2018 Second Quarter in Review
Study: Modern Families are Coping with Outdated Laws
Why does a housewife who takes a minimum wage job get immediately put into her husband’s much higher tax bracket? Why can’t husbands and wives share their Social Security contributions, the same way they share contributions to other savings plans? Why can’t private sector employees with children or elder care responsibilities have the same flex time opportunities federal employees have?
These are a few of the questions asked in a new study authored by Goodman Institute board member Nan Hayworth.
“Tax law, labor law, employee benefits law and scores of other federal programs were created years ago when Congress thought husbands would go to work, wives would stay home,” says Hayworth, who is a former member of Congress and a medical doctor. “Congress also thought divorce would be very rare.”
The study says that two-earner couples have become the norm these days and it’s not uncommon for them to have duplicate health insurance from different employers. So why can’t one of them get higher wages instead of unneeded health insurance? Employers can’t do that without risking huge penalties imposed by the IRS, says the study.
“We need a thorough review from top to bottom of federal policies that affect families,” says Hayworth. “We need to make sure every program reflects the way people are living their lives in the modern era,” she says.
Voter Awareness about Tax Reform
The Goodman Institute is launching a new project for which we need funding. The Atlanta Federal Reserve is sharing data with us – data that is not available anywhere else. Also, it is willing to publish our results and put its name on it. This is very good news. It will add credibility to the numbers. No one is going to say the Atlanta Fed is partisan.
What Prof. Laurence Kotlikoff and his colleagues expect to produce:
- We will have estimates of the annual and lifetime gains from tax reform for people in each state by age and income level. For example, for an average-age, average-income household nationwide, the lifetime gain is in the neighborhood of $60,000 to $70,000.
- We will be able to aggregate these gains and say how much an entire state has gained. So, we could say that tax reform is worth $XX billion to the state of Georgia, for example, and $YY billion to the state of Texas.
- Note that some high-income taxpayers in Blue states may be losers. But that is not bad. It shows that tax reform was not a giveaway to the rich.
We expect to produce similar results for the small business sector.
Single-Payer Health Insurance Debate
Should everyone be in Medicare? That seems to be the number one theme of many Democratic campaigns for Congress this year. So, appropriately, John Goodman went head-to-head to debate the idea with a representative of the Physicians for a National health Care Plan at Drury University in April.
Goodman surprised the audience when he said that the U.S. and Canadian health care systems are about 80% the same. In both countries we primarily pay for care with our time and not with our money. One out of every ten American patients leaves the hospital emergency room without receiving care – just because they get tired of waiting. In Canada the number is one in five.
“In both countries we have completely suppressed the market – year after year, decade after decade,” Goodman said. “As a result, none of us ever sees a real price for anything. No doctor. No patient. No employer. No employee.”
Goodman says that health care markets work and work well wherever there are no third-party payers. “About 63,000 Canadians leave the country every year for health care,” he said. “When they come to the United States, they pay a free market price for knee and hip replacements and it’s about half of what we Americans pay.”
By the way, you can do what the Canadians do. See the next page.
A Free Market for Health Care
MediBid got about 3,500 requests last year from patients, and providers made 12,000 bids on those requests. They post all bids made at their Twitter feed, so you can actually see procedure prices streaming. There are more than 1,000 per month.
The average knee replacement on MediBid costs less than $17,000. The normal charge by U.S. hospitals is around $60,000 and the average insurance payment is about $36,500. A similar range exists for hip replacements, with an average Medibid price of a little over $16,000.
What are We Getting for Our Obamacare Dollars?
In a new Brief Analysis, Goodman Institute Senior Fellow Linda Gorman writes that Obamacare has been extremely wasteful. Not counting the money spent on state and federal exchanges, the federal government spent $341 billion from 2014 through 2016 subsidizing individual coverage so that people would buy it.
All this spending managed to increase private coverage by just 1.7 million people. That’s $200,000 per newly insured person. Even without Obamacare, the number of people with health insurance would almost certainly have inched back up to its pre-recession level.
Amazingly, the percent of people with private coverage in 2016 (69%) was actually lower than it was in 2008 (69.6%).
Can Obamacare be Replaced?
Sen. Bill Cassidy has a white paper describing how Obamacare money could be block-granted to the states. The paper has much in common with a conservative think tank group’s proposal of which the Goodman Institute has been on the periphery.
For the first time in 8 years the conservative think tanks have come around to the Sessions/Cassidy/Goodman conclusion that Obamacare money should be used for conservative health reform, not for tax cuts for the rich and the special interests. That’s major.
The Cassidy proposal could be made better. As John Goodman wrote at Forbes, the cause of the most serious problems in Obamacare can be summarized in a single word: Dumping. Group plans are dumping their sickest, most costly enrollees on the individual market. Within that market, health plans are dumping their most costly enrollees on each other. And individuals are dumping costs on other individuals by waiting to obtain insurance until they get sick.
What can states do to solve these problems? They can (1) make the dumpers pay the full cost of their dumping or (2) make taxpayers pay for the full cost of dumping or (3) some combination of the two.
If You Work, It’s Almost Impossible to Be Poor
It is almost impossible for a mother to be poor if she works full time at the minimum wage. Her wages plus the Earned Income Tax Credit plus the new Child Tax Credit put her above the poverty level until she has a fifth child. A couple, each working full time at the minimum wage, won’t be poor no matter how many children they have. These are the findings of a new study by Peter Ferrara for the Goodman Institute.
In 1960, two-thirds of poor families were headed by someone in the labor force. Three decades later that figure was down to one-third, with only 11% working full time, according to the study.
Ironically, the reason why work eliminates poverty is because of two tax measures championed by Republicans. The Earned Income Tax Credit was signed into law by Gerald Ford and enthusiastically expanded under Ronald Reagan. The Child Tax Credit (increased from $1,000 to $2,000 by recent tax reform legislation) originally appeared in the 1994 House Republican “Contract with America.” Without these tax measures, a mother with two children earning the minimum wage would be below the poverty level, even if she worked 65 hours a week.