Should Medicaid Count As Income in Defining Poverty?
Uwe Reinhardt identifies one problem:
Consider next two individuals, A and B, with the same money income. Individual A is a poor but healthy adult; Individual B is poor and severely disabled…After adding to their (identical) money incomes the imputed, risk-based value of Medicaid coverage, severely disabled Individual B appears to be much richer than Individual A. Do we really think Individual B is better off than Individual A?
Here is another:
Suppose a state government kindly raised the fees that Medicaid pays physicians by, say, 10 percent. This would inject millions and possibly billions of additional dollars into the bank accounts of physicians, who typically reside in the top fifth percentile of the distribution of family incomes, with quite a few in the top 1 percent.
At the same time, however, the fee-increase would instantly lift many poor families from below to above the federal poverty line, without their having a penny more to spend. One can image this puzzling headline in the daily press: “Governor Reduces Poverty by Paying Physicians More.”
That would be an interesting scenario indeed!
This must be absolutely terrifying for some poor federal economist. Could you imagine pushing a “health-challenged” individual (under the poverty line) out of the eligibility threshold for an aid program they most likely depend on?
Very interesting
The first example is a little screwy. Suppose you gave the sicker one $40 thousand of annual income rather than in kind care. The fact that he is sick means he is still not better off than the healthy guy but that has nothing to do with how rich he is.
Warren Buffet would be better off if he were a poor young black man that what he is, and old rich man, but that does not mean that he is poorer.
This seems like a very interesting approach.
However, I struggle with understanding why it is so hard for economists to determine “in dollar terms, exactly how much richer than Family B is Family A.” Couldn’t that be determined by geographical areas? In other words, based on where the individuals live determine their position in the income distribution. Making $100,000 in NYC, is not the same as making $100,000 in Texas. Thus, I believe the answer is in separating these “estimations” by regions.
Medicaid should absolutely not be counted as income. We don’t need another layer of government obfuscation when it comes to understanding the facts about our own society.
no.
Yea, I don’t really agree either.
If we do take medicaid as part of income, the same logic should make employer benefits part of income.
If I give you something for free, you have been made wealthier by my action. Why is this debatable?
In the case of medicaid, every dollar medicaid pays for your healthcare services is a dollar you do not have to spend, freeing up more of your income to spend on other things. Your bank account may not change, but you certainly have more money to spend than you did previously.
But… the value is the value of the service provided, which is not the same thing as what the government pays for the service. If the government increased medicaid reimbursement rates by 10% the services you receive would not change, so you are not wealthier. The value of a service is set by the invisible hand, not government bureaucrats.
But… if the increase in reimbursements resulted in more doctors accepting medicaid then your access to care would increase, which would increase the value of the services you receive, and thus your relative wealth.
People have of course quantified the value of government benefits when comparing tax policies. For instance, in our current system, your marginal tax rate can very easily exceed 100%, even if you’re poor, because the value of the government benefits you lose when you make more more money, exceeds the money you make. It is a tremendous disincentive to work.