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The New healthcare inequity

A.C.A. Application Forms
A.C.A. Application Forms
Justin Sullivan/Getty Images

An article crossed my screen which brought to mind something from my law school days. It was observing that under the new "Affordable Care Act" (A.C.A.) there were going to be inequities in health care that previously were mitigated under the old system: the best health care would be for the wealthy. Top executives will be able to get coverage that pays for treatment by top doctors in top medical facilities; the rest of us will have to make due with "ordinary" medical care, or pay huge out of pocket bills. How it does that is outlined in the aforementioned article; I mention it because it suddenly struck me, as one of those "ah-hah" moments that I thought I ought to have realized before now, as obvious.

Prior to the A.C.A. the majority of Americans who had health coverage had it through work. Indeed, it began that way--Baylor Hospital recognized that people who were sick enough to be hospitalized were too sick to work and were racking up bills they would not be able to pay when they were released, and came up with what might be called "prepaid hospitalization". They approached the teachers union and offered a deal, by which if every member paid the program ten cents a week, any member who got sick was guaranteed three weeks hospitalization at no charge. The teachers grabbed at it, and soon every union in the city wanted the same arrangement. It was eventually called "Blue Cross", as the idea spread to cities and states across the country, and it was the beginning of medical coverage, what we perhaps inadvisedly call "health insurance". Unions got companies to cover the cost, and so we had employer provided health coverage.

One of the points most people overlook in this is the tax benefits. If your employer provides you with health care coverage, none of it is treated as income to you--neither the payments the employer makes on your behalf nor the payments made by the carrier to the health care provider. So if your company is paying twelve thousand dollars a year for your insurance, individually, you do not pay tax on that money; and if the insurer pays thirty thousand dollars for your medical care, you do not pay tax on that money, either. Meanwhile, the employer is permitted to write off the cost of your insurance as part of employee compensation, and so reduces its own profits for tax purposes.

The caveat is that all of that is true only if the employer provides the same coverage for all full-time employees. That rule is there to prevent golden benefits packages for top executives--if the company in wooing a potential chief financial officer offers a premium health insurance package not given to the rank and file employees, that financial officer has to report the cost of that insurance as income. Thus if the top executives of a company want premium medical care provided by the corporation, they have to make that coverage available to all employees on the same terms. Otherwise the medical policy is nothing more than the corporation paying its executives in services that have reportable monetary value, and the recipients have to pay tax on money they technically never received.

The A.C.A. has, for practical purposes, eliminated this great equalizer. Top level health care coverage is now taxed for being top level, and the program will pressure companies to drop such coverage in favor of pushing employees into the healthcare marketplace. The result will be that wealthier, better paid people will be able to afford better coverage plans, and lower-tiered workers, for whom the old system made healthcare one of the few places where they stood on equal footing, will face poorer care and higher out-of-pocket medical costs.

Does the A.C.A. decrease the numbers of people who are not covered? Early results suggest that it does--but also that for many, the coverage they now have is not as good as that which they had before. Where the inequity once was that there were many dependent on charity care (which exists in most places), it now appears to be a disparity in which the wealthy have better access to better care than the rest of us.