Topic: Health Care & Welfare

Emergency UI Benefits: Reasons Against

The Senate is considering legislation to revive the emergency unemployment insurance program. These federally funded benefits were in place from mid-2008 to the end of 2013.

Federal policymakers like to spend money helping people in need, but there are large and less visible costs to such welfare legislation. Here are some reasons why new UI spending is not a good idea:

  • The U.S. economy has been out of recession and growing for more than four years. The unemployment rate is down to 7 percent and jobs are being created. The time for “emergency” UI benefits has passed and it’s time for us to go back to the regular benefit structure of 26 weeks. We all want the economy to grow faster and create more jobs, but the way to do that is to enact free market policies, not more welfare spending.
  • There is no free lunch. Extending UI benefits for another year would cost approximately $25 billion, which is money the federal government does not have. It would have to borrow every cent of the added spending, and thus impose those costs (plus interest) on working Americans in the future. Proponents of more UI spending point to sad stories of individuals out of work, but there will be far more pain inflicted on millions of Americans in coming years unless we get federal spending and debt under control.
  • Large UI benefits are counterproductive because they push up unemployment, as discussed here. Long-term unemployment has been particularly high in recent years. Meanwhile, employers may have a bias against hiring people who have been unemployed a long time. The upshot is that if generous UI benefits discourage people from taking less-than-optimal job offers early on, it ends up hurting them later when it is harder to find any job. Government “help” often backfires.
  • States can fund their own benefits. Nevada Sen. Dean Heller wants to “shrink the size” of the federal government, yet he is co-sponsoring legislation to revive emergency federal UI benefits because his state has high unemployment. But there is nothing stopping Nevada from funding its own extra UI benefits, and thus no need for Heller to try to impose the cost of his state’s problems on the other 49 states.
  • From a political perspective, it would be a big mistake for Republican leaders to go along with the push to spend more on UI. GOP leaders already caved in with more spending on the recent Ryan-Murray budget deal. If they cave in on UI, cave in on the costly farm bill, and cave in on upcoming debt-limit legislation, there would be no reason for fiscal conservatives to show up and vote Republican in November.    

Our current UI system is economically damaging, hugely complex, and fraud-ridden. Rather than adding to the system’s problems with higher benefits, policymakers should consider moving to a pro-growth savings-based UI system, as Chile has done.

“We have to pass the bill to find out what’s in it”

The Affordable Care Act is like a big box of Christmas presents: you keep rummaging around in the peanuts and find hidden treasures. Or hidden costs, as it were. Here’s one I hadn’t heard of until today:

Office workers in search of snacks will be counting calories along with their change under new labeling regulations for vending machines included in President Barack Obama’s health care overhaul law.

Requiring calorie information to be displayed on roughly 5 million vending machines nationwide will help consumers make healthier choices, says the Food and Drug Administration, which is expected to release final rules early next year. It estimates the cost to the vending machine industry at $25.8 million initially and $24 million per year after that, but says if just .02 percent of obese adults ate 100 fewer calories a week, the savings to the health care system would be at least that great.

The rules will apply to about 10,800 companies that operate 20 or more machines. Nearly three quarters of those companies have three or fewer employees, and their profit margin is extremely low, according to the National Automatic Merchandising Association. An initial investment of $2,400 plus $2,200 in annual costs is a lot of money for a small company that only clears a few thousand dollars a year, said Eric Dell, the group’s vice president for government affairs.

“The money that would be spent to comply with this - there’s no return on the investment,” he said.

In my experience, vending machines shuffle their offerings fairly frequently. If the machine operators have to change the calorie information displayed every time they swap potato chips for corn chips, then $2,200 seems like a conservative estimate of costs. But then, as Hillary Clinton said when it was suggested that her own health care plan would bankrupt small businesses, “I can’t be responsible for every undercapitalized small business in America.”

Obamacare’s War on Civil Society: It Is Big Government or Nothing

Washington offers many opportunities for schadenfreude, that wonderful German word which means to enjoy the misery of others.  The realization of liberal professionals who voted for Barack Obama that they will be forced to spend more on health insurance was one of those moments. 

Reported the New York Times: “Many in New York’s professional and cultural elite have long supported President Obama’s health care plan.  But now, to their surprise, opera singers, music teachers, photographers, doctors, lawyers and others are learning that their health insurance plans are being canceled and they may have to pay more to get comparable coverage, if they can find it.”

It’s not that they didn’t have policies that they liked and wanted to keep.  It seems that the policies were too good. 

Explained the Times:  “The rationale for disqualifying those policies, said Larry Levitt, a health expert at the Kaiser Family Foundation, was to prevent associations from selling insurance to healthy members who are needed to keep the new health exchanges financially viable.”  Unfortunately for these privileged Obama supporters, most make too much money for even the generous subsidies available under the exchanges.

As I point out in the American Spectator online:

Admittedly, it takes a few moments to stop laughing after reading this article.  If you believe in social justice and all that, you shouldn’t whine about the government running up your costs to fulfill its elaborate social engineering plan.  After all, that’s the purpose of liberal government—create Rube Goldberg policy contraptions that promote some higher good.  So what if you get run over in the process?  Eggs and omelets as the old Communists liked to say.

Still, it is striking how government is destroying civil society institutions which meet real human needs.  Even stranger is the possible federal attack on charities and hospitals which are paying the premiums for low-income patients. 

For instance, the Los Angeles nonprofit A Better LA has begun to subsidize health insurance for low-income people through the California state exchange.  Some hospitals are doing the same.  Melinda Hatton of the American Hospital Association told the Journal:  “We thought it was the kind of thing the Affordable Care Act would really support and encourage.”

Well, no.

Insurers are counting on covering well-off, and presumably healthier, professionals, not less well-off, and presumably less healthy, nonprofessionals.  Reported the Journal:  “Help from nonprofits or hospitals could speed the arrival of less healthy customers into the exchanges, outpacing the arrival of younger, healthier people.”

The administration has yet to state a clear position.  But Health and Human Services has indicated its “concerns with this practice, because it could skew the insurance risk pool.” 

Government is threatening civil society institutions, ranging from charitable to business, which are aiding the poor, disadvantaged, and uninsured!  True, the aid process is disorganized, decentralized, uncertain, and uneven.  But that is society. 

This complex interplay is what makes community.  Discerning and addressing needs, organizing diverse approaches, and responding to the people in front of you is what genuine compassion, which once meant “suffering with,” is all about.  David Beito has detailed the once important role of mutual aid societies, and how they were replaced by “impersonal bureaucracies controlled by outsiders,” such as Obamacare health exchanges.

Ultimately, Barack Obama and his allies have the world backwards.  They believe that government trumps society, and the solution to any problem should start in Washington.  Individual choice and community relations are unimportant.

Professional associations and charities demonstrate that society should be the starting point.  People should be not just allowed but encouraged to organize to solve problems.  Not only are individual lives bettered, but the sinews of community are strengthened.  Instead of supplanting other institutions, government should act as the ultimate backstop to help meet social needs which are not otherwise addressed. 

As my colleague David Boaz observed, Obamacare is “another example of a big-government, left-liberal policy that is pushing people away from cooperation and community and toward atomistic individualism.”  It’s quite an accomplishment.  Who says President Obama is a failure!?

Lessons from Dutch Welfare Reform

Welfare advocates regularly urge Americans to look to the European welfare state as a model. At least in the case of the Netherlands, they might be on to something.

The Dutch have just announced a massive reform of their welfare system, designed to reduce dependency and put a new emphasis on work. For example, welfare applicants will now be required to prove that they spent at least 4 weeks actively searching for a job before they become eligible for any assistance. And once they begin to receive benefits they will either have to work or perform volunteer community service. Dutch welfare recipients would be required to take available jobs even if they had to move or commute up to three hours per day.

Given that just 42 percent of U.S. welfare recipients are engaged in even broadly defined work activities (including job training, college, or job search), and that an attempt to restore work requirements to the food stamp program has been met with a storm of resistance, the Dutch appear to be much more pro-work than we are.

Other reforms would reduce benefits by treating families as a single unit, rather than as separate individuals. For instance a mother with two children would receive a single payment rather than three separate payments. The combined payment would be less, based on the assumption of “shared expense.”

According to the Dutch government, the reforms will ensure that welfare is seen as “a safety net, rather than a right.”

What the Dutch apparently understand is that, in the long run, welfare dependency hurts the very people it is designed to help. Making poverty a bit more comfortable may be satisfying in the short term, but the real goal should be to reduce the number of people in poverty. To do that requires people to take more responsibility for their own lives.

That’s a lesson in European compassion that the U.S. could learn from.

Obamacare’s Atomistic Individualism

Lots of people are engaging in mockery and schadenfreude over the New York Times report that 

Many in New York’s professional and cultural elite have long supported President Obama’s health care plan. But now, to their surprise, thousands of writers, opera singers, music teachers, photographers, doctors, lawyers and others are learning that their health insurance plans are being canceled and they may have to pay more to get comparable coverage, if they can find it.

It’s a liberals’ nightmare:

It is not lost on many of the professionals that they are exactly the sort of people — liberal, concerned with social justice — who supported the Obama health plan in the first place. Ms. Meinwald, the lawyer, said she was a lifelong Democrat who still supported better health care for all, but had she known what was in store for her, she would have voted for Mitt Romney.

It is an uncomfortable position for many members of the creative classes to be in.

“We are the Obama people,” said Camille Sweeney, a New York writer and member of the Authors Guild. Her insurance is being canceled, and she is dismayed that neither her pediatrician nor her general practitioner appears to be on the exchange plans. What to do has become a hot topic on Facebook and at dinner parties frequented by her fellow writers and artists.

“I’m for it,” she said. “But what is the reality of it?”

But I noticed something that I haven’t seen any comments on: the way the Affordable Care Act is forcing people out of group plans and forcing them to enter the health insurance system as individuals:

They are part of an unusual, informal health insurance system that has developed in New York, in which independent practitioners were able to get lower insurance rates through group plans, typically set up by their professional associations or chambers of commerce. That allowed them to avoid the sky-high rates in New York’s individual insurance market, historically among the most expensive in the country.

But under the Affordable Care Act, they will be treated as individuals, responsible for their own insurance policies. For many of them, that is likely to mean they will no longer have access to a wide network of doctors and a range of plans tailored to their needs. And many of them are finding that if they want to keep their premiums from rising, they will have to accept higher deductible and co-pay costs or inferior coverage.

Libertarian scholars stress the importance of civil society. I wrote about it in Libertarianism: A Primer. David Beito wrote a whole book on the mutual aid associations that brought people together in social groups were replaced by “impersonal bureaucracies controlled by outsiders.” Tocqueville and his modern followers extolled the virtues of “mediating institutions” that stood between the lone individual and the all-powerful state.

Now it seems that Obamacare, perhaps unintentionally, is destroying some of those mutual aid organizations, those mediating institutions, in order to force individuals to deal directly with the state and/or the vast insurance corporations.

Left-liberals often accuse libertarians of favoring “atomistic individualism” – an absurd charge about people who regard cooperation as so essential to human flourishing that we don’t just want to talk about it, we want to create social institutions that make it possible. But now it seems we have another example of a big-government, left-liberal policy that is pushing people away from cooperation and community and toward atomistic individualism.

Is This Time Different for Health Expenditure?

In a new working paper, economists Amitabh Chandra (Harvard), Jonathan Holmes (Harvard), and Jonathan Skinner (Dartmouth) (CHS) examine whether the recent slowdown in the growth of U.S. health expenditure reflects the Great Recession or Obamacare, taking issue with both explanations:

[H]ealth expenditure growth in the depths of the recession was nearly identical to growth prior to the recession. Nor can the Affordable Care Act (ACA) … take credit, since the slowdown began prior to its implementation.

Instead, CHS

… identify three primary causes of the slowdown: the rise in high-deductible insurance plans, state-level efforts to control Medicaid costs, and a general slowdown in the diffusion of new technology, particularly in the Medicare population.

As to whether the slowdown will continue, CHS 

are more pessimistic, and not entirely because a similar (and temporary) slowdown occurred in the early 1990s. The primary determinant of long-term growth is the continued development of expensive technology, and there is little evidence of a permanent slowdown in the technology pipeline.

CHS’s bottom line, therefore, is that

over the next two decades … health care costs will grow at GDP plus 1.2 percent; lower than previous estimates but still on track to cause serious fiscal pain for taxpayers and workers who bear the costs of higher premiums.

WSJ: Dems Nuked Filibuster to Defeat Halbig v. Sebelius

Wall Street Journal editorial surmises that Senate Democrats eliminated the filibuster for non-Supreme Court judicial appointments so they could pack the U.S. Court of Appeals for the D.C. Circuit with judges that would block an important ObamaCare case called Halbig v. Sebelius:

Democrats surprised Republicans in November with how quickly they dismantled the filibuster, and we are beginning to see why. Another major challenge to ObamaCare is being heard by a D.C. Circuit district judge, this time concerning whether subsidies can be delivered by the federal exchanges. Then there’s the new IRS proposed rule curtailing the political speech of 501(c)(4) groups. This rule will also probably make its way to the D.C. Circuit, and blocking GOP-leaning groups from politicking is part of the Democratic strategy for holding the Senate in 2014.

Democrats figure they have a better chance to win if they have more nominees on the appeals court—either in a three-judge panel or en banc. The plaintiffs could appeal to the Supreme Court if they lose, but you never know if the Justices will take a case.

Case Western Reserve University law professor Jonathan H. Adler and I laid the groundwork for Halbig and three other cases challenging President Obama’s attempt to tax Americans without congressional authorization in this law-journal article.