How Obamacare Kills The Incentive To Work
In France, people go on the dole because they make just as much money not working as they do working. In America, with Obamacare, thanks to the ways family subsidies work, at a certain point, it becomes cost-effective for one working parent to stay home. Daniel P. Kessler writes in the WSJ:
Starting in 2014, subsidies will be available to families with incomes between 134% and 400% of the federal poverty line. (Families earning less than 134% of poverty are eligible for Medicaid.) For example, a family of four headed by a 55-year-old earning $31,389 in 2014 dollars (134% of the federal poverty line) in a high-cost area will get a subsidy of $22,740. This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799. But a family earning $1 more--$93,700--gets no subsidy.Consider a wife in a family with $90,000 in income. If she were to earn an additional $3,700, her family would lose the insurance subsidy and be more than $10,000 poorer. In addition, she would also pay more in income and Social Security taxes. Taken together, these policies impose a substantial punishment on work effort.
Notches also lead to unfairness. The principle that families of the same size with similar incomes should be treated similarly by tax law and transfer programs has deep philosophical roots and appeals to basic notions of equity. The notch turns this principle on its head. Next-door neighbors with virtually identical circumstances could receive very different levels of government assistance, depending on which side of the notch they happen to fall. This feature will justifiably increase public cynicism about the law and government in general.
Fixing the notch is not so easy. To phase out the subsidy smoothly for families with incomes of 134% to 400% of poverty, the law would have to take away $22,700 in subsidies as a family's income rose to $93,700 from $31,389. In other words, for every dollar earned in this income range, a family's subsidy would have to decline by 36 cents. On top of 25% federal income taxes, 5% state income taxes, and 15% Social Security taxes, this implies a reward to work of less than 20 cents on the dollar--in economists' language, an implicit marginal tax rate of over 80%. Although economists may differ on the effect of taxes on work effort, it is hard to fathom how anyone could argue that this will not reduce economic activity.
Easy solution. Stop subsidies. I'm so sick of covering everyone else's expenses. I was unemployed for a year but probably paid 30k in taxes in two years when I worked. (I'm fairly young) I quit a job that treated me like crap and am not eligible for anything because I saved 60% of my income. Honestly I don't think I deserve a dime from the government but I dont think anyone else does either. You are punished if you save money. Get charged with a crime yoh didn't commit and if you have any savings you can't even get a public defender. You can be completely innocent and be responsible and it will cost you a grand minimum. If your parents jumped the border and don't pay taxes and you get charged with a crime someone else to pays for you because you have no resources. Waste all your money and responsible people bail you out and we wonder why this country is going to shit.
Scott at April 25, 2011 12:40 AM
Take a look at the money for a moment - and realize that it will be collected even if you do not use the health-care system. You pay for something you don't use at all, because of other people.
And that's why the system is going to tell you what care you can get.
Don't buy this. Do this instead!
Radwaste at April 25, 2011 2:19 AM
"I quit a job that treated me like crap and am not eligible for anything because I saved 60% of my income."
No, you're not eligible for anything because you quit your job. Somehow, I get the impression that the "welfare state" is not riding on your shoulders.
Rad,
"You pay for something you don't use at all, because of other people." This is how insurance works.
whistleDick at April 25, 2011 4:47 AM
Rad,
I followed your link and read your proposal. There already is such a mechanism in place like your "medical VISA" idea. It's called a regular VISA. In case I missed something about your proposal, which is entirely possible, it's basically a plan to have everybody put the cost of their health care on a credit card a la carte. That's what happens in a lot of families now and causes financial ruin and homelessness.
I particularly liked your "limit" idea, based on income even. $20,000 was the hypothetical limit you mentioned? One ride in a medi-vac helicopter will take care of that pretty quickly, and then some. What aspect of our health care crisis does your solution address?
whistleDick at April 25, 2011 5:03 AM
They already have the FSA -- pre-tax dollars going into an account to cover medical expenses. My issue with them -- they are a use them or lose them proposition.
If they changed it that the money accumulated over the years, and insurance only kicked in for catastrophic expenses -- insurance would be a lot cheaper.
Jim P. at April 25, 2011 5:23 AM
Jim P., I believe you are describing a medical savings account.
Pirate Jo at April 25, 2011 8:41 AM
"This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700."
Yes, we all believe in free markets. On the other hand, a guy with a family of four needs $23,700 for even Kaiser care? Health care was one reason I sent my family to live Thailand. I was working to pay for health "insurance," although it was remarkable what was not covered, like teeth, deductibles, prior conditions, etc
Even more than free markets, I like systems that work. The US system does not work. Not for me.
Fact is, Great Britain, France, Denkark etc all spend half what we do on medical care, and get roughly the same results.
Let's do the Denmark thing, on health care. BTW, for some reason Denmark is considered the country most favorable for entrepreneurs. So state-un health systems do not have to sap the all-sacred but exceedingly fragile entrepreneurial spirit.
BTW, if we have to tax some rich bastards to pay for an efficiently run national health plan, I don't care. How about we stop getting involved in $3 trillion fool's errands in Iraqistan first?
BOTU at April 25, 2011 9:36 AM
Pirate Jo, I'm guessing he's got group insurance through work, and the FSA is the only option. I don't have an FSA for the same reasons. And I won't until I have kids who need braces.
sofar at April 25, 2011 11:28 AM
It may increase the number of people not working, it may not. There are already a bunch of people not working because they had children, and the cost of day care effectively wipes out any potential income, especially at the minimum wage or just above minimum wage level. And you could argue that those people shouldn't have children, but unless we find a way to stop it, you know it's going to continue. The people not working now are likely to be the same people not working then. I doubt it will change that much to really see an effect.
NikkiG at April 25, 2011 11:32 AM
wd, you have to read it again.
Homelessness is not the product of using a VISA card for medical expenses - it's the product of not planning for those expenses.
A medical VISA card:
a) cannot be used for anything else
b) is independent of work
c) can carry an interest-paying balance when you pay into it
and, the part you didn't notice: the income level threshold indicates the point at which the system kicks in for catastrophic care. But if you want to keep your account green, you do need to do something.
The real benefit is twofold:
1) No rationing. I can get the care I want, not just what I need, because doctors, not bureaucrats, get paid. Nobody can pretend - and that's all it is, pretending - that this is free, merely to buy votes from the idle.
2) I do not pay skyscrapers full of people in offices, who do not deliver care, anything.
I have medical insurance through my company. Yes, its quality is GOING DOWN and ITS COST IS GOING UP because of the "Affordable Health Act". Nice going, morons!
By comparison, I pay a pittance for auto insurance that protects me against truly huge expenses. Please notice that auto insurance can and does pay for the helicopter ride you said would put me on the street.
Somebody, everybody, needs to ask, "Why the hell is medical care so expensive anyway?"
Radwaste at April 25, 2011 3:13 PM
Please notice that auto insurance can and does pay for the helicopter ride you said would put me on the street.
Indeed it can -- I would like to add that, if the person who crashed into you is underinsured or uninsured, you would need UM/UIM coverage for the helicopter to be covered. Or PIP in a no-fault state. Or Medical Expenses coverage in a tort-state. If you've got a bad driving record or live in certain cities, that can all get pretty pricey.
...although you're right...even with all that extra crap tacked on, it is a pittance compared with health insurance. Which ran me almost $100 per MONTH for catastrophic coverage on the individual market when I was between jobs.
My biggest problem with the current health insurance system: not everyone who wants to get insurance can get it, even if they are willing to pay for it. And any system that makes people go bankrupt if they're simply in the wrong place when someone decides to shoot them is broken. Period.
The reform law is a hot mess in a lot of ways. But I think any solution would need to make sure that everyone can get at least catastrophic coverage.
sofar at April 25, 2011 3:38 PM
Rad,
I have a better understanding of your idea now. Thanks for taking the time to clarify.
"Homelessness is not the product of using a VISA card for medical expenses - it's the product of not planning for those expenses." How do you plan for a half million or so in cancer treatments? I know, your plan accounts for catastrophic care. So where does that money come from?
It looks to me like your plan winds up as a hybrid universal healthcare system after all. Only with all the bad parts and none of the good. A bureaucracy would need to be set up and taxes would have to fund these catastrophic care situations while routine care, the bit that brings the costs and severity of illnesses down considerably, would come out of pocket -- meaning people won't get it routinely.
Also, who pays the interest on the money on your card? That means that there is investment going on with that money as it waits for you to use it. More bureaucracy and your healthcare dollars are subject to some degree of risk. I would assume your money would be guaranteed. That means that the system could be very susceptible to collapse given a bad economic downturn.
"Somebody, everybody, needs to ask, "Why the hell is medical care so expensive anyway?"" On this, you're spot on and I think we can all agree.
I think we can also agree that things are definitely broken. I think those that believe it should be left alone and be subject to the same free market forces that we like to see in other industries are living in an ideological dream land.
I don't want you to get the impression that I think your idea has no merit. It might be a very good component of a more comprehensive plan. I just don't think it's a magic bullet.
Did your senators ever get back to you?
whistleDick at April 26, 2011 2:46 AM
wD -
There's precious little evidence to suggest that spending shitloads on "preventive care" actually prevents any high-cost catastrophic illnesses.
And any "universal" system will very quickly devolve into a tiered system where the privileged get excellent care, and the schlubs get squat.
But rest assured that the schlubs will pay for it all.
And to answer your question about why medical care is so expensive: FARTS.
brian at April 26, 2011 5:56 AM
"There's precious little evidence to suggest that spending shitloads on "preventive care" actually prevents any high-cost catastrophic illnesses."
My sense is that you're probably right in terms of quantity of studies and I have no statistical evidence to back up my claim. I haven't the time to spend on the problem. But, it seems to make sense that it would do a lot to help.
"And any "universal" system will very quickly devolve into a tiered system where the privileged get excellent care, and the schlubs get squat."
I don't know that that's the case in all the other first world nations that have adopted such a system. In spite of all the hyped up and isolated news stories to the contrary, citizens of Canada, the U.K., France, Belgium, Holland, etc, seem to like their systems. Taxes are much higher, yes. But bang for the buck seems to even that out and work out well. I'm for it. I wish that the Democrats in Congress hadn't been such sissies and that they had gone full universal healthcare when they had the chance.
whistleDick at April 26, 2011 7:35 AM
If that was the case, then those countries wouldn't be using the US and India to backfill their enormous capacity problems. Complaints in the UK are legion. Rationing is a daily occurrence. France has some sort of whacked-out hybrid system that seems to work from the outside, but they still had 10,000 oldsters die from a heat wave.
If Congress had gone "full universal health care", the 2010 election would have been far more dramatic. To implement "full universal health care" in the United States without resorting to severe rationing would require tax rates so ruinous that our economy would collapse entirely.
We're talking marginal rates for the middle class (50-200k) on the order of 50%.
Which would lead to a significantly lower standard of living for everyone.
brian at April 26, 2011 8:22 AM
The long and short of it is this: no universal single-payer health care system works long term without falling back on some external funding source to prop it up.
Right now, that's us. We do the bulk of the new drug development now. Same with new machines and techniques. We also cover the bulk of the national defense budgets for Western Europe.
In order to afford such a lavish public health care system, we'll need to severely curtail the military and crank the shit out of taxes, pulling the bulk of disposable income out of the consumer economy. And rationing and price controls will end innovation.
Which fucks Europe hard. Now they have to come up with a national defense plan, deal with no new medical innovation from anywhere, and watch the markets for all their high-priced export goods disappear.
You should learn to play chess. Thinking beyond the current move is a useful skill in life.
brian at April 26, 2011 8:25 AM
"A bureaucracy would need to be set up and taxes would have to fund these catastrophic care situations while routine care, the bit that brings the costs and severity of illnesses down considerably, would come out of pocket -- meaning people won't get it routinely."
Well, think more about this.
The VISA organization collects fees for handling a few hundred billion dollars a month and guaranteeing two things: payment for the seller and consumer protection for the buyer. They can do that.
Now think about a hundred million people - they don't even have to be citizens! - with these cards. Below their limit, or, other than for catastrophic events which exceed their limit in one event, they have a monthly bill to pay, just as you get a VISA bill now. There would be interest charged on the outstanding balance.
That's the "stick", as well as ONE of TWO sources for the pool of money needed for catastrophic treatment. Interest paid by consumers goes into the "pot", to be disbursed, by the card company, for catastrophe.
The "carrot" - aside from its portability - is that you could EARN interest for an outstanding balance. Handled properly, this could be as stable, more stable, than government bonds. The "pot" is enhanced by $$ invested in medical savings accounts associated with the card.
Now, say you have the catastrophe. You have a positive balance, it goes to pay bills first. It should. Your life is your responsibility.
And the economy comes from the plain fact that people must be personally involved in every aspect of their care. You mention that people "won't get it routinely". Just why should their routine care be provided by others? We cannot afford to provide "everything" to everyone, period.
And the sad part about this is that so long as government is involved, then the greedy can vote themselves more stuff from the public treasury, which is why we're in a jam today.
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I got the usual form letters back from my senators. I don't expect this to be popular with government people, because it takes power away from government.
Imagine, for a moment that the US Government was involved in auto repair. Do you really think that would be cheaper? Not me, because the more people there are in the shop, the more they have to charge - and government agents do not have to perform to be paid.
Radwaste at April 26, 2011 2:57 PM
If you have a Blue Cross, Blue Shield or any other plan's Explanation of Benefits, get it out and read it.
There are numbers on there that no one was paid.
This is explained away by people who say that "doctors accept lower payment in order to be guaranteed payment".
Again - why do you believe that?
Because it's not there in your car-insurance documents after a wreck.
The doctor's office charges what they need to stay open, no matter what the papers say. Meanwhile, you pay to run all the air-conditioning in downtown Jacksonville, FL.
Radwaste at April 26, 2011 3:02 PM
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