Last Friday, the Department of Health and Human Services announced that the verification systems needed to determine eligibility for ObamaCare subsidies would not be ready by October 1, and that the program would instead rely on self-reported data to determine eligibility. Shorter version: If you lie to the government, the government will give you a tax credit.
This decision, as Michael Cannon observes, “effectively expanded the eligibility criteria for ObamaCare’s new entitlements without so much as consulting Congress.” [Cato-at-Liberty, July 9] And it follows the Department of Treasury’s announcement earlier last week that it was suspending the reporting requirements on which enforcement of the employer mandate depends, ostensibly because the reporting requirements were too complex for businesses to follow.
If employers don’t have to pay a penalty for not providing their workers qualifying health insurance, and individuals can get subsidized coverage—as well as avoid the tax penalty for not having qualifying health insurance—by fibbing about their incomes with no risk of getting caught, then more individuals are going to end up in the ObamaCare exchanges.
So was funneling more people into the exchanges the real purpose for these two decisions? Betsy McCaughey says it’s so: “The delay is the administration’s desperate strategy to prop up the health exchanges […] . The administration fears an under-enrollment crisis.” [Betsymccaughey.com, July 10]
If HHS Secretary Kathleen Sebelius isn’t desperate to figure out how to get people to sign up for the ObamaCare exchanges, she certainly seems concerned. The Secretary has been soliciting donations from private companies—in particular health insurers, pharmaceutical manufacturers, and even tax preparer H&R Block—for the non-profit Enroll America, whose mission is to “fully address the ‘enrollment gap’.” (But who needs a tax preparer to get a health care tax credit now? Maybe H&R Block is rethinking its donation.) Sebelius also tried to recruit the National Basketball Association and the National Football League into a partnership to promote ObamaCare to the leagues’ younger fans.
Why wouldn’t everyone just want to sign up? By the lights of those who wrote the law, ObamaCare “fixes” health insurance by preventing insurers from charging different rates or turning people away based on health status, and by preventing insurers from offering inexpensive plans that provide limited coverage. The only way that set-up can happen without making premiums too high is to force the young and the healthy to participate, too. But, as Joseph Antos and Michael Strain explained back in July of last year, the ObamaCare individual mandate has no real teeth:
First, the tax (nee penalty) is too small to matter to the people who are its target. In 2014, the tax will be the larger of $95 or 1 percent of taxable income for an individual. By 2016 it rises to $695 or 2.5 percent of income. Young people would not want to pay a dollar if they could avoid it, but avoiding the tax means signing up for insurance that many do not think they need. That insurance is not free. Even with subsidies, they will pay at least 3 percent of their incomes for premiums and up to 6 percent of the cost of the insurance in deductibles and copayments. That adds up to a lot more than 95 bucks.
Second, the law counts on most of the scofflaws turning themselves in. If you do not have insurance and think you owe the tax, then you will be asked to check a box to that effect on your tax return. If you choose to ignore the mandate, you might also choose not to check the box. But even those who do confess that they do not have insurance may not be liable for the new tax. Illegal aliens, Native Americans, prisoners, those who are without insurance for less than 3 months, those who do not have to file an income tax return, anyone who faces a hardship or cannot find affordable coverage, and others are all exempt. […]
[E]ven if the IRS has determined that you owe the new tax, it has very limited ability to force you to pay it. Basically, the IRS has two options: To ask you for the money and to reduce the size of your tax refund. But the IRS cannot reduce your refund unless you overpay. Since taxpayers have great control over their withholding, a savvy taxpayer who does not want to buy insurance could easily work the system to ensure that the IRS could not hold back his refund to enforce the mandate tax. And half of American households do not owe any income tax to begin with, so good luck getting the money from them. [The American, July 17, 2012]
Betsy McCaughey calculates that the total cost to taxpayers of covering the additional workers who get health insurance from an ObamaCare exchange instead of their employers will be $60 billion in 2014—and that’s not counting the cost of covering individuals who will obtain the subsidies fraudulently because the verification system isn’t ready. [Betsymccaughey.com, July 10]
And the Wall Street Journal points out that if the ObamaCare subsidies suffer just the same error rate as that of the Earned Income Tax Credit (21 percent to 25 percent), then ObamaCare will spend $250 billion in improper benefits in the first decade.
So, if you don’t sign up, you’re just paying for somebody else’s insurance. The Obama administration, it seems, has created a system that makes you a sucker if you don’t lie. This set-up also insulates members of Congress from political accountability. Now they can all say: “That’s not the program we voted for.” And they would be telling the truth.