Wednesday, August 12, 2009

Super-Gold-Plated Cadillac Health Care Plans

A Clear Choice on Federal Subsidies

The debate over the merits of taxing high-cost, excessively generous insurance plans has highlighted Goldman Sachs’s plan as an example. Goldman’s 400 managing directors reportedly receive an average of $40,543 in employer-provided health insurance annually. What has received less attention is how much of the cost the federal government pays. This compensation is provided tax-free. The same result would occur if the compensation were included as income and the government sent each Goldman managing director a check for $14,777 each year.

For comparison, consider an illustrative family of three in which the father earns $30,000 as an independent contractor for a small plumbing company and the mother earns $25,000 from a small retailer. Neither small business provides health benefits. The couple has a daughter in second grade at the local public school and pays $100 a week for child care after school and during the summer. The family lives in a modest home and pays $1,000 a month in rent and $250 in utilities. It owes $2,312 in federal income taxes, $6,502 in Social Security and Medicare taxes, and $1,350 in state income taxes. It has two cars with payments of $300 a month each, and pays $2,000 a year in car insurance and $1,000 a year for gasoline. It spends $150 a week on groceries. The couple has avoided accruing any credit card debt, but they have no saving for retirement and no life insurance.

After paying these basic expenses, this typical family would have a little less than $500 a month to cover any costs for clothes or shoes, car repairs or maintenance, household expenses, restaurant meals, and any hobbies or activities — and all of the family’s health expenses.

Right now, the federal government pays $14,777 to provide health insurance for each of Goldman Sachs’s managing directors and pays nothing to provide health insurance for this middle-income family. The Administration and Congress face a clear choice: can we modestly reduce the extremely generous government subsidies provided to the Goldman bankers and others similarly situated to help pay for a subsidy worth a fraction of that amount to families of modest means?


I know something like a comment is expected here, but do I really have to say anything at all? What conclusions do you draw about our supposed democratic republic? I mean, technically it still is a democratic republic, right? Maybe...?