New health care bill: A Robin Hood tax with a twist

The new health care bill takes from the rich. But a decade from now, it trims some of the subsidies to the near-poor.

In Nottingham, England, stands a statue of famed outlaw Robin Hood. Some critics call the new health care bill a Robin Hood tax.

Critics like to call the new healthcare bill a Robin Hood tax. And they're right.

The sweeping reform legislation redistributes benefits from the richer segments to the poorer segments of US society.

But things are a bit more complicated in 21st century America than in the 13th century England. America's Robin Hood healthcare plan will have to be fiscally conservative as well as redistributionist, which would make its Sherwood Forest predecessor nervous.

Subsidies for the near-poor

To begin with, the new subsidies for healthcare insurance don't go to the poor. (Medicare already handles them.) The new financial aid goes to the near-poor, who have struggled for decades to be able to afford healthcare insurance.

Those who earn 150 percent or less of the poverty line (around, say, $30,000 for a family of four) would get a subsidy equal to about 95 percent of their premium.

To pay for a large chunk of those subsidies, the bill taxes the rich in various ways.

More importantly, the bill redistributes the benefits that, up to now, have been skewed toward the rich, The Economist magazine points out.

For example, the government currently makes health-insurance tax-free for large companies. That's a nice $240 billion subsidy for employees of large companies, but are they more deserving than employees of small businesses or small business owners. Are they more needy than the unemployed, who get no such tax break?

The bill's redistribution of benefits is Robin Hood-like as far as it goes. The challenge is that there's more to the new plan.

Limiting future subsidies

To reduce the deficit in the long term, the bill cuts back on the growth of subsidies, beginning about a decade from now, writes Monitor guest blogger Donald Marron:

From a budget point of view, the basic structure of the legislative package is thus: Expand the commitment to health care in the next decade, pay for that expansion using other revenue sources, and then reduce the overall health commitment in later years. It’s that structure that leads to disagreement among budget experts about the long-run effects of the legislation.

If Congress is willing to slow the growth of subsidies (cutting them back, relatively speaking), then the US really can reduce its deficit by about half a percentage point of gross domestic product, starting about a decade from now, according to the Congressional Budget Office.

If not, then it could expand the deficit by roughly a quarter percentage point of GDP, a huge swing, points out Monitor guest blogger Diane Lim Rogers.

It’s the difference between being able to call this a major deficit reduction plan (which was a sketchy label anyway for a plan with a primary purpose of expanding health coverage), and more realistically calling it a deficit-financed expansion of a new entitlement.

In a decade or so, we'll know whether the new healthcare plan took from the rich to give to the less fortunate – or just mortgaged the future for all of us.

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