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Obama's Health Care Reform Employer Responsibility Myth
In his address to Congress outlining his "plan" for
health care reform earlier this week, President Barack Obama
declared:
It's a plan that asks everyone to take responsibility for meeting this challenge -- not just government, not just insurance companies, but everybody including employers and individuals.
But the president is not alone in making this misleading assertion. The Washington Post today uncritically reports:
The broad concepts sketched out by Obama would move the country to a health-care system in which individuals and employers share the burden of medical costs.
Misleading? How so?
"Everybody thinks they're spending somebody's else's money," explains Robert Helms, a health care scholar at the American Enterprise Institute. Yet "payments for health insurance come out of wages. Everything ultimately comes out of wages; it's just accounting that obscures that fact."
Obama must know, and the Post should know, that health insurance premiums are paid in lieu of employee wages. Because of a stupid tax loophole, employers use pre-tax dollars to purchase health insurance as a benefit rather than pay their workers wages. So instead of paying an employee $1,000 more in wages, of which $400 will be taxed away, companies purchase $1,000 in additional health insurance tax-free. In this way companies funnel more than $140 billion a year in federal tax breaks to their workers.
Bottom line: Employers are not paying their workers anything extra; they are just diverting some portion of their employees' wages to buy one-size-fits-all health insurance. And nowadays, premiums can rise so much that companies will drop health care coverage because they can't justify boosting their employee's wages as much as the premiums have increased.
It would be far more "responsible" to leave the purchase of health insurance in the hands of individual employees rather than have their bosses do it for them. That would provide employees some of that "choice and competition" that the president says he wants.
And please don't get me started on Obama's promise that...
...not a dollar of the Medicare trust fund will be used to pay for this plan
Trust fund? What damned trust fund? The Medicare "trust fund" amounts to a government-sponsored Ponzi scheme and is, in any case, projected to be bankrupt by 2017.
See my colleague Matt Welch's sobering assessment, "Obama's Lies Matter, Too," here.
|9.11.09 @ 11:50AM|#
Good cartoon.
This whole shell game reminds me of Social Security. It's not
usually portrayed as a tax, either. 'Cause, you know, you get it
all back.
|9.11.09 @ 11:59AM|#
Privacy spambot can't spell his own name this morning. Can
spambots get drunk?
I love how Obama mentioned the decoupling of insurance from
employment at the very beginning of the speech... for two
seconds... and completely dismissed it. No saying why it won't
work, no saying it's a bad idea, just never really talking about
it.
Scarcity|9.11.09 @ 12:06PM|#
I had all but bailed on Obama's speech and was multitasking
across the room when I nearly got whiplash upon hearing the words
"trust fund". I had to check the transcript to be sure I heard him
right.
Hey Obama - take your lies about the trust fund and shove them up
AL Gore's lockbox.
|9.11.09 @ 12:10PM|#
It's a lockbox, Aunite Em! A lockbox!
It's actually more of Bizarro roach motel: tax dollars check out,
but they never check in.
Tony|9.11.09 @ 12:14PM|#
Medicare does not fit the definition of a Ponzi scheme, and this article is the best argument for single-payer I've read on Reason yet.
|9.11.09 @ 12:17PM|#
The link in the article to
http://www.ssa.gov/OACT/TRSUM/index.html is a funny read.
Apparently, there was a "net increase in assets" to the tune of
$179 billion for OASI and a -$4.7 billion in "assets" for HI, in
2008. I wish I could loan myself all my money and call that an
"asset."
Medicare already takes in less than it pays out it appears then,
and satisfying those "asset" obligations just means it comes out of
general revenue. How is this an asset? These people are deceiving
themselves with their own accounting gimmickry at this point.
I remember the Enron shell game...where debt the company owed was
structured to actually be owed by off-shore entities it controlled,
therefore moving the debt off Enron's books and instead booking it
as money Enron itself was owed. Cute. Social Security and Medicare
trust funds do the same thing vis-a-vis the Federal Government. But
of course the Government can set up its "off-shore" entities right
in front of our faces, on-shore. And most of us eat it up like
schmucks.
Now that Medicare is no longer a "profitable" debt structure for
the Fedz, the logarithmic compounder of doom is out of the box.
Tits up in ten years or less, that's my prediction.
JB|9.11.09 @ 12:21PM|#
Obama's lies make Bush look like a choir boy.
Obama = so much worse than Bush.
Scarcity|9.11.09 @ 12:21PM|#
OK, now I need a translation. From Ron's SSA.gov link:
What Are the Trust Funds? Congress established the trust funds
in the U.S. Treasury to account for all program income and
disbursements. Social Security and Medicare taxes, premiums, and
other income are credited to the funds. Disbursements from the
funds can be made only to pay benefits and program administrative
costs.
The Department of the Treasury invests program revenues in special
non-marketable securities of the U.S. Government on which a market
rate of interest is credited. The trust funds represent the
accumulated value, including interest, of all prior program annual
surpluses and deficits, and provide automatic authority to pay
benefits.
It goes on to show balance reconciliations of said trust funds for
2008.
Am I right in my understanding that "special non-marketable
securities of the U.S. Government" amount to giving the money to
the general fund, crediting an account with a paper entry (plus
interest!) that will be "paid back" from the general fund when the
time comes? In other words, the money has been spent long ago and
all Medicare got were these worthless IOUs, right?
Scarcity|9.11.09 @ 12:22PM|#
And Zeitgiest's pre-comment seems to confirm my understanding, and piss me off even more at that BS on SSA's site.
|9.11.09 @ 12:23PM|#
Let's don't assume that if companies no longer provide it as a benefit, they will increase your pay.
Gilbert Martin|9.11.09 @ 12:34PM|#
You have to understand that when Obama uses words like
"responsibilty" what he actually means is that everyone should
consider themselves responsible for subidizing his addition to the
welfare state.
Which of course is the antithesis of actual individual
responsibility.
|9.11.09 @ 12:36PM|#
"Am I right in my understanding that "special non-marketable
securities of the U.S. Government" amount to giving the money to
the general fund, crediting an account with a paper entry (plus
interest!) that will be "paid back" from the general fund when the
time comes? In other words, the money has been spent long ago and
all Medicare got were these worthless IOUs, right?"
This would be right, but its actually worse. The "special
non-marketable securities" have a couple unique things about them
relative to real Treasuries in the bond market. Namely, there's no
fixed time horizon on the bond (ten year, twenty year, etc.), and
there's no counter-party to the contract.
That's why politicians talk of raising retirement age, modifying
benefits, etc, because doing that changes the terms of the bonds
themselves. Note the language of the thieves when they speak of
these programs... the politicians talk of the "promise" of Social
Security or Medicare, because its not a real contractual
obligation...like a real bond. Its just a promise...a politician's
promise to boot.
Can you imagine such a financial contrivance being sold in the open
market? Who'd voluntarily buy such a pig?
I'd love it if the bank gave me terms like that on my mortgage. The
bank makes my principal payments on the house over thirty years on
the condition that I have to (start) paying them at the end of that
thirty years. And I have the provision in the contract that twenty
five years into that period I call up the bank and say "Did I say
thirty years to payback time, oh, I meant forty years! but you
still have to keep paying on my mortgage or I can throw you in
jail!"
That's the deal with Social Security and Medicare, in no other debt
arrangement is the creditor so screwed and powerless while the
debtor holds all the cards.
|9.11.09 @ 12:36PM|#
In other words, the money has been spent long ago and all
Medicare got were these worthless IOUs, right?
Just so. All funds raised by Medicare and SS taxes are spent that
year, either by Medicare/SS or through the general fund. Any
amounts surplus to the needs of Medicare/SS are transferred to the
general fund in exchange for IOUs that will be a claim on general
tax revenue in future years.
Medicare does not fit the definition of a Ponzi
scheme,
Well, leaving aside the bit about Ponzi schemes being investment
schemes, its pretty close. From wiki:
A Ponzi scheme is a fraudulent investment operation that pays
returns to separate investors from their own money or money paid by
subsequent investors, rather than from any actual profit earned. .
. . . The perpetuation of the returns that a Ponzi scheme
advertises and pays requires an ever-increasing flow of money from
investors in order to keep the scheme going.
The system is destined to collapse because the earnings, if any,
are less than the payments.
How does that not describe Medicare? Does it not pay benefits from
taxes collected from beneficiaries or others? Does it not require
an ever-increasing flow of tax money? Is it not destined to reach a
point where Medicare taxes are insufficient to fund benefits?
Calling it a Ponzi scheme is at least as accurate as calling it a
trust fund.
smartass sob|9.11.09 @ 12:44PM|#
Calling it a Ponzi scheme is at least as accurate as calling
it a trust fund.
It's more accurate. One other difference: Ponzi schemes are
voluntary - the government's scam is not.
|9.11.09 @ 12:45PM|#
Too bad they couldn't use a Trojan Rabbit.
RUN AWAY! RUN AWAY!!!
Actually, that's not bad advice, right about now.
smartass sob|9.11.09 @ 12:48PM|#
Too bad they couldn't use a Trojan Rabbit.
A Trojan ass will have to do.
|9.11.09 @ 12:51PM|#
And he tells you of the dreamers
But he's cracked up like the road
And he'd like to lift us up, but were a very heavy load
Scarcity|9.11.09 @ 12:54PM|#
I think it's a counterproductive distraction to argue about the
Ponzi-ness of these schemes. They do fail the definition, if the
definition includes unsustainability of the model (an
ever-increasing stream of money is unsustainable). Old-age security
payments and medical insurance schemes aren't unsustainable in
general, just at current tax and benefit levels. In a stable (or
growing) population, such a scheme can be designed to be
financially, though perhaps not politically, sustainable(i.e., it
would require politicians who resist perpetually increasing the
promised benefits without increasing the level of taxation).
Even if you think my analysis is wrong, enough people will blow off
anything you say following "Medicare is a Ponzi scheme" that it
becomes counterproductive.
|9.11.09 @ 1:08PM|#
"I think it's a counterproductive distraction to argue about the
Ponzi-ness of these schemes. They do fail the definition, if the
definition includes unsustainability of the model (an
ever-increasing stream of money is unsustainable). Old-age security
payments and medical insurance schemes aren't unsustainable in
general, just at current tax and benefit levels. In a stable (or
growing) population, such a scheme can be designed to be
financially, though perhaps not politically, sustainable(i.e., it
would require politicians who resist perpetually increasing the
promised benefits without increasing the level of taxation).
Even if you think my analysis is wrong, enough people will blow off
anything you say following "Medicare is a Ponzi scheme" that it
becomes counterproductive."
I don't think defined-benefits schemes of any kind can work in the
long-term. Any implementation of such depends on an implicit trust
and accuracy in predicting future developments...that is a huge
risk that is not accounted for (from an actuarial perspective) when
computing the income/outflow of such contrivances. General Motors
and its benefit schemes are a great example of that fallacy.
Another inherent problem of such schemes in today's world is fiat
money. People forget that when Social Security - and to a lesser
extent - Medicare were cooked up in an era of understanding
inflation as exceptionally benign and rare. This was due to the
underlying theoretical concept of money being "fixed" against some
arbitrary thing...gold in this case. Inflation kills defined
benefits over time like nothing else.
It was a huge problem with Social Security in the stagflating
years, one of the drivers of it was the government having to borrow
money with real bonds to pay off fake bonds in the Trust...what a
financial joke that was. People forget that era was the last time
Social Security was paying out more than it took in (till "tax
cutter" Reagan jacked Social Security taxes up...way up, in the
80's).
I'm not a gold-nut by any means, but when you cook up a scheme
based on one perception of money (no matter what it is) you need to
account for that when you change the fundamental of what "money" is
down the road, which again none of these defined-benefit schemes
could or would do, because of course they couldn't predict the
future when they cooked the schemes up...full circle loop in the
logic here.
crackertyasscracker|9.11.09 @ 1:41PM|#
I kinda miss joe now. If he was here he would now be telling us how we can't be against social security because we don't consider it a tax, because he once heard some republican say poor people don't pay taxes. or something like that.
|9.11.09 @ 1:46PM|#
Am I right in my understanding that "special non-marketable securities of the U.S. Government" amount to giving the money to the general fund, crediting an account with a paper entry (plus interest!) that will be "paid back" from the general fund when the time comes? In other words, the money has been spent long ago and all Medicare got were these worthless IOUs, right?
Yes, you're right.
I have explained this over and over to people but I still find new
ones that don't know it.
And as you've shown from Ron's link this is not some arcane
knowledge accessible only by the initiated, it's freely available
to any one who looks. And it was long before the intertubes.
But for what it's worth, Social Security's funding mechanism (FICA)
was always a fraud from the beginning. The very purpose of
collecting an excess (the SS 'surplus") was to get a stream of
revenue that could be spent on other vote-buying programs without
borrowing or the appearance of a tax increase.
Hey, it's not a tax increase if you get it all back, is it?
And yes, TheZeitgeist is right too. These are nonmarketable
securities. They are nothing more that fictional accounting
entries. The kind of thing that would get you or me sent to jail if
we tried to pass them off as valuable assets.
T|9.11.09 @ 1:52PM|#
The kind of thing that would get you or me sent to jail if
we tried to pass them off as valuable assets.
I have remarked for years that if any corporation kept their books
like the .gov does, the entire executive level and most of the
accountants would be in jail.
Naga Sadow|9.11.09 @ 1:59PM|#
Bartender, people. *points thumbs at self*
Most of my income is hidden. Suck it, you 9 to 5er's!
Kunal|9.11.09 @ 2:05PM|#
"... so that from now on, whenever someone has wood, they will think of Trojans."
Scarcity|9.11.09 @ 2:06PM|#
Issac - My point quoting from the SSA site was really to point out the extent of obfuscation taking place. I had always understood the "trust funds" to be as described here (i.e., a fraud); but when I, a professional in a financial field, read the SSA web site, it caused me to doubt myself because they explicitly say the money is invested. Being reasonably savvy, I was able to infer what "special non-marketable securities" means. But I think most people, with better things to do than my job but still enough curiosity to do a little research, would read that to mean, "Cool, the SS money is growing for me in an account invested in uber-safe US Gvmt securities." Because nowhere on SSA.gov do they point out the fact that the purported trust fund asset is offset by an equal off-book liability in the general fund (and hence is purely fictitious).
|9.11.09 @ 2:11PM|#
Even if you increase Medicare taxes to cover the increasing
payments, it's still problematic, because it becomes fundamentally
unjust. One generation is essentially forced to pay a larger share
of their income because an older generation has more political
power, numbers, and votes, and can vote to raise the taxes or
increase benefits. And then when there's another baby boom, say,
the younger generation can vote down the taxes and benefits, so
that the previous generation gets less than what they paid
in.
This is essentially what already happened with social security and
medicare. They raised taxes in the 80s to cover current retirees.
Now the boomers are retiring, and we can expect taxes to be hiked
again to pay for their retirement.
Worse, almost everyone gets more out of the system than their money
actually earned (since it was invested in IOUs), but less than what
they would have got in some other investment.
So everyone feels entitled to more money and ripped off at the same
time.
|9.11.09 @ 2:14PM|#
Because nowhere on SSA.gov do they point out the fact that
the purported trust fund asset is offset by an equal off-book
liability in the general fund (and hence is purely
fictitious).
We're investing in America's Future, man! Can you dig
it?
All that off-book spending is going to make us uber properous and
enable us to collect these huge tax surpluses to pay back the
social security fund just in time!
|9.11.09 @ 2:21PM|#
Envision a bomb-crater overgrown by jungle in Grenada somewheres...that's your retirement "investment" at work!
Scarcity|9.11.09 @ 2:35PM|#
Good idea Zeitgiest. But it being Friday and me being in a good mood despite thinking about government abuse all day, I'll envision my "investment" as part of, say, Yosemite NP. Then when we're collectively broke and I'm old and not getting SS or Medicare, at least I'll have somewhere pretty to pitch my tent.
|9.11.09 @ 2:36PM|#
Envision a bomb-crater overgrown by jungle in Grenada
somewheres...that's your retirement "investment" at
work!
Personally, I'm envisioning a housing project in Detroit. Same
difference.
|9.11.09 @ 2:36PM|#
Re: sustainability of returns/benefits under SS/Medicare.
Can't happen. At current benefit levels, you simply cannot raise
enough tax money. You start cutting benefits, well, you aren't
sustaining them anymore, are you?
SS/Medicare are unsustainable at promised returns, because there
aren't enough rubes coming down the pike to advance the needed
funds. That, my friends, is a Ponzi scheme.
Whether using the term is an effective rhetorical strategy, I
couldn't say.
|9.11.09 @ 2:43PM|#
"Good idea Zeitgiest. But it being Friday and me being in a good
mood despite thinking about government abuse all day, I'll envision
my "investment" as part of, say, Yosemite NP. Then when we're
collectively broke and I'm old and not getting SS or Medicare, at
least I'll have somewhere pretty to pitch my tent."
As someone who just visited Yellowstone and Grand Teton NP's on
Labor Weekend, I am inclined to agree. However, Yellowstone and the
Tetons (both hold up their inflated reputations BTW...amazing
places) were there without political schemes, whereas the bomb
crater (or the current version of Detroit) were not. Tee-hee.
Scarcity|9.11.09 @ 3:04PM|#
Dammit Zeitgeist, don't make me turn to drugs to maintain my
good mood! (Also, I spent an amazing week camping in my car in
Yellowstone and the Tetons several years ago; completely agree,
particularly if you are able to get off the Disneylandish main road
and enjoy the astounding solitude.)
RCD - I said that old age welfare payments and/or medical insurance
schemes can be designed to be sustainable. I didn't say that the US
can sustain it's current schemes with no benefits cuts nor tax
increases. Yer pickin nits. I was pointing out that the problem is
political, not fundamental. You can certainly oppose a perfectly
financially sustainable program (I absolutely would), even if ours
was adjusted to be so (which it could, but won't, be).
|9.11.09 @ 4:02PM|#
Sorry, Scarcity, I should have recognized your post as largely
rhetorical. Sometimes my Sarcasmometer(TM)* gets out of calibration
too. The sharp slap I give myself palm to forehead when I realize
my mistake usually gets back reading right for a while.
I see your point about the SS website quote now too. The text does
indeed tell the absolute truth but many, or even most, readers will
come away thinking, "oh, that's so nice there a securities backing
my FICA contributions. Genuine assets in my personal
account."
Actually the level of skill at obsfucating is true
magnificent.
And as to your "I said that old age welfare payments and/or medical
insurance schemes can be designed to be sustainable", I've often
joked that we can have Swedish levels of benefits as long as we are
willing to accept Swedish levels of taxation. But, hell, even the
Swedes got fed up with Swedish levels of taxation.
*I'd o' done one o' them cool TM in a circle dealys if I had mad
html skilz like some folks around here. :)
|9.11.09 @ 4:15PM|#
I said that old age welfare payments and/or medical
insurance schemes can be designed to be sustainable. I didn't say
that the US can sustain it's current schemes with no benefits cuts
nor tax increases. Yer pickin nits. I was pointing out that the
problem is political, not fundamental. You can certainly oppose a
perfectly financially sustainable program (I absolutely would),
even if ours was adjusted to be so (which it could, but won't,
be).
Yes, and even if it was financially sustainable, it would still be
fundamentally unjust - even by the logic of socialism. Any shift in
the ratio of retirees to workers inevitably changes the relative
payments workers have to make, and the political calculus behind
the tax rates involved. If you are born at the wrong time you get
screwed to pay for someone else's retirement, and then get screwed
again when the benefits get cut for yours.
Neu Mejican|9.11.09 @ 5:02PM|#
TrickyVic | September 11, 2009, 12:23pm | #
Let's don't assume that if companies no longer provide it as a
benefit, they will increase your pay.
QFT.
Of course, if we were really reforming the way insurance was
purchased, so that it was easier/possible/affordable for
individuals to buy insurance, then workers would probably negotiate
with employers between the cash and the benefit a larger percentage
of the time. And the saavy workers would get a better deal.
Neu Mejican|9.11.09 @ 5:11PM|#
I was pointing out that the problem is political, not
fundamental. You can certainly oppose a perfectly financially
sustainable program (I absolutely would), even if ours was adjusted
to be so (which it could, but won't, be).
I am fairly confident that it will be incrementally adjusted in
ways that make it sustainable. The trick for making the required
adjustments politically workable is to stop pretending that your
taxes pay for your benefits. The workers pay for current retirees.
Once you get there, then pointing out that workers may not need to
provide benefits to retirees that are richer than them gives
political cover for making the appropriate adjustments to the
system.
It seems.
|9.11.09 @ 5:18PM|#
If someone is getting new credit cards to payoff old credit
cards, is that a ponzi scheme?
Neu Mejican, I stand by that statment. It's foolish to assume
companies will do the right thing. Their first concern is their
bottom line, nothing wrong with that, so if they see an opportunity
to cut their costs by not giving you the full amount of your
insurance, they will.
It would be a safe bet that if your insurance increases, you won't
get a raise.
|9.11.09 @ 6:17PM|#
RCD - I said that old age welfare payments and/or medical
insurance schemes can be designed to be sustainable. I didn't say
that the US can sustain it's current schemes with no benefits cuts
nor tax increases. Yer pickin nits.
Point well taken, but I still think you can describe our current
and actual SS/MA system as a Ponzi scheme.
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