Setting the health care scapegoat free

The use of a scapegoat is an honored tradition that goes back thousands of years. An actual goat was made to assume the sins of an entire people before being cast out into the desert to perish—thus saving the tribe from misfortune.

But what happens when the troubles aren’t moral but economic? And instead of sending the goat out into the wilderness, the people keep the goat around to sign paychecks?

State legislators have come to the realization that the spiraling cost of health care is a serious problem. But rather than confront the problem directly through the heavy lifting of policy-making, they are choosing to foist the burden onto employers.

Mandates requiring that businesses provide some amount of health care coverage to their employees (or pay a fine) have popped up in statehouses from California to Maine. But frequently left out of the discussion are the inefficiencies and astronomical costs that such policies entail.

Employer mandates rest on the false assumption that employers are somehow insulated from the rules of everyday economic activity; more precisely, they assume that businesses won’t react to increased costs. But employers will have to make offsets someplace.

It’s no wonder, then, that recent research shows that health care mandates will cause employers to raise prices, reduce employees’ hours or cut jobs altogether. A study by Harvard economists Ellen Meara and Meredith Rosenthal found that a national employer-provided health care mandate would increase the number of insured employees by 8.2 million but at the cost of almost a million (995,000) lost jobs. In addition, the mandate would shift 1.6 million employees from full-time to part-time employment and decrease total wages by $71 billion.

Worse still, the most vulnerable members of the work force are the ones most likely to feel the brunt of employer cost-cutting. A June 2005 paper from economists Katherine Baicker and Helen Levy suggests that those who lose their jobs from health care mandates are poorer, less educated and more likely to be a minority.

Furthermore, requiring employers to provide, and employees to accept, a strictly defined set of benefits limits employee choices. Many single or young workers may prefer a higher salary to a full-service health care plan. But mandates prohibit that sort of personalization.

It’s a similar story for employers. Mandates restrict their ability to tailor compensation packages to encourage employee performance. Health care costs can prevent them from offering additional bonuses or vacation time.

Also, mandates tighten the knot between health insurance and employment, further restricting the development of an individual market in health insurance. If, instead of the employer-based system we have now, each American owned a personal, private insurance account, workers wouldn’t face coverage disruptions if they changed jobs.

Finally, mandates distort the health insurance market by declaring the minimum that a company spends on coverage. Employers no longer have an incentive to “shop around” for a better value, or to offer new and innovative health plans, like health savings accounts.

Wrestling with such a widespread quandary as health care is properly a political task—at least as long as government is involved in health policy. But instead of taking the necessary steps to reduce the costs of health care overall, legislators are just looking to pass the buck. And in the end, everyone will pay the price. In that way, scapegoating employers is no less superstitious or ineffectual than scapegoating, well, goats.