McKinsey: more right than wrong
Administration apologists, from the White House official blog to Paul Krugman (“McKinseyGate”), have all lined up to denounce the McKinsey survey I wrote up here the other day (“Bye-bye employer health insurance”). McKinsey found that a large share of employers who now offer health insurance benefits will drop them once ObamaCare comes into effect in 2014. At first, McKinsey didn’t release the questions or the methodology, prompting reactions like Krugman’s:
It’s hard to escape the conclusion that the study was embarrassingly bad — maybe it was a skewed sample, maybe the questions were leading, maybe there was no real data at all. Whatever [sic].
A few days of criticism of this sort was more than the consulting firm could take, so it released the full survey and the underlying data. Turns out the sample was not skewed, the questions were entirely reasonable and factual, and there’s plenty of data.
At the core of it is this: McKinsey gave the surveyed employers details on what would happen if they dropped coverage—how much it would cost their employees, after government subsidies, to buy insurance on the new exchanges (e.g., $4,437 for a family of four with an income of $55,125), and what it would cost them in penalties for not insuring employees ($2,000 per worker after the first 30 workers). McKinsey presumably did not have to tell employers what their present coverage cost them, but the numbers are stunning. According to the Kaiser Family Foundation, typical coverage costs almost $14,000 a year, with employers paying about $10,000 and employees about $4,000. No wonder a third to half of employers would seriously contemplate dropping coverage—their cost savings would be enormous. And their workers might not have to spend all that much more than they’re contributing today. But their coverage is likely to be a lot crummier than what they’ve got now.
Forbes blogger Avit Roy—who appears to be rather conservative, but also smart and serious—has written some convincing defenses of the McKinsey survey (like“The McKinsey Health Insurance Survey Was Rigorous, After All”). One of his commenters, Heritage Foundation economist Paul Winfree, notes that studies like the Congressional Budget Office’s, which show many fewer employers likely to drop coverage than McKinsey does, are based on extrapolations from minor, year-to-year changes in the cost of health insurance that may not be relevant to an enormous transformation of the sort that ObamaCare represents. This seems like a sound point: a massive institutional change like this is more likely to produce a major rethink than minor twiddling.
Single-payer advocates should be embracing the McKinsey results, not jumping on the Democrats’ apologetics bandwagon.