The Heritage Foundation’s budget proposal is presented in a variety of ways, one of which involves slicing the population up into demographic slices. One such slice is “Millenials” who Heritage defines as those of us born in 1981-1988. We like feature phones and oversize sunglasses:
Now the actual plan here suffers from a familiar problem. What Heritage wants to do, sensibly, is transition us away from a system in which health insurance is closely tied to employment. That means replacing the current tax deduction for employer-provided health insurance with a tax credit that goes to individuals to help subsidize our purchase of insurance. It’s a decent idea.
But there’s a problem. The employer-based system has a lot of problems, but it creates large risk pools of the kind that are needed to make insurance work. If everyone just buys on the individual market then the incentive for all insurance companies is to focus all its energy on implicit or explicit risk-screening. You’re going to need some kind of regulatory definition of what constitutes a minimum acceptable benefits package, you’re going to have to make sure that insurers take all customers, and you’re going to have to make sure everyone gets a minimum plan. Once you’re there, you’ve got the basic tripod of the Affordable Care Act—regulate, mandate, and subsidize—and then it becomes very sensible for people to disagree around the margin about exactly how generous the minimum plans and subsidies should be. And, indeed, just a few years ago this was the Heritage Foundation’s position—regulate, mandate, and subsidize but be relatively stingy about it compared to what people more enthusiastic about government-subsidized health care would want. This is the debate we ought to be having, but instead we’re stuck reinventing the wheel.