That money that's currently going from wages to health care won't be redirected to workers...it'll be pocketed. That's the political poison. If that 10% VAT were matched with a 10% or so increase in wages, that would be one thing. But I really doubt that's going to happen.

The other thing is that a voucher plan does nothing about the duplication of bureaucracy problem. It's good for getting everybody insured, but in terms of keeping down costs, it just won't work.

I think that most people know that their total wage is cash plus benefits, and if their employer no longer has to pay for health insurance, they can now afford to pay the savings in the form of cash wages.

Of course the employers will balk, but competition in the market for workers will cause cash wages to go up. Think of like this, if workers in a given market get say $40,000 plus $10,000 in health insurance, then the effective market wage is $50,000... and employers will have to pay that to get workers whether it's in the form of cash or benefits.

I think that hoping that competition for workers will pick up the slack is probably pie in the sky. Especially for lower folks on the ladder, there's more people who want jobs than there are jobs. Thusly, wages will be bid down, not up.

That's probably a temporary thing, however, with the impending retirement of the boomer generation, however as it stands right now it'll be a huge political problem.

85% may have health insurance, but 85% are happy with it? Seriously? There have been times in my life when I've been satisfied with my health insurance, but not right now, by a long shot. We are already paying 10% of our pre-tax wages for insurance, but it covers almost nothing. If a 10% VAT gets me better coverage, I'll be first in line.

That money that's currently going from wages to health care won't be redirected to workers...it'll be pocketed. That's the political poison. If that 10% VAT were matched with a 10% or so increase in wages, that would be one thing. But I really doubt that's going to happen.

Ummm...why do you believe this? Do you have some secret knowledge of how capitalism and/or labor markets work that the rest of us are not privy to?

I image not.

Clearly you think that labor prices are currently maintained by a large cartel of evil corporations, rather than by the free market. I don't subscribe to your theory, however.

I think that hoping that competition for workers will pick up the slack is probably pie in the sky. Especially for lower folks on the ladder, there's more people who want jobs than there are jobs. Thusly, wages will be bid down, not up.

The population you refer to here CLEARLY belongs to the 15% that currently do not have health insurance. Nice Straw Man, though.

You are suggesting that once VAT is enacted, and employers do not have to pay health insurance, they will LOWER wages? What? Why? If things are as you say they are, then why are they offering health insurance NOW? Clearly (since you know something about the demand for work that we don't), labor is in such large supply that they could just do away with insurance and pocket the money now.

Good post-- I agree that the politics of good health care reform ARE difficult.

This is true for any plan with real cost controls, but it's not to be underestimated, and a clear political strategy has to exist for overcoming these forces. As of yet, I'm not seeing it.

Well, all but one. A consumer-oriented plan. This is been a long-standing point of mine-- that cost control packaged as "your money, your choices, your doctors, your health care" has the potential to effectively push back against many stakeholders. If a consumer plan is enacted in a smart way, one that would get health policy folks on board (rather than conclude that too much risk is being shifted to an individual level), there would be limited effective attacks on this type of plan. In many ways, its a hybrid of a voucher plan, that would allow people to pocket part of their voucher for the future/co-pays/etc and rather than forcing Health Board assessments onto benefit plans, its done in a way that incentivizes cost-effectiveness and preserves choice rather than mandate it.

The real key for progressives, is to start owning the consumer-directed health care, because the Republican distortion of CDHC hasnt been good. The politics of CDHC, though, could be great if done the right way.

Of course the employers will balk, but competition in the market for workers will cause cash wages to go up.

Well, for some workers, maybe, and for others, probably not. But even were the economy booming, unemployment low, and workers scarce, what makes you think the average American employee (you know, the one who is always getting screwed by The Man and is therefore increasingly cynical) believes he/she will get a raise?

Ezra's right: this plan has a lot to recommend it from a policy perspective, but stands zero chance of being enacted in that polity known as the United States.

85% may have health insurance, but 85% are happy with it? Seriously?

I was a tad skeptical of this particular Ezra factoid, too. But it fact large majorities of Americans have consistently said in polls they're happy with their health insurance. Maybe that 85% is a bit lofty, but it is a large majority, whether those of us who hunger for reform like it or not.

Hasn't Obamamania taught you anything???

The Democrat party is no longer about controlling costs...were all into what's best for us.

Public campaign fincance not working for you, hey, start your own private under the table fundraising and make 3-4 times as much money. OBAMA SAYS, PRIVATIZING IS THE WAY TO GO!!

Got problems with your public education system, Obama says PRIVITIZE THAT PUPPY and I'll send my kids to private school thank you very much. Obama says, PRIVITIZING IS THE WAY TO GO!

We've come so far since 2000 when our platform praised and supported McCain-Feingold to the hilt, we're now the party of the PRIVATIZERS!!

So Ezra, get on board, you want good healthcare, PRIVATIZE THAT PUPPY!

Actually, in a way, this post shows you the evil inherent in the worst of all the plans, the individual mandate.

You see, Ezra notes that "stakeholder opposition" is a key reason you can't get anything passed. The individual mandate is a way to keep all the stakeholders-- employers and insurance and pharmaceutical companies-- happy by forcing the burdens of the health care reform onto the American public.

In other words, because politicians and health reformers lack the guts to fight their campaign contributors, the little guy gets screwed. It's an almost perfect encapsulation of what is wrong with Washington. Thankfully, it will never pass.

Dilan,

Do you believe we are really ahead trading in employers that usually care at least a little for their employees, insurance companies that care about efficeny and cost containment and Rx companies who for a fat profit create mircles for politicans who care only about the next election? Unless it will win them votes Congress doesn't care how mush is lost to fraud or waste. They don't care how poor the quality or access is. The only thing that motivates a politican is their career.

I'll stick with what we got any day over the alternative of government healthcare

In other words, because politicians and health reformers lack the guts to fight their campaign contributors, the little guy gets screwed.

No, politicians lack the guts to fight the little guy, because it is the little guy (in large majorities) who thinks he's not getting screwed with regard to health insurance, and it is the same little guy who has the power to put the politician out of work.

Our politicians are highly skilled experts at the use of the proverbial moistened finger in the wind. Lots of policies good and bad -- the mortgage interest deduction, farm subsidies, Social Security, absurdly low gas taxes -- are firmly in place not because of powerful lobbies (don't you think the hugely powerful financial services lobby would just love to get Social Security privatization enacted?) but because the policies in question are extremely popular with people who vote.

Ezra,

Have you read Emanuel & Fuchs' 2005 article in Washington Monthly? In it, they make a case that most of the major stakeholders - doctors, hospitals, businesses labor unions, even large insurers -would benefit from the reforms, and their support would be enough to overcome the opposition of small insurers and anti-tax conservatives.

Of course the employers will balk, but competition in the market for workers will cause cash wages to go up.

Yes it will, assuming that all labor markets are competitive auction markets and there is full employment.

The second is really the kicker, since if there is not full employment, that creates the situation where there are workers with a marginal product that is greater than their potential contribution to output, but since there is no effective demand for that output, their marginal value product is $0, and they will not be employed at any wage.

That creates a negotiation market with a range between the maximum that the employer is able to afford to pay and the minimum required to attract sufficient workers, and where the wage ends up within the bargaining range depends, obviously, on bargaining power.

So this statement is a claim that, on average, the relative bargaining power between employers and employees in this country is at the position where employees will, on average, be able to recoup the reduction in health care plan costs as wage increases.

This is a claim that requires much more substantial support in terms of evidence and argument than the equivalent claim for competitive auction markets, where it is only imperfect information that could get in the way of cash wages very quickly rising to replace the cost of the benefits.

Employees who are highly valued are most likely to get a raise equivalent to their former benefits.

As someone on this thread noted, these are likely to be employees on the top half of the income ladder.

Employees on the bottom half (or bottom quarter) of the ladder are more likely to be viewed as "replaceable," and so less likely to get the raise.

But, as Emanuel points out they are also less likely to have employer-sponsored insurance. Today, they are either uninsured, or have bought low-cost insurance on their own that is not very good.

So even if they don't get the raise, they come out winners. Say, a median income
family earns $49,000 and spends all of it. A 10 percent VAT tax means that they pay $4,900 in taxes.

In return they get a voucher that entitles the family to health care insurance worth roughly $13,000. (Under Emanuel's plan, the benefits are better than medicare and 85% of employer-based insurance. There is no deductible and co-pays are minimal)

Now look at an upper-middle class family earning $125,000. If they spend all of it, they pay $12,500 in VAT taxes.

Today, they probably have employer sponsored insurance, and in their income bracket the employer probably pays 2/3 of the cost. (This is the major reason why "better paid workers" like their employer-based insurance so much.. Among "better paid workers" (earning over $60,000) 15% pay nothing toward their premium. Their employer pays the full amount.)

Okay, so now they no longer need to pay 1/3 of their premium (roughly $4,000 for a family), but they are paying $12,500 in VAT taxes.
This leaves them $8,500 in the hole.

EXCEPT, these are the workers who are most likely to get a raise equal to what their employer has been been paying toward their premium ($8,000).

So now they're down only $500. And that's without factoring in the likelihood that they'll get a big break on their state income taxes.

Under Emanuel's plan, states will no longer have to pay for health care for their employees (like everyone else, state employees will get vouchers from the federal government). States also won't be paying for Medicaid and SCHIP (going forward, they will be rolled into the national plan.)

So states are likely to announce tax cuts.

When you look at how the VAt money is distributed
and the effect in terms of higher wages and lower state taxes, it's a win-win for nearly everyone.

It’s always funny when people that have no understanding of insurance or economics wax on like they have a clue, Ezra and Maggie come to mind.

Um Maggie have you heard of income taxes? Dependning on which state you live in they can easily equal 25-30% of your income. So that $8000 raise is really only around $5600. You seem to also be under the mistaken impression there are no dual income families in this country.

Your numbers are great for those living in MA, NY, and CA or other states where Liberals have totally destroyed the Health Care systems but what about the 80% of Americans that live in states with more reasonable insurance cost? Average healthcare utilization per non Medicare individual is around $3500, assuming 2.5 times for family your 8750. The average American family doesn’t pay anything near $13,000 for coverage. After employer subsidy it’s lower then that. Besides being convenient for trying to prove your point your calculations are worthless.

There are only 3-5 million working people that don’t have insurance because they can’t afford it. That is 1 to 1.5% of the population. This hardly makes them likely to be working at an employer that doesn’t offer insurance. No if you wish to include all those eligible for free insurance already that choose to not sign up you might be right, very misleading to write off the lose of benefits all these individuals will suffer because it’s contrary to your thesis.

I’m not a math wiz but I thought when numbers compounded the final amount was higher then the sum of the parts. If you charge 10% 3 times it equals more then 30%. A 10% VAT on a car could be charged 50 times. The final consumer will end up paying far more then the 10% if charged once. That is why only an idiot would consider a VAT, it’s a sneaky way to sell a huge tax increase because people don’t directly see how large it is.

You really think everyone can pay this new tax without any compliance cost?

If you guys are going to sell this it is exactly what you need, a bunch of lies and funny math.

Nate: "If you charge 10% 3 times ..." ...

Drop this objection from your list ... the second seller only pays VAT on the amount that its sales exceed its VAT-able purchases, and so with the third seller ... that's the "Value Added" part of the Value Added tax.

Compliance costs are a point you can keep on your list ... not as big a point as for Australia when they adopted a VAT, where most consumption taxes where assessed at the wholesale level, but still a point. Presently only the retailer has to apply sales tax, while under a VAT every step of the supply chain has to participate.

However, the main point you want to make on the VAT is that it is a disguised income tax that automatically gives a tax break when the wealthy place their money in financial assets to entrench their economic power and position.

The reason that single payer advocates can discuss funding a Medicare for All with a flat (which is to say, neutral) income tax of 6%, as opposed to a VAT of 10%, is that under a neutral income tax, all income is assessed. Under a VAT, income is not taxed if it is used to accumulate wealth. With 50% of income going to the top 10% of individuals, and a substantial fraction of that going to accumulate wealth, that is a big chunk of national income held back from contributing.

If Universal Health Care was something that had no external economic benefits, there would be a case to be made for those at the top of the income ladder to pay a smaller share of their income toward the system ... one body per person and all ... but since this is something that offers substantial economic benefits, and they stand first in line to reap those economic benefits, its taking a free ride on the external benefits to tax the wealthy at a lower rate than the poor for funding the medical system.

"If a 10% VAT gets me better coverage, I'll be first in line."

That's the part that concerns me. How long will it take, even with ostensibly risk-adjusted payments blah,blah,blah, to wean insurance companies off the notion that denying care and otherwise screwing over the customer is the right way to make a profit? Although subsidies for buying private insurance (and remember, this is just a 100% subsidy) have proved better than no insurance for a lot of people, they've also just provided additional captive markets for insurors.

I predict that if such a system came into being, the big new profit center for insurors would be systems that maximized the difference between risk-adjustment as calculated by the government and risk as measured by actual payouts.

(And even more pernicious, that difference could be a good thing -- if an insurance company could figure out ways to work with doctors so that high-risk patients actually got less sick and needed less care, that would be great. Especially as opposed to pushing wrong-risk customers onto another company just before they incurred major expenses, or tricks like that. But then a company that made risky patients less risky would end up getting paid less money for them, which is exactly the kind of incentive you don't want.)

This sounds *a lot* like the English/Welsh NHS. Ezra will like that, I am less sanguine about that, but agree that it is still much better.

One modification I might propose is that the voucher have a fixed, nominal value that can be used to subsidise any health insurance that people already have.