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.