I’ve talked before about the perverse incentives built into Obamacare (Browse this category for more examples), but those have been largely about the incentives provided to businesses to cut hours and stop hiring full-time workers thanks to the onerous burdens imposed by the ACA. But now we have an example from the other end, that of the
victim consumer of Obamacare.
The San Francisco Chronicle looks at the situation of people caught in a trap by Obamacare: On the one hand, the coverage requirements under the Affordable Care Act, along with its ban on lifetime benefits caps, has caused a tremendous rise in insurance rates. (For example. And again.) On the other hand, people making up to 400% of the poverty level are eligible for varying degrees of subsidies — money provided by our taxes and federal borrowing.
The problem is that some people are caught on the wrong side of the subsidy boundary: if you make 401% of the poverty level, your rates may triple, you may be forced to buy coverage you don’t need, but you also get no subsidy. Like they used to say on Starkist commercials, “Sorry, Charlie!”
But, hey, no worries! The Chron’s Kathleen Pender has the solution for you: earn less, so you can get a larger subsidy. Her main example deals with the Proctors, a San Francisco couple in their 60s who make just above the 400% mark and so do not qualify for subsidies, but are suffering huge increases in their insurance premiums. Pender covers tax and IRA strategies the couple can follow to get them under the magic boundary and greatly reduce their direct insurance costs. But the kicker comes in this line:
You can also consider reducing your 2014 income by working just a bit less.
Yes, you read that right: Obamacare makes the cost of individual policies so high that it is in the economic interests of some people to become less productive and earn less, because they need that government subsidy to survive economically — or to survive at all.
This is what economist Dan Mitchell has described as the “poverty trap.” While the quote below talks about welfare benefits and the disincentives they create to earn more and be more productive, I think it applies equally to the Obamacare subsidy question:
Most people focus on the huge burden that the food stamp program imposes on taxpayers, which surely is significant, but there is another economic cost that is equally worrisome, and it applies to all income redistribution programs. Whenever the government gives people money simply because their incomes are below a certain level, that creates a poverty trap. More specifically, because people lose benefits for earning more income, they are penalized with very onerous implicit marginal tax rates for climbing the economic ladder.
I highlighted that last sentence because it illustrates perfectly the situation faced by the Proctors and others; if you substitute “insurance premiums” for “marginal tax rates,” you’ll see what I mean. And, heck, let’s call those insurance premiums what they are: a tax. You’re required under penalty of law to pay them, even if the money goes to a company, rather than the government. For you and me, there’s no effective difference.
Pender’s article, in short, reveals the insidious heart of Obamacare: it creates incentives for people to become moochers, infantilized wards dependent on the government, rather than productive, self-reliant citizens building wealth for themselves and others.
And, in my darker moments, I suspect that’s the whole point.
PS: Before anyone goes after me for mentioning the Proctors, I’m not blaming or criticizing them. It’s the Democrats and their anti-constitutional monstrosity that put them in this bind. They’re free to act in their own best interests given the circumstances in which they find themselves, and I’ll not throw stones. It’s the people who created this mess who deserve the brickbats.
(Crossposted at Sister Toldjah)