Free Hostile Takeover: Resisting Centralized Government's Stranglehold on America by Matt Kibbe Page A

usually referred to as “third-party payment.” Too much of our health care is paid for by third parties. Too much control has been taken away from us , the patients, and is being wielded by others.
    No one spends other people’s money as wisely as he spends his own. That insight is as true in health care as it is everywhere else. And in health care, the negative effects of letting other people spend our money have encouraged more centralization of the system, away from patients. It’s as tragic as it was foreseeable, and preventable.
    Happily, it’s also reversible.
    The most common form of health benefits coverage today is a fairly comprehensive insurance plan covering most hospital costs and doctor bills, as well as any medically necessary prescription drugs and medical devices. For most folks, the benefits also tend to be rich in terms of cost-sharing. The deductibles and co-pays—the portion of the bill we pay before our insurance kicks in—tend to be relatively low. That means our premium payment—the amount we make each month to keep our coverage in effect—must be relatively high. This is the basic trade-off with health insurance: we can have higher premiums with lower cost-sharing, or lower premiums with higher cost-sharing.
    The lower-deductible kind of coverage so widespread today is great for those who want “more” benefits and don’t mind paying extra for them, up front. The higher-deductible kind is more economical; it makes more sense for people of lesser means. More important, the higher your deductible, the more of a role you’ll tend to take in your own care—because, in keeping with human nature, we tend to spend more carefully when, by doing so, we can save money for something else we’d rather have more.
    The downside of the more generous, lower-deductible sort of coverage prevalent today is that it tends to encourage medical inflation. People consume more than they otherwise might—demand rises unchecked—because, once their insurance kicks in, any additional costs feel “free” to them. An extra test? Another office visit? Name brand instead of generic? Don’t worry, your insurance will cover it! Americans have become disconnected from the cost of their own health care. And it’s why in health care, unlike most other areas of the economy, prices always go up; they never remain flat or go down. We’re spending what feels to us like “other people’s money.”
    How did things get like this? The answer lies in the tax code, specifically in section 106. That provision excludes health benefits from the income and payroll taxes—which is very generous treatment—but only if those benefits come from your employer. As a result of this government policy, more than half of Americans get their health coverage through the workplace. Which is odd, if you think about it, since no other country on earth does it that way.
    The downside is that Americans without access to job-based coverage don’t get the tax break. They pay full freight. The 15 percent of the population that goes without coverage, either voluntarily or involuntarily, is, in a sense, the price we pay for having this peculiar system. To be sure, some of the uninsured have sufficient resources to protect themselves, out-of-pocket. But for most, coverage is simply too expensive, relative to its value for them personally.
    Section 106 is one of the great examples of how a seemingly small, “altruistic” change in the law can have massive negative repercussions over time.
    Historically, this policy was a bureaucratic response to the unseen economic consequences of wage and price controls imposed by FDR during World War II. Bureaucrats at the War Labor Board were charged with enforcing a complicated system of wage and price controls, and faced pressure from employers and labor unions eager to get around those controls. The board decided to embrace the idea that fringe benefits up to 5 percent of wages shouldn’t be deemed