The Affordable Care Act leaves it to the states to decide whether they want to let insurers charge older Americans more for coverage. If a state takes no action, a 64-year-old buying his own insurance in the individual market will pay up to three times more than an 18-year-old. In the small-group market – if a small business employs an unusually large number of older workers – the same 3:1 ratio applies.
Today, in most states, there are no caps on how much insurers can charge a 60-something forced to purchase his own insurance. In the individual market, only New York State bans age rating altogether, and just three other states limit how much premiums can vary, based on age, to less than 3:1. When insurers sell policies to small businesses, Vermont also prohibits age rating, but only five other states cap increases.
To check whether your state shields older boomers in either of these markets, take a look at these charts. (A checkmark in the right-hand column means that age rating is now unregulated in that state.)
Help from the younger generation?
Under reform, more states could decide to ban age rating, or follow Massachusetts’ example, and limit the ratio to 2:1. But, politically, this would be a third-rail decision.
If older boomers pay less, younger adults would be charged more, and most are vehemently opposed to being asked to support the Pepsi Generation. As one of my younger readers once commented, “I’m willing to help my mother, but not someone else’s mother.”
Just how much more would a 20-something pay? According to researchers at the Urban Institute, eliminating age rating would lift average premiums for those 18 to 34 years old by $1,400 (from $3,600 to $5,000). Policy holders ages 35 to 44 would see their premiums rise by $800 (from $4,200 to $5,000). Meanwhile, premiums for those between age 45 and 64 would fall by about $2,400, from $7,500 to $5,100.
In other words, when costs are distributed over a large group, older adults save more than younger adults lose.
Still, many believe that older Boomers can and should pick up the higher tab for their own care. After all, throughout their financial lives, they have been luckier than most: they enjoyed first crack at the employment market when jobs were plentiful, and first dibs on housing when homes were affordable.
A generation hit hard
Yet in recent years, the economy has not been kind to the rock ‘n roll generation. One in six is now unemployed, and from 2000 to 2011, the average (mean) after-tax income of Americans age 45 to 54 (who are now in their 50s and early 60s) plunged by 13.3 percent.
By that measure, the recession has hit them harder than other age groups except Americans aged 15 to 24. Over those years, this cohort should have been enjoying their peak earning years. But as the chart below reveals, they didn’t.
Between 2000 and 2011 average after-tax income of Americans age 45 to 54 plunged by 13.3 percent. Graph: Advisor Perspectives, Inc.
Even worse, the Wall Street Journal reports, “at an age when they should be generating peak … savings,” many have been raiding their retirement funds and “applying for early Social Security benefits.” Among median-income households headed by someone age 55 to 64, total savings and assets stand at just $87,200. In 2014, they will be the 50- to 64-year-olds struggling to scrape together $7,500 to $8,500 to purchase health insurance in the individual market.
Of course, younger middle-class Americans also have watched their incomes slide, but time is on their side. They have many more years to recover. The problem for a jobless 60-year-old is that she won’t be able to make up for her losses unless she finds a higher-paying job – and that isn’t likely.
In 2014, just how many older Americans will find that they can’t afford universal coverage? Writing in Health Affairs in February, the Urban Institute’s researchers estimated that under reform, age rating means that roughly 1 million Americans age 45 to 64 will forego insurance.
Abolish age rating?
Yet there’s a trade off: if age rating were abolished, younger adults would be charged more, and some would decide they can’t afford insurance. Bottom line: “the number of uninsured older Americans would be roughly offset by increases in the number of uninsured adults in the two younger age groups (18-34 and 34-44).”
This worries policymakers for two reasons. First, we need young, healthy Americans in the pool to keep insurance costs down. Secondly, if young families decide to forego insurance, many won’t buy separate policies for the children.
How do we choose between children and their grandparents?
If we don’t want to ration care, the only rational solution is to bring down the cost by trimming waste in our health care system. This will be difficult. Most of the fat isn’t hanging out on the edges of the steak – it’s marbled throughout in the form of unnecessary treatments and over-priced products. It needs to be removed carefully, with a scalpel. But it can be done.
Maggie Mahar is an author and financial journalist who has written extensively about the American health care system. Her book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, was the inspiration for the documentary, Money Driven Medicine. She is a prolific blogger, writing most recently for TIME’s Moneyland. Previously she wrote and edited the Health Beat blog for the progressive think tank, The Century Foundation. Previous work for the Health Insurance Resource Center includesWill the Supreme Court strike down health reform? She also recently provided background on Congressional health care legislation for HealthReformVotes.org, a special project of the Health Insurance Resource Center.
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Tiffany–
]
Thank you very much for you coomment.
You wrote:
The attitude that some younger people have (I’ll pay for my mother but not someone else’s mother) is symptomatic of a larger problem in America. We don’t really care about our effect on other people. In some ways,”
Yes i’m afraid that is true of many (but not all, and I hope, not most )Americans.
You add: ” this is why the ACA would be a good thing. Even though at the moment it doesn’t have anything to stop age-rating (it should) it does make sure that everyone has health care coverage, regardless of moral objections or people who want to ride the system. Sam Ennis wrote a great column on some of the other benefits of the ACA here: http://www.constructionlitmag.com/additions/appeal-of-the-affordable-care
Yes, I agree. And thank you for the link.
Keith:: The good news is that he Affordable Care Act set s up financial bonuses for providers who try to keep paients well.
They wil be paid more if they keep patients out of the hospital– and managing their chronic diseases.
Tiffany
Brandy
Brandy– Yes, the VA has been very succesful in negotiating for lower drug prices for Vets. But Republilcans pushed through a law that banned Medicare form following the VA’s example
Neverthelesss Medicare, ike the VA , has the clout (size) to refuse to overpay.
And President Obama has indicated that letting Medicare negotiate is stil on the table. See http://www.healthbeatblog.com/2011/04/using-medicares-clout-to-negotiate-drug-pricesdid-obama-put-that-back-on-the-table.html
The attitude that some younger people have (I’ll pay for my mother but not someone else’s mother) is symptomatic of a larger problem in America. We don’t really care about our effect on other people. In some ways, this is why the ACA would be a good thing. Even though at the moment it doesn’t have anything to stop age-rating (it should) it does make sure that everyone has health care coverage, regardless of moral objections or people who want to ride the system. Sam Ennis wrote a great column on some of the other benefits of the ACA here: http://www.constructionlitmag.com/additions/appeal-of-the-affordable-care-act.
Costs will always go up for everyone, patient, employer, and medicare. Our healthcare system is not based on wellness but sickness. If you want medicare to cover your healthcare needs you need to be sick, if you want medicare to cover health wellness your out of pocket, its not a benifit.
Everyone should have affordable health care. The fact that I as an ordinary worker who has insurance pays more for the same drug as someone in the military or Canada, is insane. Health care needs to be regulated. False claims need to be stopped, which are driving up health care costs.
Bob–
Yes, under the Affordable Care Act states will control Age Rating.
Insurers will not be able to charge older people more than 3 times as much as they charge a 20-year-old, but the law is very clear: States can also prohibit age rating altogehter, or lower it to 2:1.
Your question reveals how even a very well-informed, intelligent person is not aware of the many, may ways that the Affordable Care Act will lower premiums. This is partially becuase few people have time to read the entire law, and “the good” is in the many details. It is also becaue so many people (including, I’m sorry to say, single-payer advocates who I admire, have spread so much misinformation about the law.)
For exampl: , No , you don'[t have to pay $850 a month in New York. (Many people who don’t live heret don’t know the market, and haven’t bothered to do the nitty-gritty research.)
I pay less than $500, and there is also a program called “Healthy New York” that makes very good insurance significantly less expensive for people who earn somewhat less than I do. (Here I’m talkng about people who earn well over Medicaid imits, but are in the the lower end of the middle-class.
Finally, perhaps I should have said that I chose a policy that requires me to stay “in network.” I have no problem with this. I have never called a doctor who wouldn’t take my insurance. (And the docs I see are all either on the
Upper West Side (where I live ) or on the East Side (Park Avenue) close to where I used to work.
There are, of course, doctors who wouldn’t take my insurance. But in my experience (and I’ve been in plans where I could go out of network, and even see docs who took no insurance), they are no better than the in-network docs in my very large plan. (The key is just that you want to be in a very large network.)
]
Finally, we already have evidence that reducing waste cuts spending.
Hospitals are already reducing waste (anticipating what wil happen under the ACA) and Medicare spending has fallen sharply in the last two years.
Try Googling “Peter Orszag” (former CBO director) on “growth” and
“Medicare Spending” and slowing. Much has been written about this.
But I’m afraid that people who spread misinformation word-of-mouth just
don’t do that much reading.
Bob –
I think you are roughly correct in your assertion that large claims account for 70% of costs. If we just focus on the expenses that insurers actually pay such as hospital bills, physician and clinical fees, labs, imaging, PT, prescription drugs and the like, the first $5,000 of claims paid, I’m told by experts in the field, account for between 25% and 33% of total claims costs. That includes the first $5,000 for people with very high costs. There are significant medical costs that commercial health insurers don’t pay including long term and home health care, dental care, R&D, public health initiatives, hospital construction, etc. Total healthcare costs, including those that insurers don’t typically pay, add up to roughly $8,000 per person.
The big potential for savings from the strategies that Maggie describes could come from avoiding surgeries that might be triggered by a high PSA score. Trying physical therapy first for people with low back pain would also be helpful. Better hospital discharge planning could reduce the number of costly readmissions. More intensive use of case managers for the very high cost cases could improve care coordination while more widespread use of electronic records could reduce duplicate testing and adverse drug interactions.
I think it would be easier for doctors to embrace guidelines such as the recent PSTF pronouncement on PSA testing if we passed safe harbor protection from failure to diagnose lawsuits if doctors follow evidence based guidelines where they exist. I’m quite certain that defensive medicine is a factor in excessive testing now along with patient expectations and the opportunity to make more money under a fee for service payment model.
If it were up to me, I wouldn’t pay for some of the ultra expensive cancer drugs that only give the patient an extra month or two of low quality life. I also think there is considerable potential savings from more aggressive fraud mitigation efforts in the Medicare and Medicaid programs. That’s important because it would help to free up money to pay to subsidize insurance for people age 64 and under.
It is no easy task to get doctors to change long established practice patterns. The specialty societies need to get behind it and PCP’s need to push back against patients who wrongly think that more care is better care and more expensive care is better care. To help them do that, we probably need to pay them more for their time. At the same time, autonomy is a big deal in the physician world. Many of them don’t appreciate outside interference no matter how well intended or how much expertise the outsiders have.
Employers, for their part, should embrace tiered network insurance products that would require patients to pay enough more to get their attention if they insist on going to a high cost provider whose care quality is no better than more cost-effective competitors.
If Medicare is to take the lead in all of this to provide political cover for commercial insurers who would want to follow CMS’ lead, there are powerful political interests that need to be persuaded. That’s no easy task either.
1.Maggie, you imply that the states control age rate up ratos…..which they do now.
Will they still have this control after 2014 if all laws remain unchanged?
This is a recipe for chaos when it comes to subsidies.
2. I was under the impression from Joe Antos and Health Affairs that community rating in NY state had pushed everyone’s health premiums up to $800 a month.
If so, keep your insurance company a secrert.
But still, from what I have read even Healthy NY charges $400+ a month and they get huge subsidies. So I still puzzled by your low premiums, but I won’t tell anyone.
3. and most important —
I am skeptical that cutting waste will lower insurance premiums.
Let’s say you insure 1 million adults and the total cost of all the claims they file is $7,000 per person or $7 billion total.
This might be the case if you had a somewhat older group that included high-risk persons (as the ACA does include them in the exchanges.)
Large claims would be about 70% of the total. The bulk of the large claims would be for heart attacks, cancer, complications of diabetes, joint replacements, MS, Parkinsons, etc.
My gut feeling is that even if you cut out all un-needed diagnostic tests, you would have trouble making a big dent in the $7 billion.
We both know that the private insurance industry, as presently constituted,
tries to save money by passing off sick people to Medicare and Medicaid or recissions or just denying coverage in the first place.
My problem is that while I greatly dislike these methods, I don’t see a lot of other methods that will really work.
Barry–
If more people need subsidies than expected, we will need to do two
things:
a) find more ways to cut waste. As I said, I think CMS will develop formularies for drugs — and devices– just as the VA does. Obama knows that this must be done,and has said so publicly. VA outcomes are generlaly good because they are practicing evidence-based medicine.
Drugs & devices now account for 18% of healhtcare costs (much of that
cost shows up on hospital bills, not on retail pharmacy bills.)
Private insurers would be eager to follow Medicare’s lead. (We will hae many fewer private insurers and so they will have enough clout to do this–as long as Medicare takes the lead.)
I also am impressed by the fact that the Preventive Servcies Task Force came out recommending against PSA testing. This will eliminate a great
many prostate cancer surgeries and radiation treatments (some exorbitantly expensive) that do aboslutely no good. (The disease would never have progressed to hurt the patient. No lives saved.)
I expect that the Preventive Services TAsk Force and, the Secretary of HHS are going to recommend covering many other tests and treatments only
for certain patients under certain circumstances, while also reducing payments for “overvalued” tests and treatments. Again, insurers will follow suit.
Secondly, we may well have to raise taxes, on capital gains, inheritances,
and income taxes not just for individiuals earning over $200,000, but
perhaps individuals earning over, say, $150,000.
But now, we are not going to cut the subsidies. The whole point of reform
is to make sure that everyone (or nearly everyone) has access to high
quality, comprehensive coverage, just as in every other developed
country in the world.
Of course if Romney is elected and the Republicans take both Houses, all
bets are off. The Republicans are not committed to helping those
who cannot help themselves. They would be happy to give everyone a voucher and tell them they are free to choose as much–or as little–health care as they can afford while Congress makes the Bush tax cuts for the
wealthy permanent. As you know, I think that rationing health care according to ability to pay is wrong. Healthcare is a necessity and no one shoudl have to go without exactly the same care that you and I would want for ourselves and our chldren. Moreover, most people do not have enough
money to pay even a moderately high deductible before insurance begins to cover them.
Finally, what many people don’t realize is that Romney wants to do away with employer based insurance, so even those Americans who now have
good insurance with a large employer won’t be able to keep it. People will be very surprised. This, alone could make him a one-term persident.
As for the cost of insurance, I don’t know why your friend’s daughter is paying so much I’m in New York, and I I pay about $450 for an excellent, comprehensive policy with no deductible, no annual or life-time limits
that covers virtually everything I might need. I also have a very good eye and
dental policy that is quite cheap and covers $2,000 a year worth of dental care–no deductible. Perhaps your friends daughter went to an insurance broker. Some are very good. Some are promoting certain products from
certain insurers . . . .
Once we have Exchanges, navigators who are not paid by insurance companies (and so have no vested intereset in certain products) will
be helping people find policies best suited to their needs.
Correction: the friend was quoted $39K for his 2012 policy, not 2011.
Maggie –
I agree that the cost of health insurance in 2014 is very difficult to predict for all the reasons you mentioned. My concern relates to the consequences of being wrong. If healthcare costs are higher than our experts estimated or if many more people apply for and qualify for subsidies than we thought and the cost to taxpayers is far higher than we thought what then? Will we be prepared to scale back the subsidies, sharply increase deductibles or otherwise reduce the scope of coverage or find more coercive ways to reduce the cost of care? I think my fear that once enacted, the subsidies will be hard to scale back no matter how much more they cost than was originally projected is a legitimate taxpayer concern.
Regarding the cost of insurance, I live in NJ where we also have community rating. When I retired at the end of last year, my wife was not yet eligible for Medicare. I was. COBRA coverage for here was a reasonable (to me) $437 per month. However, since my employer has an older than average workforce with somewhat above average healthcare costs per person, I asked her to price coverage in the NJ individual market. Horizon Blue Cross of NJ quoted $722 per month for a policy that was not as comprehensive as she would have under COBRA coverage from Highmark Blue Cross.
A doctor I know told me that when his daughter graduated from college a couple of years ago, he wanted her to have health insurance before starting her new job as a teacher at a charter school in NYC. She was 23 or 24 and perfectly healthy. He had to pay over $600 per month for that coverage. You seem to suggest that younger people will only have to pay a little more so older people can pay less. In NY, NJ and ME, it’s a lot more. In NJ, we have guaranteed issue as long as you can show that you had prior coverage and no more than a 63 day gap in coverage before seeking replacement coverage.
Finally, a friend who has a 60 year old wife with heart disease and one child now in college was paying $24K for a very comprehensive, low deductible family policy in New York State last year. For this year, he was told that his 2011 premium for the same coverage would be $39K! He found a high deductible plan from a different insurer for $22K and that was the small group market rate. A good part of the reason why health insurance is so expensive in NY and NJ is that very few young healthy people who don’t have employer coverage buy it and for good reason. The individual market in these two states is completely dysfunctional.
Bob–
No one knows what the subsidies will cost in 2014, or 2015
because no one knows how high premiums will be.
Everything depends on whether;
A ) the underlying cost of care rises 2% a year or 5% a year– Will CMS and private insurers begin to reduce payments in certain areas? Will doctors become more aware that they are ordering too many tests? Will more urologists explain to patienets that even if they have early-stage prostate cancer, this disease progresses very slowly, and there are many reasons why they might want to consider “watchful waiting” instead of surgery?
In general, will more doctors share decision-making with patients about
elective surgery, sharing the data on what percent of knee replacements are not successful, how hard recovery and rehab can be, etc.
Lately (last couple of years) growth in healthcare spending has slowed.
Under reform, will this continue?
B– How many healthy 20-something and 30-somethings people will buy
insurance, and how many will decide to pay the penalty instead? This wil
make a huge differenece. If health care costs are distributed over a large
pool that contains many more young and healthy people, everyone will
find that premiums are much lower.
C– Will more states join Masschusetts and limitt age rating to 2:1, so that
insurers can only charge older adults twice as much as they charge a 20-year-old?: Will these be large, populous states? If older people have to pay 3 times as much, there subsidies will have to be much larger.
D– Wil CMS begin negotiating for lower prices on drugs and devices?
Will CMS refuse to pay for some drugs and devices that are overpriced, and no better for most patients– covering those drugs and devices only
under for patients who meet a particular medical profile. (If Obama is re-elected I predict this will happpen sometime over the next 4 years, and private insurers will follow suit.)
There are just way too many large unknown to estimate how much subsidies will cost us. (And I too lilke EPI and Families USA.) Premature
estimates are just that–premature.
Finally, whether any individual winds up paying more or less than he does now depends, to a large degree, on where he lives. I live in New York
State where we now have something close to community rating: an insurer
cannot charge me more because I am older, because I am a woman, or if I suffer from a pre-existing condtion. Under reform, it’s very llkely that more young people will sign up for insurance in New York, in part becuase they
will be eligible for subsidies. This means that my premiums shoudl go down– unless overall health care inflation heats up.
If I lived in a state that lets insurers shun the sick, refusing to cover them, I would assume my insurance premiums would go up once those folks are
alllowed into the pool. On the other hand, depending on my income and the size of my family, I might eligible for a subsidy . . .
Bob –
It wouldn’t be fair to just give currently uninsured people a high deductible plan because all the people who get health insurance through their employer are paying a meaningful sum out-of-pocket toward the cost of the insurance, especially for family coverage. Moreover, most economists argue that the employee is really paying the entire cost of the premium because the employer share is part of total employee compensation that would likely be rolled into pretax wages if the insurance were not provided.
An insurance policy with an actuarial rating of 70% means that approximately 70% of the total medical costs incurred by a “standard population” of, presumably, average risk would be covered by the insurance and the rest would be paid out-of-pocket. The out-of-pocket cost includes not just co-pays and deductibles but the cost of services, tests, procedures and drugs that are not covered by the insurance policy. A plan with a 70% rating would be in the silver category under the ACA. The minimum bronze plan would have a rating of 60%. I can’t remember where I saw it but sometime ago I read that the standard FFS Medicare coverage would have an actuarial rating of 56% which reflects the $1,000 plus deductible for each hospitalization, the 20% co-pays for each Part B service, test or procedure with no out-of-pocket maximum limit and the fact that Medicare doesn’t cover long term care except under very limited circumstances such as after discharge from a hospital and then only in full for 20 days and at 80% for the next 80 days.
With respect to state high risk pools, an expert on this subject put up a slide at a conference I attended a couple of years ago that showed that the medical cost ratio for state high risk pools generally ranged from 200%-300% which means that the premium paid by the insured only covered one-third to one-half of the cost of care. The rest was covered, depending on the state, by a combination of assessments on insurance companies and state general revenues. There are a lot of extremely high cost individuals in these pools though there are also some with comparatively modest costs but probably not many.
While I am thinking about it, the Kaiser table that you summarized has another piece of data that has intrigued me for some time.
Notice that at 400% of poverty, the subsidy for a family policy starts at $2000 and moves up steadily.
At 300%, 200%, and 100% of poverty the subsidies will be larger of course.
Anyways, I recently read studies by two defenders of the ACA — Families USA and the Economic Policy Institute. I really admire them incidentally.
But what troubled me was that both of them put in writing that the average subsidy in the exchanges would be $4,000.
By using a $4,000 average, they were coming up with the whole Exchange arrangement costing under $50 billion a year.
Yet for a family earning $40,000 a year, the subsidy will be more like $14,000 a year. At that rate, the whole Exchange arrangement will cost the taxpayers far more than $50 billion.
Familieis USA and EPI seem to assume that everyone in the exchanges is getting single coverage.
.
I am totally in favor of subsidizing families, which is true in the French and German systems especially, But then we should expect higher costs.
Barry, you are correct to at least look at high-deductible plans. In fact I would suggest that the government not merely subsidize them but actually provide them in full.
Assume that a $10,000 deductible plan costs $1000 a year at younger ages, and $3000 a year at older ages. For $100 billion, using very rough numbers to save time, we could jiust give high-deductible Medicare policies to 50 million young people and 16 million older people. Leave the insurance companies out of it………no subsidy, just a benefit.
This obviously needs a lot of refinement. Having a $10,000 deductible will still cause people to avoid seeing the doctor…..even if the preventive visit is free, what if the doctor finds a $5,000 problem? There are a lot of people who cannot find $5000 or borrow it. One of the bankruptcy studies showed that people did go bankrupt with medical debts of $5000.
But anyways you are looking in the right direction.
Myself, I am still reeling from the numbers that you were kind enought to copy from the Kaiser Calculator.
If I am reading right, a 70% policy for a family of four will cost almost $11,000 a year at age 25 and going up to $32,000 a year at age 64.
I am rusty on what 70% value really means, assume it refers to deductibles and co-pays.
This must have a lot of inflation and lot of New York City pricing built in.
I am in the Minnesota High Risk pool myself, and if I bought a 70% family policy from them today the cost would be about $20,000 a year……….
and that is from a pool that is stuffed with sick people.(thisMN plan does receive some quiet state funding, I am not sure how much)
Maybe Kaiser was taking a very pessimistic view on how many healthy persons will join the exchanges. Maybe we can use their numbers as what happens if there are no mandates.
Maggie –
My comment that referred to a $10,000 deductible included full coverage of preventive care though I would limit that to tests that receive an A or B from the Preventive Services Task Force.
Frankly, I get a little tired of hearing that we have tens of millions of people who can’t afford basic care and won’t go to the doctor when they need to but, somehow, they can afford $150-$200 a month for cable TV and a similar sum for a couple of cell phones and a data package. As I said previously as well, you would be surprised how many people don’t take blood pressure and cholesterol drugs even when they don’t have to pay anything out of pocket for them.
If people had the peace of mind knowing that they were largely covered for the cost of a catastrophic event as compared to having no health insurance at all, they would perceive themselves as much better off than they were before. In the meantime, given our current fiscal situation, subsidies for high deductible plans would be far more affordable for taxpayers than the comprehensive coverage as proposed under the ACA.
In the meantime, we should focus more on cutting the cost of care through price and quality transparency tools, sensible tort reform, more use of tiered network and narrow network insurance products, refusing to pay for ultra expensive cancer drugs that are only marginally useful, more widespread use of living wills and advance directives, and aggressive fraud mitigation strategies, among others. When those bear fruit, we can lower the deductibles that are subsidized.
Wrong link.
Try this.
http://www.cnn.com/video/?/video/bestoftv/2009/10/20/ldt.face.off.cost.of.health.care.cnn#/video/bestoftv/2009/10/20/ldt.face.off.cost.of.health.care.cnn
Barry—
You write: ” Ik now some will argue that people won’t go to the doctor because they can’t afford the deductible or just don’t want to pay for basic care and society will pay in the end if they wait until they are much sicker to seek care. As a taxpayer, I’m willing to take that risk.”
Barry, as a taxpayer, you’re taking a financial risk that these people will
not become more expensive later.
They, on the other hand,
are being forced to risk their health, their lives and their children’s lives.
.
In this country, many people don’t use health care, not because they don’t need care, but because they cannot afford it. We all need some
preventive care. (regular eye exams, dental exams, seeing a doctor when we have an irrregular growth that might be skn cancer. . . .
Catastrhopic insurance is great for wealthy people who can afford to pay for preventive care out of pocket. For everyone else, it means that kids and older people don’t get the care they need.
We are the only developed country in the world that does not believe that we have an obligation, as a civlilized society, to make sure that everyone has access to basic care and preventive care without large co-pays or deductibles.
An interesting thing I learned on the Kaiser Subsidy Calculator site is that in any given year fully 25% of our people incur no healthcare costs whatsoever. Even within the Medicare program, in any given year the least expensive 50% of beneficiaries account for only 4% of the program’s cost or roundly $850 per person on average.
I understand that we have to define minimum creditable coverage somehow or people could buy a policy for a nominal sum that covered everything above, say, a $1 billion deductible. If it were up to me, though, I would want to ensure that everyone at least had coverage for catastrophic events. A $10,000 deductible that included full coverage of preventive care, for an individual would be preferable because younger people and those with moderate incomes could much more easily afford the premium either without subsidies or with much lower subsidies than are currently contemplated.
I know some will argue that people won’t go to the doctor because they can’t afford the deductible or just don’t want to pay for basic care and society will pay in the end if they wait until they are much sicker to seek care. As a taxpayer, I’m willing to take that risk. The insurers will tell you that there are plenty of people who don’t take their blood pressure and cholesterol drugs even when they can get them for zero out of pocket cost. You can lead the horse to water…. Personal responsibility has to count for something.
Bob–
As I’m quite sure you understand, if your children are adults, they are no longer your dependents, and thus not part of your “family” when
calculating subsidies. (You are no longer feeding them, clothing them–etc.– or at least I hope you’re not.
Even if your adult children move in with you, society expects them to do their best to get jobs and feed and clothe themselves (even if the jobs are not their dream jobs.)
Holtz-Eakin’s numbers are colored by his ideology.
If you want to get a better, more non-partisan feel for the cost, Google the
CBO and cost of “health care reform.” The CBO is not entirely
optimistic, but not entirely pessimistic either.
Holtz-Eakin sticks to a script of conservative memes and avoids talking about specifics.
I debated him on Lou Dobss, and even Dobbs (hardly a flaming liberal)
began to side with me. (You’ll find the debate here. http://www.cnn.com/video/?/video/bestoftv/2009/10/20/ldt.face.off.cost.of.health.care.cnn#/video/us/2012/05/31/start-ks-pastor-homosexuality-comments.cnn (People tell me that it’s entertaining.)
Bob –
Thanks for the reference to the Kaiser Health Reform Subsidy Calculator. For fun, I found the cost of a so-called “Silver” plan with an actuarial rating of 70% for families of four with breadwinners of various ages with a projected income of 400% of the FPL in 2014 which Kaiser projects at $93,600 on its site. The results for higher medical cost regions are as follows with the first number being the full premium and the second number the value of the subsidy or tax credit.
Age 25 — $10,967 and $2,075
Age 30 — $12,130 and $3,238
Age 35 — $13,324 and $4,432
Age 40 — $14,556 and $5,664
Age 45 — $17,094 and $8,202
Age 50 — $20,229 and $11,337
Age 55 — $23,700 and $14,808
Age 60 — $28,851 and $19,959
Age 64 — $32,902 and $24,010
As I noted in my prior comment, if your income is just slightly higher, say 401% of the FPL or more, your subsidy will be ZERO. The individual or family’s contribution toward the premium appears capped at 9.5% of income, at least at this income level. The table also puts real numbers on what a 3 to 1 maximum age rating band looks like.
In addition to the potential for certain employers to stop offering health insurance because their employees and their families can get a better deal on the exchange and qualify for significant subsidies, the underground economy is likely to result in lots of people hiding or materially underreporting their income to qualify for a larger subsidy and they will probably get away with it because while the IRS is very good at matching up documents like W-2 and 1099 forms, it’s not very good at finding income generated in the cash economy with no associated paperwork.
The bottom line is that there is enormous potential for this program to cost far more than the so-called experts at CBO and elsewhere in the government think it will. If that turns out to be the case, we taxpayers will probably be stuck with the bill because entitlement programs are very difficult to repeal or significantly scale back once enacted.
Barry is correct about the subsidies and family size. If you find an internet entry called 2012 Annual Federal Poverty Guideline, you find that a family of two hits 400% of poverty at $60,500, whereas a family of four hits 400% of poverty at about $92,000.
I am definitiely inviting my adult children to come home and live with me!
Meanwhile the Kaiser Health Reform Subsidy Calculator Website seemed to tell me that if my family was under 400% of poverty, then my health premium would be capped at 9-10% of income.
I think that is the way Switzerland’s system works.
So I am in favor, but this is a stunning and massive amount of money involved once every small business with older employees figures this out.
Holtz-Eakin has some rather scary tables on the cost to the federal budget if the health exchanges have 40 or 50 million participants, versus the 10 million or so that was predicted when the legislation passed.
Here is the question —
if my family income is $60,000 and my family premium is
Thanks to Barry for part of the answer.
According to the Kaiser Health Reform Subsidy Calculator, a family of two hits the 400% of poverty limit at $60,500.
A family of four hits the 400% of poverty limit at $92,000.
Weclome home, kids!!
I am still fuzzy on one thing………..
If my family income is $60,000 and my famiily health premium on the exchange is $20,000…….
then do I really get a subsidy of $14,000 to bring my out of pccket premium down to $6000 or 10% of income?
That would be wonderful, but the cost to the federal budget will be a killer if corporation dump everyone onto the exchange.
If 10 million families of 60 year olds get a subsidy of $14,000 each, then the cost to the federal budget is $140 billion a year.
Stretch this to 50 year olds and 40 year olds, and the ACA will cost over $500 billion a year no sweat.
This is what right wingers like Ferrara and Holtz-Eakin and Goodman have been saying.
Naturally the Administration will set up barriers to keep employers from dumping their plans.
comments?
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Barry–
You are absolutely right that “:there is plenty we don’t know– and won’t know– until we gain some experience with Exchanges.”
Again: Health Care Reform will be a process (not an event) that will require much tweaking over time.
But we do now know that many Americans who have employer-sponsored insurance would be interested in the Exchanges. (See my post above on the Exchanges for the link to this survey.)
Presumably , many of these are people who work for a small business.
Their insurance is more likely to be more expensive, and less comprehensive than ift would be if they they were part of a large group (working for a large company)– or buying insurance in an Exchange (where they become part of a large group.)
What many pepople don’t realize is that, once the Exchagnes open up in 2014, their small employer will be abe to enter an Exchange and shop for insurance for his small group of employees there. Because he and other small businesses will now form a large group, he will find that comprehensiive insurance doesn’t cost as much.
Finally, regarding young people, we do know that the majority of 20-somethings and 30-somethings who don’t have insurance are low-income and lower-middle income.
They don’t think they’re invincible; they just can’t afford it. (I’ve written about this on HealthBeat–with links to sources.)
Under reform, they will have pretty generous subsidies. I feel pretty safe in predicting that many will sign up for insurance.
How many? I have no idea. This is what we will find out.
John–
You write “Our president reallly seems to believe in both ponies and unicorns . . ”
Great observation. I’m going to steal that line!
Maggie –
I actually like the idea of exchanges conceptually because they will facilitate comparison shopping and I hope they’re successful. Success is hardly guaranteed though for a number of reasons.
We don’t know, for example, whether people who gravitate to the exchanges will have above average health risks and associated healthcare costs compared to people who get their insurance through an employer, especially a large self-funded employer. We don’t know how many young healthy people will choose to pay the penalty and remain uninsured. We don’t know to what extent the required scope of coverage to meet the “essential benefits” criteria will exceed the cost of typical insurance offerings to individuals and small groups today. We don’t know how much it will cost to administer the exchange itself and who will pay for that. Employers with lots of low wage workers in industries like restaurants and bars, retail trade and hospitality could opt to eliminate health insurance if they currently offer it and steer their employees toward exchanges because they will qualify for large subsidies. In short, there is plenty that we don’t know and won’t know until we gain some experience with exchanges. As I said above, I wish them well and hope they’re successful but I wouldn’t bet the ranch on it.
Thanks, Maggie. I stand corrected.
That’s why I’m in the peanut gallery and you get the big bucks.
~~> LOL <~~
And you're right.
Our president really seems to believe in both ponies and unicorns…
John–
No, insurers did not drive the legislation.
Yes, the mandate brings them new customers, but they actually have to COVER them by coverring Essential Benefits (most policies for individuals don’t do that now) and by spending 85% of premiums on health care –or refund premiums to customers (which they have already begun doing.)
The regulations are stiff enough that many for-profit insurers will be getting out of the business– they just won’t be able to make the profits that Wall Street expects.. (The best non-profits will be okay.)
Recently, the CEO of Aetna said publicly that in a few years, the (for-profit) insurance industry, as we know it, will no longer exist.
.
Both he and Zeke Emanuel have suggested that insurers will have to join up with providers, creating organizations like Kaiser and Geisinger, which provide health care and insurance. They have one
goal: to keep people as healthy as possible.
This will be a great improvement.
By the way, Obama only pretended to be against the mandate because Hillary was in favor of it. He needed to find some way to distinguish himself from Hillary– and to appeal to the young voters who were so
important to his base.
But during the primary, Obama’s health care advisor, David Cutler, told me that Obama was hoping that young people would sign up voluntarily for insurance. If they didn’t. . . well then Obama realized we would have to have a mandate.
I believe this. Obama often assumes that if you explain things to people in a reasonable way, they will agree to do the fair and reasonable thing. (So young people would agree to help pay for insurance for older, sicker people.)
Obama even believed that this would be true of the most conservative Republicans. If he just sat down with them and explained that cutting taxes for the very wealthy just isn’t affordable, they woudl say “Oh, okay, we understand.” Then he could move on to having a rational discussion about Gay Marriage.. . .