A key piece of the American Health Care Act is changing the ACA’s income-based subsidies to a blend of income- and age-based tax credits. For consumers under the income-eligibility threshold, this essentially creates a health care “minimum income.”
The term “minimum income” has been used in more and more policy circles in recent years. What is it? A minimum income is a type of welfare program intended to reduce poverty by providing all citizens with a liveable income.
It might sound a bit socialist, but the minimum income approach actually has some Founding Father and conservative credibility. Thomas Paine was an advocate, calling it a “citizen’s dividend,” which he believed was owed to people for their loss of land access through the creation of property rights.
In his essay “Agrarian Justice,” Paine argued people who own land owe the community, especially non-land owners, for their loss of access to formerly public property where they may have previously hunted or fished to be able to eat. He used this to justify an argument for a tax funding a minimum income of £15 per year to every person age 21 or older.
The economist Milton Friedman, advisor to Ronald Reagan and Margaret Thatcher, was also an advocate for the minimum income, which he called a negative income tax. A free market capitalist, Friedman thought the minimum income would be more efficient than than existing programs like Social Security or food stamps. He also argued that it would end the “welfare trap,” where low-wage work is not more beneficial than safety net programs, disincentivizing recipients to get off of government assistance.
Many who are initially against this idea begin thinking about it differently when understanding it could replace all other government assistance. Instead of only people under a certain income getting government assistance, everyone just gets a flat payment.
This seems to be the approach Republicans are taking when it comes to health care, though not as purely as Friedman or Paine might have liked. The Republican plan does integrate income-based eligibility, meaning only individuals making less than $75,000 per year or couples making less than $150,000 per year could receive this health care “minimum income.”
For consumers under these income thresholds, the AHCA’s tax credits would not vary by consumer. They would not take regional cost differences for insurance into consideration, nor would it give lower-income individuals more than those right under the $75,000 threshold. This is different than the ACA’s subsidies, which did take these things into account. Instead, the AHCA would simply create the following annual health care “minimum incomes”:
•$2,000 for consumers under 30
•$2,500 for consumers between 30 and 40
•$3,000 for consumers between 40 and 50
•$3,500 for consumers between 50 and 60
•$4,000 for consumers over 60
Instead of attempting to offer more support to lower-income Americans, age-based credits would create an across-the-board benefit for everyone under the income threshold. The credits would only be accessible by those with individual plans, meaning those with employer coverage, Medicaid, or Medicare benefits would not be eligible.
Like minimum income supporters, advocates of the age-based tax credit say they are simpler to execute than income-based subsidies. However, critics say the program will lead to reduced assistance for those who need it most. Under an age-based system, a person making $74,000 and living in Illinois would receive the same help as someone making $25,000 and living in Alaska, where insurance prices are much higher.
Further, while age is often correlated with health status, it isn’t always. Under an age-based system, a healthy 50-year-old would receive more than twice as much assistance as a 25-year-old with cancer, even though the 25-year-old would likely need a more comprehensive and expensive health plan than the 50-year-old.
Even so, a minimum health care income would be an novel approach to solving health care unaffordability. Taken even further, one could imagine that this might incentivize removing the income threshold in favor of a fully comprehensive health care minimum income, which could lead to eradicating group health insurance altogether.
Instead of employers, tax credits, Medicare and Medicaid providing assistance to different groups on a piecemeal basis, every American would receive a guaranteed annual health care allowance to do with as they please. Who knows ― this may even be paving the way for minimum income policy outside of health care, like what Paine dreamed of for all Americans.
Regardless of what happens, it is notable that the AHCA offers federal assistance at all in the individual market. Before the ACA, there was no federal assistance for individual market buyers. Even if the law is repealed, the ACA has made a lasting impact on U.S. health care policy.
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