Warren Buffett and Charlie Munger: Employer Health Care Not Taxes Is the Problem.

Posted on | June 14, 2017 | Comments Off on Warren Buffett and Charlie Munger: Employer Health Care Not Taxes Is the Problem.

Buffett and Munger

Mike Magee

This week the Wall Street Journal editorial page couldn’t help itself. They let loose with a snarky piece titled “California Single-Payer Dreaming” and front-ended their conclusion with the words, “This proves the truism that the liberal solution to every government failure is always more government.” For good measure, they added, “This bill reflects the left’s Platonic ideal, with the promise of free care for everyone for everything.”

The editorial cites a California Senate committee price tag of $400 billion, with a Federal contribution of $200 billion as an offset. But an independent University of Massachusetts/Amherst study released this week pegged the cost at $331 billion and potential Federal offsets of $225 billion. As important the study predicted that moving to single payer simplicity would cut the state’s health care costs by a whopping 18%, and decrease middle class patients cost 9%, and low-income resident costs 5%.

Just about a month ago, the Oracle of Omaha, Democrat Warren Buffett, and his life long sidekick, Republican Charlie Munger, provided a full-throated financial defense of single-payer. Andrew Ross Sorkin who got the scoop summed it up this way when comparing the value of tax reform legislation compared to health care reform: “As Mr. Buffett pointed out, these chief executives are missing the bigger issue — the one that should be their Holy Grail. As a percentage of our gross domestic product, the cost of maintaining our American health care system — hospitals, H.M.O.s, doctor visits, prescription drugs, medical devices, insurance companies, Medicare, Medicaid — is rising at an alarming rate. And Corporate America pays a big (and growing) chunk of the bill.”

Buffett put numbers to his argument. He said, “If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of G.D.P. I mean, they bounced around some. And now, they’re about 2 percent of G.D.P…health care was 5 percent of G.D.P., and now it’s about 17 percent…When American business talks about strangling our competitiveness, or that sort of thing, they’re talking about something that as a percentage of G.D.P. has gone down, while medical costs, which are borne to a great extent by business” are on a steep rise. “Medical costs are the tapeworm of American economic competitiveness.”

His friend Charlie agrees, pointing out that a corporate tax break won’t change operations in any of the Berkshire Hathaway companies. “We’re not going to change anything at the railroad just for some little tax jiggle.” As for health care politics, Charlie says, “On this issue, both parties hate each other so much that neither one can think rationally, and I don’t think that helps, either.”

Easily lost in the debate are the numerous flaws in employer based health care that were laid out in a Health Affairs article over a decade ago. They include:

1. High administrative costs with 850 health insurance companies selling to millions of employers.

2. These high cost are passed on to employees in rising contributions and lost wages. This burden weighs more heavily on low income employees.

3. Many employees of small firms and the unemployed/underemployed are left out of coverage.

4. Employment based insurance is a major contributor to bankruptcies and poor labor relations. Plus, this system discourages worker mobility and advancement.

5. Many CEO’s know nothing about health care and delegate decisions to consultants and favored local agents who are ripping them off.

Way back in 2006, Stanford’s Alain Enthoven and Victor Fuchs wrote, “In the long term, we think that the likely and most desirable outcome is replacement of job-based insurance with some form of universal health insurance that encompasses choice, competition, and technology assessment to revitalize social insurance while making care more cost-effective.”

Back then then noted the lack of political will to address the status-quo, but also said, “But some external traumatic event…could trigger a political upheaval that would increase support for universal health insurance and force a compromise among alternative proposals.”

Trump may be that event.