The Joys of Employer-Based Health Insurance

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Brad DeLong and Paul Krugman have some fun with Princeton expending resources and putting everyone through hassle to try to make sure that nobody’s smuggling a fake spouse onto their health insurance. This kind of thing is pure waste from a social point of view, but the privatization of health expenditures in the United States guarantees that we’ll see plenty of it.

This is part of why it’s too bad that the reform proposals in Congress don’t move more aggressively to bust-up America’s employer-based health insurance system. They’re timid on this score because they’re trying to meet the president’s pledge that nobody will have to give up the insurance they currently have. And he’s made that pledge because surveys indicate that the insured majority is generally happy with the insurance it has. So that’s life. But it is worth saying that insured Americans’ love affair with the insurance they have is a bit perverse. Having every large employer in the United States maintain a substantial side-business in managing a health insurance plan is a senseless waste of society’s resources.

If instead people had higher salaries, higher taxes, and government provided insurance you could give everyone equally comprehensive insurance and put some extra money in their pockets. Or if instead people had higher salaries, the same taxes, and bought insurance on their own in regulated “exchanges” you’d probably wind up with everyone having slightly worse insurance and a lot of extra money in their pockets.