November 6, 2019

One Flaw in the Warren Medicare-for-All Plan

At long last, Elizabeth Warren has revealed how she plans to pay for her plan for universal health care. Her plan is expensive and complex, but it is not the usual smoke-and-mirrors proposal we are used to seeing in political campaigns. Her plan might actually work (or not). Of course, even if Warren is elected president, her plan will be passed by Congress only when hell freezes over. One has to wonder why Warren even bothered.

I won’t evaluate the plan here, which has been much criticized in the press. (See, for example, this analysis by The Washington Post, which is more positive than most evaluations.) I only want to comment on one aspect of Warren’s scheme.

The plan finds $8.8 trillion—for effect, we should write that as $8,800,000,000,000.00—by requiring employees currently paying for medical insurance to pay nearly all of that money to the government instead. (It isn’t clear whether employers who do not provide a health insurance benefit are let off the hook.) I object to this on philosophical grounds.

That employer-provided health insurance is widespread, though hardly universal, in this country is something of a historical accident. During World War II, employers found it hard to attract workers. Many men were fighting the war, and wage-and-price controls didn’t allow employers to compete for labor by raising salaries. The federal government, however, ruled that offering health insurance as a fringe benefit did not constitute raising wages. (Wikipedia offers an explanation here.) Thus, a new incentive for potential workers was born.

Those wartime wage-and-price controls are long gone, of course, but the offering of fringe benefits continues to be a mechanism by which employers compete for labor. Although one could make a case for increasing salaries and eliminating fringe benefits completely, I only want to address health insurance here.

In the abstract, it has never made sense to associate health insurance with employment. Yes, workers need health insurance. But the need for insurance does not vanish if a person is not employed.  In recent times, obtaining health insurance as an unemployed individual or as an employee without benefits has been difficult (or impossible) and expensive. This situation has been improved by the Affordable Care Act, but it is hardly ideal. Hence, the allurement of Medicare-for-all or something like it.

The Warren scheme of extracting trillions of dollars from employers may seem attractive, but it maintains a nexus between employment and health coverage that does not and never made sense. The plan raises other questions. What about employees who never paid for health insurance? Have they no obligation under this plan? Employees now can change their health coverage of employees or even eliminate it completely. What happens to this option under the Warren plan?

Of course, these questions are irrelevant, as the Warren plan will never be implemented. As a practical matter and as a campaign promise, only restoring Obamacare to its original form, undamaged by Trump administration depredations and enhanced to include a public option makes sense in the near term. Democratic presidential candidates need to point this out.

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