What Jonathan Gruber and Ezra Klein don’t get about Obamacare
Obamacare is like free Big Macs … for some

McDonald's by Shutterstock.com

Article Highlights

  • Though some proponents ignore the evidence, Obamacare won't help everyone

    Tweet This

  • The ACA's goal is to make premiums go up for some and down for others

    Tweet This

  • For large numbers of people, premiums will increase under the ACA

    Tweet This

"My plan begins by covering every American. If you already have health insurance, the only thing that will change for you under this plan is the amount of money you will spend on premiums. That will be less," president Obama said in a May 2007 speech unveiling his health care plan. He continued making similar statements during last year's presidential campaign.

But newly released data on insurance premia in California's health care exchange show that they are not true at all: for large numbers of people, premia will actually increase.

Some of President Obama's most prominent acolytes, including MIT professor Jonathan Gruber and Washington Post blogger Ezra Klein, have attempted to argue that that does not matter at all, that there are people who used to have no health insurance who receive it at a discount now and that all is glorious.

Their case rests upon the following series of arguments. Before Obamacare, fairly basic health insurance was available at a low price, especially for healthy young men. Other plans, for older or less healthy consumers especially, were much more expensive. What the Affordable Care Act was meant to do is outlaw these basic plans, and make somewhat more comprehensive plans mandatory. These plans will be subject to community ratings that make them more expensive for groups such as healthy young men, and less expensive for others. On top of that, low-income buyers of these plans will receive subsidies paid for by high-income buyers.

This reminded me of the following (entirely fictional) anecdote:

Ezra Klein and Jonathan Gruber walked into McDonald's a few years ago, trying to buy a burger. They'd heard about the McDouble, which is on the Dollar Menu, and costs $1. That struck them as a good deal, and they expected all burgers to be priced similarly, so they ordered a Big Mac. In a shocking development, McDonald's charged them over two bucks!

But then Obamacare passed, so they expected prices to drop.

The next time they walked past McDonald's, they noticed a homeless person eating a Big Mac. Curious to see how the presumably poor person had acquired such an expensive treat, they asked him how much he had paid for that.

"Well, you guys just gave me $2, and I had a quarter, so I got this Big Mac." "Wow," Ezra Klein and Jonathan Gruber thought, "Obamacare has really lowered the price of a burger. You get one that used to be super expensive but delicious and you're paying less than what you used to pay for a terrible one! This program is truly amazing."

 So they walked in, stood in line for quite a while, and ordered a Big Mac. It is hard to express their surprise when they realized it cost them over two bucks, again. Adding in the $2 they had handed to the homeless person, they had now spent over four bucks on their Big Mac.

That's the Obamacare Dollar Menu in a nutshell. Its whole point is to offer only Big Macs. Its main goal is to make them cheap as a McDouble for some, but expensive as a Big Mac meal for others. You can support that or not, but claiming or implying that it makes everyone better off is, you know, disingenuous.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Stan
Veuger

What's new on AEI

Study: Piketty tax plan would boost equality by making rich less rich. But poor would be poorer, too
image Rep. McCaul’s cybersecurity information sharing center: If you build it, will they come?
image Halbig and its aftermath
image Culture of how Washington pays for medical care
AEI on Facebook
Events Calendar
  • 28
    MON
  • 29
    TUE
  • 30
    WED
  • 31
    THU
  • 01
    FRI
Tuesday, July 29, 2014 | 10:00 a.m. – 12:00 p.m.
Is Medicare's future secure? The 2014 Trustees Report

Please join AEI as the chief actuary for Medicare summarizes the report’s results, followed by a panel discussion of what those spending trends are likely to mean for seniors, taxpayers, the health industry, and federal policy.

Event Registration is Closed
Friday, August 01, 2014 | 10:30 a.m. – 12:00 p.m.
Watergate revisited: The reforms and the reality, 40 years later

Please join us as four of Washington’s most distinguished political observers will revisit the Watergate hearings and discuss reforms that followed.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.