I’m a sucker for stupid arguments as the Apothecary at Forbes, a “thought” leader on conservative policy wonkery fucks up yet again. The writer wants to block grant Medicaid and tie it into other social service supports. He argues that there is an income cliff between $20,000 and $30,000 and fucks up reality fairly well here:
The current welfare state imposes a very high marginal-income tax rate at an income between about $20,000 and $30,000, largely due to the complete elimination of Medicaid benefits in this income range
Let’s take Mississippi for a moment, and assume a single adult in the first case, and then an adult and a kindergartener without special medical care. Then let’s also take New York and 2016 Utah with the same scenario.
In Mississippi, there is an income cliff at 0% of federal poverty line for a childless adult, and at roughly 23% for the parent of the kid who gets Medicaid through 133% FPL. Once a childless adult makes 100% FPL, s/he will pay 2% of income for 94% acturial value coverage with Silver Cost sharing assistance with a maximum exposure of 9.5% income at 400% FPL. A family of 2 (parent and child) at $30,000 per year will pay slightly less than 6% of their income in premiums and get 87% acturial value coverage for that price. I don’t see a cliff.
In New York, an adult making under 138% FPL will get roughly 97% acturial value coverage for no premiums on Medicaid. If they make 139% FPL, they’ll pay 3.4% of their income to get 94% acturial value coverage from the Exchange. Again, a family of 2 making $30,000 per year will get 87% acturial coverage for less than 6% of their income. Utah in 2016 is slightly different, as a person making under 100% FPL will pay no premiums for Medicaid and get 97% acturial value coverage. There is a slight cliff at 100% as premiums go to 2% of income and the acturial coverage drops to 94%. A family of two making $30,000 gets 87% acturial value coverage for slightly less than 6% of income.
In all 3 states, a single adult making $20,000 per year pays roughly 5% for 87% Acturial Value coverage to 8.5% for 70% acturial value coverage. There is a technical argument that there is a fairly significant marginal tax rate at precisely 200% FPL as that is where the acturial value adding cost sharing assistance subsidies go from pretty good to thoroughly mediocre. But that is not the argument that is being made.
This very simple analysis excludes CHIP from consideration. The numbers I am projecting are the most favorable for the argument that there is a large healthcare induced implicit marginal tax rate between $20,000 and $30,000. That is bullshit. In Mississippi because the governing elite there are sadists and sociopaths enabled by Chief Justice Roberts et al, there is a large marginal tax rate at 23% FPL for parents of healthy children until they get to a good faith estimate of 100% of FPL, and then there is a small ramp up in expected costs on Exchange subsidies to 400% FPL. In New York and Utah, it is a gradual ramp.
It is like the asshole who wrote the piece for Forbes wants his audience to not think about Obamacare as he slams Obamacare and genuflects to the Church of the Block Grant and the sancitification of the stealth social services cuts.
Snarki, child of Loki
Disingenuous and dishonest conservatives, part the infinity.
The problem is the states, therefore, let’s give more control to the states.
Mike in NC
“Current welfare state”? Isn’t Forbes magazine aimed at rich pricks like Trump and Romney, guys who never did an honest day’s work in their entire miserable lives?
About The Apothecary:
Other people also write for it, but that’s the slant.
Forbes has what essentially amounts to a blogging platform for various people. It’s not the same as Forbes magazine.
Edit: Forgot to add this disclaimer about it from the site:
@Violet: so what, they give the platform and the branding of their name, they get the abuse.
If your response implicitly assumes that someone writing for Forbes cares about whether their analysis is correct or incorrect, that’s an assumption you may want to re-examine. I respectfully submit that all the editorial staff at Forbes really cares about is faithfully serving their political overlords.
Villago Delenda Est
@Snarki, child of Loki: Nothing new under the sun.
Forbes, and the WSJ, are sewers.
@Richard Mayhew: Oh, I agree. Forbes is responsible for doing this. They don’t have to allow people to publish under their name. No one is making them. They chose to so they’re responsible.
It’s a ridiculous construction and I think it’ll backfire on them at some point. When you allow people to publish whatever the hell they want under your name without any control then if crazy people publish crazy stuff it’s your responsibility.
I thought it was worth pointing out in case people weren’t aware of how Forbes has structured this section of their empire.
Villago Delenda Est
Which guarantees he’s a total fucktard who is best dealt with by tumbrel ride.
@Villago Delenda Est: Which explains this part of Richard’s post:
Of course this is what they want to do. Making the rich richer and the poor less secure and more dependent on rich people for crumbs is their entire reason for living.
Edit: I do want to thank Richard for writing this post. This kind of crap needs to be pushed back against. Richard did a great job.
Richard, would you care to comment on the 60 Minutes hit piece on Obamacare last night. Dan Diamond at Forbes took them to task in the following article. http://www.forbes.com/sites/dandiamond/2015/01/11/60-minutes-just-called-obamacare-a-disaster-heres-what-they-didnt-tell-you/
That looks like an extremely steep cliff. If the person at 139% pays that premium, their remaining income is now 135.6% FPL, which is lower than that of the person at 138% FPL.
Was that the point? I are confused.
There is another cliff at $1 above the subsidy range. From thousands of $ subsidy to zero.
@wvng: Ditto everything that Dan said…
Basically 60 Minutes is taking the same argument my 6 year old makes when the car fails to fly— No shit, it failed to fly as the car was never designed to fly but it does drive down the highway fairly well.
ACA does have some cost containment provisions in it, but that was definately a secondary consideration. On its primary consideration (correcting a dysfunctional individual insurance market AND greatly expanding the reach, scope and reliability of coverage) it is passing with flying colors right now, and even on cost control, we have four years of medical cost growth at or below the rate of the entire economy which is amazingly good.
@catclub: Yep, you are getting the point … there is a bit of a Medicaid cliff to Exchange, but not a trap you in forever poverty because you’re better off cliff. And yes, there is a cliff at 399.999% FPL and 400.01% FPL if you live in a high cost insurance state.
From the same people that brought you defined-contribution pension plans. I don’t think we have long to wait until that blows up.
I can’t find a clear reference to it in the linked Forbes article, though I don’t have time to read it all that carefully. The economist Casey Mulligan published a study in late 2013 claiming high implicit tax rates for lower income people in Obamacare subsidy structure, which seems to be going through the conservative policy hack rounds now. So, this issue will be talked up for a while. Below is is a link to a mention in Greg Mankiw’s blog.
I have no idea how good the analysis is.
Since many poor and lower income working class people have access to a market that they did not have before, it is difficult to do a straightforward an uncontroversial argument that any claimed marginal tax rate cliffs reduce social well-being, the question is the benefit-cost trade-off. So, the headline policy analysis to show horribleness in the effect of the marginal tax rate hikes on labor supply. This emphasis might be because estimation of welfare effects would be very controversial and difficult to do, or maybe because Mulligan has been truly obsessed with the idea that micro-economic disincentives to work can explain all the weak labor market since the beginning of the recession. Mulligan has fingered four or five policies as huge villains in the past few years, including the rink dink government mortgage refinancing programs that didn’t do much of anything for anybody. So, Mulligan has a very invested i interest in getting a certain answer. I hate to say that because before the recession he did some very good and fair minded analysis of the incentive effects of social insurance. But now? I am getting a little suspicious. So, his analysis has to be looked at very closely by someone who understands how to do this kind of analysis (which ain’t me. Maybe RM can take a look). Edit: though all the copies of the study seem to be behind a paywall, though from NBER it is only 5 bucks.
Marginal Tax Rates under Obamacare
Can someone suggest an easy talking point to rebut the “turn Medicaid into a block grant” argument? The problem is that sounds like a simply technical fix and most people can’t figure out why it’s a bad thing (most people don’t even know what a block grant is). I know enough to give an argument against it, but I inevitably end up sounding like a technocrat and the core message doesn’t come through.
@Xantar: I’d suggest two rebuttals. First, that there are too many ways for the states to not use the money to help the poor.and lower income working class, and the money will not be used as intended.
The second thing to note is that, the standard US approach to income support produces marginal tax rate hikes where subsidies and program eligibility end suddenly as income rises. There is nothing in the Forbes blog posts I read that suggest how this problem can be avoided. Unless of course, individual states will go Sweden, or Canada or Taiwan. Of course, a state could go the purported zombie Swiss ‘free enterprise’ route, though the actual reality world Swiss approach requires both harsher business regulations and much harsher transparency and audit requirements, and DEATH PANELS (ie, cost-effectiveness tests for social insurance subsidies for treatment) that are not politically feasible over the foreseeable future in even the most liberal US states.
Looking around the link provided in this post, Forbes seems to be peddling fantasy stories about all the liberal environmental health and chronic illness risk remediation that individual states will do if only they could get block grants. Really? Individual states are going to pour money into particulate air pollution control to reduce the excess risk of asthma in poor and working class neighborhoods? Eliminate healthy food deserts? Fund programs to increase exercise? Really? That is going to happen in Texas, for example????
Edit: One might also question why these kinds of lifestyle and environmental programs that these people have routinely ridiculed in the past if proposed by any liberal or progressive, are suddenly obviously very effective if done with block grants.
@Xantar: Easy description of a block grant: Free money with few or no controls over how its spent. Ask them if that would work well when money that used to be specifically tied to road repair (for example) gets used for [pick something the person doesn’t like.]
Better than trying to explain CHIP, Medicaid, etc. go with Medicare. Most people know someone on Medicare and that someone has needed to use it. How would it work if the states decided the block grant money didn’t need to go to Medicare because screw those old people and instead used it for something else.
Medicare may not be a truly accurate example but it’s a great example from a practical sense because people who don’t know people on Medicaid probably know people on Medicare.
It’s funny how so many FP’ers have usually been so delightfully foul-mouthed and cranky, but Richard’s posts have always been very staid and dignified, carefully-reasoned, long(!), and level-headed… until now… when something about the egregious violence done to mathematics by The Apothecary has so righteously PISSED OFF Mr. Mayhew, that he came out cursing and snarling for the first time I can remember.
Do and say whatever you want, wingnuts, but if you have the insolence to get the NUMBERS wrong, then may god have mercy on your soul, Richard Mayhew is gonna open up a 50-gallon drum of whup-ass on ya.
Well done. Thanks as always for your clear and complete analysis.
The Ancient Randonneur
And McArdle is nowhere to be found when the math demands it!
Wondering if Mt. Mayhew might have commentary regarding this quickly upcoming ACA foofaraw.
@fuckwit: I’ve been known to be slightly vulgar when my wonk sense has been offended. It is only possible to have a rational discussion about policy and trade-offs when there is a shared consensus on reality. Assholes like most of the Forbes stable of writers and affiliated bloggers do violence to that potential shared reality.
@NotMax: I have no major problem with the McClatchey piece — I might have written it slightly differently (a few more fucks at the very least) but yeah, people will be surprised at tax time when they either get a bigger refund due to overestimating their income or see a good chunk of their refund disappear when they underestimated their income.
@Violet: In a link posted in a previous thread that I’m too lazy to look up, Forbes actually ran an article stating that we need to end stock-based compensation and attendant practices if we want capitalism to survive.
I happened to agree completely, but was a little baffled at the source. Knowing their willingness to let anybody slap the Forbes banner on anything goes a long way toward explaining how that happened.
The cliff business with respect to Federal benefits seems to run in cycles, and their existence is largely conservatives’ fault.
Basically, liberals notice that having benefits up to an income of $X, but ceasing at $(X+1), creates powerful disincentives to increase one’s income above X. So they make sure the benefits phase out, rather than suddenly disappear.
But the flip side of that is that people who are making semi-decent money are still getting some benefits, because they’re not above the level where they’ve completely phased out. And that’s ripe for right-wing demagoguery, where THEY’RE MAKING $40,000 AND STILL GETTING FOOD STAMPS!!!! or whatever other aid you might mention. And next thing you know, the GOP stampedes a bunch of vulnerable Dems to reduce the eligibility ceiling to $18K or some such, and you get a cliff.
Then on the next turn of the wheel, liberals note the problems with having a cliff, and fix it, then conservatives demagogue the fact that people with middlin’ incomes are getting aid…lather, rinse repeat ad infinitum.
So the next time a conservative complains about cliffs, ask him if he’s got a pledge from the Congressional GOP leadership to never make an issue of people with semi-decent incomes getting aid from whatever program he’s talking about.
@Kylroy: Glad it was helpful. It’s confusing if you aren’t aware of this “blogging” section of Forbes.
Why I read this blog.
And I wish White House spokespeople and advocates could speak as bluntly, to get through the clutter and the concern trolling by “serious journalists.”
To be fair to your six year old it is 2015 already. Where’s my goddamn flying car?