As Obamacare’s startup date for the individual mandate approaches, the focus has become the lack of income verification for subsidies. Under new rules published by HHS federally operated exchanges still will verify such information beginning in 2014, but states operating their own exchanges can wait until 2015 to do so
Under the Affordable Care Act, individuals with annual incomes ranging between 100% and 400% of the federal poverty level who do not have access to affordable coverage through their employer are eligible for subsidized coverage through the exchanges.
Prior to the final rule, exchanges were expected to verify applicants’ income status and conduct random checks to determine their access to employer-sponsored coverage. But under the new rules it will not require the states running their own marketplaces to do this check until 2015.
Subsidies are based on income levels but in the initial year of operation the federal government will take an applicant’s word on their income. The federal government has decided that they will only sample a statistically significant number of these people with large income discrepancies, rather than the entire group.
Most applicants will supply honest information just as most do on their tax returns but the opportunity for “free money” will be too much for some people. Expect widespread abuses of the new Obamacare system. If Medicaid fraud is any indication of the government’s ability to police such a system then there may not be enough money to pay for this program.
Not all abuses will be venal. Many of the income problems will occur due to honest mistakes by uninformed applicants. The government’s definition and recipient’s definitions are often different. If HHS does not have clear definitions of income and communicate these to applicants expect big problems.
The really confusing thing about our new four-part health system is that the federal subsidies available to households earning the same income can vary dramatically, depending on which part of the health system you find yourself in.
As long as you are old or disabled, Medicare treats all comers roughly equally. The federal contribution to Medicaid varies from state to state, but the level of coverage tends to be pretty similar across recipients.
Subsidies for employer-sponsored insurance, meanwhile, are much higher for households earning high incomes, and thus paying high taxes, than for less affluent households, while subsidies for the new exchange policies are generous for low-earners and phase out for high-earners. The upshot is that subsidies for many low- and middle-income households are far more generous on the exchanges than they are for employer-sponsored insurance.
If the employer mandate and income verification are unworkable now, will they be workable in year? If the federal government never gets the employer mandate up and running, what will stop employers from dropping health insurance for lower paid workers?
Obamacare looked good to the liberals when it was jammed through the Congress on a purely partisan vote, but it seems that it is more than the government can handle. Anyway that the Obama administration describes this boondoggle, you just can’t put lipstick on this pig.