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California SB 2: Socialized medicine? Hardly.

In the course of some other work, I’ve been catching up on Pacifica Fund VC and IFTF affiliate Tim Oren’s Due Diligence column.  It’s a fascinating grab-bag of information about new technologies and the process of innovation, and also occassionally into the mind of how a deep water business technologist thinks about the wider world. And if you care about technology it should be required reading.  However, at the start of a fascinating post about how outsourcing and other phenonema are slowly killing the intellectual learning process of Silicon valley, Tim lets his politics out of the bag about SB 2, the pay or play mandate being pushed by Senate President Pro Tem John Burton (D-San Francisco) (reg reqd). Tim says he’s not prepared to"compromise my investors’ interests" so that "Senator John Bloody Burton can retire having socialized medicine in California".

Well let’s hang on a minute here. The bill demands that companies with more than 20 workers provide (80% of the cost of) health insurance for them or pay into a state fund that will provide insurance for the workers. It also says that companies with 20-49 employees will get tax credits to compensate for the cost of the insurance. VCs like Pacifica tend to invest in high-tech companies that offer their high-paid workers health insurance. The only "employees" not offered these benefits tend to be the office temps or the janitors who actually work for someone else. And these companies tend to have less than 50 employees, especially while they are getting going.  So the companies Tim wants to protect are either not affected by this legislation because they are too small, or more likely going to get a tax credit for providing a employee benefit that they already give!

In fact the play or pay issue is designed to lower the uninsurance rate among the working poor, who constitute 75% of the uninsured.  These are the people who clean your house or serve your fries at McDonalds, and not surprisingly the fast foods chains are in the vanguard of opposition to these types of bills. So unless VCs start investing in cleaning companies, lanscapers or fast food I don’t see how this affects Tim’s investors directly.

It did, however, get my hackles up when he glibly trots out the phrase socialized medicine. It’s incredible to me when sensible business people vigorously defend their right to be gouged by the current health care system and call anything else socialized medicine–although I do like Tim’s phrase "simple payer".  The reason American companies get to pay double what European and Japanese competitors do in health care taxes (whether public taxes or private ones called insurance premiums) is to do with the lack of social insurance and the consequent lack of anyone with responsibility to keep the costs of that insurance down. Very few places in the world outside the UK, Canada and Scandanavia have genuine socialized medicine where all the doctors and hospitals work for the government. SB 2 doesn’t suggest that and doesn’t even put in place a single-payer fee schedule (as discussed in my recent post on single payer).  In fact if it were to become law, which isn’t exactly likely, it would be a bonanza for private health insurance companies, and eventually a (much less) modest bonaza for those companies that are paying taxes and higher health insurance premiums already to make up what the health care system loses when it provides uncompensated care for those uninsured employees of companies that don’t provide benefits.

I’m not actually a fan of "pay or play", or of employment-based insurance at all for that matter. That also goes for workers comp too, (which is also in a hell of a mess) where again there is no real reason for hte medical care part ot be connected to employment..  But given the social costs of uninsurance, not to mention that added burden on those employers who "do the right thing" and provide health benefits, it’s not illogical to look at those employers who don’t as a place to start changing the system. It has nothing to do with socializing medicine. And its implementation would have zero impact on an entrepreneur’s ability to start the high-tech business of tommorow.

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