Obamacare

ObamaCare: Work More, Get Less?

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In The Wall Street Journal, Stanford University's Daniel Kessler explains how ObamaCare's health insurance subsidy structure creates cut off points in family income that discourage work: 

Starting in 2014, subsidies will be available to families with incomes between 134% and 400% of the federal poverty line. (Families earning less than 134% of poverty are eligible for Medicaid.) For example, a family of four headed by a 55-year-old earning $31,389 in 2014 dollars (134% of the federal poverty line) in a high-cost area will get a subsidy of $22,740. This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799. But a family earning $1 more—$93,700—gets no subsidy.

Economists call large, discontinuous changes in program benefits like this "notches." Although notches might be administratively convenient, they have terrible incentive effects. As Prof. Raj Chetty of Harvard points out in a recent National Bureau of Economic Research working paper, prior research on notches show that they induce sharp reductions in labor supply.

Consider a wife in a family with $90,000 in income. If she were to earn an additional $3,700, her family would lose the insurance subsidy and be more than $10,000 poorer. In addition, she would also pay more in income and Social Security taxes. Taken together, these policies impose a substantial punishment on work effort.

For families in danger of crossing the threshold of a notch, the deal ObamaCare offers is depressingly straightforward: Work more, get less. Most people, if they're thinking about it, won't take that deal. And so families will avoid work in order to keep their benefits. Meanwhile, other families may notice those benefits: 

Notches also lead to unfairness. The principle that families of the same size with similar incomes should be treated similarly by tax law and transfer programs has deep philosophical roots and appeals to basic notions of equity. The notch turns this principle on its head. Next-door neighbors with virtually identical circumstances could receive very different levels of government assistance, depending on which side of the notch they happen to fall. This feature will justifiably increase public cynicism about the law and government in general.

I continue to think that the inherent unfairness in the subsidy structure is going to be a serious political problem. Two essentially identical families—living on the same block, with the same family size, and yearly income that varies by less than a few thousand dollars—will nonetheless receive dramatically different benefits under the law. It won't take long before the complaints reach Congress. When they do, well, I don't foresee many members of Congress arguing that the situation should be remedied by taking the subsidies away from everyone. 

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115 responses to “ObamaCare: Work More, Get Less?

  1. You mean there will be unintended consequences from this law? And they’re going to be negative?

    *shocked*

  2. This feature will justifiably increase public cynicism about the law and government in general.

    Bully!

  3. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799.

    Nice to know that we are redistributing wealth to all of those poor families, who earn a meager $93K per year. How they manage to survive such poverty, is beyond me.

    1. And the fact that liberals have the audacity to say with a straightface that all this can be funded by the handful of the population making over $250k per annum is the most obvious lie ever uttered.

      1. ever notice that it’s every program that can be funded that way. they keep going back that same well.

      2. Yes. You are right. The tax increases should be part of the overall solution – not the sole content of the solution. Also, it is equally as ignorant to say the any solution should contain NO tax increases at all.

        1. Solution to what? Overspending?

          If you don’t drastically expand the welfare rolls (including people making 90k), then you won’t need tax increases.

        2. Have you not noticed that spending always rises to meet the tax level (or beyond)?

          I am just pragmatic enough to be willing to accept some tax increase (for myself) if it was in combination with an ironclad guaranteed balanced budget immediately and forever after. But I am also pragmatic enough to know that no such “guarantee” is worth anything.

          We’ve tried all sorts of tricks, and none have worked; spending rises regardless of party in power or politicians in power. Since government has proven itself incapable of a balanced budget, the only option left is radical tax cuts.

          1. Guaranteed? With Gov’t? For sure, they are guaranteed to raise taxes – even if it’s not obvious. When it’s too hard to raise taxes, they just print more money and create inflation – same exact effect, but requires no political process. Buy gas or food lately?

          2. The only way I would ever be willing to kick up and extra penny, would be if the feds put in the hard work, and found ways to get value out of the money they already get.

            Scrap a department or 12, find ways to do more with less employees, and out source whats left. Once that happens, then we can talk about increasing the revenue stream.

  4. How they manage to survive such poverty, is beyond me.

    The subsidies, duh!

  5. You know the whole “dont assume malice when incompetence could explain” thing…yeah, not doing it in this case. Notches are so freakin easy to avoid that malice is the only logical choice.

    Or, to quote one of the iron laws:
    Forseeable Consequences arent Unintended.

  6. We have got to come up with a way to permanently keep these leeches off our medical resources. Of course they will quit their jobs or earn less just so they can do something completely un-America – taking their sick kid to the doctor. Stop The Madness!

    1. Like, why would we ever expect people to pay for their own healthcare?

      1. The next thing you know, we’ll expect people to pay for their own food, home, and car. Those evil libertarians. Why do they hate people?

        1. The next thing you know, we’ll expect people to pay for their own food, home, and car.

          Death in the streets!! ROADZZ!! SOMALIA!!1111!!

    2. What???

      “Our medical resources?” Are you suggesting all “medical resources” are collectively owned, comrade?

      “Medical resources” are not naturally occurring – they are a product of somebody’s hard work and intellect. Unless you wish to poison the golden goose, you have to pay a fair market price for these “resources.” That requires a free market – not Obamacare.

      1. Just make all medial professionals government workers and cap their compensation. I’m sure they’ll go for it and the quality of care won’t be lessened.

        1. You are correct. If those moochers knew they didn’t have the money to pay their healthcare bill, they should have never gotten sick in the first place! Same thing goes for those Commies who complain about the price of gas.

          1. But Comrade, gas prices must be high to prevent American drivers from raping mother earth and to encourage them to accept high speed rail.

            1. In Russia, mother earth rapes you!

              1. Yakov – I thought you were dead? Or what that just your career?

                1. That’s not the first thing you’ve gotten wrong in this thread…

    3. How about treating everyone fairly? Did you even read what was posted?

  7. Like every awful feature of Obamacare, this is a feature, not a bug. The law is designed to raise outcry from damn near everyone, because it is just an incremental step towards single-payer. The pols already have the answer for this issue, once the unsubsidized neighbors start to complain: “well, gosh, we tried real hard to design a better system, we failed, so the only thing left is single payer.”

    Another “unintended” consequence of these nothces will be a massive shift away from cash compensation, towards untaxed benefits. Why would any sane person accept a salary just above a notch, when it is far more advantageous to limit cash comp to one less dollar, and make up the difference in various forms of untaxed perks?

    1. “well, gosh, we tried real hard to design a better system, we failed, so the only thing left is single payer.”

      That, or blame the Republicans.

      1. “We’d have designed a better, single payer, system were it not for those meddling Republicans.”

        Two birds, one stone.

  8. Don’t worry, unions have a loophole

  9. Agree 100%. Only those of us with the funds have a divine right to proper medical care, food, shelter, etc.. Those without should just shut up and die off, just as our creator and founding fathers intended. If you can’t pay, you can’t play!

    1. And only those of us without sufficient funds have a divine right to have them supplied at the labor and expense of others. Those who produce should just shut and get out their checkbooks. If you can’t pay, you can force someone else to do it!

    2. Do you honestly think that people would be starving to death in the streets if the government wasn’t doling out food, medical care, shelter, etc.? Ever heard of private charities? They tend to be much more efficient in helping people, and they don’t hold a gun to my head to finance themselves. I assume that you put your money wear your mouth is and donate all of your income over the poverty line to the government, right?

    3. I wish you would fucking die off, troll.

    4. If you can’t pay, you can’t play!

      You gotta pay the troll toll to get in!

      1. Dayman! Enemy of the Night…man! Champion of the sun!

        1. A master of karate and friendship for everyone!

  10. I would like to say those without healthcare insurance have a right to live, but living off the land is now illegal. Regardless, their land was probably foreclosed upon anyway, so it doesn’t matter for them, anyway.

    I’m with you people. Those of us with the resources got them through intellect and hard work. Those without are all lazy moochers and should not be allowed to reproduce. This is why their sick children should NOT be treated. That would be evil.

    1. Is retarded.

      1. Confound your lousy toll, troll!

    2. You probably feel pretty smug about yourself right now, but what you’re doing is similar to going on a left-leaning website and making snide remarks about the USSR. Maybe you’d be more comfortable in the comments section of a major newspaper?

      1. This is NOT the forum for those disagreeing with the Libertarian view. It’s about this specific issue. It has already been established that Obamacare is wrong and will bankrupt our country. We stand for taking responsibility for yourself and not blaming successful people for your problems.

        1. Yeah, ok, I’m not really sure how that’s different from what I said, but ok nonetheless…

    3. I would like to say those without healthcare insurance have a right to live,

      Indeed they do. And I daresay you won’t find a single opponent of ObamaCare who thinks that the government should deprive them of their life.

      Which makes me wonder what your point is.

      1. Don’t you get it? The right to life = free CT scans, chemotherapy, double bypass surgery, and, lord willing, free abortions, transgender surgery, Viagra, and Ritalin. To name but a few, of course.

      2. Directly depriving people of their lives is not something people will ever admit they support. However, when a large percent of the population has no access to healthcare, those who support repeal need to understand that a certain number of kids with pre-existing conditions (covered now), will be denied treatment for that condition. Which, in turn, leads to deaths of a certain amount of those kids.

        But, it should be made clear that this is NOT the fault of anyone else expect for those parents who were unable to afford the treatment via the free market. Those with resources are not legally or morally obligated to funds this – and charities are not equipped to handle this either.

        It’s just our creator’s method to natural selection. It is what it is.

        1. a certain number of kids with pre-existing conditions (covered now), will be denied treatment for that condition.

          They might be denied insurance coverage for those conditions.

          1. They WILL be denied. Insurance companies are not shy about following free market principles – which is how they keep costs down. When a pre-existing condition is “suspected”, it is noted in the Explanation of Benefits and the burden of proof is on the insured.

            Their option, then, is to go without treatment and medication – then when a life-threatening situation occurs, go to a city hospital. Then – claim bankruptcy.

            This is where the free market fails, again, because these moochers just made the producers and job-creators pay the bill in full!

            How can we discourage this behavior – do we need personal backruptcy reform so that medical bills are not dischargable?

            1. Parody troll gets serious all of the sudden.

              “Their option, then, is to go without treatment and medication – then when a life-threatening situation occurs, go to a city hospital. Then – claim bankruptcy.”

              Are you aware of such things as academic and charity hospitals? Have you heard of financial screenings, not to mention the vast welfare programs that existed before Obamacare was passed?

            2. Why do they have to go to a city hospital? Various religious groups provide hospital care, offering pro rated fees and just plain charity care to those who can’t afford it.

            3. They may be denied insurance coverage. That is not the same thing as being denied treatment.

              1. He’s already ignored that point once.

                1. I’ll answer it again. Treatment = meds. Meds – Can’t afford without insurance – period – even if you get a doc to prescribe. Ever ask the full retail price of a month’s worth of heart medication? $300+

                  So, denial of coverage = denial of treatment (because they can’t afford it).

                  Back to the point. Those with the funds are NOT morally or legally obligated to pick up the tab for someone like this and gov’t should NOT force this.

                  Where is the confusion?

                  1. The “full” price is the beginning bargaining position of the drug companies. The health insurance companies then negotiate the sticker price down to the actual market price. Of course, the market is dysfunctional, so the market prices continue to skyrocket. Nothing you’ve said so far indicates to me that you have any awareness of the underlying problems, much less possible solutions.

                    1. The issue is, for individuals with a pay-go plan, that starting price is the finishing price. This is a key weakness of the current system and where those who are not part of a group or “exchange” get shut down.

                      So, we go one of two directions – Provide exchanges for individuals (Obamacare), provide a government option, or incent, via tax credits, or incent the insurance companies, via tax credits, to create their own private offerings to address this group (most efficient option by far).

                      Then, you can offer some premium assistance for those in temporary need, if you want.

                  2. How many folks who “can’t afford” that $300/month are paying $100 a month for cable, $75/month for a smart phone, same for high-speed internet, and $400/month for a nice car?

                    1. It’s about choices. If you choose to be jobless and without insurance, you shouldn’t buy those things.

                      If you do, and then you get sick, you shouldn’t whine and expect treatment. This problem corrects itself quite efficiently.

                      It’s about free will.

                    2. How dare you criticize how the downtrodden spend their disposable income. Just shut up and write the check!

        2. Seriously, do you sign over to the government every dime you make over the poverty line?

        3. No one has no access to healthcare in the US. Even if you have no insurance, anyone can find a doctor and pay cash or set up a payment plan (which is what my wife did before we were married and she got my insurance). And ERs must take all comers. There are also such things as charity hospitals and free clinics.
          Would I want to trade my heath care situation for that of a poor person with no insurance? Of course not. But it is not at all true that people without insurance have no access.

          1. We just need to face reality. Treatment should be available to those who can afford it. And, this is OK.

            Medicine always cost money. No insurance – no medicine. If you had a heart condition and no insurance, you will not get treatment until you have an attack. Then, you can go to the city ER and file bacnkruptcy soon thereafter. I guess that’s a treatment plan.

            But, a better plan is to make sure the job creators of this country are taken care of – then they will provide jobs and you can get coverage so you won’t need to worry about a condition becoming pre-existing.

            1. You are a strange and silly troll.

        4. “However, when a large percent of the population has no access to healthcare, ”

          Bullshit.

          1. 50M people/300M people = 17%. So, you’re right – it’s not really a large percentage. My apologies.

            1. Are you aware that the vast majority of those are young, healthy people or people between jobs?

              1. Does that even matter? If I don’t have the right to not provide their health insurance, do they have a right to refuse it? I guess the individual mandate solves this by forcing them to get insurance.

                1. Individual mandate will NEVER stand. People have the right not to insure themselves and their families. It doesn’t affect the rights of others. The mandate for car insurance is consitutional because you ARE affecting the rights of others when you drive on the same road as them.

                  People without the means to buy individual health insurance plans or health services directly, just need to stop whining, take care of the job-creators of this country, and get a job!

                  This will solve the unemployment problem – one way or the other – as well. Basically – get a job or die off. This is GOOD for society either way. Deal with it, liberals!

              2. more to the point:

                “does not currently have health insurance” != “no access to health care”

              3. Yes. I agree that those people shouldn’t seek care unless it’s a crisis. Preventative care should be available only to those who can afford it.

                But, there is at least a small minority that might have children or a spouse that will die due to a treatable condition that worsens – like diabetes or something like that.

                Again – patients are consumers. They should have options to shop around. And, they should only buy things they can afford.

                So, this is our creator’s law of natural selection at work. And, this is GOOD for society as a whole.

            2. 50M people/300M people = 17%.

              50M do not have health INSURANCE, nearly all by their won choice. But they ALL have ACCESS to health care on a pay-as-you-go (aka, normal business transaction) basis.

              You are a dishonest piece of shit.

              1. Perhaps if I said “Can’t afford pay-as-you-go-care”, would that make it right with you? If you buy services from a doctor without the Group Plan discount, it goes like this:

                – Routing exam – $140
                – Specialist – $280
                – Monthly supply of Crestor – $320
                – Angioplasty – $76,000

                Yes – It’s their own choice – that’s what I said. You should read before you decide to throw out offensive and personal words. I actually agree with you – Don’t play if you can’t pay.

                1. I actually agree with you

                  Yeah, but you do it in that trolling-pandering way that has everyone labeling you a troll.

                  Also, notice how nobody else has to defend the fact that they’re “agreeing”?

                  1. That’s useful troll to you, Mister!

        5. No, Christians are morally obligated to help. But my reading of the Bible is insufficient. Can you point me to the book and number where Jesus said the charitable are morally obligated to take, by force, from others who also have resources?

          1. Christians should help. But, the constitution bans a national religion. So, there is no crisis of conscience involved here. Yes, the law of natural selection applies to free markets. And, it’s OK to admit it. You still have the right to donate to charity – but that gets to be your choice – not the gov’t’s choice.

            1. Seriously, do you sign over to the government every dime you make over the poverty line?

          2. Luke 18:18-24
            [18] A certain ruler asked him, “Good teacher, what must I do to inherit eternal life?”

            [19] “Why do you call me good?” Jesus answered. “No one is good — except God alone. [20] You know the commandments: ‘Do not commit adultery, do not murder, do not steal, do not give false testimony, honor your father and mother.'”

            [21] “All these I have kept since I was a boy,” he said.

            [22] When Jesus heard this, he said to him, “You still lack one thing. Sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me.”

            [23] When he heard this, he became very sad, because he was a man of great wealth.

            [24] Then Jesus had Andrew and Peter beat the shit out of the rich young ruler and take his purseth and divided the spoils among the poor.

            1. I really need to sit down and read the whole bible some time. Sounds like one hell of a read!

              1. Talk about a preachy book! EVERYONE’s a sinner… except this guy.

    4. There is one very simple fact that an astonishing number of people seem to miss entirely: Shit’s not free.

      1. Well said. Like I said before, if you can’t pay, don’t play! If you want to suck off society, move to Europe – plenty of Nanny states there!

    5. Only thing missing is a areference to Somalia!!11!!1

      Try and do better next time.

    6. Such brilliant sarcasm.

      Let me try.

      All those rich greedy bastards should be shot!! Then we can take their money and give to it all away to the sick and the poor, especially the sick and poor children!! Yes, save the children!!

      What’s that you say about the “rich” earning their wealth and that it’s immoral to steal their heard-earned wealth?? What a bunch of BS!! Nobody earns their money – it’s all just luck and thievery, yeah thievery!! All those poor people are just victims of bad luck… and thievery!!

      1. I’ll top that:

        People of wealth=intelligence, hard working, successful, independent, deserve what they get

        People not of wealth=not so intelligent, lazy, defensive, don’t take accountability, dependent, deserve what they get

  11. I question whether this truly provides a disincentive to work. How many people are really going to be in a position where 1.) they’re on track to make somewhere between $90k and $93k; 2.) they are aware that earning an extra $3700 will cause them to lose a $10k subsidy; and 3.) they have a job where they can avoid making that extra $3700? I’m guessing the answer is quite small.

    That being said, it’s still a shitty plan and the person that makes $94k is getting dicked over (even more so than the rest of us).

    1. Probably more people than you think. For some it will be an overtime issue. Their base pay could be under the limit but overtime would put them over. They’ll skip the overtime.

      For others it could be the two-income versus one-income situation raised in the article. The primary wage earner doesn’t have to be right at the limit, they could be in the mid 80’s and find out that it’s just not worth it for the secondary earner to work at all.

      Of course some would say these are features, not bugs. If everyone refuses overtime, their employers might hire more people. If secondary income earners drop out of the labor market entirely, they open up jobs that might be a move up for a low-income primary wage earner (or for an unemployed worker).

      Not that I’d ever accuse the government of social engineering or anything like that….

      1. Of course some would say these are features, not bugs. If everyone refuses overtime, their employers might hire more people.

        After cutting the salaries of current employees. MISSION ACCOMPLISHED!

        1. Thus, the system works! Is that by accident, or did someone in gov’t really think this through?

        2. SPREAD THE WEALTH!
          EVERYONE WINS.

          1. Commie troll!

    2. Since these decisions will cost them somewhere in five figures, I’m guessing that people will wise up really quick.

      1. Do you think people can plan their families’ illnesses this well, so as to game the system?

      2. Do you think people can plan their families’ illnesses this well, so as to game the system?

        1. Who’s talking about planning illnesses? We’re talking about planning incomes.

          1. This is really nothing new. People with kids in college have been engineering their incomes this way for years to qualify for financial aid.

            Same thing with the child tax credit. At some point, you make an extra $100 and your tax bill goes up $1000 as a result. But, people really aren’t successful when they try to play this game.

            1. “Nothing new” is not a great endorsement.

            2. child tax credit is only 1000 per child and is phased out by income to avoid the notches issue.

              1. Then, this issue is really easy to fix.

      3. Perhaps… I still think that, on the long list of reasons why ObamaCare sucks, a disincentive to work doesn’t crack the top five.

        1. I disagree – this is a big deal.

          What are the top five that make the status quo better than Obamacare?

          1. Just off the top of my head…

            1. It’ll raise premiums; 2. It’ll increase the national debt; 3. It’ll disincentivize medical R&D; 4. It fucks over young adults who aren’t making much money; 5. It fucks over small businesses.

            1. Er, I guess it should be “It’ll raise COSTS” rather than “premiums,” since that’s what really matters.

              1. Good list. What about the most important piece – legislating collectivism over individual rights.

                People have a right to do things other people think are stupid as long as it doesn’t affect the right of others – like not buying health insurance.

                1. I was thinking more from a utilitarian/cost-benefit perspective (given the economic nature of this thread). To me the moral objection to the government forcing you to participate doesn’t belong on the list since, since if you feel that way (which I do, for the record) then your analysis stops there and everything else is moot.

                  1. Fuck, I can’t type today.

                    1. Fuck, I can’t type today.

                      Deep breaths.

    3. 1) the band of income where this is an issue isn’t that small. In the author’s example, the affected band is $83,001 to $93,999. The band is likely larger once income, payroll and state taxes are figured in.

      2) people in lower income ranges often have hourly jobs where they can avoid taking certain hours, or can avoid taking overtime.

      3) the dual income situation, where one earner makes say $65,000 and the other makes $30,000 is probably pretty prevalent. The second earner may just quit once they realize that, after factoring in the return from working after taxes, loss of subsidy, loss of other tax breaks, and other costs of working, they’re at nearly the same place as before.

  12. I wonder how this is going to play out in terms of employer provided health insurance. I assume that people who get insurance from work would not be eligible for the subsidy. Seems like this would also remove the incentive for employers to provide a health benefit.

    1. That is why the job creators of this country are all seeking waivers!

    2. Probably will incentivize some employers to drop coverage, but there is a penalty for employers of a certain size to drop, and tax breaks for really small business to continue. It will probably be a business by business decision. I’d imagine that businesses with a workforce of mostly low wage employees that provide insurance now will drop, pay the penalty, and maybe give the employees a bit of a raise to justify the change. If you employee a bunch of higher wage employees, you probably won’t be able to do that.

  13. WORST. PRESIDENT. EVER.

    1. The best was…..

      …and why?

  14. Trolls on this subject are especially irritating. I guess it shows the weakness of arguments in favor of Obamacare. All they have is “social darwinism” and “you guys hate poor people, right?”.

    1. You are correct. They need to stop using that term. It was a liberal hate-term from the 19th century. We need to repeal Obama care right now and eliminate other obstacles for businesses. This gives free markets back to the job creators. When they are freed up and provided certainty to do what they do best, everyone will have a job and this problem will heal itself without bankrupting the country.

  15. Maybe social conservative Republicans shouldn’t complain too much about Obamacare. These notches and subsidies seem designed to get one parent (usually the wife) in two earner households to quit working and stay at home, especially where the husband makes most of the income and the wife is just supplementing. For a lot families, once you factor in the taxes on the additional wages, loss of the insurance subsidy, loss of other tax benefits as income rises (e..g. child tax credit), and the additional costs of working (child care, transportation, work clothes, etc.), it’s a no-brainer for one earner to quit.

  16. FYI to the new brand of trolls: it’s not trolling if you repeat what your audience already believes.

    “Hey, these libertarian ideas ARE the best solutions to the problems facing the nation.”

    Yeah, that’s not trolling here. Maybe over at Fark, or some at some staunch Dem/Repub site.

    No points for effort either.

  17. This already happens with things like Medicaid, Earned Income Credit( which encourages work up to a certain point), and college financial aid. The existing subsidies may not be as significant but they are pretty substantial at certain income levels.

    If you can’t make a shitload of money ( the amount at which none of these expenses are a consideration), you are almost better off not working at all or purposely underearning.

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