Just one week after the President said ObamaCare is working better than he expected, the Kaiser Foundation published a study that shows a whopping 95 percent of people who received advanced subsidies last year may have been handed an amount for which they were not eligible. To put that in perspective, to every 100 individuals that ObamaCare sent advanced subsidies, only five received the correct amount.
This blunder would shape out to be a costly surprise for most of the people who received advanced subsidies under ObamaCare in 2014. Half of them would owe the IRS a significant average repayment of $794. It would eat up roughly 65 percent of the tax refunds to the middle-income families who received these subsidies. On the other hand, since only about five percent of the eligible population would have finished the year with the correct amount of subsidies, about 45 percent could look forward to an average refund of $773.
The Kaiser Foundation has not been alone in discovering that ObamaCare has very successfully sent the wrong amount of subsidies to a vast number of people. For example, H&R Block and Jackson Hewitt both reported that more than half of their clients who have filed taxes so far have been required to issue a repayment.
The reason for this blunder is the ridiculous method by which ObamaCare determines the amount of subsidies to send to each person. Although monthly subsidies are ultimately tied to an individual’s final annual income, people actually receive them based on their uncertain estimations, which are validated by their most recent tax return information.
According to this method, people who signed up early for 2014 subsidies could have done so as early as October 2013. Thus, as the Kaiser report says, they “would have likely had their incomes verified by their 2012 tax returns…Unless applicants actively accounted for changes between 2012 and current income, their subsidies may have been based on an already out-of-date income.” Counting on applicants to “actively account for changes” in their incomes has turned out to be wishful thinking. After all, the report projected that only five percent of the eligible population finished the year with the proper amount of subsidies.
Ultimately, the law—which Congress had to pass in order to find out what it said—developed a tenuous system of passing out subsidies based on an individual’s best guess of the future, which could have been verified by an out-of-date income. So it wouldn’t come as a rude awakening to learn that the law had just a five percent success rate in passing out subsidies. Although, on a more positive note, maybe this is better than the President expected.
FreedomWorks Letter to Congress in Support of Fiscal Commision Act (H.R. 5779)