Who Pays? Who Benefits? Unfairness in American Health Care

34 Pages Posted: 26 May 2011 Last revised: 25 Dec 2014

See all articles by Clark C. Havighurst

Clark C. Havighurst

Duke University School of Law

Barak D. Richman

Duke University School of Law; CERC, Stanford Univ. School of Medicine; George Washington University - Law School

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Date Written: June 13, 2011

Abstract

In several ways, traditional health care financing has long been unfair to middle- and lower-income insureds. A major problem is monopoly pricing of many services and goods. Although the point is seldom recognized, American-style health insurance greatly aggravates the redistributive effects of monopoly by weakening the usual constraints on sellers’ pricing freedom. Moreover, lucrative monopoly is often tolerated as an expedient instrument of public finance through which seemingly desirable spending on health care or health-related innovation is financed by the equivalent of an unfair head tax on individuals with private coverage.

Other underappreciated unfairnesses are specific to employer-sponsored health coverage and to the distorted incentives and perceptions spawned by the tax subsidy encouraging it. Because employer-sponsored coverage effectively hides premium costs from the employee-voters who ultimately bear them, middle- and lower-income employees regularly bear the unjustifiably high and uncontrolled costs of health coverage designed principally to accommodate the values and economic interests of the health care industry and other elites. These same consumers also appear to get less, as a group, out of their employers’ health plans than their higher-income coworkers, despite bearing equivalent premium costs.

The Patients Protection and Affordable Care Act (PPACA) does little to alter the framework of employer-sponsored coverage and thus represents a missed opportunity to rectify its unfairness to the working class. Although the law’s main purpose is to ensure that nearly all individuals either have employer coverage or procure “essential health benefits” through an Exchange, it defines the latter new entitlement in such a way as to perpetuate, not correct, the distortions engendered by the tax subsidy. In addition, the new law not only has no answer for the provider monopoly problem but is likely to increase wealth transfers from consumers to providers.

Suggested Citation

Havighurst, Clark C. and Richman, Barak D., Who Pays? Who Benefits? Unfairness in American Health Care (June 13, 2011). Notre Dame Journal of Law, Ethics and Public Policy, Vol. 25, p. 101, 2011, Available at SSRN: https://ssrn.com/abstract=1849873

Clark C. Havighurst

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7061 (Phone)
919-613-7231 (Fax)

Barak D. Richman (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7244 (Phone)
919-613-7231 (Fax)

CERC, Stanford Univ. School of Medicine ( email )

United States

George Washington University - Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States

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