The latest Obamacare atrocity is the way in which Obamacare subsidies have the potential to be grossly under- or over-calculated. Because the process is run through the IRS, the IRS can only rely on the tax earnings…of the previous year. And of course, the income amounts for people fluctuate every year.
For instance, if your income increases from the prior year, it is likely that your subsidy amount will then be too large; if that happens, “the law says you have to pay back at least part of the money when you file your tax return” the following year. As a result, the payback would count against any tax return or else added to a tax bill.
Additionally, the subsidy itself is not money given to the taxpayer. Because it is a tax credit working in a “novel” way, “the vast majority of taxpayers won’t actually receive the subsidies. Instead, the money will be paid directly to insurance companies and consumers will get the benefit in reduced premiums”.
There are caps on subsidy repayment, based on income and family size. What those caps will work out to be are still uncertain. What is certain is that Obamacare is a mess and a moneygrab.
The total amount of money that taxpayers will have to repay is unclear, but congressional estimates offer some clues. Twice since the health care law was passed Congress has increased the caps for how much people will have to repay. Combined, the two measures are expected to raise more than $40 billion over the next decade, according to Congress’ Joint Committee on Taxation.
So, we have a healthcare system that is run through the tax code. Besides the obvious problems with the entire structure of the health care law, the inefficiencies of this tax-based system are likely to create mismanagement, waste, and fraud — not unlike most of the rest of the government programs.
This latest news with subsidy guessing-games is another example of why Obamacare is both bad economics and bad insurance.
Crossposted at alanjoelny.com