An article in the Washington Post brings up a big issue. Right now, young adults—in the aggregate—roughly pay their own way on health care. On the one hand, they are more likely to be uninsured, which means that many become free-riders on government (Medicaid), hospitals (charity care), or their parents. On the other hand, a large share of this generation is compelled to pay more in health insurance premiums (either through their employer or, in some states, when buying individual coverage) than they actually consume in health care, which means they are net contributors to the system. In states like New York, which prohibits varying the premium by age, young adults are required to pay premiums that are some two-to-three times higher than the actuarial cost of their benefits. In effect, the young are required to subsidize older people. It’s just in these states, of course, that the largest numbers of young adults find these premiums unaffordable, refuse to pay, and become charges on the public. So even on a state by state basis, the karma sorts of equals out.
OK, enough of what goes on now. What about the new health-care reform package? Well, in theory the plan will mandate (require) every adult to purchase his/her own health insurance policy. This mandate will have a disproportionate impact on the young and, in effect, put a stop to the de facto free rider subsidy they now receive. Also in theory, according to the most-discussed drafts in Congress, the plan will require strict community rating, which means that *every* young adult nationwide will face the same “community” price as in New York state. The net result of both of these provisions will be a truly massive new subsidy by young adults to older Americans and retirees, maybe in the $100-$200 billion range if both provisions are literally followed. In reality, of course, some young adults may be allowed to escape the mandate (or will prefer to pay the penalty—imagine millions of 20somethings paying the mandate penalty because they cannot afford a reform which they supported!). And maybe the community rating edict will be eased to something called “modified community rating,” which allows some consideration of age. And, to be sure, young adults will benefit somewhat more than other age brackets from means-tested tax-breaks and overt federal subsidies.
Still, the generational implications of reform are very large and, in any plan resembling those now being discussed, will work heavily against the young. Obama, hands-off about everything, seems to leave all the initiative about such issues in the hands of Congress. And I’m not sure Congress, where so many of the Committee heads are 70something unreconstructed New Deal Democrats, will lend the Millennial (born 1982-200?)a sympathetic ear.
Enough, you may be saying. Isn’t all of this Millennial sacrifice is OK for them because the health-care reform legislation is investment, designed to “bend down the long-term curve” of national health spending? Don’t get me started here. The brutal truth is that the likely reform package will almost certainly add, not subtract, from health spending as a share of GDP in the long term. Insuring the uninsured (e.g., by subsidizing some to be able to get health care under the mandate) will cost an extra $100 billion yearly both to the federal budget and net to the economy as a whole (CBO numbers here). But how about strategies to bring down the long-term growth trend—which was, after all, the avowed central purpose of reform? They just aren’t there in any of the major reform packages. The Blue Dog Democrats are upset about this, but of course their vote is not decisive. If you’re interested in this topic, take a look at our upcoming Facing Facts alert from the Concord Coalition—and at some of our prior alerts.
Why do I get all worked up over this? Because: All this harvesting of premiums from Millennials comes on top of massive additions to deficit spending projected for decades after the current recession is projected to end—taking debt-to-GDP levels all the way back to WWII levels, according to the CBO. This extra public debt will significantly penalize, through debt service costs alone, future Millennial living standards.
Let me sum up my long-winded post as follows: What does the Democratic Party really intend to do for the generation that took them to the White House? Invest massively in their future? Or cover them with debt, leach off their health premiums, and play them for suckers?
The following article is an introduction, but it misses community rating, which is the elephant in the living room, and doesn’t speculate on net impact on the young.
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Mr. Reed
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M Douthit
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Michael