Healthcare Hypocrisy Revisited

by on June 22, 2017 in Economics, Politics

I have been away for a while. Nothing has changed. Last I wrote was about healthcare, and to welcome me back the Republicans have released their Senate healthcare plan. It is an astonishing piece of class warfare. It is mind-blowingly hypocritical. Its entire purpose is to act as cover for a monstrous tax cut for rich families whilst eliminating swathes of coverage for our poorest families. It is positively grotesque in its moral and social inequity.

I am not going to waste too much breath on it. If it passes into law — still not a certainty — it will go down as one of this country’s darkest acts. It is that vile.

But, I am certain there are still voters who support it. Those folks, like most Americans, are shielded from the full cost of healthcare by a whole battery of tax breaks that allow them to live under the illusion that they “pay their way”. This illusion then allows them, in turn, to look with anger on the cost of providing healthcare to those less fortunate than they are. Given the oppression of low wages, ridiculous cost increases in education and healthcare, and endemic job insecurity, I cannot blame voters for feeling less than generous when asked to kick in taxes to pay for healthcare for their fellow citizens.

Still, in the interests of fair play I think voters ought to be made aware of the true cost of their own healthcare coverage.

At the heart of the Republican tax cut/healthcare plan is an offset. In order to make the tax cut neutral with respect to the overall Federal budget — which is a requirement of Senate rules if the Republicans  want to avoid a risk of filibuster — that tax cut must be matched by equal or greater cuts in expenses. That way the tax cut won’t add to the deficit. The only target large enough to provide sufficient cost savings is the program we call Medicaid. So that’s where the Republicans want to swing their ax.

Medicaid is the largest government healthcare program. It is the plan through which aid flows to the poorest. Before Obamacare ramped up spending on Medicaid, it cost the Federal government about $275 – $300 billion a year. This is not all though. Medicaid is a shared program between the Federal and State governments who kick in a further $150-$200 billion a year. So the total cost, pre-Obamacare, was around $500 billion. I am using pre-Obamacare numbers because the Republicans want to get rid of it, so its is the best comparison to other costs. Medicaid, which covers about 20% of the population, thus costs about $630 per person covered per month. That compares favorably with most private healthcare plans.

But about 50% of the population gets its healthcare through a plan provided by an employer. Guess what? The employer gets a nice tax break from the government to help defray that cost of those plans. And that tax break costs taxpayers a whole lot in terms of the forgone tax revenue. In tax parlance the revenue lost because of the tax break is called a “tax expenditure”.

Tax expenditures are sneaky things. They mask the cost of government policies because they only exist as “shadows” in the accounting. They are costs to the taxpayer that are hard to see because the revenue is never collected and then disbursed — that makes the cost of a policy easy to discern. Instead the revenue is simply never collected. The government’s books then don’t reflect the cost. That makes it difficult to identify the true cost to taxpayers of certain policies, which provides politicians with cover when they implement a program involving a tax expenditure.

Medicaid is not so lucky. Its costs are fully accounted for and thus leap off the page making it an easy target for so-called fiscally responsible critics. Oddly those critics hardly ever turn their ire onto tax expenditures.

So: my purpose in all this is to give you the true cost of the tax expenditure that the Federal government provides to support employer based healthcare plans. The estimate for fiscal year 2018 is $236 billion. That’s $1,430 a year per person covered, or $120 per month. Remember: that’s the cost of the subsidy, not the full cost of the healthcare plan. Obviously the employer and the employee pay the majority of the full cost.

Yes, that’s right. The federal government spends just about as much, in total, on subsidizing employer healthcare plans as it spends on Medicaid. Admittedly this subsidy covers more people than Medicaid does, but, still, why isn’t the Republican right wing up in arms over it?

More to the point: cutting the subsidy would cost the average taxpayer covered under an employer plan about $120 a month. Yes that’s a lot, but they would still have coverage. And they could choose a different plan to manage down that cost. The typical Medicaid customer has no alternative. Gutting Medicaid the way in which the Republicans propose is simply to abolish care for the poor. They cannot change to a different and cheaper plan. There aren’t any such things.

So why won’t the Republicans get rid of the employer subsidy? Politics. It’s always easier to hammer the poor and young than it is to hammer the middle class.

And, let me return to my opening comments: this so-called healthcare plan is in actuality a tax cut masquerading as a healthcare plan. It is an act of war against the poor. It is a throwback to the distant past when it was socially acceptable to abandon the poor. After all if they are poor they must be lazy, drunk, or something. Right? No one in the Land of Opportunity can possibly be poor if they work hard. Right?

Wrong.

One last thing: the largest tax expenditures, those pesky taxpayer giveaways lurking in the shadows of the government’s books, almost always benefit those with property or those higher up the pay scale. After all we don’t want to sully their self-image of being free from welfare do we?

No we don’t. Poor things might get upset that the government was helping them through life. Plus if they realized just how dependent on the taxpayer they were they might feel more at ease helping the poor.

And we can’t have that.

 

Addendum:

Here is a list of the top tax expenditures [Courtesy of the Tax Policy Center]:

 

 

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