March 31, 2005
From the desk of Jane Galt:Good intentions, bad outcomes
A judge has blocked a Bush administration rule that would have allowed companies to cut health benefits for retirees as they become eligible for Medicare.
Now, it's fair for people to suspect that the administration was just giving prizes to its buddies in industry on the government dime. But think about this. If you're a company like GM, paying more for retiree benefits than for the steel in your cars, are you more likely to suck up this expense . . . or cut benefits for people under 65. After all this judge just turned what might have been a five-year committment to an employee who retired at 60, to a committment of 20 years or more, which will now encompass those terribly expensive end-of-life years. Better to let your retirees go from 60-65 without health care, no?
Posted by Jane Galt at March 31, 2005 4:52 AM | TrackBack | Technorati inbound linksOn the other hand, why in heck should we encourage people to retire at 60?
We should encourage people to retire at 60 for a number of reasons. One, we need turnover in the workplace. If people hold on to jobs too long, we will have fewer spots for younger workers who will need to earn income for a much longer period of time. We will also have people working when it really isn't safe for them to do so anymore due to diminished hand/eye coordination, vision, reflexes etc.
By that logic, Pozzo, we could as easily justify mandatory retirement at 45. (I'm 45, and I can sadly attest that my hand/eye coordination, vision, and reflexes are noticeably diminished.)
"If you're a company like GM, paying more for retiree benefits than for the steel in your cars, are you more likely to suck up this expense . . . or cut benefits for people under 65. "
I'd rather have every company eliminate benefits for everyone. The health insurance market would work better if people were buying their own health plans with cash, rather than everyone at the same workplace getting the same plan at the same price from the company store.
It'd also work better if companies weren't required to cover certain things on all policies. I'm covered for obgyn visits, cervical cancer tests, the works...but I'm a 23-year-old single male. Why am I paying for that? Because the government compells my insurer to provide that. At most require them to offer it to me, but allow me to decline it. I don't think I'll be needing a papsmear anytime soon, and I don't really need to be insured for it.
Pozzo, if there's a certain, fixed number of 'spots' in the workplace, then unemployment should be about 80%, since the labor force has increased dramatically since (picking a date at random) 1900.
Timothy, I think that eliminating the requirements you refer to would exacerbate the hazard problems that are endemic to the health insurance market.
"f you're a company like GM, paying more for retiree benefits than for the steel in your cars, are you more likely to suck up this expense . . . or cut benefits for people under 65."
Why is cutting benefits for under 65 the only alternative?
Qetzal, Your reflexes may not be what they were when they were 18, but they aren't as bad as they'll be when you are in your sixties and seventies and beyond. 45 year olds aren't that dangerous behind the wheel as a group, for example. Senior citizens are.
Don,
I am not asserting that there is a fixed number of slots, only that retirments open up opportunities for others. Deferring retirement obviousl defers some of this opportunity.
i guess instead, gm will just go bankrupt and transfer health and pensions to the gov't, just like steel companies did. then it will be a much stronger company.
I think you are missing the key point. Companies typically provide benefits to retirees subject to a carve out for Medicare. The result is that employer benefits prior to age 65 are much larger because Medicare is not available. The judge's decision is just another round of stupidity, which will lead to more companies dropping retiree coverage.
This is one more example of the government assuming that the private sector is a fixed target. Make the rules onerous enough and the players will leave the game. Then we start hearing the calls to make it mandatory.
"Good intentions, bad outcomes"
Does this refer to the judge's decision, or to the Age Discrimination law itself? It seems likely to me that the judge's decision was the only one possible under the law (and I say this as someone utterly unfamiliar with this particular law, of course), and that the Bush administration should go to the Congress to get it changed, rather than trying to abrogate it through administrative decree.
Congress is very good at passing laws. They just seem to forget that the law of unintended consequences always passes, as well.
Why is cutting benefits for under 65 the only alternative?
Well, the other alternative is merely employing fewer people, yes. But I hardly think it's unusual to claim that since the cost of providing insurance in these gap years has gone up so dramatically for the companies, while the benefit to most workers and early retirees hasn't gone up by nearly so much, since they were going to get Medicare otherwise when they became 65, that it just isn't going to be worth it to provide the health care for these years in the middle.
The companies were greedy before when they offered the health care. Now that costs have gone up massively without benefits so much, greed will probably direct them to not offer it.
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