Medicaid’s Poverty Trap Illustrated
The tragic story of a disabled woman trapped in poverty by the hodge-podge of ways the U.S. finances health care illustrates why we need to sweep the whole thing away and give everyone a universal, refundable tax credit:
On a crisp California morning in February 2012, my sister-in-law, Marcella Wagner, was driving down the interstate toward Chico State University, where she had just entered the nursing program.
To avoid a collision, she jerked the wheel hard, and her car veered off the freeway. It rolled over, crushing the roof. The other driver sped off, never to be found.
But Marcella was left a quadriplegic, paralyzed from the chest down and with little use of her hands. She will need a wheelchair and round-the-clock personal care assistance indefinitely.
Marcella qualified for Medi-Cal because she is disabled, but because Medi-Cal is for poor people, Dave and Marcella have to be poor to receive it.
As a family of three with one disabled member, they are allowed to keep $2,100 of Dave’s $3,250 monthly earnings to live on. The rest of Dave’s earnings, $1,150, would go to Medi-Cal as the family’s share of cost. That is, any month in which Marcella incurred medical expenses, she and Dave must pay the first $1,150. To our surprise, if Dave earned more money, the extra amount would also go to Medi-Cal: The cost sharing is a 100 percent tax on Dave’s earnings.
Essentially, the way they meet the income test is for Medi-Cal to skim off Dave’s income until they are in fact poor.
(Andrea Louise Campbell, “How Medicaid forces families like mine to stay poor,” Vox.com, July 28, 2015)
The universal tax credit is a very sound idea.
However, let’s play it through this actual case to see what else is required.
Dave and his wife would get their tax credit, say the amount is $5,000.
They could use their credit to buy health insurance that did not impoverish them.
However — there would have to be an insurance company that would accept Marcella with her severe and expensive condition.
Does this mean we would have to keep the ACA ban on underwriting? Or would we allow Marcella to buy into Medicare?
All I care is what works. But the individual insurance market before 2009 would not work here.
They would have had to buy insurance before the accident, of course.
They really need to talk to a lawyer and figure out how to separate his income from the calculation.
It does not seem they had insurance before the accident and are complaining now that there is a cost for care?
Note to John and Erik:
I guess you are right, in that the couple should have had health insurance before the accident.
To which I would raise two points:
1. Someone who needs round the clock assistance would have blown through the lifetime limits of any individual policy sold before the ACA. Not meaning to give ACA a lot of praise, but it did deal with this problem.
2. There will always be some people who have catastrophic health costs and do not have insurance.
Interestingly enough, one subset of this group gets to go on Medicare (renal failure)
The rest of this group can only go to Medicaid.
Medicaid is mainly meant for poor people, and so you get these ugly spend down programs such as the article described.
So I think the ball is in your court, so to speak.
How would you help people who have terrible illnesses and no insurance? If not Medicaid, what?
Medicaid is charity care funded by federal taxpayer and state taxpayer. Is another vision of charity care not possible to envision?
Bob,
I think Medicaid is a valuable program.
I was more commenting on the article which seemed to push responsibility for medical costs away from the injured party and blaming the very program that is helping them when no one else would.
They would have had a different outcome if they had insurance initially.
I am not sure I agree, Erik. If they had had insurance initially and the policy had a lifetime limit of, say, $250,000, they would have burned through the policy and they still would need Medicaid today.
Bob,
Back in the old days of 2012 lifetime caps were up in the 2-6 million range.
These people’s biggest mistake was taking a change on their health and they lost.
There is a left wing school of thought which says that we should not allow people to take a chance on their health. This belief helps to drive the single payer crowd.
They are not all wrong. In about 98% of American cities and counties, we do not allow people to decide whether or not they will pay taxes or fees for the fire department. We consider it bad public policy to have people taking a financial chance on something which could be of grave harm to themselves or their loved ones.
This would argue for some kind of taxpayer funded catastrophic plan,at the least. If I remember right, Milton Friedman supported this concept.
Thank you. I never tire of discussing the fire department, which is not a red herring but close to it. There are libertarians who oppose taxpayer-funded fire departments, but I will leave their arguments aside for now.
First, the fire department is funded almost entirely by county and municipal taxes. (Until the 1990s there was zero federal funding.) So, if you want to say the local taxpayers should pony up for emergency services, that is a different argument than federalizing the burden.
In such a case, the hospital executives have to go to the town meeting, where all residents can attend, to make their case. They don’t have lobbyists in Washington, DC.
Second (and I recognize this is not your argument), there is a gap a mile wide between a municipal fire department and single-payer, taxpayer-funded homeowners’ insurance. The fire department makes best efforts to stop your house burning down, but it is not liable to rebuild it.
Third, the public good argument for a fire department in a city is so fires do not jump from home to home. It is analogous to classic public health: clean water, etc. to prevent the spread of epidemics. Most of health care today is not concerned with communicable diseases.