Rudy on Health Care

So I feel like the fact that the centerpiece of Rudy Giuliani's health care plan is absolutely terrible hasn't quite gotten the coverage it deserves: "Under Giuliani's plan, up to $15,000 of a family's health care spending would be excluded from taxes."

The way this works is that the level of help this gives you with your health care costs is inversely proportional to your objective level of financial need. If you're a millionaire, a $15,000 exclusion is worth over $5,000 but a working class person in the 10 percent bracket only gets $1,500. This is, in short, just another way of saying "we need a giant tax cut primarily focused at rich people" except now health care is the pretext.

Comments

Not too different from the present situation of healthcare savings accounts for the wealthy and the medical deduction for the not-very-wealthy. Completely empty campaign point that just repackages something that (basically) already exists.

It really translates as a $5000 subsidy for the purchase of health insurance by the wealthy self-employed who would purchae it anyway (and can use an HSA to do so). And for uninsured, median income folks--a whopping 7.5% of income deduction to those who can't afford insurance (e.g. married couple with AGI of $40k with $15k in medical expenses would get an added break of (.075(existing threshold for deducting med costs)*40k*.15(mariginal tax rate)=$450). It seems like it would be basically cost neutral, but some bright bulb in Rudy's campaign clearly thought it would play well to someone.

Posted by zaleriana | August 1, 2007 1:04 PM

Well, of course. This is how it works. If you're poor and need health care, with Rudy's policy, you can just work your way up the ladder to become rich, and then your health care needs are taken care of! Isn't it a wondrous thing!

Posted by amandaw | August 1, 2007 1:25 PM

It isn't meant as a health plan, it's meant to check the health "plan" box. That's typical Republican politicians, they don't actually care if working people don't get medical care, but they can't say that out loud.

Though this "plan" says it clearly enough.

Posted by AJ | August 1, 2007 2:14 PM

Well, except for the part about "offerp[ing] tax-credits to low-income individuals."

The proposal could be reversed--tax benefits provided by employers. That would have the benefit of being progressive (in that the rich, who benefit the most from the current deductibility, would pay the most), and would equalize employer vs. individual purchases. Which is the point of the proposal, despite MY's suggestion to the contrary.

("Millionaire", btw, is typically used to describe someone with $1 million or more in assets, or in liquid assets; it doesn't tell us anything about how much someone earns from income in any year.)

Posted by Thomas | August 1, 2007 2:17 PM

Well, given that the rich folks will generally have health insurance, how many of them will have qualifying health expenses at the maximum of $15,000?

Also, that $1,500 is likely to have a bigger impact on the life of someone at the low marginal end of the tax spectrum than the $5,000 will on the life of someone at the high marginal end. To a millionaire (lets say someone who earns exactly $1,000,000 a year), 5 grand is .05% of their income. To someone in the 10% tax bracket after taking the $15,000 deduction (lets be generous and say that the person earned exactly $7,825 of taxable income after the full $15,000 medical care deduction and $5,150 standard deduction, giving him a yearly income of $27,975) that $1,500 represents about 5% of his yearly income.

In other words, that $1,500 will likely mean ten times as much to someone in the 10% tax bracket as the $5,000 will to our hypothetical millionaire.

In any event, the point of Giuliani's approach is to allow individuals the same deductions corporations receive for providing that insurance. If that actually lets people afford health insurance who otherwise would not have been able to, that will have major benefits down the road (both societally and specifically for the folks in the 10% tax bracket you are concerned about).

Posted by Akiva M | August 1, 2007 2:20 PM

Just give me the $1,500.

Posted by FS | August 1, 2007 2:32 PM

$1,500 isn't going to do crap for me if I can't be insured because I have a "preexisting condition."

Posted by amandaw | August 1, 2007 2:36 PM

"...but a working class person in the 10 percent bracket..."

But why stop there?

If you're unemployed (and therefore likely in dire need of help with heath care costs), Rudy's plan does you no good at all.

Posted by Robert Earle | August 1, 2007 3:10 PM

In the olden days we would've demanded affordable health care, rifles in hand. Quick tip: bring mason jars to carry all the leeches!

Posted by Gregorio | August 1, 2007 3:11 PM

In other words, that $1,500 will likely mean ten times as much to someone in the 10% tax bracket as the $5,000 will to our hypothetical millionaire.

$1500 doesn't mean much of anything if you have cancer.

Posted by Derek Scruggs | August 1, 2007 3:30 PM

Your all also not mentioning that to get the $1500 tax cut the poor person had to sepnd $15,000 on health care, how many poor people are gonna be able to spend what could be virtually their entire years take home pay on health care?

Posted by Eric K | August 1, 2007 3:50 PM

"that $1,500 will likely mean ten times as much to someone in the 10% tax bracket as the $5,000 will to our hypothetical millionaire."

And since it represents about (1.5k/12.975k=) 11.5% of his after-medical-expenses income versus (5k/985k=) .5% of the million dollar man, it really means 23(!!!!) times as much. So Guiliani's proposal looks like a great deal for the working man and a terrible deal for the wealthy. Rudy's a real man of the people.

Oh, wait . . . if you spend (15k/27975=) 53.6% of your pre-FICA income (or 15k/25835=58% after fica---just over $800 per month, ignoring fed and state income tax withholding) on medical costs and insurance, you can't afford anything else--you're headed straight to bankruptcy and you won't be seeing that refund as it will go straight into your Chapter 13 estate (since Chapter 7 is not-very available after the last "reform").

Posted by zaleriana | August 1, 2007 4:02 PM

I think the important thing about the plan is its presentation -- Rudy's 'single-payer... European... socialism...' bullshit suggests that he has no real investment in the topic, and isn't interested in anything like a good-faith discussion. In short, he's just going through the motions.

Posted by pseudonymous in nc | August 1, 2007 4:03 PM

If you're poor and need health care, with Rudy's policy, you can just work your way up the ladder to become rich, and then your health care needs are taken care of!

Or you can find someone who's come into a lot of money from speechifying, and marry him. Huzzah!

Posted by pseudonymous in nc | August 1, 2007 4:16 PM

If Joe Sixpack today doesn't have health insurance because of an existing condition or whatever other nonsense, the government giving him $1500 to buy some isn't going to make the insurance companies insure him. The risk to the company does not come from his inability to pay, it comes from his health situation as a human being. Yet another place where the "free market" jars with health care reality.

Of course, this is obvious. Rudy knows it. He just doesn't care. It's not meant to be serious health care reform, if he were to become President (heaven help us), it wouldn't even be enacted. Health care is not on his list, or any R's list.

Posted by Joshua | August 1, 2007 5:03 PM

Why is everyone overlooking the obvious fact that people are sick because they have sinned?

Simply repent and be healed, voila! Jesus cures.

Posted by Gregorio | August 1, 2007 5:15 PM

Re: Of course, this is obvious. Rudy knows it.

don't be so sure he's aware of that (exclusion of sick people from individual health plans). My guess is that he and everyone he knows is insured by a group plan, which do not exclude people or charge them more, and he may just assume that's the way it works for everyone. Don't underestimate the ignorance of the rich about the facts of life for the non-rich.

Posted by JonF | August 1, 2007 5:17 PM

Well, except for the part about "offer[ing] tax-credits to low-income individuals."

Yup. The Rudy plan may look bad for poor people if you ignore the parts that are meant to help poor people.

Posted by Al | August 1, 2007 5:27 PM

"The Rudy plan may look bad for poor people if you ignore the parts that are meant to help poor people."

You mean the parts of the plan which they haven't developed yet?

From Newsday: "Competition would push prices so low that even the uninsured could afford it, he said. He also said he would propose tax credits and vouchers to help them buy insurance, but offered no details."

From Fox News: "Giuliani offered the broad outline of his plan but his campaign did not provide many specifics. Asked how much his plan would cost and how many of the people without insurance it would help, Giuliani said he won't have those answers for two or three months.

He also acknowledged that it could take years for insurers to drop their prices and make insurance affordable to those who don't have it."

Looks pretty bad for poor people. Or at least for the not-quite poor person who makes one dollar too much to qualify for the "vouchers".

Posted by zaleriana | August 1, 2007 5:42 PM

I guess that one defect of Guliani plan can be fixed pronto. Already some gazillionaires enjoy 15% tax rate. Make income tax frankly regressive, and then tax benefit will become progressive! Start with 38% bracket on income 0-15k, then 30% on 15-30k, etc, down to zero bracket above 200k. In that way, all deductions like mortgage etc. would benefit the poor and middle class alone.

Just do not tell Guliani -- he could as well win elections with this brilliant idea.

Posted by piotr | August 1, 2007 8:54 PM