Next week, the Supreme Court will hear a case that threatens to ax the subsidies millions of Americans receive for health insurance purchased on Obamacare’s federally run exchanges. And a sizable chunk of the population seems to be cheering for exactly that result.
First, though, perhaps we should all look in the mirror and consider how much in health subsidies we’re milking from the government ourselves.
In a survey this month by YouGov and the Economist, Americans were asked whether they agree that the federal government cannot provide subsidies to low-income people who purchase insurance policies through the federally run health-insurance marketplace. About a quarter said yes, with the oldest Americans leading the way; about a third of respondents over age 65 agreed that such subsidies should be eliminated.
One possible reason for this response pattern: America’s senior citizens seem to (wrongly) believe that they have paid for their own health care and that therefore others should, too.
In that same YouGov/Economist poll, respondents were asked whether they personally receive a government subsidy to help them pay for health insurance. The overwhelming majority — 85 percent — said no. The age group most likely to say this? Again, those over age 65, 93 percent of whom insisted they do not receive any such subsidies.
This is astounding, given that the lion’s share of people in this cohort receive Medicare. Despite all the mockery that oblivious cries of “Keep your government hands off my Medicare!” generated several years ago, older Americans still don’t seem to understand that Medicare is not only the government’s largest health-care program but also one that involves transferring lots of money away from everyone else and toward them — i.e., a subsidy.
Maybe the confusion stems from the fact that Medicare recipients have paid Medicare taxes. Every time I mention Medicare in a column, I’m inundated with irate e-mails proclaiming that seniors “paid for it fair and square” and are therefore not receiving a handout. These claims overlook the laws of arithmetic. As estimates from the Urban Institute show, the amount retirees receive in Medicare benefits usually comes to several multiples of what they paid into the system. This is true even after accounting for inflation, Medicare premiums and the expected rate of return, had workers instead invested all the money they paid in Medicare taxes.
For example, a single male who earned an average wage, was employed every year from age 22 to 64 and turned 65 this year would have paid about $70,000 into the Medicare system, in inflation-adjusted terms. Sounds like a lot, right? But bear in mind that he should expect to receive about $197,000 in Medicare benefits. A two-earner couple of the same age, both of whom also worked every year since age 22 at the average wage, would have paid in $141,000 to get some $427,000 in benefits.
To be fair, of course, nearly everyone answering that poll question about health subsidies got the answer wrong, not just retirement-age folks. That’s because most people who have health insurance receive some sort of direct or indirect subsidy, whether they realize it or not.
There are the 9 million leeches who receive subsidies through the Obamacare exchanges, yes, and the nearly70 million moochers who use Medicaid or the Children’s Health Insurance Program, or CHIP, benefits. But the largest group of Americans who benefit from government health-care subsidies — without often acknowledging it — are those who receive employer-sponsored insurance.
Like me, about 158 million Americans receive insurance through employers. The exclusion from workers’ taxable income of employer-sponsored health insurance costs the federal government about $250 billion each year. Why? Your employer gets to deduct the costs of compensation provided to you in exchange for your services, whether it’s salary, bonuses, health-care costs or even a BMW. But while the value of that salary, bonus and Beemer are all taxable to you, the tax code explicitly lets you ignore the value of those health-care benefits when calculating how much you owe Uncle Sam in payroll and income taxes. And under certain circumstances, you get to pay for your own share of your employer-sponsored health insurance premiums with pre-tax dollars, too.
These kinds of little-noticed subsidies are part of what Cornell professor Suzanne Mettler has memorably dubbed the “submerged state.” You see, we Americans aren’t trying to be hypocrites when we proclaim handouts-for-me-but-not-for-thee. We just often don’t realize we’re getting handouts in the first place.
Read more on this topic: