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Senate floor #011: The “hidden tax” of the uninsured

I have heard the following argument frequently and expect to hear it much more over the next few weeks. Here is Senator Baucus speaking on the Senate floor Monday:

Third, health care reform will work to repeal the hidden tax of more than $1,000 in increased premiums that American families pay each year in order to cover the cost of caring for the uninsured.

I am skeptical about the $1,000 figure, which is from an outside group, but let’s assume it’s accurate.

CBO estimates that the Reid bill would reduce the number of uninsured in 2016 (when the plan is in full effect) from 52 million to 23 million. That’s a 55% reduction in the number of uninsured.

If we’re generous and presume that the so-called “hidden tax” is reduced proportionately, then this indirect premium subsidy would be cut in half, not repealed.

Senator Baucus covered himself by saying “work to repeal” rather than “repeal,” but the impression left with the reader is that the Reid bill would eliminate this cost-shift. Others are not as careful with their language as Senator Baucus is here.

I have written before that I have always been skeptical of the cost shifting argument. Here’s the best response I’ve seen to my skepticism.

Whether or not cost-shifting is real, and whether or not the $1,000 figure is good, the Reid bill would at best cut that figure in half. More importantly, total health spending and costs to the insured will increase if we cover more of the uninsured with taxpayer-subsidized insurance. This sounds almost tautological, but it needs to be said: covering more people costs more money. Yes, there are some indirect savings through less use of emergency and charity care, but those savings are small compared to the gross outlays of subsidizing the purchase of health insurance for many others.

If you’re advocating a policy to subsidize coverage for people who are now uninsured, I hope you’ll argue that the benefits to those uninsured are worth the higher costs to others. Don’t argue that we’ll save money overall, or that it will financially benefit those who are now insured. This one isn’t a free lunch.

By | 2017-01-22T12:53:24+00:00 Wednesday, 2 December 2009|