Just like the scene in the movie where the lab rat dies, and you know the protaganist is coming next, the mounting failures of the Massachusetts health care overhaul tell us what we can expect in the rest of the country if conservatives cannot undo the national health care legislation.
Fortune has a helpful story out detailing “five painful health care lessons from Massachusetts.” Most of them are pretty obvious and have been explored in depth on this blog, particularly how the changes make the system more expensive, place an incredible spending burden on government, and encourage employers to drop coverage and dump employees on the government-run exchange. But the article also notes a problem that gets less attention — how the system punishes the middle class when they start to earn a little more:
Data is lacking on how damaging these perverse incentives are in practice. But it’s clear in Massachusetts that low-to-medium earning families often suffer financially if they get a raise, work overtime, move to a higher paying job — or if a spouse rejoins the workforce. For example, a family earning $33,000 pays no premium at all under Commonwealth Care. But if their pay goes to $46,000, they’re obligated to contribute about $2,400. That’s an effective tax rate of 18.5% on that $13,000 raise. A pay increase of $44,000 to $46,000 is mostly erased by higher premiums alone.
The federal bill is plagued by the same weakness. For example, a $55,000 earner contributes $4,400 a year towards insurance. At $65,000, the bill is $6300; so the family is paying a “tax” of $1,900 or 19% on that $10,000 raise. After payroll taxes, those Americans would face a marginal rate of around 35%, a number that’s heretofore been the territory strictly for high-earners.
Such distortion of incentives can have absolutely devestating consequences for the economy. And people wonder why I’ve been critical of Mitt Romney, and skeptical of his conservative credentials and claims to have been a great governor.
