David R. Henderson  

Ezra Klein's Claim about the Shutdown

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This [the shutdown of well under half of the federal government] is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance. That's it. That's why the Republican Party might shut down the government and default on the debt.
Ezra Klein, whom many people respect as a blogger, in part because of his alleged command of the facts, wrote this yesterday.

Although Klein may be right because he follows these things more than I do, I don't think he is. The increased taxes on "rich people," by which term I'm sure he means "high-income people," have been in place all this calendar year. Now it's possible that the House Republicans tried to repeal those taxes in the last few days, but I don't think they did.

As Alan Reynolds pointed out last week:

Even if such "defunding" could have magically attracted the 67 Senate votes needed to override a veto, it would not have undone the mandate to buy insurance, premium subsidies through refundable tax credits, planned cuts in payments to Medicare providers, or any of Obamacare's numerous new 2013 taxes-including the extra 0.9 percent payroll tax and 3.8 percent surtax on investment income for couples earning more than $250,000. Rhetorical opposition to "funding" did not even include opposing Obamacare taxes.

But I'm willing to be corrected. At the time Klein posted, which was 2:45 p.m. EDT, did the latest House Republican bill include repeal of those increased payroll taxes and income taxes? If you answer yes in the comments, please provide a link.

Moreover, what I do know is that the bill the House sent to the Senate last night did not at all do what Klein claims.

Here's what The Hill, which I'm sure Klein pays attention to, reported this morning:

Before that, the Senate rejected a House amendment delaying the entire healthcare law for a year, Boehner pushed through a second series of amendments to delay only the individual mandate and scrap subsidies in the law for members of Congress, their staff and political appointees.
Led by Reid, the Democratic majority in the upper chamber swatted down each House volley like a tennis player hovering at the net.

Get it? What it came down to was removing the requirement for individuals to buy health insurance and stripping away subsidies that Obama had granted, with no legal authorization, to Congressmen and staffers, people who could hardly be called "low-income." In other words, it had nothing to do with what Klein claims.

I wonder if Klein will issue an update.


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COMMENTS (31 to date)
R Richard Schweitzer writes:

There will not likely be any change.

The Zebra changes its stripes only by polling in mud.

Steve J writes:

So you're saying this whole thing instead of being about taxes is rather about the desire to be irresponsible? Delaying the individual mandate can only be viewed as continuing to allow the irresponsible to rely on EMTALA to provide themselves with free healthcare. Why aren't the Republicans trying to repeal EMTALA? Wouldn't the free market take care of the health care problem if we didn't have a law requiring hospitals to treat people who cannot pay?

Michael writes:

Your characterization of the part regarding congressional staffers getting health insurance through the exchanges is very inaccurate. It is based on an amendment proposed by Chuck Grassley (R-Iowa), not Obama. Klein discussed the proposal at length yesterday.

David R. Henderson writes:

@Steve J,
I'm not defending Republicans. I'm saying what the post purports to be saying: Klein badly misstates the issue.
@Michael,
Your characterization of the part regarding congressional staffers getting health insurance through the exchanges is very inaccurate. It is based on an amendment proposed by Chuck Grassley (R-Iowa), not Obama. Klein discussed the proposal at length yesterday.
I'm always open to having inaccuracies pointed out and, if you read this blog much, you know that I'm better than pretty much anyone else in the blogosphere at admitting my mistakes. But you haven't pointed out an inaccuracy. I read the article you linked to and it says nothing that implies that I was inaccurate. I'm aware that the amendment was Grassley's. So what? It's part of the law. Are you really saying that Obama can violate the parts of the law that he didn't like?

MikeDC writes:

The most realistic and best GOP goal I've seen is that (among other things) they're pushing for an end to the medical devices excise tax, which is by definition quite regressive.

MikeDC writes:

The most realistic and best GOP goal I've seen is that (among other things) they're pushing for an end to the medical devices excise tax, which is by definition quite regressive.

Steve J writes:

@David,
I think Ezra Klein was making a general description of Obamacare not trying to describe the Republican approach to dismantling it since that is changing all the time.

Michael writes:

@David
It's possible I didn't understand your position and if so I apologize. My take away from the Ezra Klein article was that the claim that Obama was "stripping away subsidies that Obama had granted, with no legal authorization, to Congressmen and staffers" was not accurate. I based that on the following:

In the end, the Office of Personnel Management, which manages federal employee health-care benefits, ruled that members of Congress and their staffs would be ineligible for taxpayer subsidies but that the federal government could continue contributing to the cost of their health insurance.

Some republicans have asserted that the OPM's decision was illegal but I don't know how they support that view. Do you know what the legal argument is against the OPM's decision?

John Hall writes:

Ezra Klein, whom....
Shouldn't it be who?

MikeP writes:

Nope. "whom".

...many people respect Ezra Klein...

...[subject] respect [object]...

Object is "whom".

MikeP writes:
This is all about stopping a law that increases taxes on rich people and reduces subsidies to private insurers in Medicare in order to help low-income Americans buy health insurance. That's it. That's why the Republican Party might shut down the government and default on the debt.

Actually, by mandating that the young and healthy buy far more health insurance than they need, Obamacare effectively taxes the poorest age cohort of Americans to subsidize those wealthier than they are -- the exact opposite of Klein's complaint.

The young uninsured are quite literally the sheep whose shearing pays for this monstrosity.

Delaying the individual mandate can only be viewed as continuing to allow the irresponsible to rely on EMTALA to provide themselves with free healthcare.

EMTALA is a pittance -- 3% of total health care spending in the US. That the disaster of Obamacare was at all rationalized by it is almost as funny as it is tragic.

Arthur_500 writes:

Those in favor of the political decision to keep ObamaCare point out that the President has already spent the current budget and re-allocated other funds to get his signature program up and running at this time. so what?

Private businesses often spend huge sums of money on a project before they determine it is not economically feasible and pull the plug. Why is it that once Gubment puts a program in place it is never, ever to be deleted?

I seem to recall a 55 mph speed limit that was in place for two decades before it was abolished. Retail Banks, Commercial Banks and Insurance Companies were all separate for 50 years before those wiser than me decided they could co-mingle and all risk would be borne by taxpayers.

However, if we end ObummerCare before it really gets off the ground the world as we know it will come to an end. How this is a Republican vs Democrat issue is only in the eye of the politicians and our biased media. Anyone with a lick of budgetary sense, and you don't need to be an economist to understand a budget, can see that you can't continue to buy what you can't afford.

Now, when is the UAW going to give me a new GM vehicle that I paid for???

David R. Henderson writes:

@Michael,
It's possible I didn't understand your position and if so I apologize.
No need to apologize although I do appreciate your civility.
Some republicans have asserted that the OPM's decision was illegal but I don't know how they support that view. Do you know what the legal argument is against the OPM's decision?
I'm pretty sure their argument is that there is nothing in the ACA that gives OPM the authority to do this. If you're taking OPM as the arbiter of the law, as Klein seems to, that's problematic. You've probably followed the Obama administration enough to know that it sometimes breaks the law, as with the early July decision, based on no legal authority, to delay by a year the employer mandate. That's just one instance.
@MikeP,
Thanks for replying on grammar to John Hall.

David R. Henderson writes:

@MikeP,
Actually, by mandating that the young and healthy buy far more health insurance than they need, Obamacare effectively taxes the poorest age cohort of Americans to subsidize those wealthier than they are -- the exact opposite of Klein's complaint.
Well put. I have nothing to add.
The young uninsured are quite literally the sheep whose shearing pays for this monstrosity.
Well, not "quite literally." :-) But figuratively, absolutely.

Steve J writes:

@MikeP

On EMTALA, wouldn't you say the availability of EMTALA is what allows young people to avoid buying insurance? It may only be 3% but that 3% is critical for the people who take advantage of it. Those people should be buying health insurance but instead are not.

Again your stance that young people do not need health insurance is completely based on EMTALA which you dismiss as only 3% of costs. Young people DO need health insurance. Low probability events happen all the time when you are talking about millions of people. This is exactly why insurance was invented. And of course the costs are still high when you are young - you have to amortize the costs of when you are older. How could the old possibly afford health insurance? Come on this is pretty basic math here...

Hazel Meade writes:

Thank you for making the distinction between "high income" people and "rich" people.

I am one of those individuals who might be termed "high income", in that I make a little over $100,000 / year, but I am just a couple of years out of graduate school, have very few assets, and do not even own a home. I rent, because I do not yet have enough money saved up for a down payment, and I live in a high cost-of-living area, so it may take a few years even to get to the point that I could afford to make a down payment on a house. My rent is well over $1000/month. I paid over $15,000 last year in federal income taxes, several thousand in FICA, a few thousand in state income taxes, and so forth. After taking out taxes, my 401(k) contributions, and health insurance premiums, I only get about half my nominal salary a month to live on. My rent is roughly 1/3 of that which is the maximum that financial advice dictates.


MikeP writes:

Young people DO need health insurance.

Young people need catastrophic health insurance.

And the ACA has essentially made catastrophic insurance illegal.

And of course the costs are still high when you are young - you have to amortize the costs of when you are older. How could the old possibly afford health insurance?

The old could afford health insurance because they weren't overpaying for comprehensive health insurance for 30 years that they didn't need it.

Come on this is pretty basic math here...

Indeed. Stealing from the poorest age cohort to subsidize the richest reduces the gains of compound interest from the former's wealth. Social Security, Medicare, and now Obamacare: the sheep will be sheared.

MikeP writes:

On EMTALA, wouldn't you say the availability of EMTALA is what allows young people to avoid buying insurance?

Actually, I wouldn't say this at all. EMTALA does not absolve you of paying your hospital bill. A hospital can pretty much ruin you over your bill if it wants to. But most people who don't pay their bill can't pay their bill.

So with respect to emergency care, health insurance is financial insurance. Your health will be taken care of: your finances may not.

In any event, EMTALA is not going away with Obamacare. Do you find it more sad or more amusing that illegal immigrants cannot buy health insurance on the exchanges, even without a subsidy? Yep, that ACA is a fine piece of legislation.

ColoComment writes:

I don't read Klein if I can help it (or maybe I'm thinking of Iglesias?), but based solely on your post I'd suggest that when he attributes the opposition to ACA solely to Republicans wishing to advantage the "rich" at the expense of the "poor," he's deliberately pandering to emotions at the expense of understanding the basis for valid ideological opposition.

He might acknowledge that those who cherish their personal independence oppose ACA because it makes every American a supplicant of the federal government for his routine health care, and will finally accomplish the progressive goal of making every last American a dependent (in some regard) of the federal government.

If ONLY it were a "rich" v. "poor" competition, it would not be as damaging to the character of our country.

PS to Hazel: I completely agree re: rich v. high income. If I were Queen, I'd have a rule that any pundit, talking head, columnist or blogger who used the terms "rich," "poor" or "middle class," would be required to define the parameters of the group.

Steve J writes:

The old could afford health insurance because they weren't overpaying for comprehensive health insurance for 30 years that they didn't need it

My impression is the old are having a hard time affording food right now much less health insurance.

Do you find it more sad or more amusing that illegal immigrants cannot buy health insurance on the exchanges, even without a subsidy?

And which party do you think made sure that restriction was in there?

If the other side had any sort of alternative there might be a debate here. I don't get it - how is it possible to eliminate the pre-existing conditions problem if you don't require everyone to get insurance? Seriously just talk me through the basics of a plan that allows anyone to get insurance (even those with major medical problems) but doesn't require the healthy to buy in too.

Steve J writes:

So with respect to emergency care, health insurance is financial insurance. Your health will be taken care of: your finances may not

But isn't this the whole problem? The young don't get insurance because we have guaranteed them we will keep them alive. But then we ruin them financially. And even taking everything they have still will not recoup the healthcare costs. There are problems with ACA (and actually I think they should scrap the employer mandate) but the individual mandate makes sense to me. We have already mandated the "we will keep you alive" half of the equation. The other side is the individual mandate that says "in exchange for keeping me alive I will buy insurance".

BC writes:

Steve J: Or "we" -- and I'm using the term as loosely as you are, inasmuch as I never guaranteed anybody anything, and decline to be counted as part of the hive -- could simply repeal the original "we will keep you alive" mandate that's the source of the problem.

Proponents of the ACA purport to be desperately concerned about having to pay increased premiums resulting from the free rider problem that EMTALA creates. As always, the crappy but entirely-foreseeable consequences of one dumb government intervention are used as the justification for further dumb government intervention. If you don't want to pay the healthcare costs of free riders, then don't: get behind an effort to repeal EMTALA rather than trying to dragoon the country into paying for that boondoggle.

On the other hand, if your response is to say, "Well, we couldn't possibly do that," then congratulations: you've just volunteered for the shearing on offer, and no one is obliged to support a policy solution to make it less painful for you.

MikeP writes:

And which party do you think made sure that restriction was in there?

Presumably the one party that voted for ACA.

otherBC writes:

It's time to put to rest the rationalization that the individual mandate is there to avoid free-rider use of emergency rooms. If that were the case, then Obamacare wouldn't have made it illegal for insurance companies to offer insurance policies to young people that are too cheap relative to older people's policies. Young people are actuarially cheaper to insure than older people. If we just wanted to prevent free-riders, we wouldn't make it illegal for young people's premiums to reflect their lower actuarial costs. (Ironic that something called the "Affordable" Care Act outlaws policies for being too cheap.) The only reason to outlaw actuarially fair pricing is so that the excess can be used to subsidize the old.

Steve J writes:

Presumably the one party that voted for ACA

Ha! That is great. Bend over backwards to make them happy then "we didn't vote for it".

Steve J writes:

If you don't want to pay the healthcare costs of free riders, then don't: get behind an effort to repeal EMTALA rather than trying to dragoon the country into paying for that boondoggle

The problem is it is impossible to get rid of EMTALA. In an emergency it would be tough to check if the patient has coverage before working on them. It seems like it is easier to require insurance than to figure out some method to distinguish the responsible from the irresponsible at the emergency room entrance.

Steve J writes:

It's time to put to rest the rationalization that the individual mandate is there to avoid free-rider use of emergency rooms. If that were the case, then Obamacare wouldn't have made it illegal for insurance companies to offer insurance policies to young people that are too cheap relative to older people's policies

Am I missing something? Don't young people eventually become old people? I mean I understand for car insurance you can group people by how they drive. A good driver may remain a good driver for quite a while. In fact I wouldn't be surprised if driving risk decreases with age (to a point). But that is not true with health insurance. We will all eventually be in a very high risk group.

BC writes:

Steve J:

Seriously just talk me through the basics of a plan that allows anyone to get insurance (even those with major medical problems) but doesn't require the healthy to buy in too.

It's impossible to devise such a plan. This is because talking about pre-existing conditions in the same breath as insurance is a massive category error.

Insurance is a vehicle for financing future risk. A pre-existing condition is not future risk. It's past loss. You don't insure against past loss; you just pay for it. You can no more legitimately insure against a pre-existing medical condition than you can insure against pre-existing automobile damage. And while it may be sad that an uninsured gets sick and subsequently finds himself uninsurable (and thus forced to pay significant medical expenses out of pocket), it's hardly society's problem.

What could be done is to improve insurance portability, by (for example) eliminating the Depression-era wage and price controls that incent employers to provide health insurance benefits in lieu of wages. Most children will be covered by their parents' policies until they're 18, and if you improve insurance portability thereafter you'll have gone a considerable ways towards covering conditions before they get to be pre-existing.

BC writes:

Steve J:

It seems like it is easier to require insurance than to figure out some method to distinguish the responsible from the irresponsible at the emergency room entrance.

I'm baffled why you think we need to do this at the emergency room entrance.

Analogy: Restaurants do not run credit checks on customers as they come in through the door. You get seated, order your meal, eat, and then pay. If you don't pay, you get thrown out, possibly arrested, and the restaurant may or may not come after you for the debt while refusing to serve you in the future.

Obviously the situation with emergency healthcare is somewhat different: ER patients are unlikely to be deliberately stealing from the healthcare provider, so there probably isn't cause to arrest them. That said, what's the problem with sending them a bill for services rendered, trying to collect on the debt normally, and refusing to treat them in the future if they can't pay?

Steve J writes:

And while it may be sad that an uninsured gets sick and subsequently finds himself uninsurable (and thus forced to pay significant medical expenses out of pocket), it's hardly society's problem

This probably is the fundamental disagreement between us. But I think I understand where you are coming from and believe it is a reasonable position. I'm just not happy with what is happening right now so typing out some of my frustration.

Shayne Cook writes:

To Steve J.:

You made the statement, "If the other side had any sort of alternative there might be a debate here."

I don't claim to be "the other side", but I'll provide an alternative for you to ponder.

1.) Change tax law to allow 100% tax deductibility for ALL actual healthcare outlays - to individuals only. (I agree the direct insurance tax deductibility should be repealed for businesses.)
This individual tax deductibility should be applicable to either realized actual out-of-pocket health care expenses, OR health insurance premiums - paid by individuals only.
(Special note here: Current tax law allows deduction for health care expenses only in excess of 7.5% of AGI. ACA increases that threshold to 10% of AGI.)

2.) Change tax law to allow the tax deductibility to be transferable to any other tax-paying entity. Tax deductions aren't of significant value to low/no income folks, but they are of high value to high income folks especially with an increasingly progressive tax system. The transferability feature incentivizes (and allows) others to offset costs of delivered healthcare through the tax code, whether those "others" are "rich folks", charitable organizations or even family members.

The focus of this alternative is to get the "third party" payers out of the U.S. health care system decision making process and out of the cost structure.

To give you an idea of how costly the third-party-payer system is, consider that one of the "provisions" of ACA is that insurance companies are "limited" to 20% of their revenue being diverted to "administration" - 80% of their premium revenues must be to pay for actual "health care".

Just now, the U.S. GDP is about $17,000B, and by all estimates, 18% (just over $3,000B) is health care related. Assuming (conservatively) that private insurance covers 50% ($1,500B) of actual health care costs, and the insurance companies adhere to ACA limits, the U.S. costs of private insurance "administration" alone - limited to 20% - translates to about $300B per year.

That's $300B per year for ONLY the private insurance company "administration" costs - as mandated by the ACA 20% limit. It does not include hospital/doctor office/clinic "administration" costs - that is paid out of the 80% private insurance outlay for "actual" health care. Nor does it include the Fed Gov "administration" costs incurred simply monitoring private insurance to make certain they limit their "administration" costs to only 20%. And it certainly doesn't include the "administration" costs of Medicare/Medicaid/Indian Health Services (IHS)/ VA or any of the other government "health care" programs.

I have no problem helping pay for actual health care costs of folks who actually have extreme health issues, or who don't have incomes/financial means of paying for their health care costs. But I'd rather be incentivized to help, rather than coerced to help. I have an EXTREME problem with being forced to pay upwards of $1,000B per year for multiple layers of "administration" costs that have nothing at all to do with health care delivery to these folks, or myself. That is the major problem with ACA, or anything resembling ACA.

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