Reliance on Employers

Wharton legal studies and business ethics professor Arnold Rosoff favors the notion of universal health coverage, but cautions that the system could never cover the costs of all the care citizens might want. He says a universal system should provide an adequate level of coverage, then rely on private insurance to offer additional care. "No matter how health care reform plays out, there's no way that we won't have a substantial private health insurance market in the United States."

Rosoff notes that private insurers are already moving toward more consumer-driven plans for employees that cover catastrophic events, but less routine care. Employers "are probably doing this to save on premiums, but what they say to employees is that they are putting the responsibility back on people to use health care resources [wisely]. It's really just a smokescreen."

The recession may also have additional implications for the health care system as patients put off routine visits and preventive care to save money, but wind up needing more expensive care in the future, according to Rosoff. Fan Zhou, a University of Pennsylvania student conducting research under Rosoff's guidance, is exploring relationships between economic downturns and health outcomes. Zhou says the United States offers a good test case of the link between economic conditions and health because the nation's health care system relies heavily on employers. "I think that tie and that uniqueness will lead to negative health outcomes for individuals" in recessionary times.

Another aspect of the relationship between recessions and health care lies in the political arena, according to Zhou. "In times of recession, when people aren't getting health care, is when you see a push for reform. This is also when it is hardest to make that happen because the tax base is diminished."

The result of the government's stress tests for the banking system may give politicians more confidence to push for health care reform because they are less concerned about the frailty of the financial system than they were in prior months, suggests Rosoff.

The health care reform debate may go in a number of directions, but he expects the Obama Administration to gradually expand Medicare to people under age 65. That coverage, he says, could be paid for in a number of ways, including employer-paid premiums. "Politically and practically, no one wants to come in and displace the private health insurance market with a government plan. They're not going to sweep away the private sector and replace it with a single payer."

The government may, however, want to allow participation in Medicare plans by small employers and the self-employed who often find it difficult to secure affordable coverage because they do not have a large subscriber population.

Rosoff acknowledges that the existence of an expanded Medicare program might encourage more employers to dump coverage for their workers. At the same time, the government program might result in subsidized coverage that puts private health insurers at a disadvantage. He says it will be difficult to structure the plan to address those concerns. Personally, Rosoff favors a larger government role in health care. "In my mind, if we can get there in the next five to 10 years, it could erode the private market and move more toward a government program. I don't necessarily see that as a bad thing."

As for Social Security, Mitchell says there is no easy fix. According to the trustees' report, Social Security tax income will begin to fall short of outlays in 2016, but will be enough to finance 76% of scheduled annual benefits in 2037, when the trust fund is projected to be exhausted. The trustees report goes on to state that Social Security could be brought into actuarial balance over the next 75 years with an immediate 16% increase in the payroll tax, from 12.4% to 14.4%, or an immediate reduction in benefits of 13%, or some combination of the two.

Mitchell points out that proposals to develop private security accounts are likely to fall flat as a result of the stock market decline. And while the Obama Administration is interested in improving financial literacy to encourage successful saving and investing, it will take years for that to have an impact on individual portfolios. "A good economy could lead to a rebound in revenues for the Social Security system if people get good jobs and pay payroll taxes again," Mitchell says. "But that may well take a couple years. There's nothing rosy on the immediate horizon."