Gladwell on Employer-provided health care

Malcolm Gladwell on employer-provided health care:

The closest I can come is to imagine if we had employer-based subways in New York. You could ride the subway if you had a job. But if you lost your job, you would either have to walk or pay a prohibitively expensive subway surcharge. Of course, if you lost your job you would need the subway more than ever, because you couldn’t afford taxis and you would need to travel around looking for work. Right? In any case, what logical connection is there between employment and transporation?

It is good to see Americans questioning the cost and inefficiency of employer-provided health-care. While the analogy is amusing, it does not completely hang together, as the cost structure of the subway (huge fixed costs, small variable costs, and a natural monopoly) is very different from the health industry (high variable costs, and some scope for competition).

It is worth remarking that the absurd US system of employer-provided healthcare is a good example of the law of unintended consequences: it came about because of government imposed restrictions on wages during the Second World War, so employers provided health care insurance instead.

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