Businessman trying to solve a maze questions

No, Obamacare’s Complexity Is Not a Good Thing

Obamacare by from The Weekly Standard, May 29, 2015

In their review of House Budget Committee chairman Tom Price’s newly released Obamacare alternative, Bloomberg’s editors strain to make a virtue out of Obamacare’s maddening complexity. Whereas no one knows until tax time the following year what, if anything, they will be getting in subsidies under Obamacare, Price’s alternative offers tax credits in three simple amounts. It also lets Americans quickly see what they will be getting immediately, and does not compel them to buy health insurance against their will. Bloomberg’s editors object to such refreshing simplicity, writing, “The reason Obamacare subsidies are complicated is so people can get affordable coverage, whatever their age, at the lowest government cost. Because premiums vary enormously — by age, type of coverage and geography — that necessarily entails something more complex and flexible than three numbers set by Congress.”

These “three numbers” refer to the value of Price’s non-income-tested, refundable tax credits for those who purchase health insurance on the private market. Those aged 18 to 34 years old would receive a tax credit worth $1,200; those 35 to 49 years old would receive $2,100; and those 50 to 64 would receive $3,000. Parents, meanwhile, would get a $900 tax credit for each child.These tax credits would bring more equality to the tax code without upsetting the health care of the 169 million Americans who receive employer-based coverage.

Here’s a specific example of how Price’s plan would work: A 34-year-old single woman making $50,000 a year is paying a 25% marginal tax rate (assuming she does not itemize). With an employer-provided health-care plan valued at $5,000, she therefore gets an income-tax break of $1250. Under Obamacare, if she buys a $5,000 plan on the private market, she gets nothing—no tax break and no subsidy since she is too young and too wealthy under Obamacare’s byzantine formula. But under the Price proposal, she would receive a $1200 tax cut in the form of a tax credit to buy the insurance of her choice, bringing her into near-tax-parity with a similar person getting employer-based coverage.

Contrary to Bloomberg’s argument, the Price bill’s simplicity is not a flaw; it’s a feature. To illustrate how well Obamacare’s maddening complexity works, let us take the case of a couple, each partner aged 52 years old, living in Milwaukee and making $62,900 a year. Under Obamacare, this couple receives $6,200 a year in subsidies that go directly to their health insurer to help pay for their coverage. It is money they never actually see, but whether they know it or not, they could be on the hook for it. Because Obamacare’s formula has income cliffs built in that create huge disincentives to work, this couple will lose all of their $6,200 in Obamacare subsidies if their income increases $100 to $63,000 a year. Think of the predicament facing that couple when they realize they need to stop working in the final weeks of December to make sure they do not have to pay the government back $6,200 come tax time. And if they don’t realize it (as Bloomberg admits was the case for two thirds of Americans receiving subsidies last year, citing an H&R Block report) they will have even more complicated decisions to make on April 15th as they try to figure out how to pay back the $6,200 they just learned that they owe Uncle Sam, courtesy of Obamacare.

Under the simplicity of the Price legislation, which already has 67 House cosponsors, the same couple would receive $6,000 in tax credits without the year-end fear of stepping out of their government-created income box. Unlike under Obamacare, they could use their $6,000 tax credit on health coverage tailored to their specific health needs, rather than having to buy Obamacare’s mandated coverage of items irrelevant to these 52-year-olds’ lives, like pediatric dental care and prenatal care. Obamacare’s approach to health care is akin to this childless couple going into a car dealership and being told they have to buy a fully loaded luxury SUV with preinstalled car seats and Frozen playing on a loop on the backseat entertainment system. Price’s approach would let them pick the car they really want. And if they bought insurance for less than $6,000, they could put their savings in a health savings account, which they could not do under Obamacare.

There is a reason that political candidates do not run on slogans of making government more “complex.” People demand simplicity in how something affects their lives. The underlying complexity of an iWatch is acceptable to the consumer so long as the interface is simple and those who build the watch know what they are doing. Conversely, the complexity of Obamacare remains unacceptable to Americans because it has resulted in unexplained lost coverage, restricted access to long-familiar doctors, and provided unexpected year-end bills, among its other negative outcomes. What is more, its interface with the public has been anything but simple, leaving millions frustrated and worse off than before Obamacare.

With Real Clear Politics showing that all 183 Obamacare polls taken during President Obama’s second term have found it to be unpopular, supporters of the law are understandably at their wits’ end. But praising the 2,400-page legislation for its indecipherable complexity only further highlights the need for full repeal followed by real, sensible, understandable reform of the sort that Dr. Price has advanced.

Brian Blake is managing director of the 2017 Project, which is working to advance a conservative reform agenda, including a winning alternative to Obamacare.

© 2015 Weekly Standard LLC. Reprinted with permission.