Madison’s liberals spend a lot of time talking about helping the poor and improving the lives of the poor. This is, bluntly, a load of hogwash.
The Capital Times published another article about Wisconsin Health Care for All and their plan to offer health care to everyone in the city of Madison. In this article, I learned that most of the group’s members are former Kerry campaign members. They were, understandably, depressed after Senator Kerry’s loss in the 2004 election:
“We decided that we wanted to keep working,” said Barbara Spar, who teaches human resources management at Madison Area Technical College. “We wanted to be for something. We wanted to use our energy instead of being depressed.”
They decided to use their energy to implement universal health care on a local level — Madison, specifically. As I wrote previously, the group wants to implement their plan by requiring all businesses in Madison to pay a portion of their payroll into an insurance fund. Businesses that already provide healthcare will be exempt from this new “fee”.
The group boasts that they have an economist as one of their leaders: John Kalfayan. Therefore, group members are certain that their plan will not hurt businesses in Madison or lead to layoffs. Quite possibly they’re right. If they are able to implement their plan, I have every confidence that no existing businesses will close. Furthermore, I’m fairly confident that no one will be laid off as a result of this plan.
That’s not to say that this plan will good for everyone. This is one small group of people that would be hurt by this plan: those who have few marketable job skills. As an economist, I would expect that Mr. Kalfayan is familiar with the idea of “marginal utility”. Simply put, marginal utility is the value that someone gets from the last unit of something. Think of it this way: for a hungry man, a single burger has great value. A second burger would be appreciated, but a little bit less than the first burger was. A third burger would be okay, but he might not miss it if it wasn’t there. A fourth burger might even be ignored. The fourth burger then has a much lower marginal utility than the first burger did.
The same principle holds true in business. As businesses hire more employees, each employee will have a lower marginal utility to the business. If it is too expensive to hire an additional employee (for instance, if the employer must provide healthcare in addition to minimum wage), the business may choose to make do with the employees they already have. Thus, while this healthcare plan may not cause any layoffs it will, quite possibly, prevent new jobs from being created.
There is another factor that will come into play. As employees become more expensive, businesses will choose to hire only the best employees. If this new “healthcare fee” causes the minimum wage to rise from $5.50 an hour to $5.94 an hour, the employer will only hire employees who can contribute more than $5.94 an hour to the bottom line. This means employers will only hire someone who is fully trained and competent.
What about less qualified applicants? What about people who might have had trouble holding down a job in the past or who have limited work experience or who simply require a lot of on the job training? The answer is simple: it will be much harder for them to find work. They will be passed over in favor of applicants who can justify the higher pay scale.
Implementing this healthcare plan would remove the lowest rung from the economic ladder. Implementing this healthcare plan would lead to businesses squeezing out applicants who are inexperienced or under-qualified. For these people, Wisconsin Health Care for All is not offering a choice of a job without healthcare benefits or a job with healthcare benefits. No, for these people, Wisconsin Health Care for All only offers the choice of a job with healthcare or no job at all. Which do you think a desperate man would prefer: a job without healthcare or no job whatsoever?
I know which option I would prefer. The simple fact of the matter is, this plan would neither help the poor nor make them better off. It is a purely cosmetic fix that will have large, hidden repercussions. While Madison’s liberals will pat themselves on the back for the workers they’ve helped, they’ll be completely oblivious to the people they’ve hurt.
I’d rather focus on why Madison’s businesses can’t voluntarily offer health insurance. I have a sneaking suspicion that it might have something to do with the fact that only four states in the nation have higher taxes than Wisconsin. Unfortunately, that problem will only be made worse by taking a new payroll “fee” from local businesses.
2 Comments
Mr. Martin only read the Capital Times article about the universal health insurance plan proposed by the Madison grassroots group. Going to the web site http://www.wisconsinhealthcareforall.org would give every reader a better understanding of what we propose. Unlike Mr. Martin’s take on it, universal means universal. That is, those individuals who are not employed are also included in the plan with premiums based on their ability to pay. The intent of the plan is to cover everyone who lives or works in Madison. Of course, there are those who would play the class card with that information. They would say “What! Subsidizing the poor! That means that some people would pay, as part of the administrative costs, the share for the poor.” Yes, that is how social insurance works. For instance, income tax is like that.
What we propose will provide health insurance for everyone in Madison. Those who have family incomes above 350% of the poverty level will pay full price and it will still be less than what is available now for individual or small group policies. The small business community has been asking for a group plan of this size for a long time. This way they, like individuals, will have access to affordable insurance that is stable. That means businesses will have less costs and be more competitive and the owners will be able to afford insuring themselves and their own families.
Interesting article, stimulating dialogue and to say the least; a very controversial topic - “insuring the uninsured.” Here in Ohio, we have more than 400,000 full-time workers without an employer sponsored health plan. That does not include the untold number of part-time, seasonal, 1099 type and employees or those languishing in 6 month waiting periods until their coverage takes effect. Now, with a Democratic Governor, I fully expect similar proposals formerly on the back burners to make their way to front and center. I’m all for covering the uninsured, but not with increased employer payroll taxes from only those employers who don’t sponsor a traditional group health plan. Why? Well, first of all, an old strategy called “cost-shifting” comes into play whenever one segment of the population has an advantage over the other - in this case, the employers who don’t offer group health insurance vs. those that do. For those that do, their cost will most likely be significantly higher as they are more apt to be based on their group’s claims experience in parr or in whole. For those that don’t offer group health insurance and therefore must participate in the local government program, their costs will most likely be lower as premiums for such coverage would most likely be community rated and benefits may not be as rich. If this were to occur then the employers who do pay for health insurance from the private/commercial market would simply opt to drop their plans and join their government health insurance pool which, by the way, may be the “unintended” consequence of creating such a plan. Do I have the solution? No, I don’t think so, but I will state this; 70% to 90% of all health care costs in this country are directly related to poor lifestyle behaviours which if modified or changed would have the greatest impact on the cost of health care than any one, or combination of plans, could bring about. Instead of investing time, money and energy into how to force employers to pay for health insurance, why not create ways to force employees to think about their own health and pay a greater share of the financial consequences of makeing poor choices and, being financially rewarded for making better, healthier choices? Thanks! Mark