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June 27, 2012 11:11 AM Very Rich People Already Get Subsidies for Their Health Insurance

By Aaron Carroll

A commenter (and some e-mailers) noted that they thought it was “astonishing” that someone making more $90,000 a year will get a subsidy of $2200 to buy insurance on the exchanges. This is probably a good time to remind all of you that tons and tons of people get subsidies already to buy insurance. They get them through tax deductions for health insurance when it’s purchased through their jobs.

Look at it this way. Let’s say your plan (like the exchange example) costs about $11,000. Let’s say you make a comparable living, such that you are in the 25% tax bracket. That means you’re getting a $2750 “subsidy” when you use pre-tax dollars to buy your insurance. You’re getting a bigger subsidy than the guy who makes $90,000 and buys his insurance through the exchange.

Moreover, the more you make, the bigger your “subsidy”. If you’re in the 35% bracket, your subsidy is $3850.

No one ever seems to complain about these people getting thousands of dollars back in their taxes for their insurance. But offer a family of four who make far less $2200, and it’s “welfare”.

[Cross-posted at The Incidental Economist]

Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.