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
  • Stan Veuger's research focuses on the intersection of economic and political behavior. In particular, he has researched voter behavior, political activism, banking supervision, and policy uncertainty. At AEI, Veuger is concentrating on the impact of the Tea Party movement, on the relationship between job losses and economic policy uncertainty, and on the design of various social insurance programs.


     


    Follow Stan Veuger on Twitter.

  • Phone: 202-862-5894
    Email: stan.veuger@aei.org
  • Assistant Info

    Name: Emma Bennett
    Phone: 202-862-5862
    Email: emma.bennett@aei.org

What's new on AEI

image The Pentagon’s illusion of choice: Hagel’s 2 options are really 1
image Wild about Larry
image Primary care as affordable luxury
image Solving the chicken-or-egg job problem
AEI on Facebook
Events Calendar
  • 29
    MON
  • 30
    TUE
  • 31
    WED
  • 01
    THU
  • 02
    FRI
Monday, July 29, 2013 | 10:30 a.m. – 11:30 a.m.
Squaring the circle: General Raymond T. Odierno on American military strategy in a time of declining resources

AEI’s Marilyn Ware Center for Security Studies will host General Raymond Odierno, chief of staff of the US Army, for the second installment of a series of four events with each member of the Joint Chiefs.

Tuesday, July 30, 2013 | 12:00 p.m. – 1:15 p.m.
The Trans-Pacific Partnership and 21st Century Trade Agreements

Please join AEI for a briefing on the TPP and the current trade agenda from 12:00 – 1:15 on Tuesday, July 30th in 106 Dirksen Senate Office Building.

Thursday, August 01, 2013 | 8:10 a.m. – 1:30 p.m.
International conference on collateral risk: Moderating housing cycles and their systemic impact

Experts from the US, Europe, Canada, and Asia will address efforts to moderate housing cycles using countercyclical lending policies.

Event Registration is Closed
No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.