For months, Vox’s Sarah Kliff has complained about the declining value of workers’ health insurance coverage and in particular rising deductibles.
Kliff has also written about Obamacare’s Cadillac Tax.
“Three articles on increased worker cost-sharing
and yet NO mention of the Cadillac Tax?”
So did The Tax Foundation.
It appears that Sarah has now awakened to the fact that the Cadillac Tax is driving down the value of company plans — and increasing employee costs — and her discovery has not made her happy.
NOW she’s skeptical. NOW she wonders if workers will really experience pay hikes as their health plans lose value. It took a long time and some hard cogitating to get Kliff to this point, but we congratulate her for discovering what we revealed in June.
One may wonder how her enlightenment is sitting with Vox boss and alleged wunderkind and intellectual giant Ezra Klein. Klein was a HUGE fan of the Cadillac Tax when disgraced Obamacare architect Jonathan Gruber promoted it in 2009 and 2010. In fact, Klein and Gruber had a mutual Cadillac Tax love-fest, and Klein frequently wrote in support of the tax and its wage growth promise.
Earlier in the day, I’d been talking to MIT economist Jon Gruber about this issue. “There are a few things economists believe in our souls so strongly that we have a hard time actually explaining them,” he said. “One is that free trade is good and another is that health-care costs come out of wages.” To put it another way: Economists are pretty united on this point. A firm’s compensation for its workers is pretty static, and if relatively more goes to health-care costs, relatively less will go to wages, and vice-versa. But this isn’t just a matter of theory.
Unions will respond by “rebalancing compensation away from expensive insurance plans and towards higher wages, which is exactly what the tax is supposed to.”
[T]he excise tax is small change. It won’t hurt many people. It won’t hurt folks badly.
But should workers suffer, Klein was all in:
When a policy bumps up against the tax, a couple of different things could happen. One is that the employer just passes along the tax, either increasing premiums for the employee or taking it out of wages. The other is that the employer chooses a plan that’s beneath the threshold. That plan might have a higher deductible, or more co-pays, or tighter networks, or less coverage for brand-name drugs. It will, in other words, be more like the managed care of the 1990s, which brought down spending and didn’t hurt health outcomes, but which people really didn’t like. “Managed care worked,” says Gruber, “but workers didn’t know it. They didn’t see the benefit. We’ve got to make them feel the pain of not reforming and enjoy the benefits of reforming.” In this case, the pain will be the excise tax.
In what can only be called economic incest, Gruber used a chart Klein created from Gruber’s numbers as evidence that his premises were valid.
The available evidence clearly illustrates that there is essentially a one to one offset between employer insurance spending and wages. There are a number of economics studies that support this conclusion. But it is perhaps most vividly illustrated by simply comparing the growth rate of health insurance costs to the growth rate of wages, a task recently undertaken by Ezra Klein…when health care costs moderate, wages rise.”
In other words, Gruber fed Klein his numbers, Klein sold them to America, and Gruber quoted Klein as evidence for his wage growth hypothesis.
So Kliff now concludes that “the evidence is thin” that Klein’s Cadillac Tax sales job was honorable.
Let’s hope he doesn’t punish her for actually thinking this through herself, even as it took her years.
UPDATE: Who could have anticipated this? Klein admits Gruber’s “wage growth” hypothesis was bogus all along.
You have some ‘splaining to do, Mr. Klein.