During a hearing today on the latest CBO report, Rep. Paul Ryan declared the health care law to be “a poverty trap.” He’s way off base. In fact, he’s got it backwards.
Rep. Ryan was riffing off of the estimates in the new CBO study predicting that some people—the equivalent of 2.5 million full-timers by 2024—will choose to work less to avoid having the ACA subsidy reduced as their earnings rise.
The facts, as shown in this Kaiser Family Foundation fact sheet (see table 3), are that in states that accepted the ACA Medicaid expansion, poor adults can earn far more than they could before the new law and still maintain their Medicaid eligibility. The median income cutoff for the 26 states that accepted the expansion is 138% of poverty. For the states that did not, that cutoff is 47% of the poverty line for parents and 0% (!) for childless adults. (To be fair to the Congressman, I should note that the WI cutoff is 100% of poverty; then again, to be fair to the poor, I should note that Ryan wants to block grant Medicaid, cutting by a third over the next decade.)
If the earnings of a single parent with two kids in Texas, where the eligibility threshold is 19%, goes above $3,600, that parent loses Medicaid (their kids remain covered). That’s a bit more than three months of full-time work at the minimum wage. Now that, Mr. Ryan, is a poverty trap.
If that family relocated to one of the 26 states implementing the ACA expansion, the parent would face an income cutoff of about $26,000. Above that, if she’s not insured through work, she would be eligible for subsidies in the exchanges.
None of this is to deny the CBO’s point that some people with incomes above the poverty level will choose to work less to avoid reductions in their premium subsidy. But those choices are not the ones faced by the poor who live in states where the ACA is the law of the land. In those states, the law has thoroughly reversed the poverty trap. Rep. Ryan should know that and correct the misimpression he’s created.