Health Care Benefits to Gays...Is It Worth The Cost?

Here is the transcript that Professor MV Lee Badgett, a preeminent scholar in the economic lives of LGBT men and women, presented to Congress this month. She addresses HR2517, also known as “Domestic Partnership Benefits and Obligations Act of 2009” which is pending legislation in Congress. The bill is about extending health care benefits to government employees. If you don't get a chance to peruse her testimony, here are the main bullet-points verbatim with my own commentary in parenthesis.

1. This important legislation would put the federal government in the mainstream of modern compensation practices with respect to the equal treatment of the same-sex partners of federal employees. (As the agent of equal rights, its time the government cath up to the private and state sectors)
   
2. A study that [she] recently co-authored found that 20% of people in same-sex couples are uninsured, a rate that is significantly higher than average in the United States and is as least partly the result of employers’ failure to offer domestic partner benefits.
3. [They] estimated that providing these vital benefits for non-postal employees would cost approximately $41.0 million in the first year and $675 million over ten years. The majority of these costs are concentrated in the areas of employee health benefits and retiree health benefits.
   
4. Health benefits for the same-sex partners of federal employees (including postal service employees) and their dependent children would cost $60.4 million in the first year – that is a 0.41% increase in health care spending for employees in 2008. (0.41% increase is minimal, at least when you consider it next to the cost of the stimulus package and the impending health care takeover)
   
5. Over ten years the additional tax revenue associated with granting domestic partner benefits to federal employees would be approximately $118 million. Also, the retirement savings program would actually see a reduction in annuity payments over the short-term as federal employees opt for survivor benefits for their same-sex partners. This reduction amounts to $108 million over ten years (Not a huge chunk of change, in fact fairly paltry, but at least the government is earning tax revenue)

So, I said that she is a preeminent scholar in the economic lives of LGBT men and women, but I didn't say that she is the most erudite. Her testimony is passionate, but not persuasive. I agree with her very much that "HR2517 will also greatly enhance the financial security of the 34,000 federal employees with same-sex partners, and that sense of security will also generate benefits for their employer." However, the cost of extending the health care as she states over ten years is $675 million while the sum of the benefits is $226 million from increased tax revenue and retirement savings. Because costs exceed benefits, it's not lucrative for the government to invest in a program such as this. Thus, although I'm torn, economics concludes that Congress should not pass this legislation. Prof. Badgett overlooks this in her testimony. Economics is unfortunately not on her side at this juncture.

Here are some more numbers that further illustrate the economics. Doing some arithmetic shows that the benefits of extending health care cover approximately 33% of the costs. Also, the net benefit (i.e., benefits minus costs) of extending health care is -$449 million. Again, the negative sign says the government does not gain from passing HR2517.

Although disheartening, from these numbers I doubt Congress will approve this legislation, definitely not with the cost of the stimulus package lingering in their conscience and with Obama pushing for the nationalization of health care adding to the deficit. MV Lee Badgett needs to adjust her accounting in order to better persuade Congress that beyond the scope of economics the amorphous psychological benefits of providing health care benefits is very real to gays. While economics says no to extending health care benefits, my moral conscience says yes.

So, are health-care benefits to gays worth the cost?