Jonathan Gruber felt little constraint in making the various statements that have been trumpeted by conservative media because most of what he said was completely unremarkable in health policy circles. Here are some of the health care truths that few people want to hear.
Employer Benefits Are Not a Gift from Benevolent Bosses
Every penny spent on your benefits is a penny taken out of your wages. The richer the benefits, the less money you take home every week. Companies think in terms of total compensation. A good accountant might be worth $78,000 a year to a company. The company is largely indifferent to how that $78,000 is allocated—it could be $3,000 on retirement, $18,000 on health care, and $57,000 in cash wages. Or it might be some other combination. It doesn’t really matter.
Now, that isn’t quite the whole story. A company might prefer to spend more on health care to keep you working harder and reduce sick-leave expenses. And there are some other considerations, such as not having to pay payroll taxes on health benefits, but it is still the total cost of filling a job that matters to the company.
Now, you may be happy with the boss’s allocation. You may think that the company can get a better deal on health coverage than you would be able to, but how do you really know that? Very few people know what is spent on their health benefits (and how much they are giving up in wages) until they leave the company and look at what their COBRA premiums would be if they want to continue the same coverage. Then they are shocked.
So when Gruber points out that employees actually pay the 40 percent tax on “Cadillac plans,” he is absolutely, 100 percent right. And he is also right that calling it a tax on evil insurance companies makes it more acceptable to the public. That is, the stupid, gullible, uninformed (pick your own adjective) public.
Only a Very Stupid Population Would Have Believed President Obama’s Promises
In fact, you can’t keep your health plan if you like it, you can’t keep your doctor, and prices were never going to drop by $2,500 per family. Gruber was probably astonished that people actually believed what Obama said. If the administration just wanted to reduce the numbers of uninsured without harming anyone else, they could have simply expanded Medicaid and given low-income workers a voucher to buy coverage. This might have taken 10 pages of legislative language. What do people think the other 2,690 pages were about?
Mandated Benefits Are Actually a Tax on All Policyholders
People are also stupid, gullible, and uninformed when it comes to “mandated benefits,” like in vitro fertilization, substance abuse treatment, or free contraception. Whether it is at the state or federal level, requiring insurance companies to cover some particular benefit is nothing more than a tax on insurance buyers.
This is the way it works. Some state senator is really concerned about the problem of substance abuse. He thinks society would be much better off if people could get substance-abuse treatment at low cost, but if he proposed a public program to provide such treatment he would be blasted for raising taxes. Can’t have that, so instead he proposes requiring insurance companies to cover it. Mothers Against Drunk Driving and the treatment providers love the idea, and because the state can’t regulate large self-funder employers, the only people hurt by the new mandate are small employers and individual insurance buyers.
At the end of the year, insurance premiums rise to pay for the new benefit, and everyone says, “Damned insurance company is ripping us off again.” This is exactly like a tax hike, but it is levied solely on the people who buy insurance. The insurance companies get all the blame for increased costs, and the state senator gets the credit for taking decisive action to address an “important social issue.” Sweet deal.
The exact same thing applies at the federal level. Sandra Fluke loves President Obama and the Congressional Democrats because they “gave her” free birth control pills. They didn’t give her anything. Where does she think the money came from to pay for her pills? It came from her in the form of higher taxes, premiums, or reduced wages. There is no other source.
You Can’t Cover Everyone and Charge Everyone the Same Without a Mandate to Buy Coverage
This idea is well established in health policy circles. Doing it otherwise has been tried, notably in New Jersey, and it destroyed the market in that state. Guaranteed issue means nobody can be denied coverage, and community rating means everyone is charged the same, regardless of their health risk.
Different people draw different conclusions from this principle. Some people place more value on guaranteed issue and community rating, so they support mandated coverage. Others think mandating the purchase of coverage is so onerous that they are willing to give up on guaranteed issue and community rating. Still others (including this writer) agree the mandated coverage is onerous, but also think that guaranteed issue and community rating are terrible ideas, so are perfectly happy to flush the whole idea.
Since you probably won’t hear it anywhere else, let me take a moment to explain this third position.
- Community rating is stupid. No other form of insurance uses it. People who are high-risk place a higher value on being covered and are willing to pay more than low-risk people are. As with most things, the price of a good or service is determined in part by how much value the buyer places on it.
- Guaranteed issue means people can wait until they need services to buy coverage. That impulse remains whether coverage is mandatory or not.
- Mandated coverage simply never works. Roughly 15 percent of the population will be out of compliance with a government mandate, regardless of the thing being mandated or the size of the penalty. This applies to paying child support, wearing seat belts and motorcycle helmets, buying auto insurance, or paying taxes.
- Plus, some significant segment of the population can’t cope with an insurance plan of any kind. They may be illiterate, mentally ill, live in the underground economy, or have poor impulse control. They are unable to read and understand an insurance contract, make and keep appointments, or figure out how to file a claim. These people need the direct provision of services.
Gruber’s problem wasn’t what he said, but that he was arrogant about it. He was showing off to his fellow health policy wonks. He was telling them that, while they toil in academic obscurity, he made the breakthrough to being a player in policy circles. He was a hot-shot deal maker and influence peddler. Don’t they all wish they could be as influential as him? Why, yes, yes they do.
