Monday, April 25, 2011

How ObamaCare reduces incentives to work

"We have to pass the bill so you can find out what is in it." -House Speaker Nancy Pelosi, March 2010

These infamous words take on a new meaning as we continue to discover more implications of the 2,800 page health care reform law, commonly referred to as ObamaCare.

Today in The Wall Street Journal, Daniel Kessler writes how ObamaCare impacts yet another part of our lives: it actually "punishes work." How?

Kessler points to the government-funded subsidies designed to Americans purchase health care coverage. With the onset of government-run health care exchanges in 2014, the cost of coverage will grow so much that government will offer subsidies to help citizens buy insurance. However, as incomes rise for individuals and families, the amount of their government subsidies will decrease. Kessler explains the damaging impact of such a sliding scale:

"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."

In effect, the law will punish those who earn more. As the example above shows, families and individuals will all too often be incentivized to remain in lower income brackets to qualify for higher government insurance subsidies.

Kessler closes with this poignant question:

"For middle-income families, should economic success be determined by work and savings, or by participation in a government program?"

Is this what Congress was hoping to find when they passed the law?


Hempy said...

If The Wall Street Journal really cared about taxes, then they'd be advocating Alexander Hamilton's proportional rate on the movement of money.

But alas! That would fairly tax the big money people -- the Wall Street Journal's main clientele.

The problem lies with the tax code not the Affordable Care Act, which falls within the guidelines of promoting the general welfare as specified by the Constitution.

Anonymous said...

I wouldn't say that reducing choice qualifies as promoting anyone's general welfare.

Hempy said...


The private sector health care industry is past masters of reducing choice. They routinely cancel insurance on someone when they get chronically ill.

For years when people suffered from brain disorders, called mental illness, insurance companies would only pay half the cost and then only for 30 days. Their attitude towards the mentally ill was that they'll snap out of it.

Insurance companies don't want to cover anyone who has preexisting conditions. The Affordable Care Act put a halt to that.

They'd rather to not cover anyone who may have a genetic potential for contracting some chronic condition.

Those were some of the practices that the private sector health insurance industry practiced to reduce choice for patients.

The private sector health care industry never was about promoting the general welfare. Their only concern was improving the bottom line - to hell with the common good.