Health Care Crisis Deniers Underscore Shortcomings Of CBO
Health Care Crisis Deniers Underscore Shortcomings Of CBO
In today’s Wall Street Journal, health care crisis denier Sally Pipes writes, “the assertion that the costs of providing health insurance cripples American corporations in the global economy is simply wrong.” At first glance, Pipes’ argument sounds manufactured.
We’re all familiar with the numbers. General Motors spends $71 per worker per hour on health care, while Toyota spends only $47. Health care costs add $1,525 to the price of every GM vehicle, and the company spent $5.2 billion on health care benefits in 2004. It spends more on health care than on steel, and Starbucks pays more for benefits than coffee beans.
But while Pipes’ argument is counterintuitive, it’s not entirely wrong. At least not according to the Congressional Budget Office (CBO), the agency responsible for scoring Congressional proposals. Last week, while testifying before the Senate Finance Committee, CBO director Douglas Elmendorf explained that “for employers, health care is merely a part of total compensation“:
Although U.S. employers may appear to pay most of the costs of their workers’ health insurance, economists generally agree that workers ultimately bear those costs. That is, when firms provide health insurance, wages and other forms of compensation are lower (by a corresponding amount) than they otherwise would be. As a result, the costs of providing health insurance to their workers are not a competitive disadvantage for U.S.-based firms.
But this doesn’t tell the whole story. Health care costs are soaring faster than inflation, and instead of cutting worker’s wages, businesses are struggling to keep up with costs and are scaling back coverage. The National Federation of Independent Businesses reports that “58 percent of all small-business owners” are having a “hard time keeping up with the cost of health care.”
Consequently, “in 2010, 49% of employers will reduce their health benefit plan offerings. Forty percent of employers will increase adoption on consumer-driven health plans and two-thirds of employers will move more costs to employees.
Meanwhile, the business groups are clamoring for health reform, arguing that they can’t sustain growing health care costs:
- NFIB: NFIB agrees that the current growth in healthcare costs is unsustainable for the government and for small businesses alike.
- Business Roundtable: Rising health care costs affect all American workers, employers and the government. Rising costs impact job creation, diminish the nation’s competitiveness and reduce Americans’ ability to save for retirement
- Chamber of Commerce: A healthy workforce is the backbone of a strong economy, but spiraling health care costs curb the competitiveness of U.S. businesses and constrain tight family budgets.
The CBO’s analysis, while economically and theoretically sound, is completely divorced from reality. While wages may pay for health care costs in the long run, workers won’t accept smaller paychecks every time premiums increase. As Sen. Max Baucus (D-MT) pointed out at the hearing with Elmendorf, when considering the costs and consequences of health care reform proposals, Congress should not be “in the old situation where whatever CBO says is God.” “In my judgment you’re not God,” he said.
5 Responses to “Health Care Crisis Deniers Underscore Shortcomings Of CBO”
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This is one twisted logic post.
Dirty Max Baucus opined that taxing health insurance benefits might be a good thing. Providing the benefit is “too aggressive”, meaning workers get better coverage because the benefit is tax deductible. Where does Max work? Employers cuts benefits and increased premium sharig for nearly two decades.
Dirty Max was sponsored by the U.S. Chamber of Commerce, which desperately wants to shed that pesky health insurance benefit.
When for-profit hospital CEO’s like Denny Shelton parrot the Chamber line, America is in trouble. He did that two years ago, just before he signed on to advise Nance-Ann DeParle at CCMP Capital Adivsers.
Denny’s Triad Hospitals were one of eight for-profit healthcare firms with no facilities in Montana, but a major donor for Senator Baucus.
March 6th, 2009 at 1:08 pm“While wages may pay for health care costs in the long run, workers won’t accept smaller paychecks every time premiums increase.”
When Max makes the benefit taxable, it will result in lower paychecks or the dumping of the benefit to the individual, also meaning lower paychecks.
Logic in the WR post is missing.
March 6th, 2009 at 1:10 pmIt should be noted that a couple of years back the chairman of Ford said on NPR that one of the main reasons they had moved a lot of jobs to Canada was because it eliminated a huge issue with the unions when it came time to negotiate the contracts since there is no fight over health care premiums.
March 6th, 2009 at 1:43 pmJudge an actuary by: (1) the number of elements in the actuary’s simulation model. For example, does it include a superset of Knuth’s Stanford Graphbase economic model? (2) the term at which the actuary is capable of amortizing. If there is a ten year limit imposed on budget projections, do you trust the actuary who abides by it or the actuary who laughs at the ten year limit and talks instead about “seven generations?” (3) whether their numbers add up in accordance with the Bayesian law of statistics. You don’t want someone using “fuzzy” discrete category math for continuous or quantitative values if at all possible — a set of binary values might be preferable as a supplement to a category, if you see discrete sets; and (4) how well their past predictions have conformed to expected results. Can the actuary tell you how often 100-year floods actually occur, for example?
March 6th, 2009 at 2:43 pmP.S. spelling: “than on steal” should be “than on steel”
March 6th, 2009 at 6:58 pm