Why We Can't Conclude that Obamacare Plus Subsidies are Good for Low-income People
All three factors can combine to make the value of the insurance policy well below its price. Let’s say that the family values the insurance at $3,500. That family is worse off because it is paying $4,000 net of the subsidy. The family can do a little better if one family member works less in order to increase the subsidy. But we cannot, like Krugman and Blinder, naively conclude from the fact that a family member chooses to work less that the family is definitely better off. All we know is that the government dealt the family a hand that could be very bad. The family has no choice but to play the hand it was dealt. By working less, the family makes the hand less bad. But we can’t say for sure that the hand is good.
This is the concluding paragraph of my article, “Obamacare’s ‘Disincentive’ Scheme,” Defining Ideas, February 18, 2014.
Check out my Trabant analogy.