Let's hope employers do drop health coverage
The Washington Post, June 22, 2011
Just when you thought Washington couldn't get more partisan and confused, along comes the phony tempest about whether President Obama's health-care reform will lead employers to drop coverage once the new insurance exchanges open for business in 2014. The GOP thrust and Democratic parry here are so at odds with any sane view of the national interest as to make one shriek to the skies, "Can't we have a third political party? Pretty please?"
In case you've been too busy with the Anthonys (Casey and Weiner) to keep up with your health-care wonkery, here's what I'm talking about. Some recent reports have suggested that many more employers will drop coverage once the exchanges are launched than the administration has predicted. (Disclosure: McKinsey and Co., a consulting firm where I'm an adviser for part of my time, published the results of a survey that partly looked at this issue, a project with which I was not involved.)
Overnight, every Republican with access to a microphone or the op-ed page has pounced. Voices from Karl Rove to former John McCain adviser Douglas Holtz-Eakin to former Bush aide Larry Lindsey have rushed to claim that these phalanxes of Americans poised to be "dumped" into "government-run" health care unmask Obamacare as even more of a fiendish socialist budget-buster than they suspected.
Now, I don't pretend to know how many employers will drop coverage if some workers are offered subsidies to help them buy private coverage on their own. In Massachusetts, not many employers have dropped; yet it stands to reason that if the "penalty" large employers would pay for not offering coverage ($2,000 per worker) is less than the cost of providing that coverage (which it is), they may very well drop, at least over time. But smaller firms will be getting government subsidies to help them expand coverage. In the end, the decision to drop will probably depend on what other firms competing to attract talent choose to do, and how all firms adjust the way compensation is divvied up between wages and benefits as a result.
But if these issues won't be settled for a few years, one thing is certain right now: It would be a fantastic thing—not some calamity—if more people got coverage from the exchanges instead of from their employers. Yet both parties act as if it would be a disaster.
Republicans used to know better. The policy centerpiece of John McCain's presidential campaign was a call to move past employer-based coverage by converting the tax subsidy for employer-provided care into a health tax credit for individuals.
What's more, the whole GOP line about Democrats "dumping" people into "government-run" care is preposterous. For starters, the exchanges offer choices from among competing private carriers. And most people will feel more "liberated" than "dumped." The United States remains the only advanced nation in which individuals lack access to group health coverage (with affordable group rates and no bar for preexisting conditions) outside the employment setting. As a result, health-care "job lock" afflicts millions, which is bad for entrepreneurship, worse for economic dynamism and awful for peace of mind.
Whatever quarrels you may have with the Affordable Care Act, these insurance exchanges are a historic achievement. If over time employers find they'd rather make a contribution to help employees use these exchanges, with lower-income folks getting some aid from government, it would be a huge step forward in health security for ordinary Americans.
Yet most Democrats remain confused or caught in a political time warp as well. That's why Obama didn't push to go beyond employer-based care in the first place (as the superior Wyden-Bennett plan did). It's why Democrats see employers who don't offer health care as shirking some moral duty to take care of their workers.
Big business and big labor are trapped in this dead idea, too. Large companies inexplicably fought to remain at the heart of the welfare state during 2009's health-reform battle, perhaps to keep their edge in the war for talent over small firms that can't afford sky-high premiums. Unions, meanwhile, still want to be seen as delivering the goods, which means getting those goods from employers. Both conspired to keep access to the new insurance exchanges highly limited—the exact opposite of what we should be doing.
What we're left with, then, is another case in which the partisan interests and convenience of a few thousand federal officials, business executives and labor leaders trump a better way for the other 300 million of us.
The only real objection to moving beyond our archaic regime of employer-based care is the public cost. But once you think about it for 30 seconds, this, too, turns out to have an easy fix—because we're not adding to health costs, we're just moving them from one place to another.
In an even modestly sane version of 21st-century America, as I argued in my book "The Tyranny of Dead Ideas," we'd be talking about a "grand bargain" to shift health costs from private payrolls to public budgets as a way to boost business competitiveness and health security. And we'd figure out an economically rational way to fund this shift (modest consumption tax, anyone?) that business could endorse. As Kevin Hassett, a former McCain economic adviser, has told me, such a funding swap would be fine for the economy even though it would leave government officially "bigger."
If all this seems like common sense to you, join the growing club of Americans alienated from our two-party system, where common sense is routinely sacrificed on the altar of political combat.
Where, oh where, is the third-party alternative we need?