Sunday, December 23, 2007

More anti-logic from Columbus - SCHIP and Medicaid

Here's what I don't get:

Gov. Ted Strickland is upset because the U.S. Department of Health and Human Services rejected Ohio's plan to expand Medicaid eligibility to more families in Ohio. In fact, the state's plan would have increased the eligibility threshold from 200% of poverty level up to to 300%, meaning that families of four earning $62,000 per year would be eligible. In fact, he said he was 'appalled' by the decision.

He now plans to revise the request, increasing the eligibility threshold from 200% to 250% of poverty level. If the request is funded under SCHIP, the state would have a 30% match requirement. If the request is funded under Medicaid, the state would have a 40% match.

But then, there was today's Blade article in which the state's Medicaid struggles are detailed:

"...the governor who made expanded health care a priority angered supporters by delaying plans to restore promised dental Medicaid benefits to low-income adults that were eliminated two years ago.

As Medicaid rolls increase at a clip faster than expected, the governor also delayed promised fee increases for medical professionals providing Medicaid services.

And on Friday, the governor learned that the state likely will have to spend $207 million more for Medicaid than the budget anticipated, indicating that even more belt-tightening is to come."

So, if we've cut Medicaid services like dental benefits, delayed fee increases for medical providers and will have to spend $207 million MORE than budgeted, why are we asked the feds for permission to expand eligibility?

People making $62,000 per year are, according to IRS data, at the top end of the definition of middle class. Only 25% of wage earners make more than that - meaning that Strickland's rejected proposal was NOT covering 'low-income' families, but was, in fact, a request to cover all middle-class families - some of whom already have private insurance. And he wanted to do so while keeping cuts in services to people already enrolled in Medicaid.

The state cannot afford to meet its current commitments as budgeted, but they want to add more people onto the Medicaid rolls. Where is the logic in this?


Chris said...

Maggie, there's something I don't understand according to your post. The SCHIP expansion plan would cover families of four that make up to $62,000 per year. This is household imcome, correct? Yet, you post definitions of middle class (as per IRS) as between $30,000 and $70,000 per year. This is individual income, no? So, a household income of $62,000 would not really be considered upper-end "middle class" since it would average out to $31,000 per income earner (assuming we are discussing 2 working parents). Add 2 kids to the mix, then isn't this family on the very low end of "middle class"? Maybe I misunderstand...

Maggie said...

Chris - you raise a good point, so let me explain. Poverty levels are based upon household income, regardless of how many people are actually earning any income.

The definition of middle class is NOT from the IRS, as they don't provide such a definition, but from multiple sources using IRS data on the percentages of individuals earning certain amounts of money.

So, if you have 25% of the population earning more than $62,000, and 25% of the population earning less than $30,000, a simple conclusion would be that the upper 25% are 'rich,' the lower 25% are 'poor,' and the 50% in the middle are 'middle class.'

Now, IRS income data is not based solely upon each person filing separately. Many married couples file jointly while others file under the category of 'married filing separately.' Because of this, there is no way to use IRS data to determine if the $62,000 is household income or per person income. But that also applies to all income levels, not just the middle class.

So, since the IRS data doesn't distinguish between the various types of filings, I suppose it would be more accurate to use the term 'filers' instead of 'individuals' when referring to the IRS data, with the understanding that 'filers' could be two people.

So, then, out of this definition of middle class, based upon earnings, the government has decided to define eligibility for handouts. That eligibility is based upon total household income (married or not) and number of children, among other things.

The eligibility rules would allow a family with more children to have higher household incomes and, in looking for fairness in such rules, this would make sense. IRS data doesn't distinguish earnings based upon deductions for dependents.

I wouldn't say that a married couple earning $50,000 each are each middle class. I'd say that they are, according to this definition, 'rich.' But, two unmarried people living together each earning $50,000 could each be eligible for certain government handouts, especially if they have separate bank accounts, etc... Likewise, a married couple with six kids would be at 300% of poverty level if their household income was at $95,000 - and that household could have only one income earner who would be considered 'rich' based upon the income.

The key is to understand that the eligibility determination is actually a subset of the definition. Out of all defined 'middle class filers' based upon other criteria, you could be eligible for handouts. Expanding the subset of eligibility rules does not change the overall data that only 25% of filers report earnings over $62,000.

The problem this raises is that most people think of themselves as middle class. If you read my previous column on the subject, you'll see that only 44% of people with incomes in the range call themselves 'middle class' while most peope earning between $30-200,000 think of themselves as middle class.

Part of the problem is how to define eligibility - and what criteria are used to compile such a definition.

When you consistently increase eligibility levels beyond your definition of 'poverty level,' you enter a never-ending expansion of whatever program you're providing.

And, when you look at the so-called 'quality of life' of people in the 'poverty levels' (including those up to 200-300% of poverty levels), you realize that they are not as bad off as the term and traditional perceptions of poverty would have you believe. A significant number (46%) own their own homes, have air conditioning (76%), are not overcrowded (66% have more than two rooms per person in their households), own a car (75%), own two or more cars (30%), own two or more color tvs (50%), have a VCR or DVD player (75%), have cable or satellite tv (62%), more than half own a stereo and three-quarters own a microwave.

Now, you may say that some of these things are necessitites (like cars or air conditioning depending upon where you live), but others are not (like cable, VCRs/DVDs, microwaves or stereos). As some speculate, many 'poor' people are able to afford such amenities because they're not paying for other things due to government (taxpayers) paying it for them.

Then there is the question of 'poor' versus, as you called it, 'very low end of middle class.' If you are constantly expanding your eligibility, where does it end? If you're going to offer handouts to 'very low end middle class,' why not to 'the middle of middle class' and then to the entire middle class? That's what the proposed expansion would do ...

But the point of my post was the anti-logic. Regardless of the definitions and the proposed eligibility levels, if the State of Ohio is having trouble meeting its current obligations with these funds, why would we even consider expanding services paid for with these same funds?

Chris said...

The problem with this thinking IMO, is trying to define "middle class". Once it starts, people will use different methods in order to prove a point.

But I have a problem with any defintion that defines a family of 4 making $63,000 as being "rich".

Maggie said...

Chris - agreed ... but all our presidential candidates are referring to the middle class without offering definitions - meaning that most people think the candidates are talking about them...

I think if people realized that only 25% of 'filer's make more than $62,000, they'd be quite surprised. The other way some people break this down is by quintiles (5 20% categories). Under this, the top 20% of filers would be 'rich,' the bottom 20% of filers would be 'poor' and the middle 60% total would be 'middle class.'

According to the Congressional Budget Office, the top 10% of wage earners are people (actually filers) who make more than $87,300 (from 2004 figures). So even if you don't think $62,000 makes someone 'rich', being in the top 10% of wage earners would more than likely qualify - and that means 'filers' who report incomes of $87,300 are 'rich.'

When you consider that 2-income families in Toledo with good union jobs and overtime could easily achieve these types of earnings, it really makes you stop and think.

Maggie said...

Want to know what else is scary, Chris?

When all those presidential candidates talk about 'taxing the rich', it's those filers who are in the top 25% or so of wage earners...and that means a lot more people than most would think.

Consider neighbors we had - both worked at Libbey Glass and had been there for years. Both took overtime whenever offered. In 2001 they had to pay the AMT because they earned more than $100,000 combined. They certainly didn't think of themselves as 'rich' but the government had them in the top 15% of wage earners and taxed them more. Talk about a shock to them...they jokingly said that they guess they needed to register as republicans...

Chris said...

but all our presidential candidates are referring to the middle class without offering definitions - meaning that most people think the candidates are talking about them...

Maybe that's because (as you said in another post):

nearly everyone with incomes from $30,000 to $200,000 think of themselves as middle class and that range represents about 75% of all families

And in this case, maybe the "rich" are the 5% who earn more than $200,000?

Maggie said...

Chris, according to the Tax Foundation, in 2005, $145,283 was the minimum adjusted gross income on a tax return to put the filer(s) in the top 5%.

And, as you rightly pointed out, having a bunch of kids to support, even if you have higher incomes, certainly changes your perspective.

Chris said...

I should have said "less than 5%", as I was just using the info you provided in another post.

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