ObamaCare redistribution not the only drain from young to older Americans

posted at 12:41 pm on November 21, 2013 by Ed Morrissey

Let’s start this with a clear understanding of the redistributive nature of ObamaCare.  Thomas Edsall admitted this yesterday in his New York Times essay, but got the nature of the redistribution wrong. James Oliphant does better at National Journal today:

Before the ACA, the risk in the individual market was indexed, with insurers able to price policies on the basis of personal circumstance.

Obamacare consolidates risk, grouping those most likely to cost the house money with those who have little chance of receiving a payout. The lines of demarcation between young and old blur, thanks to a compression of what insurers call “age rating”—which used to allow companies to charge older Americans not yet eligible for Medicare on the order of five times more than younger ones—and the widespread use of what is known as “community rating,” which forces insurers to assesses risk in terms of a pool, rather than an individual. “Ideally, you want to be the sickest person in the pool, so everyone is subsidizing you,” says Austin Frakt, a health care economist in Boston. …

And there is the more classic means of redistribution: the federal tax revenue used to fund the Medicaid expansion called for by the ACA. That will help fund coverage for an estimated 13 million Americans nationwide, which supporters argue will produce both societal and economic benefits. At present, that’s the largest straight commitment of federal tax dollars, but conservative critics worry that if other ACA funding mechanisms fall short, the government could end up bearing more of the load.

“The whole financing structure for the law is a house of cards,” says Charles Blahous, a fellow at the Mercatus Center at George Mason University and a public trustee of Social Security and Medicare. “Unlike a website, it’s not so easily fixed.”

The underpinnings of Obamacare could crumble in a number of ways: if young people fail to sign up for insurance in the droves needed to make the numbers work (and, given the meager penalty for failing to do so, that remains a definite possibility); or if the so-called Cadillac tax on high-dollar health plans scheduled for 2018 never happens (labor unions, among other interests, hate it); or if Congress, at the behest of the industry, follows through on its threat to eliminate the tax on medical devices; or if the long-promised savings in Medicare fail to come to fruition; or if, down the road, a cash-strapped federal government abandons its Medicaid commitments to states.

Thanks to the enforcement of “community rating” and the requirement to purchase ridiculously comprehensive coverage, the younger and healthier members of the risk pool will be subsidizing lower rates for older and sicker members.  Insurance companies had rational measures to assess risk in a much more precise manner until ObamaCare, but community rating tosses that out the window.  This is why the White House is panicked about millions of younger and healthier Americans refusing to pay those ridiculous premiums for services they’ll never access, thanks to equally ridiculous deductibles.

But, some might say, many of those will get taxpayer-provided subsidies for those premiums.  That’s true, but they won’t get subsidies on the deductibles, which means that they’ll still have to spend thousands each year before the insurers will pay the first dollar in benefits, which for healthy adults means never getting benefits. Besides, as Yahoo Finance’a Rick Newman explains today, the tax system already redistributes funds from the younger generation to older Americans — as much as $9,000 per household:

New data published by the Congressional Budget Office show elderly households receive far more in government benefits than they pay in taxes, while all other households pay more in taxes than they get back. The data are from 2006, the most recent year the necessary numbers were available. The general findings aren’t surprising, since people stop working and paying payroll taxes when they retire, and Social Security and Medicare are chiefly meant to benefit the elderly in the first place.

But the benefit gap between elderly and non-elderly households may seem lopsided to some. The popularity of programs such as Medicare and Social Security shows the U.S. has met the goal, originating in the 1930s, of building a robust safety net for seniors and others unable to fully support themselves. But demographics have changed dramatically since those big entitlements went into effect, with fewer young people now financing the benefits received by many more older people. Many feel the imbalance amounts to generational theft, as a disproportionate and growing share of national wealth goes to supporting the lifestyles of the elderly rather than cultivating future generations. …

Spending per household includes entitlement programs plus most other categories of federal spending, such as education, transportation and national defense. It doesn’t include state and local spending, however, which would even out the numbers somewhat, since that money tends to go toward education and local services not necessarily geared toward the elderly.

Those two negative numbers in red show that, on average, all households other than the elderly pay more in taxes than they get in federal benefits. There are exceptions, since low-income households get more than they pay and vice versa, but that puts an even heavier burden on working, middle-class families that don’t qualify for many federal benefits.

ObamaCare just accelerates this trend, especially for those who may not qualify for subsidies on the exchanges.  Those without children see an average of $9100 in wealth transfer from their wages to older Americans, and subsidies cut off at $48,000 income for single adults in the exchanges.

It’s just another form of generational theft.  Meanwhile, we’re also seeing a growing trend of regional wealth transfers, all going to one small point — Washington DC.  The Washington Post’s Jim Tankersley noted the rapid growth in the capital economy while the rest of the country stagnated, thanks to the flood of federal spending over the last decade and the growing regulatory control from Washington. It’s basically a watered-down version of The Hunger Games, only less entertaining.

In my column today at The Fiscal Times, I argue that this would be tolerable if it actually produced wise and beneficent policy.  Instead, we’re getting nothing but incompetence and dishonesty from this wealth transfer:

The Beltway is still a long way from being the Capitol of The Hunger Games, but that doesn’t make the economic drift from the mainstream of the nation and Washington’s aggregation of resources and power any less disturbing.  If it resulted in wise and beneficent policy, it might at least be understandable or tolerable.  However, as the unfolding disaster of the Affordable Care Act demonstrates, the trend instead feeds a poisonous combination of elitism and incompetence while protecting politicians from the consequences of failure.

The nadir of that incompetence emerged in surprising testimony on Tuesday from a key figure in the Health and Human Services project for the ACA’s web portal. CMS Deputy Chief Information Officer Henry Chao, under questioning from Rep. Cory Gardner (R-CO) in a House Energy and Commerce Committee hearing, stated that 30 percent to 40 percent of the ACA’s computer infrastructure had yet to be built.  …

Commercial web portals have been around for almost twenty years.  CMS actually has a similar system in place for its Medicare Advantage program, although one that doesn’t need to interface with IRS systems.  And yet, after more than three years and hundreds of millions of dollars, HHS and the White House rolled out a system that is only 60-70 percent finished, with so many security holes that experts would need as much as another year to plug them all.

We may not be living in The Hunger Games, but we are seeing a demonstration of the inevitable result of elitism and central planning. We aren’t sacrificing our children for the amusement of the powerful, but we are sacrificing our resources to the incompetence of the self-appointed nannies that can’t even figure out the basic economics of risk pools or the mechanics of payment systems. It’s time to pull the plug on DC’s cash spigot and return to local control and private-sector solutions.

 


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obama is offended when called a “socialist”.

He’s right. He is beyond that.

Russia and China have NO mandates.

The US is the only land with a mandate.

Hail dic tatorial obama!!!

Schadenfreude on November 21, 2013 at 12:47 PM

We aren’t sacrificing our children for the amusement of the powerful, but we are sacrificing our resources to the incompetence of the self-appointed nannies that can’t even figure out the basic economics of risk pools or the mechanics of payment systems.

Yeah, but they mean well.

White privilege and stuff too.

/LIV

mankai on November 21, 2013 at 12:49 PM

Doesn’t the forced Maternity/Birth Control coverage force the Old to subsidize the Young? It seems like the forced subsidization works both ways.

FineasFinn on November 21, 2013 at 12:50 PM

Over and over play this and spread it around.

Remind people of the Hypocrite dic tator in chief.

Schadenfreude on November 21, 2013 at 12:53 PM

Redistribution?

Wait until the gop leadership gets their version of AMNESTY passed for their big business donor buddies.

Imagine tens of millions more (and with an open border ta boot) on the government teat?

http://fusion.net/leadership/story/boehner-immigration-reform-absolutely-dead-247322

House Speaker John Boehner on Thursday bristled at the notion that immigration reform is dead for the coming year.

“Is immigration reform dead? Absolutely not,” he told reporters at his weekly press conference.

The Speaker said that he is “hopeful” the House can make progress on the issue, even though one of his top deputies recently said there is not enough time to hold votes this year.

He said that House Republicans are still having private conversations on how to move forward, but stressed that it will address the issue with smaller individual bills rather than one sweeping bill like the one passed by the Senate.

But he would not say when the House would vote on immigration reform legislation.

In a rare occurrence, Boehner praised President Barack Obama for reiterating that he’s open to passing an immigration overhaul in pieces—as long as every element of reform is included.

PappyD61 on November 21, 2013 at 12:54 PM

Doesn’t the forced Maternity/Birth Control coverage force the Old to subsidize the Young? It seems like the forced subsidization works both ways.

FineasFinn on November 21, 2013 at 12:50 PM

Actually, that’s a subisidy from the males to the Flukes of the ObamiNation. Think of it as paying for two lobster-and-steak dinners every time you even think of having an interaction with a woman, whether or not you get the lobster, steak, or the woman.

Steve Eggleston on November 21, 2013 at 12:55 PM

Obamacare consolidates risk, grouping those most likely to cost the house money with those who have little chance of receiving a payout.

Another way to put it might be: Older, sicker folks are sub-prime loans, while younger and healthier folks are the prime loans. Grouping them worked out well.

BKeyser on November 21, 2013 at 12:56 PM

There is a lifecycle aspect to this equation. Once you stop working, you stop paying social security taxes but you paid them up that point. You paid them with “real” dollars [purchasing power] not just nominal dollars. In order for you do find out if that the basic premise is true you need to adjust then year dollars to now dollars because the value of a dollar in FICA paid in 1970 is approximately 6 times higher than it is today. These figures may show a net transfer to the elderly but nowhere near what people think it is.

jerryofva on November 21, 2013 at 12:57 PM

The Obama administration is a plague on our country.

BuckeyeSam on November 21, 2013 at 12:57 PM

Actually, that’s a subisidy from the males to the Flukes of the ObamiNation. Think of it as paying for two lobster-and-steak dinners every time you even think of having an interaction with a woman, whether or not you get the lobster, steak, or the woman.

Steve Eggleston on November 21, 2013 at 12:55 PM

I think woman are being forced to pay for Viagra in their policies as well.

jawkneemusic on November 21, 2013 at 12:57 PM

But, some might say, many of those will get taxpayer-provided subsidies for those premiums. That’s true, but they won’t get subsidies on the deductibles, which means that they’ll still have to spend thousands each year before the insurers will pay the first dollar in benefits, which for healthy adults means never getting benefits.

NOT TRUE. If your income is 2.5X Poverty Level, you will qualify for additional subsidies on both the deductible AND copays. This additional program can lower your deductible to as little as $500.

Obamacare’s Secret Subsidies Make It ‘Better’ Than You Know

I wish people that write about this crap would read up on it first.

slickwillie2001 on November 21, 2013 at 12:58 PM

Desktop…..with Windows 2010 and Firefox browser…..still showing “waiting for hotair.com”.

Read anvil.rubiconproject.com seems to hang up quite nicely.

But no probs with the iPad.

Weird.

PappyD61 on November 21, 2013 at 12:58 PM

Medicare and Social security are also redistribution schemes. I would also argue foreign aid redistributes to people in other countries.

Will the GOP ever support ending the above policies?

nazo311 on November 21, 2013 at 12:59 PM

When we looked at this, it’s hard to even want insurance: with the insane deductibles you’re pretty much going to pay for everything anyway – unless it catastrophic. But then, thanks to the ACA, you can just get covered at that time. Who wants to sign up for this crap?!

Free Indeed on November 21, 2013 at 12:59 PM

Actually, that’s a subisidy from the males to the Flukes of the ObamiNation. Think of it as paying for two lobster-and-steak dinners every time you even think of having an interaction with a woman, whether or not you get the lobster, steak, or the woman.

Steve Eggleston on November 21, 2013 at 12:55 PM

All in the name of ‘fairness’ and ‘social justice’….

The Obama administration is a plague cancer on our country.

BuckeyeSam on November 21, 2013 at 12:57 PM

FIFY

Athos on November 21, 2013 at 1:00 PM

Doesn’t the forced Maternity/Birth Control coverage force the Old to subsidize the Young? It seems like the forced subsidization works both ways.

FineasFinn on November 21, 2013 at 12:50 PM

Sorta. On the whole the elderly will have much more flowing their direction.

Also, the Old really aren’t subsidizing anyone anymore if they don’t work – they’re on Medicare (supposedly only living off of the money they put into the system wisely managed by the state)

gwelf on November 21, 2013 at 1:04 PM

If social security were run by a private firm the executives would be in prison for fraud.

gwelf on November 21, 2013 at 1:05 PM

All Ponzi schemes are based on redistribution.

The only difference is – if it’s a State-generated Ponzi scheme – it’s perfectly legal. So much so, that it’s made mandatory.

There ya go. Orwell, again.

State pigs are more equal [and they can do anything that they damn well please].

OhEssYouCowboys on November 21, 2013 at 1:05 PM

OT: Per Gretawire:

Per Ed Henry:

Around 10:15am, a series of liberal radio, tv, print, and online journalists were spotted arriving at White House, expected to meet with the president.

Not a complete list. Among the folks seen walking into the West Wing –

From MSNBC: Lawrence O’Donnell, Ezra Klein, Ed Schultz

From Fox: Juan Williams

From Huffington Post: Howard Fineman

From Mother Jones: David Corn

From New Republic: Jonathan Cohn

CoffeeLover on November 21, 2013 at 12:51 PM

Goebbels laughs his dead azz off.

Schadenfreude on November 21, 2013 at 1:05 PM

I don’t get the economics of this and I have a MSME.

Policies premiums are doubling. that alone should be enough to get every body not insured insured just on my back. But we are also putting another 13 million on medicaid that is going to increase my taxes too. All of this for the 10% of the population that did not have insurance?

Something ain’t right.

jukin3 on November 21, 2013 at 1:06 PM

A site security fool, a university professor who testified to Congress on the obama’care’ security risks two days ago, from the left, said on Faux this morning:

“If you have ins. and are lucky to be in that situation, don’t go to the site; it’s not secure and it would take 3 months to review/fix, just the security part…but, if you don’t have ins. then go there and give them your private and totally exposed information”.

What a country. The leftists hate the little people. They hate the middle/poor classes and they hate minorities. They only keep them in modern day plantations, for votes.

Schadenfreude on November 21, 2013 at 1:07 PM

PACK THE COURTS!

Murphy9 on November 21, 2013 at 1:08 PM

52-48 nuclear option passes

Murphy9 on November 21, 2013 at 1:08 PM

If Obama had been sent here as a covert ‘Manchurian Candidate’ intended to destroy America, he couldn’t have done a better job.

profitsbeard on November 21, 2013 at 2:46 AM

Schadenfreude on November 21, 2013 at 1:12 PM

Meanwhile, we’re also seeing a growing trend of regional wealth transfers, all going to one small point — Washington DC. The Washington Post’s Jim Tankersley noted the rapid growth in the capital economy while the rest of the country stagnated, thanks to the flood of federal spending over the last decade and the growing regulatory control from Washington. It’s basically a watered-down version of The Hunger Games, only less entertaining.

This actually ties in to the mugging and assault this week on first-term Democratic congresswoman Grace Meng in the Eastern Market area, southeast of the U.S. Capitol. Eastern Market was a dangerous area that’s being gentrified — but it’s not the same gentrification that occurred in New York, where the money started pouring into marginal areas close to midtown or lower Manhattan only after the law enforcement policies started by Rudy Giuliani and kept in place by Michael Bloomberg lowered crime rates to where it was safe to invest in those neighborhoods.

Washington is doing in backwards — With the huge influx of other people’s money into the nation’s Capitol, and with travel around the district painfully slow, areas near the Capitol (or towards the National’s new stadium near the Navy Yard) are being pushed for gentrification because of the huge amounts of disposable income coming into the district, not because of any policy changes made by the district to make the city safer.

It’s an upper income version of the typical “Throw Money at the Problem” mindset of the left, only in this case, they’re throwing other people’s money at their own upscale restaurants, condos and office buildings that wouldn’t be possible (or needed) if there wasn’t so much taxpayer money coming from elsewhere into Washington.

jon1979 on November 21, 2013 at 1:14 PM

I trust that the youth of America, no matter how stupid, will not flock to pay the outrageous premiums of Obamacare…

Khun Joe on November 21, 2013 at 1:22 PM

Imagine each family has to pay 2-4 times or more for health insurance. The money that would normally go to buy household goods, TVs, computers, clothes, vacations, cars, etc. now has to go to fuel inefficient government health care.
Where once a family had several thousand or more to buy household goods this now must go to the government.
The ObamaCare health tax that will surely cause serious negative ramifications to the US economy in that less goods and services will be purchased which means higher unemployment.

albill on November 21, 2013 at 1:25 PM

I trust that the youth of America, no matter how stupid, will not flock to pay the outrageous premiums of Obamacare…
Khun Joe on November 21, 2013 at 1:22 PM

But if there was a Presidential election today, the majority of their vote would still go to Obama.

albill on November 21, 2013 at 1:26 PM

4m
Video: Republican National Committee chairman Reince Priebus:
*************************************************************

‘”We will make 2014 about Obamacare, and yes, we will tattoo Obamacare on each of their foreheads, and that will be what 2014 is all about’ – National Review via @TPM
see original on youtube.com

http://www.breakingnews.com/#53623732
=====================================

http://www.youtube.com/watch?v=dyq2e1mSXxk

canopfor on November 21, 2013 at 1:40 PM

canopfor on November 21, 2013 at 1:40 PM

OT: Per Gretawire:

Per Ed Henry:

Around 10:15am, a series of liberal radio, tv, print, and online journalists were spotted arriving at White House, expected to meet with the president.

Not a complete list. Among the folks seen walking into the West Wing –

From MSNBC: Lawrence O’Donnell, Ezra Klein, Ed Schultz

From Fox: Juan Williams

From Huffington Post: Howard Fineman

From Mother Jones: David Corn

From New Republic: Jonathan Cohn

CoffeeLover on November 21, 2013 at 12:51 PM

“And finally, just ask your viewers, ‘Who ya gonna believe, me or your lyin’ eyes?’” -0b00ba

Akzed on November 21, 2013 at 1:48 PM

Something ain’t right. jukin3 on November 21, 2013 at 1:06 PM

Because it’s not about health care, it’s about control.

Akzed on November 21, 2013 at 1:50 PM

Keep in mind that the goal was not even to get health insurance to the people who fell into the gap between having sufficient income and above Medicaid. That was only around 20 million people. This law is likely to vastly increase the number of uninsured.

Leaving its only true purpose exposed: funneling more money through the government for redistribution (mostly to government bureaucrats, not the needy.)

HakerA on November 21, 2013 at 1:55 PM

CoffeeLover on November 21, 2013 at 12:51 PM

Juan Williams spilled the beans “it’s the fault of the racist ins. companies, there”.

May all of them who stood with obama go under, to a tea.

Schadenfreude on November 21, 2013 at 2:00 PM

Haker:

No, the purpose of O-care is to cap incomes at lower middle class levels. There is woman in Washington State named Jessica Sanford, who Obama touted as O-care beneficiary, who learned that she makes to much money but enough to compensate for her increased costs of insurance. She thought she was going to get a subsidy but at $50k she is ineligible. She has to pay the entire bill and she can’t afford it. It would be rational for her to reduce her hours or get a lower paying job since her income net of insurance would be higher. The bill effectively limits incomes to about $45k for singles and $62k for married with a huge marriage penalty. Over time a gap will occur in the income distribution at approximately $55k for singles and $75k for couples. This is an insurmountable barrier to income growth.

jerryofva on November 21, 2013 at 2:05 PM

In my column today at The Fiscal Times, I argue that this would be tolerable if it actually produced wise and beneficent policy.

Sorry, Ed, but no. It wouldn’t even be tolerable then. At least not to many of us. Not anymore.

GWB on November 21, 2013 at 2:10 PM

(supposedly only living off of the money they put into the system wisely managed by the state)

gwelf on November 21, 2013 at 1:04 PM

Dude, I could hear your eyes rolling all the way over here!

GWB on November 21, 2013 at 2:16 PM

This is an enormous cluster.
Generational theft? Well, how about all those adults covered by their parents’ plans? They are surely not being robbed by older people.

freedomfirst on November 21, 2013 at 2:34 PM

Now I’m looking forward to E’s review of The Hunger Games.

LtGenRob on November 21, 2013 at 2:35 PM

In the endless quest for utopia, dystopia is the result.

ConDem on November 21, 2013 at 2:38 PM

In a bid to stem taxpayer losses for bad loans guaranteed by
federal housing agencies Fanny Mae and Freddy Mac,
Senator Bob Corker (R-Tenn.) proposed that borrowers be required
to make a 5% down payment in order to qualify for a loan.

His proposal was rejected 57-42 on a straight party-line vote because,
as Senator Chris Dodd (D-Conn) explained, “Passage of such a
requirement would restrict home ownership to only those who can afford it.”

Schadenfreude on November 21, 2013 at 3:02 PM

But… But… But they came back and are living in my basement! Using up all my WiFi bandwidth with their iPhones! For free!

Tsar of Earth on November 21, 2013 at 3:08 PM

Imagine each family has to pay 2-4 times or more for health insurance. The money that would normally go to buy household goods, TVs, computers, clothes, vacations, cars, etc. now has to go to fuel inefficient government health care.
Where once a family had several thousand or more to buy household goods this now must go to the government.
The ObamaCare health tax that will surely cause serious negative ramifications to the US economy in that less goods and services will be purchased which means higher unemployment.

albill on November 21, 2013 at 1:25 PM

Say hello to austerity, Clement Attlee-style. Except without the “full employment” or the “paying down of debt”.

Next stop Weimar.

clear ether

eon

eon on November 21, 2013 at 3:13 PM

Maybe I’m the only one that did not see this before but this comes from Healthcare.gov. From the week of 20 November 2013. Didn’t see it before. SNL and Onion can’t write stuff like this.

The individual shared responsibility payment
(That alone should be good for the euphemism award of the year)

Exemptions from the payment

1.Youʼre uninsured for less than 3 months of the year
2.The lowest-priced coverage available to you would cost more than 8% of your household income
3.You donʼt have to file a tax return because your income is too low.
4.Youʼre a member of a federally recognized tribe or eligible for services through an Indian Health Services provider.
5.Youʼre a member of a recognized health care sharing ministry.
6.Youʼre a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare.
7.Youʼre incarcerated, and not awaiting the disposition of charges against you
8.Youʼre not lawfully present in the U.S.

Hardship exemptions

1.You were homeless.
2.You were evicted in the past 6 months or were facing eviction or foreclosure.
3.You received a shut-off notice from a utility company.
4.You recently experienced domestic violence.
5.You recently experienced the death of a close family member.
6.You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
7.You filed for bankruptcy in the last 6 months.
8.You had medical expenses you couldnʼt pay in the last 24 months.
9.You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
10.You expect to claim a child as a tax dependent whoʼs been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you do not have the pay the penalty for the child.
11.As a result of an eligibility appeals decision, youʼre eligible for enrollment in a qualified health plan (QHP) through the
12.Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you werenʼt enrolled in a QHP through the Marketplace.
13.You were determined ineligible for Medicaid because your state didnʼt expand eligibility for Medicaid under the Affordable Care Act.

jpcpt03 on November 21, 2013 at 3:55 PM

jpcpt03 on November 21, 2013 at 3:55 PM

You missed Exemption #14, -You tend to fart in your sleep on nights when there’s a full Moon.

slickwillie2001 on November 21, 2013 at 5:13 PM