Health care premiums are taxes

Do not let people mislead you by focusing just on taxes, leaving out the services those taxes pay for and the other costs those taxes replace.

Guest post: Ted Boettner, West Virginia Center on Budget & Policy

(Note: This piece also appeared in the Charleston, W.V., Gazette-Mail)

While the United States is a low-tax country compared to most industrialized nations, for a majority of Americans it doesn’t feel this way. That’s largely because private health insurance companies receive a large portion of our income every month. If we sent our money to a publicly run health insurance plan (e.g. Medicare) instead, almost all of us would save thousands of dollars each year while guaranteeing comprehensive health coverage for everyone.

The United States is unique in that we pay for a large part of our health care costs through an employer-based system. It is a creature of World War II, when we had price controls on wages and everything else to stamp down on inflation. Instead of increasing wages, employers offered health insurance. No other modern industrialized nation finances most of its health care system this way, because it does a terrible job of controlling costs, it’s highly regressive and it causes job lock, where people stay with a job just to receive health insurance.

For private-sector workers in West Virginia, the average health insurance premium was nearly $21,000 for family coverage in 2018. While employers typically cover most of these payments, it is widely recognized that employers consider the payments as part of an employee’s total compensation. Large increases in health insurance premiums have downward effects on workers’ wages.

The Economic Policy Institute finds that the rapid growth in employer-sponsored insurance premiums since 1979 had crowded out almost $390 billion in potential cash-wage increases for American workers by 2016, with employer-based family premiums now comprising over half of most worker’s wages.

A 2019 University of Pennsylvania study found that workers in West Virginia had the fourth-highest health care cost burden (family premiums as a share of median household income) in the nation in 2016. So employee compensation is going up, due to health insurance getting more expensive, but the money is going to private health insurance companies, leaving employers less likely to increase wages.

Since paying health insurance premiums is basically mandatory for most workers (employers with 50 or more full-time workers must enroll them in a health insurance plan), insurance premiums paid by employers act just like a tax — but a tax paid to private insurance companies, instead of the government.

If you include these payments as a tax on labor, U.S. workers are taxed higher than those living in most European countries. The insurance premium payments are also highly regressive, falling harder on those with smaller incomes. And this doesn’t even take into consideration out-of-pocket spending, such as co-pays or deductibles, which have also grown considerably over the years.

This is a terrible to way to fund health care. Setting up a universal system, such as Medicare for All, would give the vast majority of workers the biggest take-home pay raise they’ve ever seen. Instead of paying private health insurance companies, it would be financed publicly by enacting a combination of higher taxes on the wealthy and big corporations, implementing costs savings (e.g. lower prescription drug prices and administration costs) along with a flat payroll tax similar to Social Security and Medicare.

While the naysayers of universal health care like to talk about Medicare for All being a huge tax increase, it’s actually a massive tax cut for most Americans. Here’s an illustrative example. Suppose we have a privately owned and poorly run water utility in Kanawha County that charges everyone $50 a month despite frequent leaks and boil water advisories. One day, this utility shuts down and the county decides to take it over and charge everyone an annual “tax” of $500. Would you be outraged that you have to pay $500 in a new tax or be happy that you will now save $100 on your water bill each year?

(Hint: Ask a resident in Morgantown if they would prefer to pay Charleston rates for water or the lower amount to their publicly owned water utility).

While opponents of Medicare for All like to scare people with big numbers, saying it will cost $32.6 trillion over the next 10 years, this is actually about $2 trillion less in total national projected health spending over this period. Estimates show Medicare for All would reduce total U.S. health expenditures by $5.1 trillion over 10 years relative to current projections under our existing system.

The moral of this story is do not let people mislead you by focusing just on taxes, leaving out the services those taxes pay for and the other costs those taxes replace. Like clean water, we all need affordable health care coverage and today our premiums are taxing us harder than ever. Solutions like Medicare for All can reduce overall health spending while ensuring we all have access to health care anytime we need it. Untying health premiums from overall compensation gives us not only more money in our pockets, but the freedom to start a new business, avoid bankruptcy, lower stress, improve productivity and live longer and healthier lives.

The Center, like the Iowa Fiscal Partnership of the Iowa Policy Project and the Child and Family Policy Center, is a member of the State Priorities Partnership.

Perspective for the common good on Tax Day

On Tax Day — and every day — we must ask whether rampant tax breaks, subsidies and tax cuts are wise choices with public dollars from taxpayers.

It is so tempting, as we are seeing on social media over the last several days, to talk about filing your taxes and the fact that you (1) paid more or (2) paid less.

Is that really what matters? Let’s take a step back and look at the big picture — the common good. There are three main points to remember:

1) First, what are taxes for? Schools. Roads. National defense. Health care. Fairness and protection in the workplace. Clean air. Clean water. Recreational opportunities. Libraries. There are more examples you may put out front.

But in any case, none of those services funded now by taxpayers will be provided without taxes. They will not be provided by the private sector, at least on any scale that provides access to all Americans.

Go ahead. Chart a road to opportunity for all that does not include taxes. You cannot do it. It is integral to the mission, which is why tax reform is an essential stop we identify on our Roadmap for Opportunity. Unfortunately, Iowans have not received tax reform, but a doubling down on bad tax policy trends of the last 20 or 30 years.

2) Our Iowa tax code is inequitable. The rich pay less as a share of their income than people who live paycheck to paycheck.

It was already a long-term trend in Iowa (and in many states) and it was worsened by the 2018 tax overhaul. Our state and local tax system is upside down.

3) Cleaning up and restoring balance to our tax code would better assure public money is going to public purposes, rather than subsidizing tax breaks and loopholes for those most politically well-connected.

As we have shown:
•     Tax credits for business already cost more than $300 million a year.
•     Tax loopholes for multistate and multinational corporations already cost between $60 million and $100 million.

On Tax Day — and every day — we must ask whether those choices are the best use of public money, when we know education, public safety and environmental quality are being compromised by short-sighted budget decisions in Des Moines.

Mike Owen is executive director of the nonpartisan Iowa Policy Project.

mikeowen@iowapolicyproject.org

Drug testing: Needless, costly, burdensome

To assure access to health care, drug testing just gets in the way

Multiple bills introduced in the 2019 Iowa legislative session would limit access to health care by posing bureaucratic hurdles to working families needing help.

Drug-testing Medicaid recipients is one of those ideas. Already shown to be costly and ineffective in other states, the idea is one more solution in search of a problem. Studies show that drug use among work support recipients is lower than the general population.[1] In most states, less than 1 percent of applicants have tested positive.[2]

Neighboring Missouri provides a lesson for Iowa on cost. Missouri spent $336,297 on drug testing of Temporary Assistance for Needy Families (TANF) in 2017.[3] After initial screening, the state tested 108 of 32,774 TANF applicants, finding 11 positive results. That’s an investment of over $30,000 per positive test. Another 305 applicants did not show up for a drug test or refused to take one.[4]

Iowa is familiar with these costs. Last session, a similar bill was proposed to implement drug testing for SNAP and Medicaid recipients. A Department of Human Services administrator estimated that costs to the state would have been at least $100 million.[5]

Medicaid plays a vital role in insuring more than 260,000 Iowa children.[6] Restricting access to medical care through drug testing poses a threat to child well being, by reducing resources available to the household as a whole.[7]

Over 225,000 Iowans living in working households struggle to make ends meet.[8] Medicaid and Affordable Care Act subsidies are important work supports that help families get by when wages aren’t enough to cover basic costs.

In Iowa, the large majority of Medicaid recipients who can work do work. Eighty-seven percent live in a working family and 72 percent work themselves.[9]

Instead of making it more difficult for low-income families to get the medical care they need, Iowa can invest in its workers by expanding the state Earned Income Tax Credit and Child Care Assistance programs. Other alternatives include raising wages to more accurately reflect workers’ productivity and higher living costs, or adequately funding mental health care.

 

[1] Center on Law and Social Policy, “Drug Testing SNAP Applicants is Ineffective and Perpetuates Stereotypes.” July 2017. https://www.clasp.org/sites/default/files/publications/2017/08/Drug-testing-SNAP-Applicants-is-Ineffective-Perpetuates-Stereotypes.pdf

[2] Center on Law and Social Policy, “Drug Testing and Public Assistance.” February 2019. https://www.clasp.org/publications/fact-sheet/drug-testing-and-public-assistance

[3] Ibid.

[4] Amanda Michelle Gomez and Josh Israel, “States waste hundreds of thousands on drug testing for welfare, but have little to show for it.” May 2018. Think Progress. https://thinkprogress.org/states-waste-hundreds-of-thousands-on-drug-testing-for-welfare-3d17c154cbe8/

[5] O. Kay Henderson, Iowa Senate bill to require drug tests, work for welfare.” February 2018. Radio Iowa. https://www.radioiowa.com/2018/02/15/iowa-senate-bill-to-require-drug-tests-work-for-welfare/

[6] American Community Survey, “Health Insurance Coverage Status and Type of Coverage by State and Age for All People: 2017. September 2018. U.S. Census Bureau. https://www.census.gov/data/tables/time-series/demo/health-insurance/acs-hi.html

[7] Center on Law and Social Policy, “Drug Testing and Public Assistance.”

[8] Peter Fisher and Natalie Veldhouse, “The Cost of Living in Iowa 2018 Edition Part 2: Many Iowa Households Struggle to Meet Basic Needs.” July 2018. Iowa Policy Project. http://iowapolicyproject.org/2018Research/180702-COL-Part2.html

[9] Rachel Garfield, Robin Rudowitz, & Anthony Damico, “Understanding the Intersection of Medicaid and Work.” January 2018. Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/understanding-the-intersection-of-medicaid-and-work/

 

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Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

Boost work: Keep Medicaid accessible

Complicating Iowans’ ability to get checkups and the medications they need will not improve workforce participation.

Iowa’s Medicaid program carries two major purposes. First, Medicaid provides medical care for the elderly; in fact, 44 percent of Medicaid spending goes for long-term services and supports for seniors.[1] About half of Iowa nursing home residents benefit from Medicaid.[2]

Second, Medicaid covers thousands of Iowans working in low-wage jobs with no health insurance benefits and to thousands of others who have a disability that prevents them from working. Nearly half of all Medicaid recipients in Iowa are children.[3]

The data show that Medicaid is an important work support. Most non-elderly adult Medicaid enrollees in Iowa work — 72 percent — and 87 percent live in a working family.[4]

Among Medicaid enrollees in Iowa, larger shares of African-American and Latino enrollees are working than whites. One-third of Iowa working Medicaid enrollees work in smaller companies, which likely do not provide employer-sponsored insurance. It might surprise Iowans to know the largest group of Iowa workers receiving Medicaid work in elementary and secondary schools.[5]

Imposing new requirements for Medicaid would complicate health-care access for low-wage workers, children, veterans, older Iowans and Iowans with disabilities. It would not improve workforce participation.

Contrary to some political claims, studies in case after case show the main impact of extra Medicaid requirements is not better jobs,[6] but disenrollment in Medicaid, worse health outcomes, less access to care, and financial insecurity.[7] Rather than promoting good health that is important for employment and productivity, added Medicaid eligibility requirements undermine the goal of encouraging work.

If policy makers’ goal is to increase workforce participation, more practical approaches exist in expanding the state Earned Income Tax Credit and Child Care Assistance eligibility.

Not only do new Medicaid requirements fail to encourage work, but they make sustaining coverage difficult for people who are exempt from work, such as Iowans with disabilities, who may face obstacles in documentation and verification. Workers with variable hours, particularly in food service, retail, and seasonal jobs, could face similar issues.

Many working Medicaid enrollees work full time, but their low annual wages still quality them for Medicaid.[8] Rural communities rely heavily on Medicaid; disenrollment could harm rural hospitals and restrict access to care for children, the elderly, and veterans.[9]

It makes no sense to restrict access to health care for Iowans who are working or are exempt due to age or disability status.

 

[1] Steve Eiken, Kate Sredl, Brian Burwell & Angie Amos, “Medicaid Expenditures for Long-Term Services and Supports in FY 2016.” Table 31. Iowa LTSS Percentage Trends. https://www.medicaid.gov/medicaid/ltss/downloads/reports-and-evaluations/ltssexpenditures2016.pdf

[2] Kaiser Family Foundation, “Medicaid’s Role in Nursing Home Care.” Table 1: Medicaid’s Role in Nursing Home Care, by State.  June 2017. https://www.kff.org/infographic/medicaids-role-in-nursing-home-care/

[3] American Community Survey, “Health Insurance Coverage Status and type of Coverage by State and Age for All People: 2017.” Table H105. September 2018. U.S. Census Bureau. https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-hi.html

[4] Rachel Garfield, Robin Rudowitz, & Anthony Damico, “Understanding the Intersection of Medicaid and Work.” January 2018. Kaiser Family Foundation. https://www.kff.org/medicaid/issue-brief/understanding-the-intersection-of-medicaid-and-work/

[5] Ibid.

[6] LaDonna Pavetti, “Work Requirements Don’t Cut Poverty, Evidence Shows.” June 2016. Center on Budget and Policy Priorities.  https://www.cbpp.org/research/poverty-and-inequality/work-requirements-dont-cut-poverty-evidence-shows

[7] Hannah Katch, “Medicaid Work Requirements Will Harm Families, Including Workers.” February 2018. Center on Budget and Policy Priorities. https://www.cbpp.org/research/health/medicaid-work-requirements-will-harm-families-including-workers

[8] Ibid.

[9] Center on Budget and Policy Priorities, “How Medicaid Work Requirements Will Harm Rural Residents – And Communities.” August 2018. https://www.cbpp.org/research/health/how-medicaid-work-requirements-will-harm-rural-residents-and-communities

 

Natalie Veldhouse is a research associate for the nonpartisan Iowa Policy Project. nveldhouse@iowapolicyproject.org

A look at future health care in Senate plan

Under the Senate health proposal, uninsurance in Iowa would be more than double what it would be under the current Affordable Care Act.

What Iowans need to know about coverage and costs

Health care policy is a complex issue. There’s no getting around that. But one way to consider the options vs. what we have is to look at basic, reliable estimates of the real-life impacts of the policy choices. How many Iowans would have insurance, and how many would not?

The Urban Institute has state-by-state estimates of these impacts. By 2022 — five years from now — under the Senate’s proposed Better Care Reconciliation Act, uninsurance in Iowa would more than double. Across the board of various population groups, significantly more Iowans (including children) would be uninsured than under the current Affordable Care Act, (ACA, or ObamaCare).

According to the Urban Institute:

• 148,000 non-elderly adults would be uninsured, or 8 percent, under the ACA, compared with 351,000 under BCRA, or 19 percent. This is an increase of 137 percent.

• 25,000 children would be uninsured, or 3.2 percent, under the ACA, compared with 54,000 under BCRA, or 6.9 percent. This is an increase of 117 percent.

• 115,000 non-elderly, non-Hispanic white Iowans would be uninsured under the ACA, or 5.4 percent, compared with 306,000 under BCRA, or 14.3 percent. This is an increase of 167 percent.

• 38,000 non-elderly Hispanic Iowans would be uninsured under the ACA, or 16.6 percent, compared with 53,000 under BCRA, or 23 percent. This is an increase of almost 39 percent.

For more about the impacts of the Senate proposal, see this Iowa Fiscal Partnership backgrounder by Peter Fisher of the Iowa Policy Project.

Privatizing Medicaid: ‘Why?’ ‘What?’ and ‘How?’ not yet answered

How we assure health care access to low-income Iowans needs to be the central issue here, not an afterthought.

060426-capitol-swwWhy do we have Medicaid? It’s a simple question with a simple answer. We have Medicaid because if we don’t, there are millions of Americans, and nearly 600,000 Iowans, who will not be able to get health care. Private industry will not provide it.

Why, we must ask, would we turn over to private industry a critical part of our public safety net to business interests that operate with a principal purpose of making money?

How do we assure that services are provided, that our responsibilities are met, if the people running the operation are not answerable to us?

As the legislative Health Policy Oversight Committee meets today about the Governor’s privatization edict on Medicaid, we need to remind ourselves of these basic questions.

When the Governor cannot detail the purported savings and our common sense tells us otherwise, we need an assurance that data will be available — and publicly available — to monitor what is happening with a service that has been accountable and efficient in expanding health-care access to Iowans who need it. We need to know Iowa is not setting itself to repeat problems that have been demonstrated in other states.

What will pass for public oversight after we’ve turned over the keys to private industry?

Over three dozen people and organizations filed comments (available here) with the oversight committee for today’s meeting at the Statehouse. Many have a firsthand understanding of the purpose and practice of Medicaid as we know it, and serious questions of their own about the uncertain world where the Governor is taking us, on his own.

Clearly, many fundamental questions have not been fully vetted through the legislative process, nor given a hearing before the decision was made within the Governor’s Office.

How we assure health care access to low-income Iowans needs to be the central issue here, not an afterthought.

Owen-2013-57Posted by Mike Owen, Executive Director, Iowa Policy Project
mikeowen@iowapolicyproject.org

Iowa’s decline in job-based health insurance

When the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

The Cedar Rapids Gazette today offered an interesting look at the question of where Iowans get their insurance. It’s less and less something that comes through employment. And when the costs of insurance keep rising, that makes it tougher on the household budget — or results in people not having insurance.

This is a trend we’ve been watching and reporting on at the Iowa Policy Project for many years, as have several good research organizations such as the Economic Policy Institute.

The Affordable Care Act offers at least a partial remedy. As health insurance exchanges are developed, affordable insurance should be more readily available. Tax credits for employers providing insurance will provide a targeted incentive to offer employees a better option than what employees might find on the individual insurance market.

Colin Gordon
Colin Gordon

Our State of Working Iowa report for 2012 offers another good look at this issue. As author Colin Gordon observes, wage stagnation, erosion of good jobs and recession have combined to batter workers, at the same time non-wage forms of compensation, health and pension benefits, also have declined. This has eroded both job quality and family financial security, and increased the need for public insurance. In Chapter 3, “The Bigger Picture,” Gordon writes that Iowa is one of 15 states, including five in the Midwest, to lose more than 10 percent of job-based coverage in a decade. He continues:

These losses reflect two overlapping trends. The first of these is costs. Health spending has slowed in recent years, but still runs well ahead of general inflation. Both premium costs … and the employee’s share of premiums have risen sharply — especially for family coverage — while wages have stagnated.

In 1999, a full-time median-wage worker in Iowa needed to work for about 10 weeks in order to pay an annual family premium; by 2011, this had swollen to nearly 25 weeks. Steep cost increases have pressed employers to drop or cut back coverage, or employees to decline it when offered. High costs may also encourage more employees to elect single coverage — counting on spousal coverage from another source and kids’ coverage through public programs. The second factor here is the shift in sectoral employment outlined above: Job losses are heaviest in sectors that have historically offered group health coverage; and job gains (or projected job gains) are strongest in sectors that don’t offer coverage.

This graph looks at the rate of employer-sponsored coverage, by industry sector, from 2002 to 2012.

job-based coverage comparison, Iowa 2002-2012

An interactive version of that graph in the online report allows the reader to toggle between those two years; the colored balloons sink on the graph in moving from 2002 to 2012, as if they all are losing air — the result of declining rates of coverage.

Good public policy could help to fill them again.

2010-mo-blogthumbPosted by Mike Owen, Assistant Director