Look, I’m as ready as the next guy to call out the Obama administration for the shoddy rollout of the ACA. I’m also confident that at the end of the day, as the exchanges become more accessible and as families with incomes below four times poverty get help paying for the coverage they buy there—coverage that for some will be of higher quality than what they had—the reforms will first become more popular, and later become an appreciated, and probably pretty dull, part of the fabric of life in America.
One of the problems in getting from here to there is articles like this one in today’s NYT. No question there are people paying more for health care under the ACA, but the examples in here seem awfully cherry-picked to support the headline claim that the new law “Frustrates many in Middle Class.”
–First, let’s talk middle-class. The median family income in the US right now is about $62,000. For families of four, like the one featured in the piece, it’s about $80,000. Income eligibility for the subsidies goes up to four times the poverty threshold, or about $94,000 for a family of four, meaning that a median-income family buying coverage on the exchange would be eligible for a subsidy. The family featured in the piece was chosen to be above the subsidy level—their income was $100,000. That’s certainly and fair point and I’m not denying they’re “middle-class.” But the piece should have mentioned the median, or more to the point, the fact that according to Census data, the ratio of income to the the poverty threshold for families in the middle fifth of the income scale is 3.5, again, below the subsidy cutoff of 4.
–But what of this “cliff” business on which the piece focuses, i.e., that the family takes a huge hit by not being eligible for the subsidy? As noted, the subsidy cutoff for a family of four is about $94,000 and the family’s contribution is capped at 9.5% of their income, or about $9,000. The Chapman’s, the family featured in the piece, with income of $100,000, may now pay about $12,000 per year for coverage.
The piece states: “If they made just a few thousand dollars less a year — below $94,200 — their costs would be cut in half, because a family like theirs could qualify for federal subsidies.” But $9K is not half of $12K, so at least as I read it, they’re exaggerating the cliff effect (h/t, PvDW).
–What did they have before? The Chapman’s previous plan, for which they paid $665/month, was cancelled, and as noted, the cheapest plan they could find will cost $1,000. But what did their old plan cover compared to the new plan? My guess, based on the cost and quality of non-group coverage in states with not a lot of competition, is: not much. Any piece like this that compares premium costs before and after the ACA must dig into the quality of the plans, otherwise they’re comparing apples and oranges.
–Dean Baker objected to the assertion in the piece that paying more than 10% of your income for health coverage is unaffordable. As Dean shows, under the widely accepted assumption that employees pay for their employers’ share of their coverage in lower pay, than most people have unaffordable coverage by this benchmark.
In other words, health coverage is not cheap, because health care is not cheap, especially in America, where costs are often far higher for the same treatment or drug than they are in other countries. Thus, in the interest of sustainability, we have to implement some version of reform to squeeze inefficiencies out of the system, and as I’ve stressed many times before, whatever form that takes, it will likely involve risk pooling, mandates, and subsidies. Some will pay more, though they will often get more coverage for their extra bucks. Many—post subsidy—will pay less (as the piece notes, the largest subsidies are targeted at the uninsured).
It’s not a simple story, and it’s certainly not the case that most of the middle class will end up facing higher costs under ACA than under either the current system or any plausible alternative. To the extent this piece leaves readers with that impression—and I thought it did—that’s quite misleading.