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Posted at 11:24 AM ET, 01/19/2011

The first 12 million is always the hardest

By Ezra Klein

I've been a bit dismissive of the Affordable Care Act's early benefits, but Suzy Khimm ran the numbers and found that 12 million people are receiving protection, coverage or direct benefits from some portion of the bill. That's a lot more than I would've thought.

By Ezra Klein  | January 19, 2011; 11:24 AM ET
Categories:  Health Reform  
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how many millions are paying more in taxes?

how many millions are getting increases in their MA plans based upon the subsidies going away for them?

oh ssh. I forgot, only benefits here, no costs.

Honestly i'm surprised Suzy didn't try to average out small businesses to be say an average of 3 employees per company and say it was 6 million instead of 2.

Also 2 million children not being subjected to pre-existing conditions does NOT mean that they can either 1, afford the coverage or 2 have a clue as to where to get it.

Posted by: visionbrkr | January 19, 2011 1:32 PM | Report abuse

Ezra just unwittingly provided yet another bullet-point for the detractors of the CBO score of the PPACA. See, in boasting about the millions who are already benefiting from the PPACA, Ezra reveals more flaws in the CBO 'scoring' of cost estimates.

Exhibit A: the report Ezra points us to of the 12 million beneficiaries thus far includes 4 million small businesses who are estimated to qualify for the 'small employer tax credit' in Year 1. Now, I know math is really hard for liberals, but please try to follow....

To qualify for the max 35% tax credit, an employer must have fewer than 10 employees and pay at least 50% of the health insurance premium. To qualify for partial tax credit, an employer must have fewer than 25 employees, and pay 50% of the health insurance premium.

So, I just did some rough top-side general assumptions:
$10,000 = average annual premium per employee
$5,000 = employer-paid portion
5 = average number of employees at small businesses qualifying for max 35% credit
12.5 = avg number of employees at small businesses qualifying for sliding-scale credit (I used 17.5% average credit)
1.2M = number of businesses qualifying for 35% credit, according to Ezra's reference.
2.8M = number of businesses qualifying for partial tax credit.

If you do all the addition and multiplication, you will find that the average qualifying small business stands to realize a weighted average $10,300 tax credit. Multiply this by the 4 million small businesses claimed to be eligible by Ezra's source, and the estimated tax credit to be claimed in Year 1 equals $41.3 billion.

Now, let's head over to the CBO report of which Ezra is so fond...there it is, page 19, Table 2, about 3-4 rows down....appears they assumed this tax credit would cost.....drum-roll..... $2 billion in Year 1.

Well, that's only a miss of about 2,065% by the CBO. Sounds about right....there goes another $39 billion of the supposed deficit reduction down the drain.

(by the way, am I allowed to say 'bullet-point', or is that considered violent rhetoric?)

Posted by: dbw1 | January 19, 2011 1:55 PM | Report abuse

Shouldn't you be saying "Patient Protection Affordable Care Act" -- not just "Affordable Care Act"? Your abbreviation was disrespectful of this name, whose grandiose claim reminds of, well "People's democratic republic of..."

Posted by: truck1 | January 19, 2011 2:10 PM | Report abuse

My bad...I already found an error in my own math. I only assumed an average 12.5 employees for small businesses qualifying for partial credit. I thought it was fair to assume if they must have fewer than 25, half of 25 would be a fair estimate for an average.

However, I forgot that I already accounted for employers with fewer than 10 instead of 12.5, I should have used 17.5 as the average for number of employees qualifying for the partial credit.

That means the cost of the tax credit is closer to $53.6 billion, not $41.3 billion. So it's even farther off vs the CBO score than I thought.

Posted by: dbw1 | January 19, 2011 2:10 PM | Report abuse


stellar work. You should be commended but i'm thinking you'll be ignored around here. hmmm.

Posted by: visionbrkr | January 19, 2011 2:39 PM | Report abuse


There has to be some sort of offset. I ran the numbers too, and not only did I get the same results using your numbers, it seems virtually impossible to arrive at a number as low as $2 billion.

Assuming that the average number of employees at company with 10 or fewer employees was just 1, that the average number of employees at companies with 11-25 is 11, that the tax credit on average worth just 1% for companies with 11-25 employees, and that employers only pay $3,500 on average and I STILL get an outlay of $2.55 billion.

Other than an offset, the only other thing I can think of would be that CBO drastically underestimated the number for firms which were elligible for the credit.

By the way, how cost effective is such a policy at expanding coverage? If 80% of companies receiving the tax credit would offer insurance even without the tax credit, then the cost of providing insurance via tax policy to an incremental worker is 5x the per capita value of the tax credit.

Posted by: justin84 | January 19, 2011 2:45 PM | Report abuse

"By the way, how cost effective is such a policy at expanding coverage?"

The CBO estimated 200,000 would use the high-risk pools....the labor union funded NIHCR estimated nearly 6-7 million may actually qualify.

If my numbers are anywhere even close, that would imply the CBO estimated only 250,000 small businesses would qualify for the tax credit....while Ezra now trumpets that as many as 4 million may qualify. So that at least the CBO is consistent in how far off they are in their estimates :o).

Yet another question to mull over.... how many small businesses will actually REDUCE the share of the employees premium they currently pay, since they qualify for the same tax credit for paying 50% of the premium as they would for paying 60%...or 70%...or 100%.

This would actually INCREASE the net cost of health care insurance to the employees of small businesses, harming the very ones Democrats claimed to be helping! (since small businesses tend to employ more lower-wage workers than large-businesses)

Ahhhhh....the unintended negative consequences of progressive policies.

Posted by: dbw1 | January 19, 2011 3:07 PM | Report abuse

By the way, to be fair I found my estimate of 17.5% average tax credit for those qualifying for partial credit to be too high. The tax credit scales-down much more quickly than I thought.

The 35% max credit slides down the scale at both number-of-employees increases AND average wage per employee increases. So using the average wage per employee for a small business, I estimate the average tax credit for partial-qualifiers would be more like 8%-10%....bringing the total Year 1 cost of the tax credit back down to around $33 billion.

Still a long ways to go to figure out how the CBO figured this would only cost $2 billion, though.

Posted by: dbw1 | January 19, 2011 3:11 PM | Report abuse

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