Yet another distributional analysis

The Hill has “details” on the latest “plan”-like scribblings of the Republican policy “wonks” on healthcare. There is one thing I want to look at before I start my morning coffee:

The core of the plan is a $2,500 tax credit that any citizen would be eligible for and use to purchase health insurance. The lawmakers say this gives flexibility to people, whether they get employer-based insurance or not, to more directly control their healthcare spending, for example by using a health savings account.

I’m looking at one of the sponsor’s web pages and I get very few more “details”

every American citizen is eligible to claim a $2,500 tax benefit as well as a $1,500 tax benefit per dependent minor. This benefit can be assigned to an employer, transferred to a Roth Health Savings Account, or advanced for annual distribution. With this benefit, individuals and families now have the freedom to use pretax dollars to plan and save for their health care futures.

Let’s look at the distributional consequences of this type of policy.

For people who make under 200% of FPL, pre-tax dollars aren’t too valuable as most of their dollars are minimally taxed.  For people making six figures and only have a kid or two at most, pre-tax dollars are fairly valuable as they are facing a much higher explicit marginal rate.  Worrying about pre-tax dollars is overwhelmingly an upper middle class to affluent problem.

More importantly it is the flat subsidy.

$208 a month is a decent subsidy.  In some regions that will buy the equivalent of a Silver plan with absolutely no out of pocket monthly premium.  That is fine for a healthy and young individual (as underwriting is back with a vengeance).  There are Silver plans for 40 year old non-smokers that cost under $200.  However, that same $200 a month Silver plan with a $3,500 deductible will cost a 63 year old $450 a month.  And odds are that 63 year old will need to use their policy a lot more than the 40 year old.

Furthermore, a flat subsidy is great for people who don’t need help.  I get my insurance through my employer and the visible premium payment is roughly two hours of pay per month for a Platinum like coverage for my family.  I don’t need help.  My family does not need help.  We already have access to good, high actuarial value, affordable coverage.

Families and individuals that are not mid-career professionals and are making under median income will see a far higher percentage of their income go to post-subsidy premiums.  The poorer you are, the higher the premium percentage is for a given level of individual risk.  And that is a major problem as the people who should bear the least risk are the one’s with the fewest available resources to mobilize in an oh-shit scenario.

TLDR: Comfort the comfortable






48 replies
  1. 1
    I'mNotSureWhoIWantToBeYet says:

    How do tax benefits/schemes like this work for people who don’t itemize deductions?Could someone using 1040-EZ or 1040-A claim them?

    I assume not (under normal circumstances). Isn’t it a transparent ploy to high-income (above the median) people, also too?

    Thanks.

    Cheers,
    Scott.

  2. 2

    @I’mNotSureWhoIWantToBeYet: Pretty much a means of funnelling money to high income people, yep!

  3. 3
    WereBear says:

    @I’mNotSureWhoIWantToBeYet: Isn’t it a transparent ploy to high-income (above the median) people, also too?

    Somehow, Republican policy assumes a six figure income…

  4. 4
    Baud says:

    $208 a month is a decent subsidy. In some regions that will buy the equivalent of a Silver plan with absolutely no out of pocket monthly premium.

    Doesn’t this assume the continued existence of Obamacare exchanges?

  5. 5
    Butch says:

    $208 is a Silver plan? Where? When I was converted to contract employee last fall the best I could do was $1,500 per month for the two of us and that came with a $12,000 deductible (I did not type the number wrong). We were essentially buying a premium; the coverage was worthless and it was about half my monthly take-home pay.

  6. 6
    cmorenc says:

    Presuming the GOP plan would entirely repeal Obamacare and put this health insurance tax benefit plan in its place – does the proposal address the availability of insurance to those with pre-existing conditions and lifetime benefit limits (such as existed in many pre-Obamacare policies)? Does it address any mechanism for reducing health care costs other than the presumed magic of the free market? Or more particularly, does it attempt to remedy the structural factors in the pre-Obamacare insurance system that frustrated market forces from taming rising costs and extravagant billing even for common items? In short, how is the magic of the free market supposed to work under the GOP plan better than it did under the pre-Obamacare insurance system?

  7. 7
    gene108 says:

    This is the same thing as when Bush, Jr rolled out Health Savings Accounts and High Deductible Plans as a “free market” solution to address the problem of out screwed up healthcare system.

    I mean literally the same damn thing. Here’s some pre-tax money and shop for healthcare like you would a washing machine.

    Republicans are members of a cult, wherein there is only one solution to every problem and it is built around tax cuts of some kind or other.

    I hope Republicans get crushed at every level this year.

  8. 8
    I'mNotSureWhoIWantToBeYet says:

    @gene108:

    I hope Republicans get crushed at every level this year and every election going forward.

    Cosign with a slight edit. ;-)

    Cheers,
    Scott.

  9. 9
    gindy51 says:

    @cmorenc: it isn’t, but if they put big words and lots of sentences around it, the rubes will think it does.

  10. 10
    rikyrah says:

    @I’mNotSureWhoIWantToBeYet:

    How do tax benefits/schemes like this work for people who don’t itemize deductions?

    glad you called it a scheme.

    thanks for breaking it down, Mayhew.

    Another scam to benefit those who don’t need it.

    uh huh
    uh huh

  11. 11
    NotMax says:

    And for those who don’t earn enough to file, a tax credit is meaningless.

  12. 12
    Keith P. says:

    Yet another distributional analysis

    Really trying to reel ’em in with that headline!

  13. 13
    Emperor Snapper says:

    Wow. I mean, this would be a great deal for me, but I’m hardly someone who needs it. Rather than put 8 grand in my pocket, maybe that money should go to someone with actual problems.

  14. 14
    guachi says:

    I can only believe that those who advance a plan like this are more interested in the appearance of having a plan than having a plan that actually works.

  15. 15
    Baud says:

    @Keith P.:

    You Won’t Believe What The Republicans Want To Do To Health Care Now

  16. 16
    Baud says:

    More importantly it is the flat subsidy.

    Is this an accurate statement if the tax credit isn’t refundable?

  17. 17
    Anonymous At Work says:

    But without community rating and mandated coverage of young and healthy, this amount will be too little to combat or contain the death spiral. Remember that Republicans will keep (more like “can’t not do away with”) the ban on pre-existing conditions.

  18. 18

    @Keith P.: I write electric copy — I was going for wonky exasperation combined with ennui

  19. 19
    peach flavored shampoo says:

    The poorer you are, the higher the premium percentage is for a given level of individual risk.

    Feature, not bug. Also, too, more dead poors. Intended result, not side effect.

  20. 20
    Punchy says:

    @cmorenc: Wow, if you actually think that any GOPers has actually thought through any of these questions, or cares about the answers to any of them, or believes that his constituents give a shit about anything beyond “killllllllllll O-care!”, then I have (had?) some glaciers in Alaska to sell you.

    None of this “plan” is an actual plan. There’s no follow through on anything in terms of specifics because they know 1) the media wont ask and 2) their voters are too stupid to understand it, so why bother.

    Sometimes it’s very depressing to be sharing this land with others so clearly bent on destroying it.

  21. 21
    dww44 says:

    “Comfort for the Comfortable and increasing discomfort for those already discomfited” is the GOP legislative agenda, such as it pitifully is, in a nutshell. I wish I could afford to hire you, Richard, and then afford to air a commercial featuring the expert you that combats the “Obamacare is turning out to be the disaster that we thought it was and not helping, but hurting those it was supposed to help'” ad that Sen. Isakson is airing ahead of next week’s GOP primary..

    He’s got primary opposition from the right, so he’s airing lots of TV ads. Now, this is a man, who’s 71 and was diagnosed with Parkinson’s disease last year and says that he will be able to serve a new 6 year term. One of his primary opponents, an African-American Republican, is running against him on the premise that the sitting Senator won’t make it through 6 years.

    And my GOP Congressman, Scott, who I thought was horrible enough is being challenged from his right by a white female who is excoriating him in her ads for, among other things, voting to fund Planned Parenthood. Both of them will work to protect our Georgia military bases, of which there are many, from that evil Obama’s plans to cut the military. I despair of politics and political candidates in my state. At least the GOP governor vetoed a couple of egregious bills passed by the white male GOP controlled legislature. Otherwise we’d be another North Carolina about now.

  22. 22
    Keith P. says:

    @Richard Mayhew:At 7am, that headline is deceptively hilarious.

  23. 23
    scav says:

    While we’re discussing titles, the BBC went with this. The Forgotten Wife of Charles Dickens: She was an author, actress, traveller — and the writer’s great-grandmother.

    I was soo disappointed about the implied time travel.

  24. 24
    StellaB says:

    @I’mNotSureWhoIWantToBeYet: A fully refundable tax credit (the ACA premium support subsidy or the EIC are examples) would be available to everyone despite their income. However, the ACA can provide both its premium subsidy and payment support subsidy up front so that the taxpayer doesn’t have to wait until the following year for reimbursement.

    Don’t forget that the ACA also subsidizes deductibles and copays for less affluent people.

  25. 25
    jake the antisoshul soshulist says:

    @gene108:

    You left out God and guns, and of course less gubment.

  26. 26
    I'mNotSureWhoIWantToBeYet says:

    @StellaB: Thanks.

    As always, the devil’s in the details. It’s hard to believe that the GOP is interested in making sure that the benefits are easily obtainable by those on the bottom of the pyramid though.

    Fortunately, we can control our destiny on things like this, if we turn out to vote…

    Cheers,
    Scott.

  27. 27
    pseudonymous in nc says:

    Furthermore, a flat subsidy is great for people who don’t need help.

    Not that different from how HSAs were originally embraced by people who don’t need them but like the idea of another tax shelter. You’d almost think that GOP congresscritters and health policy ‘wonks’ are completely ignorant of the everyday bureaucratic bullshit that people have to deal with.

    For fuck’s sake, most of the health care that matters is not priced for individual purchase and never will be.

  28. 28

    @Butch:
    I have a $250/month silver plan from the California exchange. Really saved my butt when the inner ear injury happened. Who could have known such a tiny piece of damage, totally without warning or visible trigger, could damn near kill me?

  29. 29

    @pseudonymous in nc:
    Less that they’re ignorant and more that they specifically, deliberately do not care. Dogma, racism, and the general bullying cruelty ethic of the GOP says that helping people cannot work. Tax cuts are Good. Forcing people to fend for themselves, and the poor to make do with much less, builds character. Those are the standards they care about, and this plan meets those standards acceptably, so it must work.

    You may note the media uses the same standards.

  30. 30
    Jack the Second says:

    @gene108:

    Republicans are members of a cult, wherein there is only one solution to every problem and it is built around tax cuts of some kind or other.

    That is actually a really great diagnostic criteria not of cults but of sham medicine.

    When a practitioner has one treatment modality (crystals, acupuncture, vitamin megadosing, chiropractic) that they claim will cure a wide range of diseases (“all” cancer [there is a huge diversity in cancers, even cancers affecting the same parts of the body], organ failure, weight loss, hearing or vision loss, mood disorders, ALL AT ONCE), that’s a pretty good sign that they’re full of shit. The real world is messy, and you can’t reduce all problems to one root problem with one solution.

  31. 31
    Anonymous At Work says:

    @pseudonymous in nc: PS: You riffing on my thing? Just checking…

  32. 32
    Keth says:

    Given that this bill also (inevitably!) eliminates the individual mandate, and voids requirements for what a policy must cover there are two other outcomes easy to postulate:

    – No mandate means the younger yet immortal poor will not get insurance, till they need it, when it is too late – making the insured pool older, sicker, more expensive.
    – Because all other policies on the individual marketplace will increase in cost (perhaps by a great deal) the policies offered at a rate in line with a $200/month subsidy will be pure crap.

  33. 33
    pseudonymous in nc says:

    @Anonymous At Work: I’ve had this nym for about a decade, so probably not.

  34. 34
    karen marie says:

    @peach flavored shampoo: I would plan on commiting a crime that will land me in prison except prisoners are no better off – if not worse off – than a regular poor person, plus no voting.

  35. 35
    pseudonymous in nc says:

    @Keth:

    the policies offered at a rate in line with a $200/month subsidy will be pure crap.

    Inevitably comes with Across! State! Lines! which means some low-population, high-wingnut state (say, Idaho) will lower its minimum policy standards to “we’ll cover surgery that you do yourself with one of those little hotel sewing kits and a mini bottle of vodka to sterilize the needle” and Idaho Insurance will become the new standard at $200/mo.

  36. 36
    Yutsano says:

    A tax credit is useless if you owe money to another state or federal agency. Here’s your $2500! Oops! Refund offset! Sorry!

    Also: this credit relies heavily on the IRS to administrate it. Something tells me it doesn’t come with a budget increase.

  37. 37
    Ruckus says:

    Ahhhh. Just another way for the conservative hive to kill off those who they deem not worthy of living with horrible policies that they hope to sell. At least 50 yrs ago conservatives were about not moving forward or at least moving forward at a pace that insured that each generation didn’t have to endure any progress. Now it’s all about the grift – how comfortable can they be while fucking over everyone they don’t like at a profit.

  38. 38
    Feathers says:

    Ignoring the details, this strikes me as another free money for people who don’t need the benefit, not nearly enough to help those who do. But it has another Republican benefit – when it is inevitably taken away down the line, it will cause all the people who have been spending that free money to scream that the Demoncrats do nothing but Steal! Steal! Steal! Because I EARNED that tax break!

  39. 39
    chopper says:

    this is fucking goofy. i have good employer-based insurance. what the hell do i need $2500 in a HSA for (and $3000 more for my two kids)?

    and besides, $208/mo for someone who needs to buy insurance on the open market isn’t gonna go far when the rest of the republican “plan” gets implemented, i.e. gut the parts of obamacare that help keep the plan costs down.

  40. 40
    shinobi42 says:

    Through my employer, I pay 1000 a month for health insurance for two people. So I mean… yeah this is not helpful guys. And of course, I am upper income so I don’t NEED the help. But like… what is even the point of this money you are giving me? My feeling is something along the lines of “Aww that’s cuuute, they think they are helping.”

  41. 41
    Brachiator says:

    The core of the plan is a $2,500 tax credit that any citizen would be eligible for and use to purchase health insurance.

    Why are the Republicans so stuck on this false idea that a hard dollar tax credit is all that is needed to give an individual or families all the power they need to make their own health insurance choices? And health savings accounts are also one-size-fits-all straitjackets.

    Also, is this a refundable tax credit?

    Oh, well. I will give the Republicans this. They seem to realize that they can no longer simply promise to repeal Obamacare without offering some kind of alternative. Part of this seems to be intended to provide Trump as much cover as they can give to offset his lack of knowledge and experience.

  42. 42
    nastybrutishntall says:

    It seems to be not much worse than Obamacare for me. I have to subsist with a grandfathered plan with a high deductible because the government thinks I make too much money for a subsidy. (Of course, my premiums, my student debt, my underwater mortgage, my child support payments, and my crazy rent take away everything but a pittance.) I slide further into debt every day even though I make what seems like good money in my business (healthcare- the irony) so I’m just waiting for more family members to die and leave me some of that Boomer cash so I can float longer.

    Meanwhile, Obamacare did nothing to fix the cost of healthcare itself, it did nothing to prevent tricks such as being unable to guarantee in-network prices for hospital stays because of physician groups picking your pocket when you’re under. I pay five grand a year for the privilege of losing everything I have potentially if I need surgery due to surprise out of network charges and various hospital/insurance fuckery. I guess I should be happy that at least when I slide into utter destitution due to medical debt I’ll be eligible for a subsidy!

  43. 43
    Ruckus says:

    @Brachiator:

    Why are the Republicans so stuck on this false idea that a hard dollar tax credit is all that is needed to give an individual or families all the power they need to make their own health insurance choices?

    2 Points.
    They aren’t trying to give all families the power to make their own health insurance choices, only those they deem worthy.
    The wealthy use tax credits (to avoid taxes that shouldn’t have been paid in the first place, naturally) therefore tax credits are the only proper way to pay for anything. And of course if you don’t have enough income to use the tax credit then you aren’t worthy anyway (see the first point).

  44. 44
    Technocrat says:

    Give credit where it’s due, guys. This is evilly brilliant. It rewards wealth and fecundity – but neither in isolation, you need both to benefit the most.

    This is the Duggar Health Plan.

  45. 45
    Tyro says:

    The lawmakers say this gives flexibility to people, whether they get employer-based insurance or not, to more directly control their healthcare spending

    Never in my life have I woken up and said to myself, “You know what I really need? I need to more directly control my health care spending.”

    No, I do not. My health care problems fall into two categories: the need to have health insurance, and needing to spend less money on my health care.

    I’m not going to turn down a free $2,500, but it just means my problems are $2,500 less painful than they used to be.

  46. 46
    WaterGirl says:

    @Frankensteinbeck:

    Who could have known such a tiny piece of damage, totally without warning or visible trigger, could damn near kill me?

    I see you must be trying out the opening line for your next book? Only a writer would come up with something like that.

    What? I didn’t know you had a problem with your ear. Oh my gosh, no warning. And it was life threatening. What happened? How did you know something was wrong? I hope you’re okay. All that from fewer letters and words than it took you to say it.

  47. 47
    Enhanced Voting Techinques says:

    @I’mNotSureWhoIWantToBeYet: In their minds it encourages the poor to stop choosing to be poor and instead buckle down and get that job as a CEO at a Fortune 500 company like other hard working Americans. But isn’t this just what Bush was doing?

  48. 48
    bob hertz says:

    Even assuming this flat credit is a good idea, there has to be some way to pay for it.
    If 150 million adults get a credit of $2500, and 75 million children get a credit of $1500, that comes to around $500 billion a year.
    When John McCain proposed this, it was to be paid for by taxing employer-paid health premiums as ordinary income.
    That would greatly harm the Republican base.
    So what is the story?

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