John Stossel: Health Insurance Isn't All It's Cracked Up to Be

Oct. 16, 2006 — -- I'm appalled reading the results of the ABC News poll on health care:

"Nearly eight in 10 favor a federal requirement that all employers offer insurance to their full-time workers. Nearly two-thirds favor such a requirement for part-time employees as well."

ABC News and USA Today are offering solutions to the health care problems in America during our weeklong series "Prescription for Change." Watch for special reports all week on "Good Morning America," "World News" and "Nightline."

Why on earth would we want mandated insurance from employers?! Do our employers pay for our food, clothing or shelter? If they did, why would that be good? Having my health care tied to my boss invites him to snoop into my private health issues, and if I change jobs I lose coverage. Employer paid health insurance isn't free. It just means we get insurance instead of higher salaries. Companies only provide it because of a World War II-era tax break that never went away.

Anyway, insurance is a terrible way to pay for things. It burdens us with paperwork, invites cheating and, worst of all, creates a moral hazard that distorts incentives. It raises costs by insulating consumers from medicine's real prices.

Suppose you had grocery insurance. With your employer paying 80 percent of the bill, you would fill the cart with lobster and filet mignon. Everything would cost more because supermarkets would stop running sales. Why should they, when their customers barely care about the price?

Suppose everyone had transportation insurance. The roads would be crowded with Mercedes. Why buy a Chevy if your employer pays?

People have gotten so used to having "other" people pay for most of our health care that we routinely ask for insurance with low or no deductibles. This is another bad idea.

Suppose car insurance worked that way. Every time you got a little dent or the paint faded, or every time you buy gas or change the oil, you'd fill out endless forms and wait for reimbursement from your insurance company. Gas prices would quickly rise because service stations would know that you no longer care about the price. You'd become more wasteful: jackrabbit starts, speeding, wasting gas. Who cares? You are only paying 20 percent or less of the bill.