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All's not fair in health reform bills


Douglas Holtz-Eakin
The Boston Globe
December 10, 2009

Health Care Reform has been cloaked in an aura of moral ascent. President Obama has called it a "core ethical and moral obligation." House Speaker Nancy Pelosi introduced her bill by saying, "We also have a moral responsibility to pass health insurance reform and we will do so this year." And Senate majority leader Harry Reid has opined that "health care is a moral issue."

Strong words on ethics and fairness. But the actual bills are unimaginably unfair. For example, a centerpiece of the Senate proposal promises "low-income" families (between 100 and 400 percent of poverty) that the fraction of their income devoted to health insurance will be capped. The cap would start at 2.8 percent and rise to 9.8 percent for families between 300 and 400 percent of the poverty line.

Ignore for a moment that the bill promises this magic for a family making $88,200 but not $88,201, the income at which the cap is lifted. (How fair is that?). Instead, focus on Jane, a primary breadwinner making $48,000 (in 2016) to support her family of four. If Jane is offered insurance by her employer that meets the test, she must accept it or pay a fine. That means Jane ends up paying for the entire cost of, say, a $14,100 policy, according to some economists. They say she pays the premiums out of pocket and the remainder indirectly because employers offer reduced paychecks to offset the cost of their share of health insurance.

Now, meet Julie, who also makes $48,000 and is not offered insurance at her job. Julie heads to the newly created exchange to purchase the same policy. But it costs her only $5,300. The rest—about $9,000—comes from federal subsidies.

Fair?

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