Obamacare: Ending a poverty trap

by Taylor Daily

For the past couple of decades, work incentives have been a priority among reformers on the federal level for many social programs. Welfare reform under Bill Clinton was heralded as a bipartisan success, despite concerns that many would unfairly lose benefits. Yet when the Affordable Care Act ended one of the few remaining federal work disincentives, little attention was paid.

Currently, Social Security Supplementary Security Income provides a necessary service: If you are disabled and cannot work, you will be provided with some income. As an individual in Rhode Island, your monthly payment would be $710. In many states, including Rhode Island, you would also qualify for Medicaid, something that is especially important if your disability requires medical care.

Under the SSI program, if you are able to work and earn money, you can do so, but your benefits are reduced $1 for every $2 earned. Furthermore, the program requires that you cannot maintain $2,000 in total assets, excluding items such as cars. If you earn too much or maintain too much in assets, you lose your eligibility and therefore your Medicaid coverage. If your disability qualifies as a pre-existing condition, then it is likely that you would be left without insurance entirely.

People in this position are trapped. They might have the potential to earn far more than SSI provides and may want to purchase their own private insurance, which could provide better care than Medicaid can. Fortunately, the Affordable Care Act will eliminate this problem entirely when insurance companies are required to cover those with pre-existing conditions.

When looking at the history of supposed work disincentives, we see a record filled with weak evidence: anecdotes of “welfare queens” that turned out to be the rare case instead of the rule. Instead, the work disincentives are real, and many people want to work instead of living below the poverty line. Yet we see little credit given to anyone over ending this unfortunate situation.

Perhaps the reason for this is that the solution came as part of the complex Affordable Care Act, which has implications far beyond the scope of this one problem. Maybe the lesson to learn is that we can often forget the accomplishments that our country makes in the din of political conflict, which so often drowns out any good news or sign of progress. It is important to remember that we do have the capacity to improve the lives of our fellow citizens, even in these times when our political system seems most broken.

 

photo by LaDawna Howard: http://www.flickr.com/photos/ladawnaspics/7029981403/