As health costs soar, more would-be entrepreneurs are reluctant to quit Corporate America and its blue-chip benefits to start businesses, entrepreneurship experts say. That raises alarms about the impact on innovation and job growth, when both are of growing importance to the U.S. economy.Energetic young people with ideas can't afford to pursue their dreams by leaving the jobs that provide their health insurance for themselves and their families. Boomers who would love to retire from jobs that have grown tiresome -- perhaps to start part-time businesses of their own -- grimly hold on to ride out the years until Medicare kicks in, because of the sky-high cost of individual health insurance premiums a their age. It's a progressive hardening of the arteries of an economy that was long regarded as the most dynamic in the world.
"This is a real problem," says Carl Schramm, CEO of the Ewing Marion Kauffman Foundation in Kansas City, Mo., one of the USA's biggest entrepreneurship advocates.
It's all so unnecessary -- and accidental, as blogger Ezra Klein pointed out in his LA Times Op-Ed the other day. The result of World War II tax legislation, our ramshackle healthcare system is one of the more dramatic examples of the law of unintended consequence.
Few mention this, but the American healthcare system is something of a mistake. It blossomed out of a World War II tax reform meant to guard against corporate war profiteering. Liberals, with their usual combination of good intentions and inadequate foresight, imposed massive marginal tax rates on corporations, effectively freezing their profits at prewar levels. But the law had a loophole: Corporations could funnel their wartime riches into employee benefits, such as healthcare, thus putting the cash to use within their company. And so they did, creating the employer-based healthcare system.Klein argues that pressure for reform has reached a tipping point, and that the time for reform has finally come.
But healthcare was simpler in the 1940s, and far less expensive. In the 21st century, it's not simple at all. Once a perk of employment, health insurance is now a necessity, and a structure that dumps such power, complexity and cost in the laps of employers is grotesquely unfair to both businesses and individuals. There's no logic to an auto manufacturer running a multibillion-dollar health insurance plan on the side; it should stick to making cars. There's no excuse for pricing the self-employed and entrepreneurial out of the market. And there's no reason the owner of a three-employee start-up should have to go to bed with a heavy conscience because his coffee shop can't pay for chemotherapy.
The work is not done, of course. There are arguments yet to be had, wars yet to be fought.For the time being, progress will probably have to come from the states. It's hard to imagine a presidential candidate having the guts to go out on a limb on health care in 2008, given what happened to Bill and Hillary's plan. But Massachusetts enacted the nation's first nearly universal plan, and California Gov. Schwarzenegger is going to announce his own plan for reform in his State of the State address Jan. 9. I wouldn't quit my job just yet, but it's a start.
Insurers want to retain their ability to discriminate against the ill and the old; conservatives want individuals to assume more risk and expense in order to force wiser health decisions; liberals want the government to guarantee universality and utilize its massive market power to bargain prices down to levels approximating those paid by other developed countries.
What's important, though, is that for the first time since the early years of the Clinton administration, these arguments are being made, and employers, insurers, politicians and, most crucially, voters are making their way back to the table.
The realization that our illogical, mistaken healthcare system can't go on forever has dawned, and so it will end. The question now is what replaces it.