Health Reform Won't Benefit Women

WASHINGTON-The Senate's Health Committee holds a hearing today, Thursday, to spotlight the effect on women of pending "health reform" legislation.

Some witnesses, including James Guest of Consumers Union and Marcia Greenberger of the National Women's Law Center, will argue that the Democratic health-care bills in the House and Senate would, if enacted, particularly benefit women. As another witness, I will suggest otherwise.

With three Democratic bills-two in the Senate, one in the House-to be melded, no one knows all the details of the measure that will reach the president's desk-assuming something does.

Despite good intentions, many aspects of these bills would leave Americans worse off than they are at present. First, people on Medicare and Medicaid, disproportionately women, would receive less care and possibly worse care.

Second, people of working age would pay more for health insurance, essentially because Congress is likely to insist on more generous benefits and to require that insurers cover even persons with a history of high-cost illness. This may be socially appealing, but it will have financial consequences which have not been discussed by the sponsors. Paying higher premiums will leave less income for everything else.

Third, by raising taxes, the legislation will discourage job creation and investment. That will hurt women more than men, because women exit and re-enter the labor force more often.

Medicare and Medicaid beneficiaries are likely to get a lower standard of care: In the Senate Finance Committee bill, sponsored by Max Baucus, the chairman, nearly 90% of $404 billion of Medicare and Medicaid savings would occur in the period 2013-19. Thereafter, savings would be expected to accrue at the rate of 10% to 15% a year, cumulatively. Elderly women would be the biggest losers. A Medicare Commission would propose further cuts.

The House Democrats' bill would expand the Medicaid program to 133% of the poverty line in order to cover low-income uninsured workers, even though Medicaid does not provide as high a level of care as private plans. Women, 69% of Medicaid recipients, would be disadvantaged by being required to accept Medicaid rather than a refundable tax credit to purchase a private plan, as has been suggested by Representative Tom Price, a physician and Georgia Republican.

Better coverage, higher premiums, less disposable income: Under all pending bills, plans purchased with the aid of tax credits in the new health exchanges would offer generous coverage, with no deductibles for many services, and no annual or lifetime limits on benefits. Premiums would skyrocket.

One obscure but important feature of the bills is that variation in premiums would be constrained. For some plans, the highest premium could be no more than twice the cheapest and variation would be allowed only on the basis of age. Younger men and women would have to pay more than they would otherwise.

A new government mandate for employers to offer health insurance, if in the final bill, would-in workplaces that don't offer it now-cause wages to decline or future wage increases to be withheld.

Economics professors Katherine Baicker of Harvard and Helen Levy of the University of Michigan concluded in a recent paper that low-income, minority workers would be the most affected by a government mandate on employers. "Workers who would lose their jobs are disproportionately likely to be high school dropouts, minority, and female," they wrote.

Similarly, Peter Orszag, now the Obama budget director, testified in 2008 when he headed CBO that "The economic evidence is overwhelming... that when your firm pays for your health insurance, you actually pay through reduced take-home pay. The firm is not giving that to you for free."

Higher taxes, fewer jobs, less investment: The House bill relies on income tax surcharges on the most productive workers, bringing the top tax rate to 45%, as well as an 8% payroll tax on employers who do not offer the right kind of health insurance to their employees. Moreover, anyone who does not sign up for health insurance would face an additional 2.5% income tax penalty.

Taxes discourage work and investment, thereby reducing employment.

Tax increases would adversely affect married women because some enter and leave the labor force depending on their family situation. The disincentive effect would discourage married women from working. It could even discourage marriage by intensifying the present "marriage penalty" in the tax code, the higher tax rate on a woman who is married.

By raising taxes on upper-income Americans to 45%, Congress would worsen our tax system's marriage penalty on two-earner couples, whereby women pay even more tax married than single.

The tax penalty for working is even more substantial at the low end of the income spectrum because phasing out health care subsidies for the poor imposes high tax rates on the extra dollar earned. As people move up the income scale, they give up the subsidy.

The staff of the Joint Tax Committee estimated that combined effective marginal tax rates on income and insurance premiums, including payroll taxes, for poor families of four under the Baucus bill would be substantial, exceeding tax rates for upper-income individuals under the House bill, and reaching 59% at 150%of the poverty line and 49% at 250 percent of the poverty line.

Our health insurance system needs to change, but not in the way envisaged by the Democratic Congress. Rather than mandating one expensive plan, Congress would do better to shift the current health insurance tax exclusion from employers to individuals and allow employees to choose their own, portable plans, as they do with car and life insurance. That would help women, and men too.