Health Care and Freedom

Health Care and Freedom - Medical Progress Today
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One of the many objections to President Obama's health carereform law echoed philosophical beliefs rather than explicitly appealing toempirical evidence; the refrain is that Obamacare is a government takeover ofour health care system, and as such, infringes on our freedom. While thereality isn't quite that gloomy, the law does significantly increase governmentinvolvement in health insurance - through subsidies, Medicaid expansion, andnew regulations for health care providers and insurers.

In a recentcolumn, Paul Krugman argues in his usual lofty tone that these concerns arelittle more than typical conservative attacks, trying to dismantle the benefitsthat the underprivileged truly need. Indeed, Dr. Krugman flips the conservativepoint around in defense of Obamacare:

Over time, as peoplecome to realize that affordable coverage is now guaranteed, it will have apowerful liberating effect.

This line of reasoning argues that those at the bottom rungof the income ladder, particularly those stuck in a job because they fearlosing health care coverage, are far from free now. Insuring access toaffordable coverage liberates people to make life decisions - such as changingjobs - without worrying about losing the valuable (and possibly life-saving)health coverage. The solution is, of course, to subsidize expansive,one-size-fits-all coverage for the poor-to-middle-income population.

There are, of course, merits to this argument. However, thereasonable conclusion is far from where Dr. Krugman arrives.

Addressing Obamacare within the context of freedom -particularly freedom to work where you please - requires going backhalf-a-century to the EconomicStabilization Act of 1942. This Executive Order, signed by FDR, forcibly"stabilized" wages and salaries, preventing companies from raising or cutting workers'salaries (it explicitly excluded insurance from this regulation). So, in orderto attract workers, companies began offering health insurance and deducting itscost from their taxes as they did with wages. 

Ironically, it's precisely this situation that creates whateconomists call (and what Obamacare would fix, according to Dr. Krugman) "joblock." When health insurance coverage is contingent on a particular job, anemployee would be less likely to leave that job for another that may not have thesame level of coverage, if any. Because of this, workers can be stuck in asituation with a job they'd like to leave, but are unable to because they wouldlose their health care coverage (this is especially a problem with lower-incomehouseholds that may not qualify for Medicaid).

Dr. Krugman's reasoning is that because Obamacareeffectively creates a market for nongroup health insurance (by mandatingcoverage and providing subsidies), people are liberated from having to stay ina job simply for the health coverage. This is certainly one way of looking atit, and it's very possible that Obamacare may marginally remedy job lock.

Let's consider another perspective, however. If the goal wasreally to "liberate" people from job lock, a more effective and direct approachwould be to eliminate the very deduction that creates job lock. Not only wouldthis nullify the incentive to remain at a job because of insurance coverage, itwould likely increase actual wages as companies would shift compensation awayfrom benefits and towards salary. With this extra money, along with basicreform to create a truly national health insurance market (think Obamacareexchanges, but on a national rather than state level, with one set of fairlyunobtrusive regulations for the country as a whole and a focus on catastrophiccoverage paired with HSAs), individuals could very well purchase coverage thatis appropriate for them without the massive subsidies under Obamacare.

Under this second perspective, people have more money intheir pockets at the end of the day, have more control over their healthinsurance, and are free to work where they want without fear of losing healthinsurance.

While we don't yet know exactly what impacts Obamacare willhave, portraying it as liberating workers is at best a stretch. It merelysubstitutes reliance on a job for reliance on government subsidies - notexactly "liberating." 

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