What the Affordable Care Act Gets Wrong

Poor form to be contrarian following a week liberals can’t stop celebrating, but count your blessings I’m done writing about golf. For now at least. I always reserve my right to tap my inner Alan Shipnuck.

Thursday night near the end of another spirited training ride. Soft spinning on North Street, two friends and I head for home. One is a well-to-do 59 year old who just retired. His very nice lake home is paid for and he and his wife just returned from another trip to Europe. Euro vacations aside, as his threadbare cycling gloves illustrate, he’s actually on the frugal side. He says he can afford the vacations because of the gloves. Decades of having made very good money no doubt help too.

“You’ll never guess what medical plan I’ve signed up for,” he says. “No clue,” I replied. “Medicaid!” “Wait, you’re 65?!” “No, I’m 59, that’s Medicare. I was surprised to learn I qualify for Medicaid because I have no income now.”

Quick google search. Medicaid is “a U.S. government program, financed by federal, state, and local funds, of hospitalization and medical insurance for persons of all ages within certain income limits.”

I was stunned. He told me a person can make about $20k/year and still qualify for Medicaid. He hardly has any capital gains because he hasn’t sold any assets for a long time. Apart from his international vacations, I’m guessing his expenses are minimal and he’s living off of savings that he previously set aside. I’m not sure how he’s sheltered his wife’s income.

Then he tells me the adult son of a mutual cycling friend is also getting “free” Medicaid despite the fact that he has a very large trust fund that must consist of tax-free municipal bonds.

Undoubtedly, if my friends are doing this, so are other high wealth/low income people. Especially those whose income stems largely from tax-free municipal bonds. Why isn’t anyone writing about this gigantic loophole and what we should do to close it?

More generally, why does the Affordable Care Act (ACA) use income as it’s sole reference point instead of some combination of income and wealth? The same can be asked about the IRS and college financial aid offices. When it comes to health care premiums, college financial aid, and taxes more generally, it’s far better to be wealthy than to have lots of income. Just ask Mitt Romney. My guess is, and I’d love a more tax savvy reader to enlighten us on this, IRS agents, ACA bureaucrats, and college financial aid officials are unable to determine people’s total wealth with any certainty.

Why not ballpark it though I wonder. If the government knew my friend owned his home outright, would it compromise his Second Amendment rights to privacy? How do we balance well-to-do people’s right to privacy with public policies that, through subsidies, take from those of modest wealth and give to those with considerably more?

2 thoughts on “What the Affordable Care Act Gets Wrong

  1. Pingback: This Week’s Links « Timothy Siburg

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