It is revealed that Mr. Nugent is now paying almost $1,300 per month for insurance. The story is framed as if he is going out to buy his own insurance in the private market, but it's clear that this is not exactly what is going on here:
SIEGEL: But isn't the essence of your problem right now that you're in the individual insurance market and that if we could find some way for you and the other people who have retired from the sheriff's office to be part of a group buy, a massive group buy, you could do a lot better than $1,200 to $1,300 a month?
Rep. NUGENT: Well, actually, that is part of the group buy. But we pay 100 percent of it. The government doesn't subsidize any portion of it. So that's why it's so expensive.
So when Nugent is talking about the $1,300 per month, he is talking about the full cost of the insurance that someone in the federal employee group pays. He is NOT talking about an individual policy. And the subsidy he mentions:
Rep. NUGENT: ...when you look at what they were going to charge me for family coverage, it was subsidized to the tune of almost 75 percent. And that's the actual cost that the federal government is paying for an elected official's health care.
What the Representative is describing here, is the fact that the federal government typically pays about 75% of the annual premium to cover a member of Congress. Where I come from that is not a subsidy, that is called compensation. Perhaps Mr. Nugent also thinks his congressional paycheck is a subsidy for his lawmaking activity, but to me that sounds like a salary.
Given this, the entire thrust of the story simply falls apart. That thrust being most folks can't afford $1,300 per month premiums on their current salary. What this leaves out is that the portion of a premium paid by an employer is also part of total compensation.
It's true most people can't afford to go from paying $1,000 a year to $15,000 a year for health insurance on their current salary. But if their salary increases by $14,000 a year, just like their insurance premiums, they are in exactly the same position!
It's a basic rule of economics, focus on the unseen as well as the seen. In this case no one seems to notice the part of Nugent's compensation that goes toward health insurance. They only account for his current cash salary and the fact that he has chosen to pay the full amount of his insurance premiums himself. This guy hasn't opted out of federal health care so much as he has engineered a pay cut for himself.
The fact that a member of Congress and an elite media institution can't appreciate these simple facts does not bode well for a successful transformation of the health insurance industry in this country any time in the near future.
2 comments:
So why is health care part of compensation at all? It would be far better if it was provided to everyone regardless of employment or status. If an employer provides it that cost will be transfered to the product. This makes it part of the cost of production and reduces competitiveness. As it is emergency care IS provided in this country and that cost is transfered to the insured. If health care was single payer and universal much of the administrative costs of our present system would be eliminated.
We pay twice as much for health care in this country for similar results.
Medicare for all would be a good solution.
Jeremy: "It's a basic rule of economics, focus on the unseen as well as the seen."
Bastiat pointed this out over 100 years ago, but unfortunately this basic rule is an inconvenience that is purposely ignored by Keynesians and supply-siders.
Dean: "So why is health care part of compensation at all?"
The short answer is firms had to do this after WWII in order to outbid for workers. Why did they do this? Because wage (a price like any other, for labor) controls made it illegal for firms to attract workers by offering higher pay. The central planners did NOT consider 'fringe benefits' to be among them. Voila.
"It would be far better if it was provided to everyone regardless of employment or status."
Provided by whom? The government can only redistribute what it taxes, prints, or borrows. You are saying producers must provide to non-producers.
"If an employer provides it that cost will be transfered to the product."
This is not even remotely true. For many kinds of products, the price is already set at the lowest it can be while maintaining profitability. This is the fallacy of the 'fair tax.'
"This makes it part of the cost of production and reduces competitiveness"
Reduced competitiveness = uniform higher costs. Always and everywhere.
"As it is emergency care IS provided in this country and that cost is transfered to the insured."
Hence the tremendous cost and complete price ignorance by consumers.
"If health care was single payer and universal much of the administrative costs of our present system would be eliminated."
What?
"We pay twice as much for health care in this country for similar results."
Not at all. We pay more because of artificially (read: governmentally) imposed barriers and the third party payer system. We also pay more because we lead the world in innovation.
We also don't fail to count dead infants, but that's an inconvenient fact that must be overlooked for stupefyingly inane comparisons like 'infant mortality.'
"Medicare for all would be a good solution."
Medicare is unfunded to well over 70 TRILLION dollars. What makes this a solution? Unless the problem you're trying to solve is rational policy making.
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