Peter = Robbed, Paul = Paid

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THE PLANK NOVEMBER 19, 2009

Peter = Robbed, Paul = Paid

A few weeks ago, Capitol Hill sources began warning that the Senate leadership might decide to offer extra assistance to the middle class by taking money away from the poor. Now it looks like they've done it, albeit in a convoluted way that helps some people even as it hurts others.

It's not easy to see and, predictably, it's not easy to explain. But here's my best shot, based on conversations with analysts and experts who have studied the bill's language.

A key feature of health reform are the subsidies that the government would make available through the new insurance exchanges. Basically, the government would establish what's known as a "premium cap": If you were buying a standard policy through an exchange, the government would give you enough financial assistance to make sure the premiums didn't exceed a certain percentage of your income.

That percentage would vary depending on how much you were making. The more money you make, the more the government would let you pay premiums on your own. The less money you make, the more the government would step in to help you with them.

When the Senate Finance Committee approved its legislation, the cap got up to 12 percent of income for people making between three and four times the poverty line, or between $66,000 and $88,000 a year for a family of four. That wasn't a crushing burden, for sure, but it was a lot--particularly since it didn't even include out-of-pocket spending, which under the Senate Finance proposal could be quite substantial.

Senate Majority Leader Harry Reid and his allies were eager to get that number down. But to do that they had to find more money, at a time when much of the Democratic caucus was trying to scale back existing revenue and savings provisions--or simply reduce the size of the bill altogether. So they decided to scale back subsidies for people making between 133 and 154 percent of the poverty line. The premium caps for these people is now higher--that is, they're entitled to less assistance--than it would have been under the Senate Finance bill.

OK, so what does that mean in practical terms, for real people? I put that question to Judith Solomon, from the Center on Budget and Policy Priorities. She gave me two examples, comparing not just the two Senate bills but also, for good measure, the final House legislation:

At 134 percent of the poverty line ($24,535 for a family of 3), a person would be in Medicaid under the House bill and not pay any premiums.  In the Finance bill, a family of three at that income level would have paid $908 and under the new bill would pay $981.
 
At 150 percent of the poverty line, ($27,465 for a family of 3), a family would pay $824 under House bill, $1,250 under new bill and would have paid $1,236 under Finance. So not a big difference at this level between Finance and new bill but substantial difference with the House.

Those are not huge differences, but they're not insignificant, either, particularly when you consider those amounts don't include out-of-pocket expenses. Or, to put it more simply, when you're trying to cover rent, utilities, food, and other essentials for a family on $25,000 a year, an extra $70 in premiums isn't something to take lightly--particularly when it's $70 on top of $900 you're already paying.

Again, all of this was done to boost support higher up on the income scale. Pretty much everybody making more than 154 percent of the poverty level will be better off than they were under the original Senate Finance bill. Overall, nobody eligible for assistance would have to pay more than 10 percent of income on insurance premiums.

That's all to the good. It's just a shame the Senate had to reduce assistance for the very poor in order to make that possible.

Update: The Center on Budget has now posted a full brief on this matter.

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posted in: the plank, the treatment, health care, senate finance, harry reid, judith solomon, senate

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