Health Insurance (Again)

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At California Progress Report, Anthony Wright takes issue with a point I made the other day:

She suggested that young people would “choose” to go uninsured, as Gov. Romney suggested. As I wrote in her comments section:

“Twentysomethings are a disproportionate piece of the uninsured, but it’s not because they don’t “want” coverage. It’s that they are more likely to be low-income, more likely not to be offered employer-based coverage, and less likely to qualify for public programs (which usually require being a parent, as well as very low-income.

Much of the differential in insurance coverage in age groups is accounted for if you hold for income and job-type. Think of the young person just starting their career, or working for McDonald’s or Wal-Mart.”

In other words, young people will become more uninsured under the McCain plan because they are more likely to be the entry level or lower-income workers impacted first as employers further drop coverage. Some might buy coverage with the tax credit, but many won’t be able to afford the difference, some would be denied for pre-existing conditions, and some would find that what they could buy with the tax credit (a $5,000 deductible plan, say) doesn’t make sense for a young person with no assets, who would go into bankruptcy before the coverage kicks in.

Let’s not blame the victims. The plan is still bad, just in a different way.

I think we are making the same point, but coming at it from different directions. Wright is absolutely correct that young people are disproportionately uninsured, and for the reasons he says. But that’s true under the current system as well.

Here’s what I meant with my suggestion that McCain’s plan might actually encourage people to drop their coverage voluntarily. Say you are 23 years old and in good health, and lucky enough to be working for an employer who provides you health coverage. Under McCain’s plan, the amount that your employer spends on your health insurance suddenly gets added to your taxable income. McCain provides a tax credit to offset that, and if it covers your additional tax liability, the chances are you would continue to take coverage under your employer’s plan. But if you live in a state where health care costs are high, or your employer has a particularly expensive plan (because the benefits are great, or because the workers in your company are sicker, or older, increasing the costs of their coverage), the tax credit might not cover it. In that instance, you would be tempted just to drop it and take your chances on not getting sick.

In economic terms, that would be a completely rational decision. Unless you get in a car accident. And the departure of a worker who is a relatively good risk would leave your employers with a workforce that is, on average, even more expensive to insure–which might ultimately force the company to drop coverage for everyone.