The June luncheon featured Dr. Robert Helms, Director of Health Policy Studies at the American Enterprise Institute, whose talk focused on the problems arising from the tax treatment of health insurance. Dr. Helms began by noting that the tools the government can use to shape the market for health care are relatively crude. Thus, consumers need to be more involved in the making of decisions that shape the delivery of health care. However, the purchase of health insurance remains concentrated in the hands of employers so that the health-care market remains characterized by restricted competition. The fundamental thesis of Dr. Helms talk was concerned with the reason why competition in this market is so limited and the cost of delivery so high.
Most individuals tend to think that the problem is greedy doctors or other forms of waste and abuse.
However, few people recognize that the root cause of the poor market performance is the special tax treatment of employer-provided health insurance. Dr. Helms noted that the origins of the current system of medical care lie in the forces that shaped the post-World War II economy. Confronted with wartime wage and price controls and a diminished labor supply, firms began to offer non-wage benefits to lure workers. Health insurance and pensions were the primary non-wage benefits offered to employees. At the same time great strides were being made in medical technology, primarily in pharmaceuticals and surgical procedures.