Subsidizing Healthcare for the Poor

Right From the Start

The bill establishing the Affordable Care Act (Obamacare) is 906 pages long.  There are over 13,000 additional pages of regulation that accompanies the bill.  Because Obamacare touched so many other areas of the law including taxation, licensing, and welfare estimates range up to 20,000 pages of additional regulations.  The House bill repealing and replacing Obamacare is approximately 123 pages of which nearly sixty pages are devoted to repealing the various provisions of Obamacare.  There is no estimate of how many pages of rules will accompany the final version because we don’t yet know the final version.  However, if President Donald Trump carries through on an earlier commitment, you can safely assume there will be twice as many old rules repealed than new rules adopted.

As it stands now, Republicans have more than enough votes to pass a bill and lay it on the desk of Mr. Trump for his signature.  But there is division in the Republican Party over the contents of a replacement bill.  A large part of that division is due to the preening, posturing and intra-party jealousies that, at times, seem to overwhelm the party.  There are members like Sen. John McCain (R-AZ) who is still smarting after the people twice rejected him in his ambition to become president (once in the primary against President George W. Bush and once in the general against President Barack Obama.)  In his defeats Mr. McCain shares the embarrassment with his friend, former Secretary of State Hillary Clinton D-MY) who was similarly defeated first in the Democrat primary by Sen. Barack Obama – a virtual nobody from Illinois – and then in the general by Mr. Trump – a political neophyte.

There are others who claim to be the conscience of conservatives, like Sen. Ted Cruz (R-TX) – who also lost his bid to be president to Mr. Trump – and Sens. Mike Lee and Rand Paul (R-KY).  The latter two legitimately follow conservative principles while the former basically follows whatever is good for his political ambitions.  They are joined by a group of Republican House members who also follow conservative principles.  These conservatives biggest complaint is that the new Republican proposal continues “entitlements” for the poor for healthcare services.

Let’s make sure that we are all on common ground here.  Medicaid is the federal program for providing healthcare services to the poor.  Obamacare expanded eligibility to people making less than 138% if the Federal Poverty Level.  According to the Department of Health and Human Services the expansion of Medicaid accounted for approximately eighty percent of the total increase in healthcare coverage under Obamacare.  It also reduced eligibility vetting and thereby increased the opportunity for Medicaid fraud. At the same time, additional regulations and reduced reimbursements drove many physicians to reject Medicaid patients.  The result was that while more people had coverage, fewer physicians were available to them for their care.  As the new Secretary of Health and Human Service Tom Price, MD has previously stated: “People have coverage, but they don’t have care.”

Obamacare then buried the increased costs of the Medicaid expansion in a series of mandates for younger healthy adults (who bore the costs but did not need the services), increased taxes on the wealthy and reduced Social Security benefits for the elderly.  All in all Obamacare decimated the healthcare market in order to hide the true costs of expanding Medicaid.  It is this increase in the sheer number of people receiving subsidized healthcare coverage coupled with “masking” of the cost of providing these services that have driven critics of Obamacare into righteous anger.

That being said, and after reading summaries of various proposals by these same conservatives, it does not appear that they object so much to the concept of entitlements but rather to the breadth of those qualifying for such entitlements.  Mr. Paul, for instance, would remove the requirement that pre-existing conditions be covered – a popular but costly feature of Obamacare – and he would shift Medicaid responsibility to the states backed by block grants from the federal government to the states. Rep. Jim Jordan (R-OH) confirmed on Fox News Sunday that conservatives object to the subsidies not the tax credits.

In contrast, the current proposal backed by Speaker Paul Ryan (R-WI) would preserve the pre-existing conditions coverage and utilize a “refundable” tax credit to pay for individual coverage including the poor.  The “refundable” part of that tax credit proposal means that if the tax credit available exceeds the taxes to be paid, the individual will receive a voucher amount for the difference that will be applied to healthcare insurance.  (I made a similar proposal in a January 2014 column entitled Fixing Obamacare).  It is that “refundable” element of the tax credit to which conservatives like Mr. Jordan object as creating a new subsidy.
Look, I have been a conservative all of my adult life.  I have embraced conservative principles enunciated by the likes of Sen. Barry Goldwater (R-AZ), President Ronald Reagan, and the loquacious William F. Buckley.  Like them, I do not believe that there is any constitutional obligation to provide welfare in any form.  However, like them I recognize that advanced societies have a moral obligation to care for those who cannot care for themselves – I do not extend that sense of moral obligation to those who will not care for themselves.  For the life of me I cannot understand how you can fulfill that moral obligation without creating an “entitlement” – every form of welfare creates an “entitlement.”

I suppose you could take the Darwinian approach and simply let the poor, the sick and the disabled die.  (For those of you forced to endure a teachers union controlled Portland public school education Darwin argued that species survived and improved through natural selection – only the strong survived.)  To some degree that philosophy was enshrined in Obamacare where bureaucrats decided whether specific treatments would be covered – the “death panels” as enunciated by former governor Sarah Palin (R-AK).  But somewhere between Darwin and the welfare state are reasonable solutions.  Let me suggest some guidelines.

1. Accept the notion that the poor, the sick and the disabled may require a subsidy to pay for healthcare coverage.
2. Utilize tax credits to pay for healthcare coverage for all.  Utilizing tax credits will allow people to redirect a portion of their taxes to a program that benefits them specifically – inevitably a better choice than the stockpile of worthless, mismanaged and politically driven boondoggles that currently consume our taxes.
3. Utilize the refundable notion of the tax credit to pay for healthcare coverage for those whose income do not generate taxable income or do not generate taxes sufficient to be offset against the cost of healthcare coverage. Offset the increased costs of the refundable tax credit in part by tightening up the eligibility and enforcement provisions for those who can qualify for the subsidies by eliminating those in the country illegally– welfare should never be an incentive to enter the country illegally.  And limit the eligibility for those who can, but will not, work – for instance, to the same time period in which the unemployed are eligible for unemployment payments.  The government should never be in the position to encourage sloth by the able bodied.
4. Shift responsibility for Medicaid administration to the states and fund the federal government’s share with block grants and only minimal requirements.  One of those minimal requirements should be to tighten eligibility requirements for those who can, but do not, work – those eligibility requirements should coincide with unemployment benefits in duration.
5. Shifting responsibility to the states will allow the state to craft a plan suited to their own demographics instead of using the “one size fits all” mentality of the federal government.  Innovation by states could improve efficiency.  State governments like Oregon that are steeped in the concepts of the welfare state may well want to expand eligibility and coverage while reducing vetting for eligibility and state taxpayers would be solely responsible for the increased costs.  Others like Texas may want to take a more strict vetting process and impose a stronger work requirement.
6. Except the pre-existing conditions waiver but create a high risk pool at the federal government to cover excess costs.  That provision is in the current plan being considered by the House.  The Congressional Budget Office (CBO) (federal bureaucrats all) chose to ignore this provision while “scoring” the current proposal, it actually will have a dramatic effect on reducing healthcare premium costs.
7. Eliminate the Obamacare mandatory healthcare coverage requirement.  In doing so you can also eliminate the requirement for children remaining on their parent’s plan until age twenty-six.  Without Obamacare’s mandates, such provisions are unnecessary.  The CBO blamed the elimination of the mandate as the reason for the increase in the number of uninsured under the Republican plan.  Young healthy people who do not think they need healthcare coverage do not want to pay for it.  That is there choice, just make sure it is accompanied by the responsibility for making such a choice.
8. And finally where there are alternatives to specific requirements, always come down on the side of individual freedom and competitive alternatives.  Of course, that will also require people to except the consequences of their decisions.  For instance, if you decide not to acquire healthcare coverage and wind up needing care and treatment, you – not the taxpayers – will be responsible for the costs incurred.  That is also true for virtually all aspects of the welfare system – if you make choices not to work when you can, if you choose to buy beer and cigarettes instead of food, or if you choose to gamble instead of pay your bills, the inevitable results of such poor judgement should be visited upon you alone – not the taxpayers.

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Posted by at 05:00 | Posted in Cover Oregon, Government Abuse, Government Overreach, Government reform, Government Spending, Health Care Reform, Individual Responsiblity, President Donald Trump, Welfare State | 6 Comments |Email This Post Email This Post |Print This Post Print This Post
  • john.fairplay

    I’ve always found it kind of entertaining that those who scream the loudest in support of Darwin are also the greatest critics of allowing his ideas to operate in human society. Imagine buffalo deciding to weaken their herd by sacrificing their strong members to save the weak ones. Our compassion will be our undoing as a species.

    Here’s what’s critical about health care: the current systems provided by the government – Medicaid for the poor, Medicare for the elderly and the Veterans Administration system – are as cheap as we can make them for beneficiaries, but still tremendously expensive for the taxpayers to provide. Despite the huge amount of money spent, these programs provide completely inadequate reimbursements to health care providers. In virtually every case, government reimbursements do not even cover the basic costs of providing health services. Health care professionals lose money on every patient they treat. This has an inevitable result in a quasi-market system: health care professionals refuse to accept these patients, or leave the profession entirely. The shortage thereby created serves to cause further upward pressure on prices.

    “Fixing” such a system is going to be extremely difficult. While I’m happy to do my part to help the poor, the old and Veterans, there is a limit to my ability to pay (since I also have to cover myself), in particular for a system that provides inadequately both for patients and health care providers.

    • SocraticMeathead

      Which raises a good question. Why is health care about twice as expensive as it is in highly developed first world countries like Germany and Denmark? If we had similar costs, we could cover everyone here for less cost than we now incur.
      What are the extraordinary cost drivers? Other countries have better outcomes, so it’s not the efficacy of care.

    • Diongenes

      “I’ve always found it kind of entertaining that those who scream the
      loudest in support of Darwin are also the greatest critics of allowing
      his ideas to operate in human society.”

      Because the two are not the same thing. You’re committing a logical fallacy. Many of attempted to apply natural selection to human society… and have failed. In your example.. no one is suggesting the strong should be sacrificed for the weak. However, asking the strong to share with the weak may be a very good strategy for the continued survival of the herd.

  • thegreatpeon

    1 – Perhaps, but that would be an issue for the States as the Federal Government has no authority granted by the Constitution to involve itself in the Health Care industry.

    2 – Tax Credits are direct, government subsidization. If everyone gets a credit, then everyone is being subsidized.

    3 – Government subsidizing specific economic activities creates a market distortion. Artificial distortions always result in a poorly functioning market.

    4 – “Shift responsibility for Medicaid administration to the states” stop there and call it good. Remember to reduce Federal taxes accordingly.

    5 – Agreed. The Left coast will likely maintain large subsidies, but State bad ideas are easier to combat than Federal bad ideas.

    6 – If you accept pre-existing conditions then you don’t have insurance. You have a cost sharing system. That’s fine, just keep the terms separate. Also, State program, not a Federal program.

    7 – Agreed.

    8 – Agreed, except to say that points 1, 2, 3, and 6 contradict this point.

    This talk of a “Darwinian approach” to healthcare is unrealistic and unhelpful. Nobody wants to push grandma off the cliff or let her fall off by herself. Talking about a “Darwinian approach” simply plays to this perspective. Instead, remind people that charities exist for a reason. Churches have historically been where people in need have gone if they needed help.

    The American people are the most generous people in the history of the world. We could easily take care of ourselves if our tax burdens were lifted.

  • Diogenes

    “I suppose you could take the Darwinian approach and simply let the poor,
    the sick and the disabled die. (For those of you forced to endure a
    teachers union controlled Portland public school education Darwin argued
    that species survived and improved through natural selection – only the
    strong survived.)”

    I only had a public school education, but even I know that Darwin didn’t say anything about only the strong surviving. He did borrow survival of the fittest from Herbert Spencer in later editions of his books. Strength isn’t necessarily a useful trait for survival — depending upon the environment. Take, for example, the extinction of dinosaurs while much smaller, and weaker, mammals managed to survive.

    And again, despite my public school education, I do know the difference between accept and except.

  • Myke

    I’m still amazed by the lack of anyone looking into medical costs, both how, and by who, those costs are established, and why no one, including your doctor can tell you what any procedure, up front, will cost. All this activity, by congress and the public in general, is dancing around the insurance maypoll, and totally disregarding the concept of price as consumer knowledge. Why do dentists and eye care work on a price competitive business model, yet medical health care remains the providence of the AMA where only your insurance company has access to pricing. Costing, from the top, needs transparency. Incidentally, I haven’t met a single underpaid health care worker, so lack of wages are not the issue.

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