Thursday, May 9, 2013

Romneycare, Obamacare, and the Labor Market

Conventional wisdom says that we can make a good guess about the post-2013 labor market impacts of Obamacare just by looking at the post-2006 performance of the Massachusetts labor market as it began its state-level health reform (Romneycare).

If there were another country or region that had already tried Obamacare, we would learn a lot from the results. However, even though Obamacare and Romneycare are both forms of “health reform,” and both seek to reduce the number of people without health insurance, they are quite different in terms of the types and amount of labor-market incentives they create.

The conventional wisdom is incorrect because it ignores these fundamental differences:

  1. Obamacare is designed to subsidize high quality insurance plans for middle class people -- plans good enough for your U.S. Senator.  Romneycare only subsidized Medicaid Managed Plans with benefits of far less value than the typical employer health plan.
  2. Under Obamacare, middle-class families can get subsidized health insurance for their entire family, including their children.  As noted above, those plans are good enough for their Senator.  Under Romneycare, the new subsidized plans were for adults only; families wanting subsidized insurance for their children had to apply for Medicaid.
  3. For the first time under Obamacare (with a brief exception under the American Recovery and Reinvestment Act), most workers outside of Massachusetts will obtain health insurance subsidies only by leaving their job or getting fired -- the economic equivalent of unemployment assistance.  Romneycare did not introduce health insurance subsidies for the unemployed in Massachusetts, because the state has had such subsidies in place since the 1980s.
  4. Under Obamacare, middle-class persons leaving a job with health insurance are immediately eligible for subsidized health insurance.  Under Romneycare, there is a six month waiting period, and even then only if the persons do not qualify for Medicaid.
  5. Both Obamacare and Romneycare have per-employee penalties for employers not offering insurance but, accounting for the business tax treatment of those penalties, the Obamacare penalties are more than ten times larger.
  6. Romneycare was designed to leverage the special federal tax treatment of employer-provided fringe benefits.  Obamacare is designed to reduce the usage of that special federal tax treatment.
  7. Romneycare subsidies exclude families between 300% and 400% of the federal poverty line.  Obamacare subsidies do not.  Even if the two reforms had the same income cutoff, a larger fraction of Massachusetts would be above it because Massachusetts is a high income state.
  8. Employer-provided insurance was a lot more prevalent in Massachusetts before Romneycare than it is in the U.S. generally.  ie., even if we ignore the penalty amounts and subsidy values, the fraction of the U.S. labor market directly experiencing the Obamacare penalties and subsidies will far exceed the fraction of the Massachusetts population experiencing Romneycare penalties and subsidies. 

The combined difference between Romneycare and Obamacare is greater than the sum of the individual differences noted above, for the simple reason that the total incentive created by new programs is the product of takeup, eligibility, and the value of subsidies to each participant.

As a result of these differences, Obamacare does a lot more to encourage employers to drop insurance.  Under Romneycare, dropping employer coverage amounts to telling employees "It's time for your children to go on Medicaid, and for you to go on a Medicaid Managed Plan, and you probably won't use your family doctor anymore."  Under Obamacare, employees will be told "You can join the same health plan as your Senator AND save money."

Obamacare creates a massive new implicit tax on work.  Romneycare probably created a new implicit tax, but, for the reasons noted above, the Obamacare implicit tax will be one or two orders of magnitude greater.


To learn more about Romneycare, take a look at the book The Great Experiment.

22 comments:

muzammal khan said...

The time expenses of childcare are also a aspect restricting young maternity. Youngsters are motivated to complete school and greater levels of education, and clients. bubblegum casting

Yasir Khalid said...
This comment has been removed by the author.
Yasir Khalid said...

When working on Tutorial 3 last semester I didn't like having to update the time by calling methods through bluejay so I quickly made some ugly textures in paint and attached them to the box-dude model and used a basic game loop from the lessons later on in the course to make the clock go. is bubblegum casting legitimate

Yasir Khalid said...

One feature of the unemployment insurance program is that it specifies an exhaustion date: a person stops receiving benefits when he or she starts working again, or reaches the exhaustion date (often a fixed number of weeks after being laid off), whichever comes first. web design manchester

Yasir Khalid said...

The way certain topics or stances are questionable in female's composing but not in male's. But that is not the same as a self-conscious poetic custom. It’s not like, say, being an Irish poet. accountant london

Yasir Khalid said...
This comment has been removed by the author.
Yasir Khalid said...

A individual prevents getting advantages when he or she begins operating again, or gets to the fatigue time frame (often a set number of several weeks after being set off), whatever comes first.
just cloud review here

Yasir Khalid said...

In other words, unemployment benefits shrink the economy to some degree, but shrinking the economy a bit may be a price worth paying. macys $10 coupon

Yasir Khalid said...

He certainly does. Of course he obtained his lower tax brackets by using deficit spending and increasing the national debt. Add back in the interest payments we'll be making and I bet Bush actually cost taxpayers far more than Clinton ever did. best tasting e liquid

muzammal khan said...

One beauty of using Dfx as a Intelligent Filter is that you can go returning and change the configurations whenever you want. This versatility is very useful if. anlæg af have

muzammal khan said...

Figure out hardly restricted sentence, ransliteration or line main idea enigmas as distribute of your details immediates as well dogmasUnfortunately. sony reparation kalundborg

muzammal khan said...

le marché black du trafic d'ivoire qui prolifère sur le Web. Des défenses prélevées. Best Adjustable Dumbbells

muzammal khan said...

Hay que ensayarnos en el sacrificio, para si la patria nos reclame. Hay que aprender. immigration lawyers

salman khan said...

The chart shows the part of individuals receiving lack of profession advantages who started working again, as a function of the number of weeks until. cheap tickets to hawaii

salman khan said...

The chart shows the part of individuals receiving lack of profession advantages who started working again, as a function of the number of weeks until. cheap tickets to hawaii

salman khan said...

The Buddhist way to all of this is quite genuine, really. Buddhism understands of that from the perspective of ego the opportunities of lack of way of life is generally difficult. The ego cannot think about being deceased. Agen Togel Online

salman khan said...

In fact, lack of way of life is an everpresent reality; it way of life at the boundary of self and ego and explains our way of life. online

steammopreviewszone said...

What to Look for in a Steam Mop : A reputable brand, Weight, Handle design and length, Mop head, Indicator Lights, Covers, On and off switch, Warm-up time, Attachment. Source steam mop reviews

Yasir Khalid said...

I am not disagreeing that Shrub does not have reduced taxation. He certainly does. YouTube

Yasir Khalid said...

Quadrature couplers and several junctions are inactive components that can be developed and produced with fairly wide bandwidths, great solitude between slots, and relatively low decrease in the alerts, above the normal reduction in energy experienced due to indication sections. http://www.youtube.com/watch?v=o-RmcvHJv-8

salman khan said...

Logistically it needs a chance to exchange out a professional to a new van and we do not want to overcome ourselves, although the earlier we change the earlier we begin preserving. for more

Yasir Khalid said...

Quadrature couplers and several junctions are inactive components that can be developed and produced with fairly wide bandwidths, great solitude between slots, and relatively low decrease in the alerts, above the normal reduction in energy experienced due to indication sections. http://pando.com/2014/06/12/paths-dave-morin-gives-up-on-lasting-memories/