Makers v Takers in Health Insurance

Peder Zane laments that Obamacare has turned his family into takers in the health insurance realm. My post shows the subsidy different groups now get for health insurance, with the key table below.

ScreenHunter_02 Nov. 16 11.16

I work for Duke and Duke pays ~$12,000/year in premiums for my insurance, and I pay $5,100/year. The ACA essentially mandates employer provided insurance levels of coverage, and as Zane notes above, substantial subsidies between 100%-400% of poverty (for a family of 5, 400% is around $120,000/year). Note that many would say the subsidy I calculated for employer (the tax savings from the tax code not considering premiums income) sponsored is a vast understatement, and that the true value of ESI is the full premium; the conversation of “employers will dump and pay the penalty and pocket the difference” argument implicitly views what Duke pays as nearly identical to the subsidy reported by Zane in the sense of a flow to an individual controlled by someone else.

Indeed, AEI this week released a report on the cost of government citing an E21/Manhattan Institute assertion that employer paid should be viewed as implicit taxes, because employees don’t have the choice to cash out, and they lose this purchasing power if they lose their job. The traditional Labor Economics view says benefits are foregone wages and would be returned to employees if employers ended employer provided health insurance for any reason, including dumping individuals into exchanges. The truth likely differs by industry, and probably falls somewhere between these two poles.

What this all means is that there are myriad ways that our society has constructed over long periods of time that serve to make health spending vastly higher than it would be if everyone bought what they could afford from their wages and earnings. The ACA is just the latest example. In that sense, just about all of us are makers and takers in the realm of health care, with our mix of income, age and illness determining the balance of the cross subsidy (and it could change for any of us tomorrow). Simply put, we have consistently preferenced health care over other types of spending since the end of World War II, to both good and bad ends.

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

24 thoughts on “Makers v Takers in Health Insurance”

  1. It seems to me that the line between being a maker and a taker with regards to health expenditure can be as small as a pea-sized tumor.

    The arrogant (should they take uncovered care and pass the costs directly and indirectly to the rest of us) or suicidal (in the vanishingly slight chance that they have the courage of their convictions and would die before they take uncovered care) willingness of such individuals to gamble at such stakes speaks to nothing but the absolute moral bankruptcy of libertarianism

    Of course, this is a problem with a lot of libertarian theories of self-ownership. You don’t own your body, you *are* your body. But that’s neither here nor there.

    1. You don’t own your body, you *are* your body.

      If I don’t even own what I *are*, then who does? And what can I possibly own under such a theory that insists I don’t even own myself?

      Political theories in which nobody owns anything have been tried. The results were less than satisfactory in every measurable dimension.

      1. Owning is a social construct and, yes, you DON’T own your body.
        If you did (ie if the society you lived in agreed with your claim) then you’d be able to
        – take whatever drugs you like
        – be a prostitute
        – sell your kidneys
        – sell the rights to your gruesome suicide on PayTV
        etc etc

        You may think all of the above should be allowed. But we are discussing the world as it is, not the world as you wish it were.

        1. You may deny ownership of your body, but I claim ownership of mine.

          You seem to say that society’s constraints on my liberties equate to ownership of my body, but how can that be true? If it were, wouldn’t I be unable, for example, to choose to exceed society’s speed limit when I’m running late?

          This denial of self-ownership seems unhealthy to society. Under the social construct of ownership, I am responsible for what I own. If my dog gets loose and bites someone, I can be held responsible. If I loan my car to a someone else who plows it into your car, you can hold me responsible by filing a claim with my insurance company or suing me if I lack insurance even though I wasn’t driving it, just because I own it. If I don’t own my body, well then don’t come crying to me about what it does to harm you, talk to the responsible party — my owner. And if you don’t own your body, then you lack standing to complain about whatever harm the body I don’t own might have done to the body you don’t own.

      2. Well, the theory you bristle so indignantly at is simply the entire canon of English law and jurisprudence.

        Oh, but that was the same terrible system that gave us the reasonable right of self-defense, including the duty to retreat before resorting to lethal force, with exceptions such as the Castle Doctrine. Clearly it’s much better to just shoot people on sight.

        1. I think you’re projecting an awful lot into what I calmly questioned to describe it as indignant bristling. And it seems more than a little over-the-top to cite some imaginary specter of shooting people on sight in order to twist the context of the discussion up to this point into some sort debate over self-defense.

          I’m curious. What entity that owns your body compelled it to type such a response?

  2. Does your calculation of the large Medicare subsidy take into account that these people paid Medicare taxes while they worked? Is the ten thousand an additional subsidy on top of that or are you only looking at the present year.

  3. How many people lamenting that they’re suddenly, for the very first time, the beneficiaries of government action have been claiming the mortgage interest tax deduction for years?

    Dangerous drinking game: Gather a bunch of friends. Every time someone thinks of a new privilege that’s protected or created by the government and which people with money enjoy more than people without, drink.

  4. Don: “Indeed, AEI this week released a report on the cost of government citing an E21/Manhattan Institute assertion that employer paid should be viewed as implicit taxes, because employees don’t have the choice to cash out, and they lose this purchasing power if they lose their job.”

    Are you aware that the AEI is a hack factory, with a looooooooooong and evilly distinguished history of lies?

    1. Even a blind pig occasionally finds acorns.

      Also, the author of the AEI report was cherry-picking. In this case, the author wants to argue that teh evul leftist commonistic reds [sic] are trying to turn the US into France or Scandinavia. Therefore, he wants to argue that all sorts of things are really gummint expenditures, and so ought to be counted.

      So, yeah, the AEI is (mostly, Norm Ornstein being the only exception I know of) a collection of RWNJ hacks. That doesn’t mean that the point’s completely wrong.

    2. Barry
      I think it is an interesting point of view to think of ESI as essentially taxation. Certainly the labor econ gem that benefits are foregone wages that would be returned via higher wages if the benefits went away might not be so certain. AEI has published some reasonable stuff on premium support by Coulam, Dowd etc. but generally they are overly hyperbolic no doubt, and 4 months ago said ACA didn’t have cata plans and now say they have too high a deductible and the like. I typically spend around 2-3x more time reading those with whom I disagree than just reading the ‘me too’ stuff.

  5. “What this all means is that there are myriad ways that our society has constructed over long periods of time that serve to make health spending vastly higher than it would be if everyone bought what they could afford from their wages and earnings.”

    Why does no-one ever criticize the most obviously wasteful of these: standard dental and vision plans, and FSAs?
    All three are based on the insane notion of “use it or lose it”. They are DESIGNED to encourage you to spend more than you need, on the quite reasonable grounds that “well, if I don’t spend it, it’s going away anyway, and those new lenses (or dental X-rays, or a redundant checkup) MIGHT come in handy so why the heck not?”

    The fact that the same crowd who are constantly going on about “consumers should take charge of their spending” and “prices will make people ‘waste’ less healthcare” have never, in my experience, complained about all three of these types of plans (which very obviously benefit the medical profession) tells us something about who they are really shilling for.

    1. For dental care at least, it’s a really good idea for people to get their teeth cleaned and checked on a regular basis. Many health problems are related to teeth and gum maintenance. Since no one likes going to the dentist, keeping the price as low as possible at least takes away that dis-incentive. Kind of like subsidizing health club memberships or gym attendance.

      1. Teeth checked regularly, OK. Tartar removed, OK.
        But then we get nonsense like “polishing” added in. Or once a year dental X-rays. Or checking for oral cancer (even in non-smokers). etc etc etc.
        Do these make cost-benefit sense? I strongly doubt it.

    2. Maynard
      For 2013, up to $500 from a FSA can be carried over to 2014….done via IRS rule I believe. Duke just mailed out about this. Also, ACA limited amount in FSA. I think we need less tax preferenced spending. I have not thought that much about dental/vision benes honestly.

  6. My favorite part: “Because of the tax savings of using a health savings account,we were paying less than when I had employer insurance.”

    But that wasn’t a government handout, because… I got nothing. Benghazi?

    1. I expect the mental trick they’re playing on themselves is they imagine that all taxes are fundamentally illegitimate, and therefore any tax break isn’t a handout but rather stolen goods, reluctantly returned.

      Once you’ve made that leap, you can accept boatloads of government cash and never understand that that’s what you’re doing.

  7. Interesting framework Peder Zane has there. If he’s a net beneficiary of the government, he’s a ‘ward of the state’ and his dignity is damaged, a loss for which no monetary advantage can compensate. If he’s a net contributor, the government is costing him money directly (and presumably he does not gain in dignity, at least no more than if he voluntarily gave the same amount of money to charity), so it’s a net loss in that case as well. Is this supposed to be a categorical argument for why any kind of redistributive effect of government is a lose-lose situation?

    I really want to believe this is satire, but I just can’t see the humour in it.

  8. There are many benefits of having health insurance that provides complete protection even if you are a foreigner in the German land.

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