Last night, Sens. Mike Lee and Jerry Moran put the Republican health care bill out of its misery, simultaneously announcing on Twitter that they couldn’t support it so neither could be precisely blamed for its demise. Health care has been the rocks upon which so many legislative agendas have crashed in the past century; President Trump and the Republicans are following in a great tradition.
But while we await Mitch McConnell’s next move, it’s instructive to understand what Republicans wanted to do here, because it offers some insight into what Democrats can use as a message for their long-sought path back to respectability as a political force. One of the core functions of the now-lamented Better Care Reconciliation Act (BCRA) was to continue outsourcing the federal bureaucracy to the individual. This trend imposes on the public an assortment of administrative duties to work the system for the best deal. It turns us all into accountants and personal shoppers, drowning us with unreasonable busy work. If there’s one rallying cry our country needs, one Democrats could give, it’s to Make America Simpler Again.
As The Washington Post’s Matt O’Brien explains, in the BCRA, Senate leaders maintained Obamacare tax increases on the rich. That money was intended for states to use to deal with rising premiums. But at the same time, the BCRA would have expanded the use of health savings accounts (HSAs), the latest in a series of government-enabled tax shelters for the wealthy.
The idea behind HSAs, created in 2003, is that you put money into a tax-exempt account, and use it to pay for medical expenses. You need two things for this to work — savings, and a high enough tax bracket that you actually pay federal taxes, making the use of pre-tax dollars worthwhile. Only about 30 percent of American workers use HSAs today, and the vast majority of the funds in them come from people earning $100,000 or more per year.
Under the BCRA, HSAs would have been eligible for the first time to pay for insurance premiums in addition to out-of-pocket costs. This makes them more valuable to the small subset of Americans who can actually use them. It also assists Wall Street, because HSA money can get invested in stocks or mutual funds. The entire HSA framework can be seen as an inducement to pay money managers fees on trades.
Of course, this is far from the only tax-preferred savings account anyone wanting to maximize government largesse can employ. There are Coverdell Education Savings Accounts and 529 plans, both of which encourage saving for future schooling for children. There are three types of individual retirement accounts and simplified employee pensions for the self-employed. There are ABLE accounts for disability expenses, flexible spending accounts for dependent care or parking and transit reimbursement, and countless others I don’t have a good enough financial advisor to know about.
All of these have their own complicated rules (check out this long explainer on HSAs): how much money you can pour in per year, how much you can take out and what you can do while it’s sitting there. There are penalties for early withdrawal or withdrawal for the wrong expenditure or not withdrawing enough later in life. What’s more, they mire people’s lives in the drudgery of accounting and bookkeeping, adding unnecessary headaches just to earn a scrap of tax savings. Josh Barro of Business Insider detailed the laborious steps needed just to get his flexible spending account purchases into the system.
Nobody in America yearns to manage 18 different tax-preferred accounts, each used for its own specific set of expenses. It’s an incredibly stupid way to submerge a benefit so only people with enough resources to hire an advisor or enough free time to become a citizen-accountant can earn the rewards. It either makes people crazy or eludes their understanding.
Instead of a robust bureaucracy that handles federal benefits and safety net provisions, we’re now meant to handle these things on our own, to become smart shoppers and investment wizards in every facet of our lives, to waste our time with make-work. It’s as if we’re in a video game where we have to unlock what we’ve actually earned by obtaining a series of special keys, each one more difficult to find than the last.
Simply put, we don’t have to make being an American this complicated, and that doesn’t only go for all these individual accounts we’re shouldering.
Instead of dozens of grants and loans and tax breaks for education, the government can simply make tuition at public colleges and universities free, and repayment for other expenses automatic rather than dealing with a middleman loan servicer. Instead of tax season stress, the government can send us our tax return, as it works in other countries, which we need only double-check and send back. Instead of having people juggle inadequate retirement accounts, the government could expand Social Security. Instead of gap insurance policies for Medicare, the government could just make Medicare cover what’s missing. In fact we could just put everyone on Medicare, saving all the burdens on the individual to update policies every year and continually search for the best deal. And instead of 18 different means-tested, segregated benefit programs, we could just give people a basic income and the guarantee of a job.
Complexity is not hard-wired into the American system; it was placed there by zealots who want to burn the state and force people onto islands of bureaucracy. We pay for a government that can easily keep track of the million pieces of minutiae we’ve outsourced to individuals over the years. That way we can experience the best in life, our favorite pursuits and most cherished relationships, instead of being chained to our savings accounts and insurance exchange portals and TurboTax schedules.
A political party that doesn’t approach people with another in a pile of unnecessary hassles, one that offers actual freedom, an escape from the tyranny of market comparison or investment due diligence, would galvanize the public.