‘Affordable’ care depends on the size of your subsidy

What does the word “affordable” in the Affordable Care Act mean? Many people might assume it means Obamacare will make health coverage less expensive. That’s certainly the impression President Obama gave when he promised his national health care scheme would “cut the average family’s premium by about $2,500 per year.”

But Obama and the Democrats who passed the law didn’t really mean that premiums will go down. What they meant was that premiums might well go up, but the government will give some Americans money with which they can pay the higher premiums and still come out ahead.

For some people that will be true. For others, not so much. Unlike Social Security and Medicare, Obamacare is a means-tested entitlement program. It will give low-income Americans substantial taxpayer-paid subsidies with which to purchase insurance. People who make a bit more will receive smaller subsidies, and those above a certain income level will receive no subsidies at all. If they have to purchase higher-priced coverage, that’s their problem.

The pro-reform Kaiser Family Foundation has created on its website a subsidy calculator into which anyone can enter his location, income and family size to come up with an estimate of how big, or small, his Obamacare subsidy will be.

Start, for example, with a low-income family of four living near St. Louis, Mo., with $35,325 in household income (that is 150 percent of the federal poverty rate for a family that size). A Silver Plan policy for the family would have an annual premium of $8,088, according to Kaiser. But the family would receive a taxpayer-paid subsidy of $6,675, which means the family would pay, with its own money, just $1,413 for the coverage. (Kaiser chose the Silver Plan for the calculator because that is the plan that determines the size of Obamacare subsidies.)

Of course, most families of four in Missouri make more than $35,325 a year. The 2012 Census Bureau estimated that the median income for a Missouri family of four was $72,230 — meaning that half the state’s families of four are below that level and half are above.

For a family that is right on the median income, $72,230, the annual premium would still be $8,088, but the taxpayer-paid subsidy would fall to $1,226, meaning the family would pay, with its own money, $6,862 for the coverage. Is that a better deal than they have now? Maybe yes, and maybe no. In any event, they won’t save as much as the president promised.

Finally, choose a higher income level, but one at which there are still a lot of people. For a family of four with an income of $85,000, the premium remains $8,088 but the subsidy shrinks to just $13 a year, meaning the family will pay, with its own money, $8,075 for coverage. So that family will technically receive help with its health care costs — but not really.

For families above that level, and there are a lot of them, the subsidy will be $0. The bottom line is, when — or if — large numbers of people actually begin purchasing coverage on the Obamacare exchanges, many will find the much-touted subsidies aren’t for them.

And that will be the key question of Obamacare: Will it help more people than it hurts, or will it hurt more people than it helps? If the answer is the former, Obamacare might become a permanent feature of American life. If the answer is the latter, it will be politically unsustainable and will fail.

The administration and its defenders might argue that the numbers will be a bit different, that some premiums could be lower or subsidies higher. But the basics are the same: Obamacare is all about subsidies, and “affordable” means the government is paying for all or part of it.

That is why the administration and its defenders are urging Democrats nervous about the disastrous Obamacare rollout to just wait for the subsidies to arrive. When that happens, they say, the Obamacare controversy will subside.

Whatever the case, the cost to taxpayers will be enormous. Obamacare limits the percentage of income that subsidy-receiving Americans have to spend on health coverage. Those at the top of the subsidy ladder are obligated to spend no more than 9.5 percent of their income on premiums. Those lower down pay a lower percentage — for that family of four with $35,325 in annual income, it would be 4 percent.

The percentage of income that people pay doesn’t change if the price of coverage goes up. So if the $8,088 premium becomes a $10,000 premium, or a $12,000 premium, the subsidy recipient doesn’t have to pay more. It’s the subsidy — paid for by taxpayers — that goes up.

So the “affordable” in Affordable Care Act doesn’t really mean affordable at all.

© 2013, United Feature Syndicate Inc.