Perverse Incentives

Sorry, It's nothing kinky. It's the policy wonk's term for the undesired and unintended effects of taxes and regulations. Efforts are underway here in the People's Republic to achieve universal health care insurance. You can read all about it -- well, not all, actually, but something -- in the Boston NYT Stepsister.

House Speaker Sal DiMasi wants to impose a 5% payroll tax on firms with 10-99 workers that don't provide insurance for their employees, and 7% on firms with more than 100 workers. This money would be used to expand Medicaid and offer a subsidized product to low-income people who don't qualify for Medicaid. But people would be required to buy it.

A lot of my friends aren't going to like what I am about to say, but here at Stayin' Alive, we are without fear or favor. This is a bad idea, at least as it now stands. Where is that 5 or 7% payroll tax money going to come from? It's going to come from workers' pay -- where else? And the workers who don't currently have employer-provided insurance are low wage workers. They need health care, sure, but they also need shelter and groceries. Then there are the two "cliffs," at 10 and 100 workers. A Mom and Pop enterprise with 9 workers is going to do whatever it can not to hire that 10th worker, and ditto with a small business with 99 workers. This isn't some tendentious argument of greedy business owners -- it's obviously true.

We need universal, comprehensive, health care, yes. Preferably, for a number of excellent reasons that I don't have time to go into here, national and single-payer health care. (Very briefly though, the Massachusetts proposal, as currently structured, won't create sufficient levers for controlling costs.) But just as important, it needs to be progressively financed.

The reason people don't have health insurance is because they can't afford it. Forcing people to buy what they can't afford is not social progress.