Papa John's Pizza's CEO said the Affordable Care Act will raise the cost of his pizza
No one thinks government spending is free, says Dr. Aaron E. Carroll
Even Americans who get their insurance from their employers pay for their care, he says
Carroll: More expensive pizza is a tiny price to pay for the benefits of health care reform
Editor’s Note: Dr. Aaron E. Carroll is an associate professor of pediatrics at the Indiana University School of Medicine and the director of the university’s Center for Health Policy and Professionalism Research. He blogs about health policy at the Incidental Economist.
Last week, John Schnatter, the founder and CEO of Papa John’s Pizza, announced that the Affordable Care Act will raise the cost of his pizza 11 to 14 cents each, or 15 to 20 cents per order. This has caused some to gloat that Obamacare won’t be “free” after all but will be passed down to consumers in the form of higher prices.
For the sake of this discussion, I’m going to ignore the fact that Schnatter is a supporter and fundraiser for Mitt Romney, and take him at his word. I’m also going to assume that his numbers are not inflated at all but represent an accurate representation of what will happen in 2014.
Still – this isn’t news.
Let’s start with the idea, espoused by many who oppose the law, that there is some expectation from those that support the law that health care is “free.” It’s not, and no one I know defends it as such.
It costs a lot of money to enact the law: The most recent estimate is well over a trillion dollars over the next decade. It is referred to as deficit-reducing, however, because it lowers spending in other areas or collects new revenue, such that its costs are more than paid for. But no one should think that it doesn’t cost money.
Moreover, no one should think that individuals won’t pay for the law. Of course they will. Everything the government does is paid for by individual Americans, including the Affordable Care Act. That’s what taxes are for.
Some may try to argue that more than half of Americans don’t pay any taxes, but they are referring only to federal income tax. Those people still pay payroll taxes, sales taxes, state income taxes, excise taxes and more. When you add all of those up, it turns out that nearly everyone pays taxes.
We’re all paying for the Affordable Care Act, just as we all pay for defense spending, we all pay for Medicaid, and we all pay for Social Security. No one thinks government spending is free.
Uninsured Americans who get private insurance in the exchanges are going to pay even more. Even those receiving the largest subsidies will still have to pay for some of their premiums, along with additional out-of-pocket costs. As people earn more, their share of health care spending goes up, too. They all pay.
Even Americans who get their insurance from their employers pay for their care. No one should be under the illusion that their “bosses” are generously picking up the tab. There are many studies that show that premiums and wages offset one another. Employees (read: individuals) pay for their health insurance themselves through lower wages.
So let’s stop attacking the Affordable Care Act because it will mean that we – meaning individual Americans – are paying for health care. We always do.
Let’s circle back around to Papa John’s, though. Part of what the act does is mandate that companies start providing health insurance to their employees or pay a penalty. Since some don’t do that already, this will cost them money. They could take this out of profits or reduce the salaries of their executives, but they will probably do what every business does: They’ll pass it on to the consumer.
This is as it should be. Some companies probably keep costs down by not providing comprehensive health benefits to their employees. Now, they will have to. I imagine some companies already do, which probably increases their costs, and now they will be on a more level playing field. Regardless, Papa John’s is telling you that people who order its pizza will now bear the cost of its employees’ health insurance.
Again – as it should be! Should people who don’t order Papa John’s pizza have to pay for that insurance? That’s what’s happening now.
In 2004, for instance, more than half of Wal-Mart employees (PDF) did not get health care coverage through their jobs. More than a quarter of children of Wal-Mart employees therefore got their insurance through Medicaid or SCHIP. That means Wal-Mart didn’t pay for their health insurance; taxpayers did. Moreover, every time an uninsured employee had to go to an emergency department and receive uncompensated care, who paid for that? The rest of us.
Things got so bad that Maryland passed a law in 2006 that pretty much targeted Wal-Mart to demand that it spend 8% of payroll on health benefits or pay the difference to Medicaid. Yes, Wal-Mart might have had to raise its prices a bit to cover that. But doesn’t it make more sense for those who choose to shop at Wal-Mart to foot the bill, than for everyone, including those who don’t, to have to pay for its employees’ health care?
You may believe that we, as a country, shouldn’t pay for care for the uninsured. But most of us are unwilling to let the sick, especially children, suffer. So we – individual Americans – have been paying for this health care, saving those companies money, regardless of whether we availed ourselves of their services. No longer. Under the Affordable Care Act, those costs will be the responsibility of those businesses and eventually their customers.
One last point. My kids happen to love Papa John’s. Some Saturdays, when my wife and I go out, they will order pizza from there. The usual delivery runs about $20. According to Schnatter, the cost of health insurance to his employees might raise the price about 1%. If it had gone up twice that because of a pepperoni shortage, I doubt it would have made the news at all.
More than 30 million Americans will get insurance under the Affordable Care Act. Tens of millions more will be protected from underinsurance, annual and lifetime limits, and unfair price increases. If the downside of this is that my pizza costs 20 cents more, that seems a pretty small price to pay.
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The opinions in this commentary are solely those of Aaron E. Carroll.