Max Tax Allows Insurance Companies to Suck Cash Directly from Treasury
The Baucus mark-up of the Baucus Mark-up gives tax credits for the purchase of private insurance policies to persons who earn up to 4 times the federal poverty level. There is also a tax subsidy for cost-sharing, such as co-pays and deductibles. The money goes directly from the Treasury to private insurance companies. This is a perfectly stupid arrangement.
Normally, tax credits are available to people who owe taxes. At the end of the year, you figure out your tax bill, then you deduct the tax credit from the bill, and then you pay the difference. That isn’t even remotely going to work with people who need the subsidies: they don’t have the money to front the insurance companies their premiums, and they don’t owe enough taxes to recover the entire credit.
Senator Baucus has a solution (pdf). This tax credit is “refundable and payable in advance directly to the insurance company” (p 20). The idea is that when you do your taxes, the form requires you to calculate the premium credit you were entitled to get, and if your credit was too high based on your actual income, you have to pay part or all of the difference.
The cost-sharing subsidy works the same way. People advance refundable tax credits to pay their cost-sharing at a level which brings the actuarial value of the insurance they bought up to 90% for people making up to 1.5 times the poverty level, and 80% for people making between 1.5 and 2 times the poverty level. That money goes to the insurance company as well.
HR 3200 contains a similar idea, but at least it isn’t called a tax credit. Both bills will give the insurance companies just what they want: one of their blood sucking tentacles is inserted directly into the Treasury.
This is no different from any other corporate welfare program. A service that could easily be provided by the government is farmed out to private enterprise for private profit. It’s no different from the way banks inserted themselves into the student loan program, ripping off kids for loans that were already profitable and safe. It’s no different from Medicare Advantage, which pays insurance companies to provide Medicare. It takes years to get rid of ideas like these, ideas so blatantly stupid you have to wonder if there was corruption.
Why set up another equally stupid and even more expensive giveaway? We have systems in place to pay doctors and hospitals directly: Medicare and Medicaid. It makes sense to modernize and expand Medicare, some of which HR 3200 does. Dr. Dean made that a part of his 2004 platform. Medicare would work also. These systems can start work tomorrow.
What could possibly be the point of funneling money to the insurance companies? Oh wait: that is the point.