Like most designs, there is usually a set of rational decisions made in an attempt to resolve a problem. For example, the introduction of Eucalyptus trees to California was a solution to the needs of the railroads for cheap, sturdy railroad ties. The lack of insight into the systems (Eucalyptus strength is due to developmental challenge from local pathogens) and the lack of foresight for alternative actions by others (resale of Eucalyptus as decorative trees in built-up areas) produces a recipe for disaster (Eucalyptus' propensity for burning + Santa Ana winds = wildfire risk).
So, where does this tie into wages and insurance?
Healthcare reform and employment.
Healthcare reform—in general—is needed. The cost of simply living for many people is high and the price in time and opportunity to maintain their health intrudes to such a degree as to challenge their survival. While the biologist in me starts seeing the wisps of natural selection, the humanist understands the value of other human's survival and wonders if there is something better. Obamacare—as the recent healthcare reform program is referred to in some circles—contains within it several elements that appear to me to be a recipe for unintended consequences. Let me explain.
The problem in the system is—like the rest of our economy—based more around the flow and rate of resources rather than the simple existence of them. The problem is the availability of healthcare resources to those that need them in conjunction with the fact not everyone will have the same basic needs. Because health and resources are not very well connected, the system installs a flow of resources from those who currently have health enough to earn the resources to those who need the resources.
This is the idea behind medical insurance. A pool of resources from those healthy enough to work and contribute—usually based on the belief these people will need resources later—is created and used for the members of the pool who need them. Businesses may also contribute based on regulatory requirements and/or as a means to protect their access to healthy workers. The pool—therefore—is closely aligned with those able to contribute. In addition to using the pool for medical care, requirement for administration exists. Those resources also come from the resource pool.
If you increase the number of people covered, you have to do one or a combination of two things: Increase the contributed resources or reduce the cost of healthcare.
Assuming the people being added don't have insurance for one of two reasons—not enough or no resources and elevated healthcare needs—the added people do not come with added resources so, on a proportional basis—increased resources would have to come from either outside support, added business contributions, or an increased levy on the contributing members of the group.
The alternative strategy—reducing costs—depends on either lowering healthcare costs and/or reducing administrative costs. Reducing healthcare costs would be ideal. The most ideal situation is increasing the health of those covered but this is the least feasible option given the independence of the American people and the variation in the population. Otherwise, what remains is reducing the resources flowing from the pool to doctors and other medical providers or reducing the costs of treatment and administration.
What Obamacare did was essentially throw more people into the pool without adding the resources. The expectation is the added cost will be soaked up primarily through a decrease in administrative costs and added contributions by businesses and those willing to pay more.
This is where half the problem is.
For businesses, the plan is set up based on the number of employees. The more employees—of any level of experience—the higher their costs are toward healthcare. New hires or employees with less utility—say, a narrower skill set—will cost as much in medical outlay as a "purple squirrel" (someone with the exact, diverse skill set). This creates a situation where it pays to hold out on hiring anyone and to be very, very selective on whom they do hire.
This creates a bottleneck towards decreasing unemployment. Most people looking for a new job will not be a "purple squirrel" and—if retraining from a different line of work—be likely to only have a basic set of skills. The business's and those currently employed maximize their benefits this way. The perverse incentive creates a downward push on employment (and resources for the pool) at the same time it creates a greater demand for the same resource pool.
The most basic solution is to create smaller businesses, yet most people do not have the right skill set or ability to compete in order to do so. Smaller businesses would be able to take advantage of various loopholes—such as lower insurance requirements and definitions of who is actually an employee—to avoid the added cost of medical reform.
The other half of the problem is within the medical field.
The United States has had problems providing primary care physicians for decades. The reason is a general economic one. The cost to become a physician is high, the amount paid to general practitioners is low, and the best payoff for the time and money investment for medical school is to become a specialist. The potential solutions—nurse practitioners (NP's) and physician's assistants (PA's)—are comparatively cheaper but are limited by the requirements of their practice. NP's and PA's often become the primary competitors for general practice doctors.
The way the current insurance system works is to pay physicians who participate in provider networks less than they would for anyone out of network, often to the tune of 60% less, in exchange for the network sending them their patients. This essentially does three things: increase the number of patients per doctor, decreases their income per patient, and increases the incentive to add procedures. Many doctors adjust to this paradigm by shopping what insurance network they participate in—avoiding the lowest paying networks—and maximizing the number of patients they see.
The efforts by Obamacare to decrease the cost of healthcare by decreasing the amounts of money for some types of office visits and to shift to a more visit instead of procedure-based pay system is likely to have a perverse effect here as well. By reducing the income of an already financially challenged subset of doctors, the risk of two things increases: lowered quality of care as doctors try to maintain a basic level of income and the perception—in medical students—that medicine, at the very least general practice, isn't worth the investment.
The general solution will likely be to increase the gap between specialist physicians and patients by a wholesale substitution of even greater numbers of NP's and PA's with the commensurate drop in medical training.
A second major issue in the medical field is actually research and development. Another way to reduce the overall resources needed for healthcare is to increase efficiency through new treatments or increase the paying contributors' quality of life (and therefore potential lifetime earnings). This is generally the role of pharmaceutical companies and how they make profits.
The incentive for minimizing medical costs through reducing administrative costs as well as programs forcing the prices of medications down—for better or worse—is a likely reason for the ongoing decrease in research and development funding. In the short term, the costs are likely to be felt primarily in the research sector in terms of jobs. In the long term, the risk is actually stagnation of medical research, a shifting offshore of both research and production, or the need to increase the amount of Federal research dollars through non-medical channels.
In any case, the perverse effect is one of research stagnation—either directly or as research dollars for other scientific research is applied to medical research—or the risk of further increased costs through increased Federal funding or paying import prices for patented medications.
Overall, I think the unintended consequences of the current form of healthcare reform are not completely clear but are likely to create adaptations in the employment-medical-tax system that were not well thought out. I think a priority focus should have been an honest look at how the system works and what the responses by different elements of the system would have been given the incentives presented.
I'm not an economist, but if I were one, I think it might be an interesting research project. The first thing I would explore is—like I suggested earlier—the effect of business size on healthcare contributions. For a real world examination, a starting point might be between businesses that exist in both a corporate and franchise form. (To steal something from Dr. Hölldobler's ants yesterday, a decentralized business model might become the wave of the future when confronted by increased costs of competition and a very large catchment.)
A second area that would be interesting to approach from a social science perspective might be means to create and support incentivized health. What would it take to change the business environment(s) and the social system to promote a mutual investment in healthy behavior? The military does this already, to a degree, but retains the ability to kick people out for non-compliance. I'm not sure the society at large would have that option.
Supporting readings:
Unemployed find old jobs now require more skills
A twist on skills jolts job picture
Obama Administration Grants Health Care Waivers to Big Companies, Unions
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