More for the Middle-Class, Less for the Poor

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THE TREATMENT NOVEMBER 16, 2009

More for the Middle-Class, Less for the Poor

Amid all the concern about subsidy levels in health care reform comes word that Senate Majority Leader Harry Reid is, in fact, going to boost the financial assistance available to Americans buying health insurance. The problem? It's not the group who needs help the most--and it may come at the expense of those who do.

According to Ron Pollack, executive director of liberal advocacy group Families USA, the Senate leadership has basically decided to give more help to middle-class families on the higher of the subsidy spectrum, whose incomes are 300 to 400% above the poverty line. “It has largely been decided, there will be some improvements on the higher end,” Pollack told me on Friday. In the Senate Finance Bill, such folks weren’t supposed to contribute any more than 12% of their income toward insurance. In the merged bill, Pollack says, the number is expected to drop to 10%.

Who won’t be receiving more help? Those on the lowest end of the income spectrum, around 133 – 150%* above the poverty line. Pollack expects that the merged bill will set this group’s cut-off for insurance contributions at around 3%. That’s actually higher than what’s in the Senate Finance bill (2%), and twice as much as what’s in the House bill (1.5%)—effectively insisting that the poor pay more for insurance.

Essentially, as my colleague Jonathan portended a few weeks ago, the Democrats would be taking from the poor to help the middle-class. There’s no doubt that this will be an issue that the Congressional leadership will be wrangling over when it comes to putting the House and Senate bills together. And the Democrats will have to decide for themselves whether it’s worth relieving the middle-class at the possible expense of the poorest and most vulnerable.

*There was an error in the original income bracket cited, now corrected.

Update: MIT economist Jon Gruber confirmed in an email that using the money to bolster subsidies would in fact be "much more progressive" than raising the threshold for the excise tax. Doing the latter, by his account, would actually be regressive due to the wage increases that would result from the excise tax. Click here for more details. 

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