Saturday, February 26, 2011

Ezra Klein - How Medicare -- and health-care reform -- help with 'job-lock'

How Medicare -- and health-care reform -- help with 'job-lock'

By Ezra Klein

One of the theoretical problems with our health-care system is that it discourages entrepreneurship. We get health care at a subsidized rate, with no discrimination for preexisting conditions, from our employers. But if we leave our jobs, we lose that health care. And buying our own health care is expensive, and occasionally impossible: Plans sold to individuals cost $2,000 more than equivalent plans sold to businesses, the employer subsidy (and the tax break underpinning it) vanish, and we can be turned away because of back pain that got resolved a decade ago. So a lot of people decide to stick with their employer and forgo starting that business. It's the responsible thing to do, particularly if you have a family.

At least, we think they do. But it's a bit hard to test why someone didn't do something. Robert W. Fairliea, Kanika Kapurb and Susan Gates, however, came up with a clever way to measure it. They used a data set that allowed them to compare "business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65." That is to say, business ownership before getting Medicare, and business ownership after getting Medicare. Not surprisingly, Medicare appears to make people more entrepreneurial. "We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55–75."

The Affordable Care Act will help solve this problem. Repealing it won't.


By Ezra Klein  | February 25, 2011; 2:05 PM ET

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