Abstract
Contrary to claims that Obamacare is compassionate, the new health care
law further entrenches a superstructure that penalizes work and encourages
dependence for a wide swathe of Americans. Obamacare also penalizes marriage,
places citizens at a disadvantage compared with non-citizens, and prioritizes
coverage for able-bodied adults over services and supports for the disabled. To
restore the values of hard work that Americans have held dear for centuries,
Congress should stop and repeal all of Obamacare.
”We are a compassionate
nation,” President Barack Obama recently stated in his weekly radio address,
talking about the health care law—implying that critics of Obamacare are not.[1] Nothing could be further from the truth. Obamacare itself
is an uncompassionate law.
To restore the values of hard work that Americans have held dear for centuries, Congress should repeal all of Obamacare. Further, Congress should reexamine other tax and welfare policies with an eye toward encouraging work and marriage.
Obamacare Creates Inequities
Many of Obamacare’s
flaws are well known.[2] According to the Congressional Budget Office (CBO), the
law will spend nearly $1.8 trillion over the next 10 years on new insurance
subsidies and an expanded Medicaid program.[3] However, inherent design flaws in that subsidy regime will
create winners and losers in a way that penalizes both work and marriage and
that prioritizes the able-bodied over the disabled and citizens over
non-citizens.
Rather than “spreading
the wealth around” as then-Senator Obama famously discussed during his 2008
campaign, Obamacare will actually concentrate wealth.[4] By penalizing work, the law fundamentally acts as a brake
on low-income and middle-income families’ desire to prosper. Instead of
improving their prospects to succeed, Obamacare focuses solely on making their
current status less bleak. The American people deserve better than Obamacare’s
dystopian vision.Inequity #1: Discouraging Work
Many of the inequities
present in Obamacare stem from Section 1401 of the law, which establishes
eligibility for subsidized insurance in government-run exchanges.[5] Obamacare’s formulae for allocating federal premium and
cost-sharing subsidies include several “cliffs.” At these cliffs, individuals
and families will actually benefit more by working less
because additional earnings could cause them to lose thousands of dollars in
taxpayer-funded subsidies.
For example, Obamacare
subsidizes insurance premiums for individuals with incomes of up to 400 percent
of the federal poverty level (FPL), which is just over $62,000 for a couple in
2013.[6] According to the Kaiser Family Foundation’s subsidy
calculator, a married couple, each 50 years old, making a combined $60,000 per
year would receive a taxpayer-funded insurance subsidy of up to $5,081.[7] The couple would qualify for this subsidy because their
combined income would be just below 400 percent of the FPL. However, if the
couple earned an additional $2,500—raising their income just above 400 percent
of the FPL—they would receive no subsidy at all. Even though they receive $2,500
more in cash compensation, the couple would actually be worse off
financially because they would lose more than $5,000 in federal insurance
subsidies.
Similar cliffs occur
elsewhere in Obamacare’s subsidy structure. As income approaches 400 percent of
the FPL, the percentage of income that households are expected to devote to
insurance premiums rises, and the premium subsidies under Section 1401 fall.
Individuals with rising income also face the loss of federal cost-sharing
subsidies established under Section 1402 of the law, which reduce out-of-pocket
expenses including co-payments and deductibles. These effects are particularly
acute at certain cliffs established in the statute—for instance, 150 percent,
200 percent, and 250 percent of the FPL—but they also pervade the entire subsidy
structure. Overall, University of Chicago economist Casey Mulligan has concluded
that Obamacare will help raise effective marginal tax rates by more than 10
percentage points.[8]
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