Transcript Don Taylor Associate Professor of Public Policy at Duke University www.donaldhtaylorjr.com January 18, 2014

Don Taylor
Associate Professor of Public Policy at Duke University
www.donaldhtaylorjr.com
January 18, 2014
Question?
 In 20 years, how do you want your children
(grandchildren) to obtain health insurance?
ACA 50,000 foot version
 Little c conservative: keep what we have in ESI
 Create market for premium supported private
insurance + Medicaid expansion
 Macro finance: tax increases & Medicare cuts
 Kitchen sink cost/system demos
 Caddy tax: limit of tax preference of ESI
Mulligan Paper
 Estimates marginal labor income tax rates from ACA
 Documents implicit + explicit
 Painstaking effort, carefully done
 Puts an estimate to intuition
 Useful: break down provisions into “programs”
 Uses median wage earner to evaluate impacts
 Statutory Index $204/month, or 4.8% points of
employee compensation
 Big effect
More on effects
 Employer shared responsibility payment only third
largest impact (delayed)
 Sliding scale subsidies for those offered ESI at work &
those not both larger
 Analysis identifies incentives to work as well as
disincentives
I am unclear on Table 2
 Table 2 key. Overall estimates focus on short run
decisions
 Table 2 provides an adjustment of overstatement of tax
increase due to longer time frame
 Table 1 uses 3 month overstate adjustment=-0.2
 12 months overstate=-1.6; 6 month =-0.6
Big question: are there really behavioral opportunities to
take advantage of this math?
Table 3 Memorable
 More taxable income net insurance + work expenses
for part time than full time
 Math is correct
 Seems an atypical example
 Part time $26/hour in wages
 Full time $26/hour in employment cost (insurance
premiums excluded, employee premiums pre tax)
 Sensitivity? Run it at $16 and $36/hour?
Slight quarrel
 Table 1 does not include a loss of the tax subsidy when
leaving ESI to move to an exchange plan
 Casey notes the ACA doesn’t take away the subsidy; the
tax code has provided it for 60+ years, it is simply
triggered when you decide to leave ESI for ACA
 Perhaps put what the magnitude of the term would be
in the footnote
What I would like to see in paper
 Show how sensitive overall findings are to using
median wages (10th, 25th, 50th, 75th, 90th )
 Estimate Medicaid expand States v not separately
 Evaluate other financing approaches for ACA
 VAT/Sales tax
 Walk down ESI tax exclusion 75th, 50th, 25th, etc & end
employer penalty
 This could be another paper (very interesting one)
What I hope is happening
longitudinally
 Are the data being collected to test for the predictions
that flow from this analysis? (and other analyses)
State Level Impacts
 I think an incentive to work term is missing for States
that have not expanded Medicaid & who have 0%
eligibility for childless adults (you are in one now)
 Childless 46 year old Adult in NC: if you make $11,489
you get nothing; if you make $11,490 you can buy ACA
plan in Durham county for: $0/month bronze;
$11.37/month silver + cost share subsidies
 Paper has disincentive factor from Medicaid expansion
which I agree with; needs an incentive term in
addition to the one derived from table 2 to account for
“low cliff” in some states
But what about Massachusetts?
 Very interesting analysis
 Mass the increase in labor income tax rate
 $16/month or 0.3% points
 US $204/month or 4.8% points
Key talking point been ESI went up in Mass, didn’t tank
labor market
Difference between doing in rich State v the South?
Two key ifs in the discussion
 Combined employment taxes roughly what they were
in 2013 even with ACA if
 Emergency Unemployment Compensation not extended
 Employer penalty delayed
The first is likely, the second is a near certainty (forever)
If so, shift from $ to health insurance (hope someone
studying this)
How much subsidy should you get?
Need a deal to transition
 We need a political deal that could allow Casey’s paper
to stimulate a conversation about what might be a
better way to finance health reform
 Left, Right and Center can sketch distant approaches,
but transitioning there is very hard
Both sides need a deal
 Easier to poke holes in any plan than it is to do better
Three suggestions:
 Replace individual mandate w/ Paul Ryan auto-enroll
 For exchange purchases above subsidy, make some/all
premium deductible
 Replace caddy tax with capping of tax exclusion ESI
My answer
I don’t want my kids to get insurance from a job
 Decouple employment from health insurance
 Make all subsidies explicit
 At Duke, there is some one with a good idea who won’t
try it because they need health insurance
 But need stable source of coverage
 Exchange approach ~ inevitable. Details flexible
Paul Starr’s “Policy Trap”
 165 Million with employer sponsored insurance
 50 Million with Medicare; 65 Million + Medicaid
 15 Million individual purchase
 ACA makes these buy ~ employer benefit level policies;
those above 400% poverty must pay full price.
 Pissed and noisy
 Issues Casey demonstrates
Republicans & canceled health
plans
 Ramesh Ponnuru in National Review on line 10/30/13
“Some Republican health-care plans would run up
against this same obstacle, because they, too disrupt
the existing health-insurance arrangements.”
Understatement alert. 165 Million with tax free employer
contributions via ESI have lots too lose (aggregate $272
Billion this year)
The hardest part of any reform
 Is the transitional period
 Left, Right and Center can sketch distant approaches,
but transitioning there is very hard
How ACA Impacts Small Business
 Employer penalty (delayed)
 96% of firms < 50 employers so does not apply
 But, only 28% of workers in such firms
 FT v PT issues (notch is inherent)
 Small Biz Employer Tax Credit
 Small Biz Exchange (SHOP Exchange)
Small Biz Tax Credit
 Complex
 Employers <25 employees, w/ avg wage <50K
 2014 Max subsidy <10 employees, avg wage <25k
 50% employer cost 2 yrs (‘10-’13 35%)
 Walk down rules based on # employees & avg wages
 Credit against income tax; ineligible if do not owe tax
Most who were eligible didn’t use the credits
Why was small biz uptake low?
 4.4 Million taxpayers told potentially eligible; only
278,000 used credits in 2010 (transitional program)
 Avg tax credit claimed $2,748
 Problems
 Incentive too small (83% eligible did not offer HI)
 Many employees offered declined
 Process to claim tax credit too complex
Small biz (SHOP) Exchange
 Voluntary
 In N.C. only BCBS selling in ‘14 SHOP Exchange
 small biz can shop there
 In State run exchange, State can define small biz up to
100 employees (N.C. not running exchange); goes to
100 for SHOP purposes in 2016
General: in 2017 States have broader flexibility on who
can buy in exchanges of all types
All sorts of revision imaginable
 Expand the small biz tax credit & make it simpler
 Alter the employee size cutoffs
 FTE, payroll, type of employee etc
Short term: lack of a Republican alternative makes a deal
impossible
Long term: how do you want your children to get
insurance in 20 years?
My answer
I don’t want my kids to get insurance from a job
 Decouple employment from health insurance
 Make all subsidies explicit
 BUT need stable source first
 Cadillac tax: replace it with a more straightforward cap
on the tax exclusion of employer provided insurance
 Make clear to whom the subsidy flows