Tuesday, January 24, 2012

American Values? Obamacare WORSENS Inequality

The White House is previewing the State of the Union message by saying the President’s agenda will renew American values, and create a country where “everyone plays by the same rules.”  But the reality is that Obamacare actually worsens inequality – by pitting similarly situated households against one other.  Some families will get vast subsidies from the federal government, while other families making the same incomes will receive little or nothing.  That’s not an America where “everyone plays by the same rules” – it’s the federal government picking winners and losers.

Take, for instance, two key numbers – the 63 percent and the 18 percent.  The 63 percent are the number of non-elderly Americans who are theoretically eligible for taxpayer-funded insurance under Obamacare.  According to the Census Bureau, there are 266.5 million individuals under age 65.  Of those, 169.2 million have incomes under 400 percent of the federal poverty level – the threshold under which individuals can receive insurance subsidies.  169.2 million divided by 266.5 million people is 63.5 percent – meaning nearly two-thirds of the population under age 65 are considered “low-income” and qualify for subsidized insurance under Obamacare.*

However, according to the Congressional Budget Office, of the nearly 110 million people theoretically eligible for taxpayer-subsidized insurance on Obamacare’s Exchanges, only 20 million – or 18 percent – will actually receive those subsidies.  The remaining 82 percent of the population with incomes between 135-400 percent of poverty will instead pay (through a dozen middle-class tax hikes) for the privilege of funding the health care of the other 18 percent.

On both fiscal and fairness levels, this Obamacare math raises serious questions:

  • How is a legislative scheme where three in five Americans are classified as “low-income” fiscally sustainable?
  • Conversely, how is a scheme where fewer than one in five Americans in eligible income brackets actually receive government benefits equitable – or even perceived as such?
  • Won’t middle-class American families who DO NOT receive subsidies, yet fund the benefits of individuals with similar incomes who DO, revolt at the inequity of the government “picking winners and losers” by deciding who will and will not receive subsidies?
  • Won’t public outrage force a rapid expansion of Obamacare’s subsidies, and/or encourage employers to drop coverage, either or both of which will quickly cause spending on subsidies to explode?

When it comes to equality, Obamacare strikes a “balance” as the worst of both worlds – making nearly two-thirds of the population eligible for subsidized insurance in practice, but giving it to only a fraction of this larger subset.  At one stroke, a majority of Americans have been classified as “low-income,” yet most of that majority will have the “privilege” of watching their hard-earned tax dollars subsidize the insurance of others with the same, or even less, income.  It’s the type of horizontal inequality – people with the same income being treated far differently – that all Americans, not just Occupy Wall Street, will view as unfair and distinctly NOT an American value.  Yet this perverse version of spreading the wealth around is one of the fundamental premises on which Obamacare is based.


* Of the 169.2 million people under age 65 with incomes under four times the poverty level, 59.3 million have incomes under 135 percent of poverty.  All these individuals – many of whom are already eligible for Medicaid – will become eligible for that program under Obamacare. (Technically the Medicaid eligibility threshold is 138 percent of poverty, not 135 percent, but the Census data have a slightly different cutoff point.)  That means 109.9 million people under age 65 – or about 41% of the non-elderly population – is eligible to receive insurance subsidies in Obamacare Exchanges, by virtue of their income. (The 59.3 million with incomes below 135 percent of poverty will be dumped into Medicaid, and will not have a choice of private plans regardless.)