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Is This Health-Care Reform's Worst Idea Yet?

The Senate Finance Committee does not want to propose an employer mandate to promote health-care coverage. But it doesn't want to let employers entirely off the hook, either. So it has come up with one of the worst ideas in recent memory: A so-called "free rider" tax. Under the proposal, employers with more than 50 workers would have to pay the subsidy costs for low-income workers who seek coverage in the Health Insurance Exchanges. But they wouldn't have to pay a dime for higher-income workers who did the same.

You can pretty much see where this is going: workers from low-income families become more expensive than workers from high-income families. As the Center for Budget and Policy Priorities explains, "Employers would have strong incentives to tilt hiring toward people who have a spouse with a good income (or have health coverage through a family member), teenagers whose parents make a decent living, and people without children (since the eligibility limit for the subsidies in the new health insurance exchanges will increase with family size). Low-income women with children in one-earner families would be particularly disadvantaged."

This would also happen on the back end. The free-rider proposal "would likely influence employer decisions about which of their employees to let go when they trim their workforces to cut costs, such as during a recession," writes CBPP. "Workers from low-income families would cost the firm significantly more to retain than other workers who are paid the same wage to do the same job." It could also subtly work against hiring minority workers, because they are more likely to come from low-income families, and disabled workers, because they are more likely to need health insurance and subsidies. You can argue that an employer mandate affects an employer's decision as to whether to hire another worker. But the free rider will change which type of workers they hire. It's a really, really bad idea.

By Ezra Klein  |  August 7, 2009; 5:06 PM ET
Categories:  Health Economics , Health Reform  
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Comments

The whole finance bill is full of terrible ideas. No public plan. Tax that hits labor unions hard. Higher drug cost for seniors. New lab test co-pays for Medicare. New burden on states. 17 million still uninsured. His bill is radioactive.

http://jwalkerreport.blogspot.com/2009/08/baucus-radioactive-compromise.html

Posted by: JonWa | August 7, 2009 5:23 PM | Report abuse

I sure think it is health care reform's worst idea yet. In fact I think it is the worst tax ever as I wrote on July 27th

http://angrybear.blogspot.com/2009/07/worst-tax-ever.html

Posted by: rjw88 | August 7, 2009 5:46 PM | Report abuse

JonWa just about nails it. The whole Finance Committee bill, from what we hear of it, is a disaster from start to finish. Wrong programs, wrong taxes, wrong subsidies, wrong ideas about cost containment, wrong approach to alternatives to for-profit private insurance, which is the main problem to begin with.

Is this health care reform's worst idea yet? Maybe, but they're not done, give 'em a chance to come up with something worse.

I imagine this is what you get when you are a) a tool of the insurance industry and those making a fortune off the current system, and b) trying to placate conservative Republicans who don't really want reform (see a) and won't vote for the bill they screw up anyway and are probably doing what they are doing with the sole intent of slowing down, or scuttling the process.

What is wrong with these people? I mean that seriously, what is wrong with them?

Let this sick joke of a bill come to the floor, or not, preferably not. Then the Senate can ignore it or fold it into the HELP Committee bill by disregarding most of its provisions. Anything less would be a disaster, politically and substantively.

Posted by: mjshep | August 7, 2009 6:13 PM | Report abuse

Another major fault of free rider: It makes health care yet another means tested 'entitlement' for the GOP to pick away at like welfare was. Turn it into class warfare that the uppers always win against the lowers. You'd soon here about the cost of Cadillac-driving single mothers with kids bankrupting the country and unmining the work ethic.

We can't wait any longer to change the rules on Senate committee chairs. Remove Max Baucas now!

Posted by: JimPortlandOR | August 7, 2009 6:46 PM | Report abuse

The administration of a free rider penalty would also be a nightmare. Employers do not know their employees family economic status. Employers would have no way to predict their costs in advance. The Finance Committee has the penalty because the costs of reform go up substantially without pay-or-play, or an equivalent means to discourage crowd-out and keep employer dollars in the system. Pay-or-pay is more effective, more predictable for employers, and preserves privacy for employees.

Posted by: kjacobs9 | August 7, 2009 7:10 PM | Report abuse

Once the Finance Committee produces its bill, I'd urge advocates of healthcare reform to wipe their asses with it in public, or a media-friendly variant thereof.

It's fascinating how the "bipartisan" circle-jerk manages to produce a bill that is offensive to everybody.

Posted by: pseudonymousinnc | August 7, 2009 9:06 PM | Report abuse

But all these proposal are shams. The first principle in all of them is the protection of the obscene executive compensation of insurance executives and the returns of their rich shareholders. Once you accept that principle, once you decide to put the earth at the center of the solar system, then you have to go through incredible machinations to try and make things work out.

The data are overwhelming. A single payer system like HR676 is simply much more efficient than anything that preserves the first principle. You get more bang for your buck. Other countries know this and they do. And nobody dies or suffers or goes bankrupt in other wealthy countries because they lack health insurance.

This represents a major failure in our democratic system in that a wealthy powerful special interest group can impose its will at the expense of the country. Well, I'm 71; I have Medicare. My kids will have to suffer the consequence of this failure.

Posted by: lensch | August 7, 2009 9:19 PM | Report abuse

lensch is correct, of course, but even failing a single payer system, the answer to the problem doesn't have to be made so flippin' complicated. What's next? A tax on employee benefits for people born on odd dates but not on days with an "r" in them or whose benefits equal less than 12.5% of their gross adjusted income - excluding pregnant women and residents of rural communities.

Posted by: eRobin1 | August 7, 2009 9:40 PM | Report abuse

If this idiotic idea is one of the few things the "gang of six - clowns" has agreed to among themselves ... God help us all when we finally see the rest of this lobbyist created monstrosity !!!

Posted by: cautious | August 8, 2009 3:17 AM | Report abuse

Also, isn't this probably unconstitutional, as it discriminates married employees and favors singles???

Posted by: Gray62 | August 8, 2009 10:14 AM | Report abuse

This isn't "reform."

This is voting PRESENT, AGAIN, and letting the corporate lobbyists write the legislation in the fine print, while playing like you care about the "little people."

Gimme a break.

Posted by: auntmo9990 | August 8, 2009 10:53 AM | Report abuse

Besides, after the SEIU goons beat up the conservative Black guy in St.Louis (calling him the N-word before hitting him), Democrats should re-think Obama's support of his union supporters being exempt from most of the fine print.

If we don't, 2010 will be a bloodbath.

Posted by: auntmo9990 | August 8, 2009 10:55 AM | Report abuse

I'm guessing auntmo9990 has a link to back that up, right? And maybe some proof that, if true, the goons were acting on behalf of the SEIU, right?

Otherwise, just another example of union bashing from someone who hates the idea of workers having some shred of power over management (because, you know, heaven forbid that happen).

Anyway, this proposal isn't just a bad idea -- it's a disgusting, yet all-too-typical, idea that protects the interests of the top while crapping on everyone below.

And that's to be expected given the jackasses writing it -- they come from such small states that they have to rely on industry $$ and, thus, could give a damn about what us regular folks think or want.

At this point, I have no faith the Senate will do the right thing. The Dems don't have the guts to do what is necessary (e.g. metaphorically smack Baucus around a bit and get him in line) and the GOP is dominating the media narrative.

Maybe I need more coffee, but I don't see how we get anything effective. At all. There's just too much industry cash affecting decisions, and too few on the Hill who give a damn about the millions of their fellow Americans dying and going bankrupt each year under the current system.

Posted by: Tke919 | August 9, 2009 8:07 AM | Report abuse

Oh, one more thing: when it comes to unions, the biggest issue is them getting death threats:

http://preview.tinyurl.com/le7te8

Face it, folks: The right has no desire to help their fellow citizens, to have a civil debate, or fix the problems we face as a nation. And they are willing to use violence in the process.

Yet Baucus is convinced they should have a say?!

Posted by: Tke919 | August 9, 2009 8:11 AM | Report abuse

What else can we expect from a senate committe headed by Baucus? His goal is to make reform next to impossible so that the population would scream:

"ENOUGH! LEAVE THE STATUS QUO ALONE! WE LIKE IT. WE DON'T WANT HEALTHCARE REFORM"

In your dreams, Sen. Baucus! Either you go with the flow of this reform or the flow will blow you away.

Posted by: Single_Payer | August 10, 2009 12:21 AM | Report abuse

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