advantage over competitors that provide full insurance. Because foreign firms may not provide health coverage directly, the pressure on international businesses is even greater to get out of the health-insurance business.
What is the endgame of this rising cost/declining coverage trend? Ultimately, a shrinking pool of employers left paying for an increasing number of uninsured will make health insurance a luxury that few employers can provide. Bare-bones insurance may be offered, but even that may be too expensive: If providing health insurance makes a firm uncompetitive, then the insurance has to go or jobs will be off-shored. That is the path we are on.
As the dinosaur that is employer-based health insurance disappears, what will replace it? Without any action, the government! Already, the percentage of individuals with private coverage is shrinking, while those with government coverage are surging, rising 50 percent over the last decade alone. As baby boomers start receiving Medicare, that trend will accelerate.
The inevitability of government-run health insurance is what the debate over Obamacare should be all about. While it is hard to believe that this is the best possible plan, alternatives such as cherry-picking popular elements will not work - someone must pay for those programs. Restructuring the health-insurance system must be comprehensive if it is to deal with the inevitable decline in private health-insurance coverage.
So, does this debate have anything to do with the Philadelphia area? You bet. What we are known for is "meds and eds" - the sprawling medical and education sectors. Nothing more aptly describes the Philadelphia economy than calling it a mecca of medical schools, hospitals, pharmaceutical companies, and universities. More than 20 percent of the region's jobs and nearly a third of the city of Philadelphia's employment is in this sector. Workers in these businesses are paid the highest wages. Nurturing and growing this part of the business community is critical if our economy is to expand rapidly.
The ultimate decision about how to structure health-care insurance will greatly determine the region's economic future. Whether you love, hate, or are totally confused about Obamacare, one thing is certain: With its universal health insurance and concentration on medical education and primary care, it is probably the best thing that has happened to the region's economy since Billy Penn decided this was a good place to live.
If it is replaced, let's hope the new proposal holds as much promise as the current law.
Joel L. Naroff is a nationally known economist and president and chief economist of Naroff Economic Advisors Inc. in Holland, Bucks County. Contact him at email@example.com.