the national interest

How Obamacare Became the New Welfare

Rep. Paul Ryan (R-WI) walks to a meeting with House Republicans on Capitol Hill October 16, 2013 in Washington, DC. House Republicans are meeting after Senate Democrat and Republican leadership agreed on a compromise to reopen the US federal government funding it to mid January address the debt limit till early February.

Having at various times represented different kinds of evils in the conservative mind — imminent social disintegration (the logic being: national health insurance equals Europe, Europe equals Greece), medical rationing enforced by bureaucrats, the collapse of the administrative state – Obamacare has now taken on a new connotation: welfare. The Congressional Budget Office’s budget update last week surprisingly adapted an analysis, advocated by conservative economist Casey Mulligan, that Obamacare would induce the equivalent of two million full-time jobs in reduced labor. Now, in addition to its previously recited horrors, Obamacare was taking money from hard-working Americans to finance indolence.

The availability of subsidized health insurance, writes Carl Cannon, will make millions of people “cut back on their hours or quit working altogether so as to not jeopardize their (taxpayer-financed) health-care subsidies.” Obamacare, rages John Podhoretz, is “making the dole more attractive than self-sufficiency.” A more refined version of this fear comes from Paul Ryan, who complains Obamacare is “inducing a person not to work who is on the low-income scale, not to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, rising their income, joining the middle class, this means fewer people will do that.”

It is true that any means-tested government benefit will discourage some class of people from working. If a subsidy is available only for people below a certain income level, then people whose income approaches that income level will lose some incentive to earn more.

But Ryan is completely wrong about the class of people facing this reduced-work incentive. It’s not workers who are set to “begin working” and “get on the ladder of life” who face the Obamacare phase-out. That hits much higher up the income ladder — $94,000 a year for a family of four. A person facing this subsidy cutoff may work fewer hours, or even quit altogether, but he or she would be living off his or her own savings or a spouse’s income. There’s no Obamacare “dole,” in the sense of income that substitutes for work, unless conservatives imagine Medicaid patients clothing themselves in free hospital gowns and feeding their children all the waiting room lollipops they can eat.

The mistake is not trivial. Ryan is borrowing a powerful critique of Aid to Families With Dependent Children, the welfare program that ended in 1996, which incentivized many workers not to enter the workforce at all. There is a legitimate argument that this incentive helped nurture, at least to some degree, a culture of dependency. Incentivizing a family that earns nearly six figures from working more is an entirely different thing.

What’s more, as Jared Bernstein and Edwin Park point out, by lifting the threshold for who gets subsidized insurance, Obamacare actually reduces this poverty trap. Before Obamacare expanded it, Medicaid had extremely low income thresholds. It varies state by state, but the average state cut off Medicaid to people earning just 61 percent of the poverty line, a pitifully low sum. If you’re a single parent in Texas, you lose your Mediciad if you earn more than $3,600 a year. A family of two in Alabama loses its Medicaid once its income, after deductions, hits the lofty sum of $2,832 a year. That’s a severe incentive to keep poor people from obtaining full-time work.

Of course, Texas is boycotting Obamcare’s Medcaid expansion, and is thus keeping in place this strong incentive for its poorest citizens to stay out of the workforce. (If conservatives are worried about fostering a culture of dependency in these Obamacare-boycotting red states, they are keeping their fears very, very quiet.) The states choosing to expand Medicaid are correspondingly increasing the incentive for the very poor to enter the workforce.

Get a job, you bum. Photo: John Moore/2009 Getty Images

Is it a problem that Obamacare may discourage some middle-class workers from earning more, or prod a second earner in a middle-class family to care for children or retire early? It’s certainly not ideal. One solution would be to extend Obamacare’s subsidies farther up the income ladder. That would cost more money. There are trade-offs to everything.

It’s odd that so many Republicans, including Ryan, have suddenly grown obsessed with the importance of coaxing every last hour of work out of the middle class. Ryan has spent the last several years vowing to reduce Medicare and Social Security benefits for more affluent workers. Indeed, he has presented such policies as a civilization-preserving imperative. Obviously, reducing Social Security and Medicare benefits for the middle class would have the exact same effect as reducing health-care subsidies for the middle class.

One could easily imagine any number of legislative changes that might satisfy the right’s newfound concern for prodding the middle class to work harder. Republicans aren’t going to accept any such solution because the main impetus of its gleeful embrace of the CBO report is not any policy reform at all, but to generate a new message about Obamacare welfare queens mooching off your hard work.

How Obamacare Became the New Welfare