Proposal Would Cut Subsidies to the Near-Poor to Help Fund Larger Subsidies for Families Farther Up the Income Scale
Our friends at the Center for Budget and Policy Priorities (CBPP) has done a report on how health care reform could hurt the near-poor in order to make health insurance affordable for the wealthy. Click here to read the full report.
This is an example of why we must always be vigilant to insure that reform does not do more harm than good.
The report notes that a family of three earning $27,465 a year before taxes – that is, at 150 percent of the poverty line – would have to pay $1,318 a year for health coverage under a proposal that Senate negotiators are considering for a merged health reform bill that they would bring to the Senate floor. This is more than such a family would pay under either the Senate Finance Committee health bill or the bill that the Senate Health, Labor, Education, and Pensions (HELP) Committee approved, and represents a large amount for families that often have difficulty paying the rent and utilities and putting food on the table.
This $1,318 premium charge, which would represent 4.8 percent of the family’s income, is nearly five times the $275 that the family would pay under the Senate HELP bill and $82 more than the $1,236 it would pay under the Finance bill.
This option would make coverage more affordable for those with higher incomes and would lower the number of households whose premium costs would exceed 8 percent of income and who thus would be exempt from the penalty for failing to have insurance. That part of the option represents a desirable change. But as Table 1, in their report indicates, this option also would increase the amount that families earning less than 167 percent of the poverty line (less than $30,578 for a family of three in 2009) would have to pay for coverage. As a result:
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Compared to the Finance Committee bill, a family of three toward the low end of the subsidy scale – with income at just $25,000 a year, or 137 percent of the poverty line – would see a 12 percent increase in its premium contributions. Such a family, which does not qualify for food stamps (its income is too high) and is unlikely to receive any housing assistance, is likely already to struggle to make ends meet. Under the HELP bill, a family of three at this income level would pay $250 a year in premiums. Under the Finance Committee bill, the family would be required to pay $963 – nearly four times as much. And under the option described here that is under consideration for the merged bill, the family’s annual premium would be raised to $1,075, well above what such a family generally could afford.
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A family of three earning $27,465 a year before taxes (150 percent of the poverty line) would now have to pay 4.8 percent of its income or $1,318 a year for coverage. This is $82 more per year than what the family would pay under the Finance Committee bill, and nearly five times more than what it would pay under the HELP Committee bill.
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The premium payments made by a family with income at 200 percent of the poverty line would go down slightly compared to the Finance Committee bill. The premiums for a family at this income level would still be almost twice what such a family would pay under the HELP bill.
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People at higher income levels who are eligible for premium credits would pay less under this version of the subsidy scale than under either the Finance or HELP bills.
