From Swampland to Sacramento…

Further puzzling all those cubicle dweller procrastinating on the Web by looking for tidbits of election news, Karen Tumulty at’s Swampland graciously responded to my post from yesterday, where I generally agree with her, but take issue with a characterization that some young people might “choose” to go uninsured.

As she writes:

I think we are making the same point, but coming at it from different directions. Wright is absolutely correct that young people are disproportionately uninsured, and for the reasons he says. But that’s true under the current system as well.

Here’s what I meant with my suggestion that McCain’s plan might actually encourage people to drop their coverage voluntarily. Say you are 23 years old and in good health, and lucky enough to be working for an employer who provides you health coverage. Under McCain’s plan, the amount that your employer spends on your health insurance suddenly gets added to your taxable income. McCain provides a tax credit to offset that, and if it covers your additional tax liability, the chances are you would continue to take coverage under your employer’s plan. But if you live in a state where health care costs are high, or your employer has a particularly expensive plan (because the benefits are great, or because the workers in your company are sicker, or older, increasing the costs of their coverage), the tax credit might not cover it. In that instance, you would be tempted just to drop it and take your chances on not getting sick.

In economic terms, that would be a completely rational decision. Unless you get in a car accident. And the departure of a worker who is a relatively good risk would leave your employers with a workforce that is, on average, even more expensive to insure–which might ultimately force the company to drop coverage for everyone.

And here’s my agreeable response, cross-posted from Swampland’s comments section.

Much thanks, KT, for the link, and the dialogue, and your evident and appreciated interest in health issues, in all their complexity. I actually agree with you: the McCain plan will leave some young (or more relevantly, newer, entry-level, and lower-income) workers without employer-based coverage, and uninsured as a result.

* I agreed with your earlier point, too. My beef was more with Gov. Romney, who made inaccurate assumptions about this segment of the uninsured. Instead of seeing the additional barriers to coverage they face and thus trying to make group coverage more available to young workers, like bolstering employer-based coverage, he put the burden on the individual to sign up, as if that was the main problem. (In fact, he even vetoed the small fee on employers who didn’t provide health coverage to their workers–the legislature has to override his veto to pass that part of “his” health plan.)

* Again, young people take up employer-based coverage at roughly similar rates as older folks. Without the group rate and employer subsidy, younger folks with lower-incomes find coverage on the individual market not affordable, either the premium, or the out-of-pocket costs.

* A number of the comments (cliff, calkate, kevpvp) here raise another key point: Health coverage should not just *available* and *affordable*, but *administratively simple*. Another reason why employer-based coverage is so prevalent (and largely taken up, by young and old workers alike) is that it is easy to sign up at work. In contrast, trying to understand and navigate the individual market is a nightmare, and takes a lot of pro-active thought and action. Another reason why the individual market is least efficient, most expensive way to get coverage.

* There’s been a lot of attention to behaviorial economics, and commentor “chucksname” referred to 401Ks. In fact, the research suggests that a major factor on enrollment is not as much income as simply whether signing up for a 401K plan is automatic or not, or if the choices are too numerous or complex.

* In California, we have sought reforms to make the individual market more transparent and understandable, to allow for apples-to-apples comparisons, etc. But the real lesson is to focus expansions on group coverage instead, either through public programs or employers.

Health Access California promotes quality, affordable health care for all Californians.
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