Benefits cost jobs

August 23, 2004

HEALTH INSURANCE premiums have risen four times faster than salaries at the same time that a growing economy has been struggling to replace the number and quality of jobs lost during the 2001 recession -- and we're still lagging about a million jobs behind.

Democratic presidential nominee John Kerry believes there's a connection, and that seems self-evident.

This nation's employer-based health insurance system has been increasingly challenged over the past decade to maintain benefits for current workers. It's no wonder companies would be reluctant to restore benefit burdens they have shed, or that they might try to get by with part-time or temporary help instead.

But what's to be done about it? That should be a central issue in Mr. Kerry's competition with President Bush, because it surely will be one of the most difficult dilemmas the next president -- or the next two or three -- will have to face.

The answer is twofold: Slow the growth of health care costs, and ease the ongoing transition from employer-paid benefits to a mix of individual policies and government subsidies. But there are lots of options for how far to go and how to get there.

Premium increases are driven by the high cost and use of pharmaceuticals, expensive new diagnostic and testing equipment, and insurance companies making up for the lean years of the 1990s when they kept prices down to ward off sweeping federal regulatory legislation.

Of the two candidates, Mr. Kerry has so far offered the most ambitious plan for redesigning the health care system.

He would allow the federal government to negotiate drug discounts for Medicare and provide health insurance tax credits to small businesses, retirees too young for Medicare and low- to middle-income workers, who would also be able to buy into a health plan like the one offered to members of Congress. To hold down premium costs to employers, Mr. Kerry proposes that the federal government pay 75 percent of the cost of catastrophic injuries and ailments.

His program would largely be financed by raising income taxes on Americans making more than $200,000 a year.

President Bush touts the new Medicare prescription drug bill passed last year, which aims to curb costs by injecting more private-sector competition into the program for the elderly. He also won approval for health savings accounts: tax-exempt funds individuals can use for medical expenses. He would expand that program by allowing holders of health savings accounts to deduct premiums for major medical coverage.

His future plans for reducing costs rely heavily on limiting awards in medical malpractice cases.

Both candidates tacitly acknowledge, though, that the days of employers providing lifetime medical benefits are in their twilight. So it makes sense to design a system that gives workers more control over their own health insurance.

But they can't be expected to fend for themselves on managing costs or sharing the risk. The government has a big role; this election should help define it.

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