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April 06, 2006

Why an Employer Mandate is Needed

Ezra -- and Max -- have eminent logic on their side in arguing for the superiority of a non-employer based health care system in favor of direct government funding of health care. Except for the tiny flaw that it's not going to happen politically, at least any time soon.

Currently, private funds, primarily employer-paid money pays for 54% of all health care in this country. For the non-elderly population, it is an even greater percentage of health care dollars. So over 8% of GDP consists of private health care spending.

Now, for the government to substitute for that private spending, that would require the US to raise a substantially larger percentage of GDP in taxes than it currently does. In 2004, combined state and federal revenue was 27.5% of GDP (Data from this nice XLS sheet courtesy of Carried Away blog). Given Bush's massive deficts, we need to raise revenue by over 4% just to get revenue and spending into balance before we can even begin incorporating a substantial increase in GDP dedicated to substitute for all that private health care spending.

So we would need to raise roughly 40% of GDP as taxes as a country to incorporate a single payer program into our political system, which assumes a truly massive sea change in the political willingness of the population to accept massive tax increases. Yes, single payer advocates argue that a completely government-run system would save money, but even knocking a couple of percentage points off that 40% figure still assumes an increase in taxes that bend credibility in the present political situation.

And of course, the GOP will filibuster any attempt to create such a government-funded health care system; that was made clear back in 1994 and there is no evidence that the GOP is suddenly going to roll over for such a change at the federal level. And at the state level, many states, including some of the largest such as California, Florida, and Texas need a supermajority vote of at least one state house chamber to raise taxes, giving any conservative resistance to government-funded health care a minority veto on such changes. The California Senate has already voted for a single payer system, but it's irrelevant if the state Assembly joins them, since they can't get the two-thirds vote needed to fund the system.

So the blunt political reality is that an employer mandate is more likely to succeed precisely because it is not a tax increase. It can be passed at the state level without needing new taxes raised and without a supermajority in those states giving a veto to the minority on tax issues. Given the costs of health care, I don't see any budgetary math where we can raise the revenue just to cover the currently uninsured without also holding on to the revenue contributions by employers.

Some states could theoretically bypass these supermajority political restrictions by going to the ballot, but that just promises to unleash the full weight of the health care establishment to defeat you. California tried to enact single payer at the ballot in 1994, which I know well since I worked hard on the campaign at the time. I even helped design their Internet site in that almost prehistoric period of the web.

And after the opposition dropped their attack ads onto television and massively outspent our side, the initiative was slaughtered at the polls. The initiative process has not been kind of progressives pushing complicated legislation. Notably, while business was able to narrowly defeat an employer mandate at the polls in 2004, California voters supported the employer mandate by almost double the percentage they supported single payer back in 1994.

Maybe it's because I've been in the middle of the largest single payer campaign in America's history that I am so skeptical of it as a strategy today. I'd vote for any single payer system that came along, but I think putting all of our eggs in eliminating the employer role in health care is dangerous and reckless with the lives of working families who currently depend on the health care funds coming from employers.

That may be a messy political reality that doesn't fit well with the abstract policy attraction of abandoning an employer-based system, but it seems far more politically within reach to preserve and even expand employer contributions to health care than to pass such a massive increase in taxes. And that will leave scarce public funds for actually expanding coverage rather than just making up for lost non-tax employer contributions.

It may leave a messier, less efficient health care system than the ideal-- but we aren't likely to get that political ideal. And it's my firm belief that fighting for an employer mandate, combined with other initiatives like expanding Medicaid and coverage for kids, is the most effective path to providing the most comprehensive health care for working families. And for actually leaving some tax revenue left over for non-health care needs like education, housing and transit.

Posted by Nathan at April 6, 2006 09:45 PM