Even for the Near-Poor, Government Subsidies for Private Health Insurance Are around 50%
Casey Mulligan argues that the typical figures we see on government subsidies for private health insurance underestimate their real level. A common technique is to calculate the income tax revenue that is lost because of the exclusion of employer payments for health care and health insurance from the worker’s taxable income. But more is involved:
- Employer health care payments also escape the (FICA) payroll tax.
- They escape state and local income taxes as well.
- And they are excluded from the determination for eligibility for food stamps and other means-tested entitlement benefits.
Given estimates that the overall marginal tax rates for the poor and the near poor are 50% or higher, government is implicitly paying for more than half the cost of insurance for those at the bottom half of the income ladder.
However you slice it, tax subsidies for employee health insurance are worth nearly half of the cost of coverage. A better way would be to provide a uniform tax credit. Let people pay for the bells and whistles with after-tax funds.
Very interesting. I’ve never seen this ;oint made before.
This is something more people should investigate
Excellent Post
Dr. Goodman, the last sentence of your article seems to be over-reaching.
The vast majority of food stamp recipients do not get employer paid insurance at all.
The original goal of Obamacare was that virtually any family with an income under $30,000 woulc get Medicaid
(for an individual, under about $19,000).
That is just a bow to reality. Employers do not want to cover low wage workers. Even with tax subsidies, the employer still has to write a check, and in some cases, $5 would feel like too much.
Another concern I have is that the actual cost of insuring an increasing number of these individuals, due to the ACA, will further cost the government more, and eventually bankrupt the public sector.