Under proposed health care reform, the government will help the poor pay for health insurance. What's the right level of subsidy?
One of the common features of the healthcare reform bills currently on the table is that they include a personal mandate combined with insurance subsidies. What this means is that you're required to buy health insurance if you don't get it from your employer, but the government will help pay for it if you can't afford it.
But what's the right level of subsidy? The draft bill introduced by Sen. Max Baucus today provides subsidies for families earning up to 300% of the poverty level, or $66,000 per year. That's a problem: health insurance can easily set you back $15,000 or more, and requiring families with modest incomes to suddenly add a $15,000 item to their annual budget may be more wishful thinking than serious policy. What's more, politically it's likely to prove to be very, very unpopular.
Much better would be 400% of the poverty level, or $88,000 per year. There would still be some unhappy families, but a lot fewer of them. It's a big difference.
Now, compare this to the much discussed "public option." This would be a federal insurance plan offered in addition to private insurance, and the idea behind it is that the competition would help force down insurance prices across the board. That would also make a big difference to a lot of families.
Ideally, we'd like to have both in the final bill. But what if we can't? So here's the question for the day: if someone put a gun to your head and forced you to choose between (a) a public option and (b) a higher subsidy level, which would it be? Please show your work.