Good Redistribution in the GOP Health Bill

Many Democrats have pointed out, accurately, that the Republican Obamacare repeal effort is not so much about healthcare as it is about (re)distribution. Obamacare raised taxes on the wealthy to fund a Medicaid expansion and insurance subsidies; the GOP would repeal those taxes and roll back assistance for the poor and lower-middle class.

But the Senate healthcare bill doesn’t just redistribute (relative to current policy) from the poor to the rich. It also redistributes from the old to the young. Obamacare regulates insurance markets so that insurers can only charge old people three times as much as they charge young people; the GOP would allow them to charge five times as much. Citing a RAND report, Vox says “this particular policy would lower premiums for a 24-year-old from $2,800 to $2,100. But premiums for a 64-year-old would rise from $8,500 to $10,600.” (In a purely free-market system, where insurers charged consumers based on their actual risk, the differential would be much greater still).

In other words, the GOP’s health bill doubles as an economic relief measure for millennials, paid for by Boomers. This is, ironically, a kind of reverse political patronage—young people vote overwhelmingly for Democrats, but it is Republicans (in this case at least) who are trying to give them a break. Democrats are offering millennials shiny objects like free college tuition, but simultaneously hosing them on healthcare.

The age-based regulatory changes in the Republican healthcare vision are sometimes presented by Obamacare partisans as callous and cruel: “How can our society ask for more from the near-elderly while giving the young and healthy a pass?” In fact, in addition to whatever stabilizing effect this might have on the exchanges (by encouraging more young people to enter) the old-to-young redistribution in the GOP’s Obamacare replacement is desirable as a matter of fairness.

Millennials entered the job market in the midst of a terrible recession that they had no part in creating. They are burdened by an unprecedented amount of student loan debt. They are not (contrary to popular perception) starting many businesses. They are having trouble forming families. They are late to enter into the housing market. They are socially isolated. And they are footing the bill for creaking pension systems set up before they were born.

Baby Boomers, by contrast, have accumulated orders of magnitude more wealth than 20-somethings. And they are set to benefit from a massive New Deal and Great Society wealth transfer programs, paid for by the young, that may not be nearly as generous when millennials reach retirement age.

That’s not to say that many Boomers aren’t struggling and many 27 year-olds aren’t prospering. But as a matter of policy, it doesn’t make sense to impose a large artificial insurance tax on a generation that is by many measures failing to launch on behalf of a generation that is at the peak of its power and wealth.

One of the most important policy challenges in our time of political instability and economic change is to provide today’s young people with a smooth transition into ordinary American middle-class life. If we fail to do this, Trump’s election will look like a minor blip compared to the radicalism and upheaval that lies ahead. In that sense (if not in many others) the GOP healthcare plan is genuinely conservative: It distributes resources in a way that is conducive to social stability and forward-looking economic growth.

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