ObamaCare subsidies holding up Senate version

The Washington Post reports this afternoon that Senator Max Baucus (D-MT) has had to refrain from publishing his own health-care plan over quibbles on federal subsidies for insurance.  Baucus wanted the cap for federal subsidies set at an annual income level of $66,000 for a family of four, but Senator Olympia Snowe (R-ME) wants it higher, at $88,000 a year, which would increase the cost of the bill substantially.  Seemingly lost in this argument is why a family of four making $66K can’t afford insurance premiums on their own:

Baucus hopes to unveil his bill before President Obama’s speech to Congress on Wednesday, and possibly to bring it before his committee next week. Senate Finance is the fifth panel in Congress to produce a health care bill, and the only one that didn’t finish its work before the August recess. With jurisdiction over Medicare, Medicaid and the tax code, the committee represents a crucial missing link in the unfolding debate.

The “Gang of Six,” comprised of Baucus, two Democratic colleagues, and three Republicans, has spent months crafting legislation that aims to lower health care costs in the long term but also bridge the uninsured gap.

One area of dispute the group will attempt to resolve Tuesday is where to set the federal subsidy cap for uninsured families. Baucus has proposed 300 percent of the federal poverty level, the equivalent of about $66,000 per year for a family of four. But some other members of the group — including moderate GOP Sen. Olympia J. Snowe (Maine) — want to push the level to 400 percent, or about $88,000 per year for a family of four. The lawmakers may compromise at 350 percent, said one individual familiar with the talks. The higher threshold would increase the bill’s cost.

Far be it from me to interject a few facts into a discussion of legislation, but the real question is why either of these thresholds should be considered.  This isn’t a riff on welfare programs, either, although that may be a good topic to broach.  Even assuming the good case for government assistance on health insurance (not care), both of these levels would make more than half of the country dependent on the dole.

Consider the following data points:

• The median household (not individual) income level in 2007 was $50,233.  That means there should be a roughly equal number of households above and below that level in the US.
• The percentage of Americans not covered by health insurance in 2007 was 15%.  Sixty-seven percent were covered by private plans through employment or direct purchase, while 27% had coverage through government plans such as Medicare (13.8%), Medicaid (13.2%), and military plans.

If 85% of Americans have coverage, 67% of them through private means, then the problem of non-coverage outside of choice falls into a very small category.  In fact, as the Census Bureau estimates, the actual affordability issue only afflicts around 14 million Americans (excluding illegal immigrants).  As the Kaiser Foundation states, the number of uninsured for affordability reasons is almost strictly related to those making under the median income level.

Why, then, do Baucus, Snowe, and others on Capitol Hill propose a welfare program that would include well over half of the country?  Families making over the median income can afford health insurance; they just choose to spend their money elsewhere.  That’s not a problem requiring taxpayer indemnification but a lesson on individual responsibility.  A look at the numbers, where 50% of families make more than $50K but 67% of Americans have private insurance coverage, should make that excruciatingly obvious.

America doesn’t need more than half of its citizens on the dole.  The correct answer to the Baucus-Snowe impasse is “neither.”

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