Planet Money’s talk with a professor of economics over at MIT, Jonathan Gruber, about the possible tax on cadillac health care plans. He debates with an unplanned guest, Planet Money’s sound engineer, Neil Rouche (probably misspelling the name, sorry!), about whether or not the tax makes sense. Both Gruber and Neil get unfairly trashed in the blog post comments.
One contentious point is whether or not people with these plans consume excessive amounts of health care. Neil repeatedly says, “I don’t know anybody who does that”, while Gruber’s response is a quote, “I don’t believe in dinosaurs because I’ve never seen one walking around.” Much of their debate is centered around Gruber trying to convince Neil that there’s mounds of evidence that such behavior does exist.
I don’t think the dinosaur line is a particularly great response. First off, many people have scientifically questionable beliefs about dinosaurs. Second, dinosaurs are extinct — by Gruber’s argument, excessive health benefit consumers exist.
A different counter might be to say “I don’t excessively speed, I don’t personally know anybody who excessively speeds, therefor I don’t think large numbers of people excessively speed.”
How might this analogy compare with the beneficiary of a cadillac plan?
Sitting in a doctor’s office is enough disincentive to consume excessive benefits. Well, so is getting a speeding ticket. The cost of the ticket might dissuade some from speeding, but obviously not all.
Claiming that none of your colleagues consume excessive benefits is similarly as absurd as saying that nobody you know speeds. Are you privy to the health care spending (or speeding) habits of all your friends?
The real difference here is that drivers see others speeding all the time, whereas benefit consumption is hidden to all but a few. Gruber should liken himself to a cop with a radar gun.
At any rate, I think a better point to bring up is why employers (and unions) can’t offer pay scales that shift along with benefits. If an employee wants the cadillac plan, he can get it at the cost of a reduction in salary. Actually, if economists think that this is such a great argument, they should definitely have looked at whether or not employees tend to elect cheaper plans when given the choice. If they resoundly do not, why should they care about the argument that removing cadillac plans will increase overall wages?