Marginal tax rates under the Senate health care bill

by on June 24, 2017 at 7:23 pm in Economics, Law, Medicine | Permalink

To see the problem, consider Brian’s situation. He’s a single adult, age 45, earning $35,000 a year. BCRA (section 102(b)(2)) expects Brian to contribute a little more than 8.3% of that income to purchase a health insurance policy. That’s about $2,911. The federal government would chip in the amount needed to let Brian buy a “median benchmark” policy in his region. That policy won’t be lavish: on average it will pay for 58% of covered expenses, but it might well let Brian avoid bankruptcy if he gets extremely sick. It will also get Brian low, pre-negotiated rates for a lot of medical treatment instead of being subject to astronomical “Chargemaster” prices that hospitals often charge the uninsured. So, if that Bronze policy costs $4,500, Brian would pay $2,911 and the federal government would pay $1,089.

Suppose Brian succeeds at work and gets a $5,000 raise; or suppose Brian gets a part time job to help supplement his income and earns $5,000 more. Now, because his income is $40,000, section 102(b)(2) of BCRA expects Brian to contribute 11.3% of his income to healthcare. Since that’s $4,558, Brian in fact pays for the whole $4,500 policy; the federal government pays nothing. So, although Brian’s raise is $5,000, he pays an extra $1,589 in premiums. His effective marginal tax is almost 32% just from the BCRA alone. When one combines his loss of a subsidy with increased income taxes of $1,488 and an increased payroll tax of $382.50 (double that if Brian’s new job is deemed self-employment), Brian’s gets to keep at most $1,541 of his new $5,000. His effective marginal tax rate is at least 69%. It’s probably even higher if Brian faces state income tax or suffers a phase out of other government income-based benefits.

That is from Seth Chandler.  Ross Douthat has a good bottom-line take on the bill.

1 Moo cow June 24, 2017 at 7:29 pm

Well. It’s not a tax, is it? He’s buying health insurance.

But yes, this is one problem. It was a problem with the ACA, and TrumpCare makes it worse.

2 Moo cow June 24, 2017 at 7:43 pm

[The House bill, flawed in so many respects, at least made an effort on this front, since its flat subsidy was available to the people currently getting hosed by Obamacare prices. But maintaining a smaller version of that subsidy would have, once again, cost money, so instead the health care law’s biggest losers will continue to lose out.]

From Douthat.

3 Dick the Butcher June 25, 2017 at 10:02 am

Why would Brian buy insurance for $2,900 much less $4,500, when, if he needed to pay it, the IRS penalty would be what? $900?

The Supreme Court ruled it is a tax. Otherwise, the individual mandate would be unconstitutional to force we the people to buy insurance or anything.

Of course, Brian is not buying insurance. He’s paying taxes to pay for other people’s health insurance.

I thought the “individual mandate” is being deleted.

Orwell, “The further a society drifts from the truth, the more it will hate those that speak it.” And, “One has to belong to the intelligentsia to believe things like that, no ordinary man could be such a fool.””

4 Boonton June 25, 2017 at 12:34 pm

Truth is a tax is simply a price you pay to the gov’t for doing something that is legal. A lawyer is under an obligation as an ‘officer of the court’ to not advise his client to break the law.

If Congress puts a $2 tax on cigarettes, a lawyer can tell his client “if you want to smoke, you can but you have to pay $2 more because of the tax”. But what about a $50 fine for using an illegal parking space? Suppose someone really wants to park there and doesn’t mind paying $50? Technically I don’t think a lawyer can advise his client that is ok. You cannot ethically break the law even if you are fine paying the penalty. A man cannot honesty call himself law abiding if he parks illegally even if he dutifully pays every $50 ticket he gets while the man who buys his cigarettes for $2 more than they could cost can. Now whether or not it is important to you to be able to honestly call yourself law abiding is a different question.

With this in mind it is pretty clear that the ‘individual mandate’ is simply a tax on not carrying insurance. The SC was correct in calling it that and it’s no more a ‘mandate’ than the fact that charitable contributions can get you a tax deduction is a ‘mandate’ forcing you to donate money to charity…which might be something you are not inclined to do for a number of reasons.

5 Troll Me June 25, 2017 at 10:45 pm

“He’s paying taxes to pay for other people’s health insurance. ”

Fortunately, he also gets health insurance in return. Interesting Orwell reference though … I guess any conspiracy theorist will be able to easily identify anything else you said as obviously true for the fact of dropping his name.

6 JonFraz June 26, 2017 at 3:42 pm

Re: Of course, Brian is not buying insurance.

Huh? If he has an insurance policy that he has paid for (with or without subsodies) he is buying insurance. That is tautologically true.

7 BC June 24, 2017 at 8:22 pm

Actually, it’s a problem with every means-tested program, i.e., every program designed to provide assistance to the poor. As a person becomes less poor, his or her benefits phase out, creating high effective marginal tax rates. The inherent trade off is that, every dollar spent trying to smooth out the benefit “cliff” is one less dollar that can be spent providing assistance to the people far below the cliff, who are even poorer.

Aside: universal basic income can be thought of as extending the phase-out to infinitely high income. Yes, it minimizes the effective marginal tax rate problem but is the worst in targeting dollars to the poorest. That’s why it ends up being so expensive.

8 Ricardo June 25, 2017 at 4:58 am

Yes, but the magnitude matters. An effective marginal rate of 69% on low-income people is just stupid. PPACA’s effective marginal rates for those in the exchanges are less than 10%.

9 rluser June 25, 2017 at 7:50 am

Does anyone have a clear idea of what “hardship” is in current interpretation of PPACA? 10% marginal seems low. It could be 100% for a significant number of cases.

10 Careless June 25, 2017 at 8:47 am

Uh, why are you excluding payroll and income taxes in the one and not the other, Ricardo? you’re better than that

11 Dishonest Ricardo June 25, 2017 at 8:54 am

He’s not better than that.

12 Ricardo June 25, 2017 at 12:07 pm

A simple mistake on my part, the correct number is 32%.

For rluser, the 10% effective marginal rate for PPACA for people in the exchanges comes from the fact that [silver] premiums are capped at less than 10% of income if you earn less than 400% of the poverty line. People who live in states that have rejected Medicaid expansion might be getting screwed, though.

13 Daniel Weber June 25, 2017 at 9:06 pm

Pile enough “less than 10%” marginal taxes on top of each other and you end up with some psychotic incentive systems.

14 byomtov June 25, 2017 at 6:19 pm

Yes. It is a problem if you decide that the proper marginal rate to use is the one described. You can always get some sort of ridiculous number.

But is it? Should we assume that people like Brian are so short-sighted that they look only at the marginal rate calculated this way? What about longer term? Suppose Brian thinks that his promotion, or side job, will lead to bigger and better things. Suppose a welfare recipient considering taking a low-paying job thinks the same thing. The long term counts, it seems to me. Maybe the proper marginal rate to use is change in the PV of all future taxes divided by the change in the PV of all future income.

Just a thought.

15 Troll Me June 25, 2017 at 10:49 pm

Marginal units of effort are obtained for marginal dollars. That’s why marginal thinking is always relevant.

If someone has the option to work another hour and my marginal tax rate is 40%, it doesn’t matter if the average tax rate is 20% – the $50 they might be offered for the extra hour is worth $30 after taxes, not $40.

16 byomtov June 27, 2017 at 2:40 pm

I didn’t say marginal thinking was wrong. I said it is important to be careful about what quantity it is you are taking the marginal value of.

Suppose you get an offer to work an extra hour for $50, with a marginal tax rate of 40%, and if you take it will get an opportunity to work an extra hour again next week, but for $100, with a marginal tax of 35%.

Now what is your marginal rate on the first extra hour? How much does it figure into your decision-making? The point is that a marginal value is an instantaneous rate of change of some quantity. Picking the quantity is important.

17 GoneWithTheWind June 24, 2017 at 10:35 pm

What a tangled web we weave when first we practice socialism.

18 Moo cow June 24, 2017 at 11:25 pm

That train left the station long before 2010 lol.

19 JonFraz June 26, 2017 at 3:45 pm

Every long-term human group since we climbed down from the trees has been socialistic in some respects.

20 mulp June 25, 2017 at 12:24 am

Yep, in the ideal world, gdp would be much lower as only a few people can buy the goods and services provided by the masses earning so little, they must survive on home goods that do not could in gdp, the food foraged, food grown, food from hunting on the common, the cloth woven and sewn into garments at home. That was the American Dream at the time of founding, free land from the government to live off, if you can, otherwise, for your grave.

Of course, in the South, the few owned the workers and depended on the socialist British Empire to provide them with cash and the luxury goods they consumed, for in Britain, wealth was constantly redistributed from worker to worker to worker.

21 Larry June 24, 2017 at 7:46 pm

Roy’s is the only defense of the bill that I have seen or heard. Any others?

22 BC June 24, 2017 at 8:44 pm

One good defense is better than many bad ones.

23 Anonymous June 24, 2017 at 9:34 pm

We will see how the CBO scores the median outcome .. but it will probably be somewhat below Roy’s optimism. “States will have new freedom with Medicaid, they will all use it to improve Medicaid, yay!”

24 Jan June 25, 2017 at 8:00 am

It’s a terrible defense that assumes Medicaid is harmful for poor people and that they don’t like it, neither of which is true. There’s a reason he’s alone among conservatives in supporting it.

25 BC June 25, 2017 at 10:01 am

Why would shifting control over Medicaid from the federal government to the states require assuming that Medicaid is harmful for the poor? One thing that people don’t seem to understand is that, unless the federal government bans states from providing welfare benefits, it’s impossible for the federal government to cut those benefits; it can only cede power over those benefits to the states. When the federal government reduces Medicaid spending by $800B, it simultaneously reduces current + future federal taxes by $800B. That means that states, if they want to, can increase state taxes by $800B to spend on health benefits for the poor. So, appropriate Medicaid benefit levels are a red herring when discussing federal Medicaid spending. The issue is whether benefit levels should be determined by federal or state governments. I have heard no arguments, from either liberals or conservatives, about why it would be better for Trump and the Republican Congress to control Medicaid instead of state governments including blue state governments like those in California and New York.

26 Anonymous June 25, 2017 at 10:06 am

When you shift responsibility to States and cut funding it looks like you are trying to make the States the bad guys. Giving them a no win situation.

As I understand it, the House Bill was more clearly doing that, and the Senate Bill adds enough money to muddy the waters .. but only until 2020?

I believe the budget projection requires big cuts then to work.

27 Borjigid June 25, 2017 at 10:44 am

There’s more opportunity for tax arbitrage if you leave it up to the states to raise taxes after lowering federal taxes.

28 Troll Me June 25, 2017 at 10:58 pm

Population mobility would be an issue because a state that wanted higher access to health services would soon face additional pressures to afford it, because people with health needs would be attracted to that and it would be relevant for competitiveness of firms under the assumption that the bill gets paid. (It should be noted that the net tax bill inclusive of health costs is much more competitive in advanced countries with no-charge universal health access.)

In the case of Canada, constitutional aspects towards reduced regional disparity in quality of public services (they are supposed to be equal, but for practical reasons this is not quite the case) mean that, despite provinces having 100% jurisdiction over health, the federal government makes “equalization payments” to achieve this.

For the case of the USA, it would be politically difficult or perhaps constitutionally impossible for the federal government to engage in such taxation at the federal level with the explicit intent to distribute to lower levels of government in such regular and substantial ways.

29 Tanturn June 24, 2017 at 8:00 pm

Pick two:

1. Coverage for the poor.
2. None off these kinds of moral hazards.
3. Low taxes on the wealthy.

The conservative prefrence seems to be for 1 and 3. As a nationalist, I would prefer 1 and 2. Too bad there’s no political party for me.

30 Moo cow June 24, 2017 at 8:11 pm

What is the purpose of this bill? Trump said he wanted to cover more people, with better quality insurance, for lower premium cost, and lower deductibles. Wow. Okay.

TrumpCare does none of this. But it does cut taxes, and it does this by cutting $800 billion out of Medicare and lowering the subsidy available to middle and lower income Americans.

31 BC June 24, 2017 at 8:25 pm

Actually, (3) is a red herring because, for any level of taxes on the wealthy, we face exactly the same trade-off between (1) and (2). Every dollar spent trying to create a more gradual phase out of benefits is one less dollar that can be targeted to the poorest.

32 WC Varones June 25, 2017 at 9:08 pm

How about a free market with posted prices and enough % co-pay to make people shop around?

That would bring costs down to the point you could accomplish 1) without the 2) and 3) issues.

33 Been There June 24, 2017 at 8:21 pm

At age 45 in most states, the deductible for most Bronze policies is $7,000 or more. In other words, Brian will pay $9,910 in premiums and deductible before the first dollar of insurance kicks in. If Brian is making $35,000 per year, I’m betting he may not have that much in available cash.

34 BC June 24, 2017 at 8:38 pm

Well, if he were expected to incur $7k of out-of-pocket expenses every year, then every dollar reduction in his deductible would increase his (unsubsidized) premiums by the same dollar. Insurance does not reduce one’s yearly medical costs, only the variation in medical costs from year to year.

I would hope that most single adults age 45 would not be incurring $7k in medical costs *every* year. So, that $7k dollar amount should not be compared against an annual income.

35 Potato June 24, 2017 at 8:51 pm

How large is this population as a %? I find it hard to believe someone works for 27 years and makes 35 thousand a year without benefits. And his wife earns no money?

How many people are we talking about? How many 45 year old married couples earn 35k total? Each earning 17k a year?

That’s 16.82 an hour with 27 years experience and assuming no overtime. What industry is this ?

36 Moo cow June 24, 2017 at 8:59 pm

[A 45 year old worker making $35,000.00 annually was in income centile 38% in 2016. This centile ranged from $35,000.00 to $35,102.00 a year.]

https://dqydj.com/income-percentile-by-age-calculator/

37 Potato June 24, 2017 at 9:09 pm

At how many hours a week ? What % of this is part time mothers adding to household income?

Give me the percentile 2 adult household income of 35k please.

A mother working 20 hrs a week to add to the household Income is not the relevant population.

38 steve June 24, 2017 at 9:11 pm

Potato nicely demonstrates how so many people, especially those who would support the GOP health care bill, have no idea how many people are affected by what this bill does.

Steve

39 TMC June 25, 2017 at 12:13 pm

Potato nicely demonstrates that nobody here knows how many people are affected by the bill. Potato at least asks questions about it. Even the household income percentile (32%) doesn’t help. Quite a few households are single people – 28%, which would not cost 7k/ year to insure.

40 Been There June 25, 2017 at 11:17 am

I agree that you could somehow theoretically amortize a large single-year expense against a longer period, whatever that period might be. But if that single-year expense strangles you in the short term, you’re screwed. And, if its a chronic condition, you’re screwed every year.

41 The Other Jim June 24, 2017 at 8:30 pm

$4500 for a policy that “might” keep him out of bankruptcy if he gets catastrophically sick?

Wow! Yay, socialism!

42 Ray Lopez June 24, 2017 at 9:17 pm

Exactly. Health insurance for most people is simply cancer insurance. It only matters is you’re rich, and you want to avoid having to go through bankruptcy. Hospital rooms cost roughly $100k / day.

For everybody else, if you get cancer, just put your assets in another’s name, declare bankruptcy, and start anew. I see this all the time when I go to landlord court to kick out deadbeat tenants; a lot of times they’ve declared bankruptcy and I can’t garnish their wages.

43 Dan Lavatan-Jeltz June 25, 2017 at 1:59 am

That is a lie. If someone is catastrophically sick, they will either die soon and it won’t matter, or they will never be able to work again and have to sustain the rest of their life from savings. If they have enough to do that the insurance won’t matter, and if they don’t nothing short of divine intervention can save them.

44 Ricardo June 25, 2017 at 4:40 am

You are mixing up two different issues. Things like car accidents, complicated childbirths or even a case of appendicitis can easily result in five-figure hospital bills but they won’t necessarily stop someone from going back to work.

In cases where someone is physically disabled, SSDI will help them get by and they can qualify for Medicare after, I believe, two years. Insurance would cover all the initial treatment and follow-up until that person can qualify for Medicare.

45 Hazel Meade June 25, 2017 at 10:03 pm

Paying $4500/year guarentees five figure bills, as a matter of spending on premiums, every 2.2 years. How often am I expected to get appendicitis?

46 Troll Me June 25, 2017 at 11:08 pm

If it’s pretty bad, then worse doesn’t matter?

47 Jan June 25, 2017 at 6:43 am

This bill preserves the socialism in the worst, half-assed way possible while inflicting harm on the poorest and elderly (most people in nursing homes use Medicaid to pay for it as Medicare doesn’t cover it) through the Medicaid piece There is nothing in it for anyone to like and I have no idea how they thought it was a good idea.

48 Hazel Meade June 25, 2017 at 10:12 pm

But if he’s chronically ill, he’ll ONLY have to spend an additional $5,000 a year on medical expenses.

I’m trying to imagine which chronically ill people spend upwards of $10,000 a year nominally, who might be benefitting from this. There have to be lots of them, but who are they, and why are we subsidizing them?

49 Troll Me June 25, 2017 at 11:11 pm

What percentage of CEOs who earn over a million dollars a year do you think enjoy less than $10,000 annually as a subsidy on steak dinners?

The costs are relevant, but I think a lot of people have an easy time agreeing that a similar amount of money to assist a person with a chronic health condition is more important than to subsidize executive steak dinners.

50 Hazel Meade June 26, 2017 at 9:57 am

If there are so many chronically ill people spending over $10K a year on health care that they drive up insurance prices for everyone to that level, I doubt you can come up with enough CEOs to cover all of them out of their steak dinner budgets.

51 Potato June 24, 2017 at 9:24 pm

Steve,

I suppose you’re right. Since we hire 19 year old kids at 15 an hour with medical benefits and plenty of OT opportunities at time and a half, and STILL cannot fill our positions it seems unfathomable. And that’s untrained. They get raises 1-3 times a year.

I guess manufacturing really is different. It still makes me wonder who these people are. Retail workers?

52 Potato June 24, 2017 at 11:36 pm

So your stats include people who don’t work 40 hours. You’re obviously unaware of that, or you’re a liar. I prefer to think you didn’t realize you’re including people who work 10 hours a week.

So the median married household income is over $85,000.

Median, not mean. This makes more sense with what I see as someone who oversees hiring. 20 year olds turn down 40k a year. At 50 a year we get bites. This is the population who graduated high school and have no further ed or training.

45 year old with experience we can’t get for less than 25 an hour, with the OT that’s easily $80,000.

If the argument is that we should have a widows and orphans fund I wholeheartedly agree.

But as a manager I don’t see this at all. The people that don’t make 40 or more are the people that literally can’t show up to work 5 days a week. They can’t. They’re alcoholics or addicts or just lazy. We hire temps at 10 an hour and if they speak English and have a brain we hire them directly at 15 an hour.

53 mpledger June 24, 2017 at 11:51 pm

I’m not in America so it’s of no direct interest to me but what is this industry and where is this industry? I’m sure there are others who might like to know so they can pass it on.

54 Potato June 24, 2017 at 11:57 pm

It’s called manufacturing. It’s everywhere. Truth is most people won’t do it for 15 an hour. It’s hot and loud, and you’re on your feet.

But the secret is Chinese will do it for 5 an hour. At the moment they can’t do it successfully. 😂🤣😂 I plan to change that.

55 prior_test2 June 25, 2017 at 4:55 am

‘Truth is most people won’t do it for 15 an hour. It’s hot and loud, and you’re on your feet.’

Tell that to all the people that would love to get a starting job at the Mercedes plant in Tuscaloosa. And I would assume (without personal knowledge), the BMW plant in South Carolina. Or the VW plant (same caveat) in Tennessee.

The problem is the lack of such plants, not the lack of workers.

56 A Definite Beta Guy June 25, 2017 at 5:50 am

$35,000 is the 25% percentile of “truck driver.”
http://www1.salary.com/Truck-Driver-Heavy-salary.html
I mean we’re not talking a very high bar to cross here. The only person I know who can’t hold down a job at this income level is the biggest friggin’ idiot I’ve ever met (my cousin). He HAD a job at this income level, with health insurance even! But he was fired, because he was running an extremely obvious scam.

Mother Dearest works at a mfg plant and can hire people at $21/hour for the lowest wage with OT practically guaranteed, with no experience. But it’s third shift. And no one wants to work third shift…which seems to be the biggest problem.

I assume it will become a bigger problem when you tax average families more because they make horribly patriarchal choices like getting married and working hard and saving money, so other people can choose not to work third shift or drive trucks or work construction or unclog toilets.

57 Moo cow June 25, 2017 at 1:31 am

Median household income is about $56k.

https://fred.stlouisfed.org/series/MEHOINUSA672N

58 TMC June 25, 2017 at 12:19 pm

He said married. 28% of households are single person households.

59 Moo cow June 25, 2017 at 12:40 pm

Barely half the ppl in this country are married.

60 TMC June 25, 2017 at 2:29 pm

Yes, but it fits the example given. Single guys do not pay 7 grand for insurance.

61 Ann Ominous June 24, 2017 at 9:39 pm

The real problem happens if premiums continue to rise rapidly. At some point, a bracket appears where increasing income has an effective 100%+ marginal tax rate.

62 Dave Barnes June 24, 2017 at 9:55 pm

BCRA?
What the hell is BCRA?
Oh, TrumpCare. (Or, you could call it ScrewYouCare.)
Call it what it is.
We live with ObamaCare now as no one calls it the AHCA.

63 WC Varones June 24, 2017 at 9:56 pm

Current Obamacare has subsidy cliffs that create marginal tax rates far in excess of 100%:

http://www.wcvarones.com/2016/05/the-obamacare-cliff-redistribution-and.html

64 y81 June 24, 2017 at 9:59 pm

69%? The plain old vanilla marginal income tax rate was higher than that when I was a boy, but I don’t remember any econ professors complaining. What hypocrites!

65 CD June 25, 2017 at 1:12 am

“69%? The plain old vanilla marginal income tax rate was higher than that when I was a boy”

Not for anyone earning less than median income.

https://taxfoundation.org/us-federal-individual-income-tax-rates-history-1913-2013-nominal-and-inflation-adjusted-brackets/

66 Daniel Weber June 25, 2017 at 9:23 pm

And anyone who cared could get their compensation in bunch of untaxed ways.

67 Hazel Meade June 25, 2017 at 10:13 pm

Like health insurance!

68 Mike W June 24, 2017 at 10:03 pm

Really, how many Brians are there…individuals making only $35,000 who have the need for major medical insurance? Brian is not going to be “bankrupt” by major a major medical condition because Brian has nothing to bankrupt…he has no assets. This is all a meaningless academic exercise in math.

69 liberalarts June 24, 2017 at 10:14 pm

I opposed Obamacare as an expensive intrusion into the marketplace. But that was 10 years ago, I have now moved from that position to the left of Obamacare: either single payer or single insurance payer. Part of that movement is because of this marginal tax rate problem. If the gov’t just gives Medicare to everyone, then these insurance phaseout marginal rate spikes don’t occur. In other words, give it to everyone from the super poor to Bill Gates and the phaseout problem goes away. The other reason I that has changed my position to single payer is that an ever increasing percentage of the population is simply not productive enough to pay for its own healthcare. Giving healthcare to all, similar to giving K-12 education to all, is a dignity-preserving income transfer to a group that I don’t want to see without education or healthcare. I say this, by the way, as someone who pays the Obamacare surcharge taxes, so I do feel that bite.

70 Ann Ominous June 25, 2017 at 12:31 am

Health care supply is very inelastic on an annual timescale. The subsidies lead to a demand shock which prices somebody out of the market. They would be less of a problem if they were phased in over the course of a decade.

71 TMC June 25, 2017 at 12:21 pm

“I have now moved from that position to the left of Obamacare: either single payer or single insurance payer.”

That was the whole point of Obamacare. Build a shitty system that would eventually implode so you’d go to single payer. O wasn’t as dumb as he played.

72 Daniel Weber June 25, 2017 at 9:36 pm

To settle the phase-out issue, give insurance to everyone, but with the option to opt-out in exchange for a tax credit of, say, $2500.

If the Republicans were a lot smarter, they could figure out some way to bait the Democrats into rolling Medicare, Medicaid, and the sundry other Federal programs into one big “single-payer” basket and let the Democrats manage it with whatever market forces they wanted to cover every American. It would have a budget of about one trillion, which is around $2800 per capita, more than most European countries spend total on their health care expenditures in total, so it would de-tooth any Democratic complaints about lacking “economies of scale.”

Then, people who are of means can choose to just get a flat tax credit to offset whatever they are paying for their insurance.

73 Dan Lavatan-Jeltz June 25, 2017 at 2:02 am

None of the chargemaster prices have or ever could be sustained in a US court of law. I’m not sure why anyone would worry about them.

74 Nobody June 25, 2017 at 3:05 am

Perhaps you’re more comfortable with (and have more resources for) going to court than most, to make a case about charges that you don’t understand.

75 Ricardo June 25, 2017 at 5:07 am

How large is the set of people who cannot afford to pay their hospital bills but can afford a $400-$600 per hour attorney to litigate the bill in court? This is another reason why insurance is good — they have much more resources at their disposal than individuals to negotiate discounts and to fight unjustified bills.

76 Hazel Meade June 25, 2017 at 10:16 pm

If we had effective price signals, insane chargemaster prices would disappear.

77 prior_test2 June 25, 2017 at 4:50 am

Imagine a place where everyone is covered, and yes, the actual amount deducted from their paycheck is around 11.3%, regardless of whether they earn 1000 dollars a month or 5000 or 10,000, an amount that is fixed regardless is they are married to a non-working spouse and have 3 children at the age of 45, or are single and aged 21. Then imagine that their nation’s health care costs a third less than that in the U.S. (with significant dental care included for everyone), and that the health care system is essentially private. Further imagine that this system has its roots a century and a third in the past, and that currently, the largest segment of the system is sitting on a 15 billion euro surplus (a surplus that has been accumulating for several years at this point), as the amount collected from that 11.3% is more than currently necessary to pay for everyone’s health care within the system. And where no one seems to feel a need to destroy the system so as to cut their ‘taxes,’ which is not how the mandatory 11.3 deduction is seen anyways – in part, of course, because that money does not actually go the government.

Welcome to Germany. (Yes, some not precisely trivial details have not been covered, such as private insurance for the wealthy – which has its own ‘Tücken’ for the unwary who confuse income with wealth.)

78 A Definite Beta Guy June 25, 2017 at 8:41 am

Healthcare is already, what, 17% of US GDP? Expansion is going to swallow up even more GDP and taxes will be a lot higher than 11.3%.

I think Tyler and the rest of us should be more concerned about slapping an extra 25-30% marginal tax on productive citizens, as opposed to worrying about the marginal tax rate on people who are barely capable of holding a job. Note that the argument “but you’ll save money on your healthcare” is irrelevant, because I’d be getting the healthcare anyways if I choose a poorer job….meaning my current high-wage job is facing the 25-30% marginal tax.

79 prior_test2 June 25, 2017 at 9:45 am

‘Healthcare is already, what, 17% of US GDP? Expansion is going to swallow up even more GDP and taxes will be a lot higher than 11.3%.’

Yep, the America health care system is totally and truly screwed up. That was just a comparison to a functioning system, where the percentage take from someone’s salary was almost identical, and yet completely inadequate to provide the sort of health care that Germans expect.

‘slapping an extra 25-30% marginal tax on productive citizens’

This is crazy, by the way – just have essentially everyone who earns money pay a standard rate, then simply take that amount as the amount available to spend on health care that year for everyone (in the German cases, that would be the ‘Kranenkassen’ representing the vast majority of health care users). Again, Germany’s health care system is private – none of this involves the sort of massive government intervention that ‘single payer’ apparently represents. That term single payer is a bit distorting, to be honest – in the German case, the Krankenkassen function as a block that must meet the same care requirements for their members, and thus can be seen as a single payer, as they use their market power in a pretty much a take it or leave it approach – they decide what they pay for, and how much, and almost magically, the German health care system seems to be able to keep itself a profitable business in the main.

Admittedly, the system has its flaws – for example, it covers essentially everyone, which seems absolutely unacceptable to many American as a matter of principle.

80 JonFraz June 26, 2017 at 4:03 pm

Re: I think Tyler and the rest of us should be more concerned about slapping an extra 25-30% marginal tax on productive citizens

Where are you pulling those numbers from? You just said “healthcare is 17% of US GDP”? So that tax would be 17% (if everything is paid for out of it– no deductible or copays). Moreover for a great many people– all of us with health insurance through our jobs– would (in principle, maybe even required by law) see an increase in our pay checks since the money, implicit and explicit, being lost from out salaries to those insurance premiums, would be added to them instead. For a fairly large fraction of people there would be a net increase as a result.

81 TMC June 25, 2017 at 12:32 pm

“As is a tradition in Germany, another reform came into law officially on January 1, 2015 the name is another jaw-breaker: Gesetz zur Weiterentwicklung der Finanzstruktur und der Qualität in der gesetzlichen Krankenversicherung. A number of measures to supposedly increase competition among the health insurance funds and to reduce bureaucracy were introduced: The premiums for members of the German public health system were reduced from 15.5% to 14.6% of income which at first sounds attractive. The Krankenkassen are still allowed to demand a supplemental payment to meet their costs and as the median declared percentage amount is approximately 1.1% in 2017 this means that the total is 15.7% with the majority of Kassen. ”

http://www.howtogermany.com/pages/healthinsurance.html

So Germany is at 15.7% vs 17%, and having the same inflation problems as we do. Given US GDP/person is 19% higher than Germany’s, we can afford our healthcare easier than you can yours. So maybe no lessons learned her.

82 John de Rivaz June 25, 2017 at 5:14 am

I am in the UK, where healthcare is paid for our of general taxation, and the government elected by “first past the post” democracy.

The problems here are that both the main parties try to get elected on platforms of keeping general taxation low, and collecting their funds from minorities with lots of money and few votes. The difficulty with this is that it is well known that taking money from people modifies their behaviour. For example, fine people for exceeding the speed limit on the roads, and the majority of people keep within the speed limit. As traffic density increases, it become physically impossible for anyone to exceed the speed limit. There is no practical difference between a fine and a tax, so if the government singles people out who work hard or otherwise do well, then many will intentionally do less well, and the tax take self adjusts downwards.

The result of all this is that the tax funded health service is understaffed and under-resourced. This has a cumulative effect in that sick people are stressed and as a consequence get sicker during the period between diagnosis and treatment, which costs even more to resolve. In the UK, one small party seems to have noticed this, but the electorate find the idea of making rich minorities pay more appealing.

Another problem is the fact that testing apparently healthy people with ever more sensitive tests produces diagnoses that generate stress and anxiety, and not all of the conditions are treatable. Testing is justified by the fact that some instances of serious disease which is treatable if found early are discovered. The brutal economic facts are less clear cut.

The problems with insurance is that it is not a level self help club. People can pay reduced premiums if they can prove that the probability of a claim is low. All well and good, but this makes every policy just an “invitation to sue in a court of law”. News media often say that the person “was not insured”. What this may well mean is that they paid a premium but did not meet the conditions. Whereas “X was not insured” may be factually correct, it gives a false impression that he did not bother to try to get insured.

I don’t claim to have any real answers, but just write this to point out the problems that those in charge are facing.

83 prior_test2 June 25, 2017 at 6:10 am

‘and collecting their funds from minorities with lots of money and few votes.’

The whole UK VAT framework would seem to be contradict this.

‘The difficulty with this is that it is well known that taking money from people modifies their behaviour.’

The whole EU wide VAT framework would seem to be contradict this, in the main.

‘The result of all this is that the tax funded health service is understaffed and under-resourced.’

Even though there was this certain promise of providing £350m-a-week extra spending for the NHS after the UK took back control. Oh wait, after the Brexit referendum, that promise was rescinded – https://www.theguardian.com/politics/2016/sep/10/brexit-camp-abandons-350-million-pound-nhs-pledge

The problem with much of such discussions is that just like the U.S. is an outlier at one extreme, the UK is pretty much an outlier at the other extreme. And yet, since both nations can understand each other’s version of English, and there is a certain now generations long ideological congruence between those who oppose health care for all citizens in terms of being called conservative, comparisons involving these two extremes end up being less than enlightening.

84 Sean June 25, 2017 at 9:30 am

What’s the comparison over all alternatives. I

85 Sean June 25, 2017 at 9:30 am

What’s the comparison over all alternatives.

86 bill June 25, 2017 at 1:05 pm

The most important idea here is that we must change Chargemaster prices. The uninsured should pay the same prices as the insured. This is just a game to force us to have to buy insurance. More than once, we would have had to pay 4x to 9x what the insurance company had to pay. The only reason I buy insurance is to get those prices. I’d much rather pay cash directly and avoid all the insurance bureaucracy but that’s just not tenable.

87 Troll Me June 25, 2017 at 10:42 pm

It’s almost like America insists on doing things the stupid way when it comes to government and health.

The additional premiums should be at a higher percentage of the amount above a threshold.

For example, pay 5% on income between 20-30k and 8% between 30-40k and 10% between 40-50k. The amounts below each threshold should be calculated at the rate applicable to them and the percentage above the threshold should only be applicable on the amount over the thresholds.

It almost reads like an advertisement for “government=dumb” and “get the government out of health”.

In the meantime, enjoy your collective trillion dollar annual premium (additional amounts comparing GDP shares of health expenditures) which obtains worse average results in exchange for the very numerous idiocies of US health markets.

88 Daniel Weber June 27, 2017 at 1:30 pm

Stop making additional marginal taxes.

There should be one place with marginal taxes: the federal tax code.

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