By: Marshall Bursis
In American politics, legislative efforts to create universal access to health insurance usually come from the ideological left. Yet, in Europe, political parties of both the right and the left share broad commitments to continued government intervention in and subsidies of health-insurance markets.
For example, the governing conservative party of the United Kingdom has pledged to increase funding for the country’s National Health Service by £33.9 billion by 2023-24. In an address to the nation following his recent personal experience with Covid-19, Boris Johnson, the country’s conservative prime minister, called the public healthcare system the country’s “greatest national asset.”
Why the difference? Messaging might explain part of the divergent thinking across the Atlantic. Fine Gael, the conservative party of Ireland, has framed its support for expansion of dental, vision, and hearing coverage as a defense of entrepreneurs. A video series promoting the party’s support for expanded coverage highlighted small business owners and their increased ability to take greater economic risks because of the program’s safety net. One entrepreneur explained the worries of her and her husband before the expanded coverage: “What would happen if we got ill, where were we going to get the money if we wanted new glasses?”
Economists refer to this fear and the inability of workers to leave jobs or to start their own businesses because of a loss of benefits—particularly health insurance—as “job lock.” In 1993, long before the Affordable Care Act reformed much of the health insurance marketplace in the United States, economist Brigitte Madrian’s research estimated that job lock reduced voluntary job mobility by 25 percent. Perhaps more troubling for the American economy, though, is “entrepreneurship lock.” A 2015 study found a significant difference in the rates of business formation between male workers just under 65 and those just over 65—and no similar change for one-year age differences between 55-75. The authors argue this peculiar anomaly in business formation stems from Americans’ qualification for Medicare at age 65. Data from 2007 compiled by the OECD supports this connection between entrepreneurship and access to affordable health insurance. The data showed that, of the 21 Western countries from which data was collected, the United States had the second lowest level of self-employment.
Various reports have documented the slowing dynamism of the U.S. economy. Creative destruction, the process by which new, innovative companies replace old, unproductive ones, is on decline in America. The firm entry rate—or businesses less than one year old as a share of all firms—fell by nearly half in the thirty-plus years between 1978 and 2011. The labor force, likewise, is more stagnant than it once was. An analysis by the Brookings Institution found that labor-market fluidity fell between 10 and 15 percent from 1980 to 2013. The impact of health insurance costs on these trends is particularly pronounced in a marketplace where annual premiums for employer-sponsored insurance have outpaced wage growth. Economic trends are often the result of myriad forces, but government investment in affordable access to health insurance might be the economic defibrillation the country needs.
President Trump and Democratic nominee Joe Biden both tout their commitment to revitalizing small businesses, but often missing from that conversation is a consideration of the positive economic impact of broader health insurance reform. Democrats tend to focus on the humane and moral arguments for insurance benefits, and Republicans vilify the Affordable Care Act and similar measures as anti-business, anti-capitalist, and anti-market. Politicians of both parties, however, should embrace government insurance subsidies and insurance programs as good for workers, entrepreneurs, and the overall economy.
Actionable policies could help reinvigorate the American labor market and entrepreneurship. Immediately, governors could expand Medicaid under the Affordable Care Act, assuring would-be entrepreneurs and job seekers that they would not fall into the coverage gap with nearly 2 million other Americans who make too much for Medicaid coverage and too little for marketplace subsidies. Additionally, there have been growing bipartisan efforts to enact a system of portable insurance benefits connected to the individual worker rather than specific employment. Democratic Senator Mark Warner and Republican Senator Todd Young introduced legislation to fund state-level pilot programs that provide insurance for independent workers. The bill has support from conservative Senators Ben Sasse and John Hoeven and liberal Senators Michael Bennet and Angus King. In 2012, The Economist urged American policymakers to adopt a similar, modern system of benefits that “better accommodate flexibility and the accumulation of individual skills.” Insurance reforms tied to the worker and not one’s employer could alleviate friction in the labor market and stimulate economic dynamism by providing Americans the safety to take greater entrepreneurial risks.
The politics of healthcare do not have to be so divided. A consensus has emerged in other industrialized countries that subsidized insurance benefits help the worker and the economy. America has the opportunity to once again become the world leader in entrepreneurship, mobility, and dynamism.
References
Alicia Adamczyk, “Health insurance premiums increased more than wages this year,” https://www.cnbc.com/2019/09/26/health-insurance-premiums-increased-more-than-wages-this-year.html.
Boris Johnson, https://www.youtube.com/watch?v=tkZhyNbGWdY.
Brigitte C. Madrian, “Employment-based Health Insurance and Job Mobility: Is There Evidence of Job-Lock?” https://www.nber.org/papers/w4476.pdf.
@FineGael, https://twitter.com/FineGael/status/1155841806837452802?s=20.
Ian Hathaway and Robert E. Litan, “Declining Business Dynamism in the United States: A Look at States and Metros,” https://www.brookings.edu/wp-content/uploads/2016/06/declining_business_dynamism_hathaway_litan.pdf.
John Schmitt and Nathan Lane, “An International Comparison of Small Business Employment,” https://cepr.net/documents/publications/small-business-2009-08.pdf.
Office of Mark Warner, “Warner Re-Introduces Bills to Prepare Americans for the Future of Work,” https://www.warner.senate.gov/public/index.cfm/2019/2/warner-re-introduces-bills-to-prepare-americans-for-the-future-of-work.
Patricia Cohen, “Fewer Americans Strike Out for New Jobs, Crimping the Recovery,” https://www.nytimes.com/2016/05/25/business/economy/fewer-workers-choose-to-move-to-new-pastures.html.
Rachel Garfield, Kendal Orgera, and Anthony Damico, “The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” https://www.kff.org/medicaid/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid/.
Robert W. Fairlie, Kanika Kapur, and Susan M. Gates, “Is Employer-Based Health Insurance A Barrier To Entrepreneurship?” https://www.rand.org/pubs/working_papers/WR637-1.html.
Rachel Garfield, Kendal Orgera, and Anthony Damico, “The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” https://www.kff.org/medicaid/issue-brief/the-coverage-gap-uninsured-poor-adults-in-states-that-do-not-expand-medicaid/.
The Conservative Party, “Strengthening our NHS,” https://www.conservatives.com/our-priorities/nhs.
The Economist, ” Modern worker, dated benefits,” https://www.economist.com/free-exchange/2012/02/08/modern-worker-dated-benefits.
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