Sunday, September 3, 2017

Let's stop using accounting gimmicks - Obamacare Ad edition

The decision by the Trump administration to slash the Affordable Care Act exchange advertising from $100 million to just $10 million is bad policy. There are many legitimate reasons why it is bad policy, so I implore people on the left to stick to these real arguments instead of using arguments based on accounting gimmicks.

Many people have pointed out that cutting this government ad spending produces “no direct taxpayer savings,” since the money comes from a 3 percent fee added to all insurers' premiums on the exchange to cover the cost of operating the exchanges and running government outreach. The idea taxpayers aren’t paying for these ads is *technically* correct, only if we take the most extremely narrow view of government spending.

The fact is the vast majority of people who buy insurance on the exchanges qualify for affordablity tax credits. Due to the way the tax credits are designed, anything that increases average insurance premiums on the exchange causes a near identical increase in the amount the government spends on tax credits for each low income individual.

What this means is that when the HHS imposes a “user fee” on insurers using the exchange, the insurers end up just increasing premiums for people by the exact cost of the user fee. This forces the Treasury to increase spending on tax credits by basically that same amount. The design means the Treasury is effectively paying for almost all of the user fees that have been funding these outreach ads -- it just does it in a needlessly complicated, indirect, and wasteful way.

It works out that for every extra dollar HHS charges in user fees, it is effectively making Treasury give the HHS roughly 90 cents via higher tax credits.

If you think the government spending significantly less on advertising for the health insurance exchanges is bad policy, just argue that. It is easy to make that policy argument, because it is bad policy. But please stop making stupid accounting gimmick arguments that we're not really talking about taxpayer spending. We have just hidden the spending in a complicated system of fees/subsidies that really just inefficiently moves money from one part of the government to another.

This desire to pretend government spending isn’t really spending or taxes aren't really taxes has been incredibly destructive to our government and terrible for long term progressive politics. It is why we end up trying to make so much policy via inefficient tax deductions to hide the true cost, or with public/private partnerships that let us pretend mandated fees imposed on government-selected private monopolies are technically not “taxes.”

If you think the government should spend money on something, please just argue why.

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