The Real Cost of Change

Okay, we’ve heard the rhetoric from both sides of the health care/insurance reform debate. We’ve heard passionate arguments from both sides. But we have heard precious little about what this is actually going to cost individuals and families.
On September 22, 2009, the Congressional Budget Office (CBO) provided Senator Max Baucus – Chairman of the Committee on Finance – with a report on “subsidies offered through insurance exchanges and enrollees’ payments for that coverage under the specifications for the Chairman’s mark for proposed health care legislation.” [1] – AKA the Baucus Bill.

This report is detailed and has a lot of “finance speak”. It includes a couple of tables with valuable information. I’m providing  portions of the tables here that cut through all the calculations and get to the heart of the matter… What’s this going to cost me? If you currently don’t have insurance from your employer, here is what you can expect to pay in insurance premiums, co-pays, and uncovered medical expenses before you would qualify for any federal assistance:

                                              Congressional Budget Office Report [1]

These expenses are calculated based on the second lowest “Silver-Plan” insurance coverage as outlined by the Baucus bill.  Of course, you can choose not to purchase coverage. That will cost you anywhere from $750 – $3,800 a year in a new Federal Excise Tax [2] plus any out-of-pocket medical expenses you might have that year.

Look, numbers don’t lie. Let’s look at a family of four making $66K a year. What we are talking about here is an out-of-pocket expense of 20% of their income or $13,300 a year. I don’t know of any four person households at that income level that can find an additional $1,100 a month in their budget. The only option they really have is to pay the new Excise Tax of $750-$3,800 a year and hope that no serious illness hits the family.

For those of you who currently have health insurance coverage through your employer don’t get comfortable! The incentive is there for employers to drop your coverage. The reality is that the penalty for not providing employer based coverage is in many cases less than what employers pay for coverage. What this means is that there is a real incentive for some employers to drop health insurance coverage telling their employees that there is now a co-op for them to buy their coverage individually.

Additionally, consider the potential impact on our economy in general. If the family of four making $66K a year is going to have to spend 20% of their income on health care, then they are not going to be spending it on housing, appliances, clothing, automobiles, entertainment, etc. The impact on other segments of our economy will be devastating.

Furthermore, this is an incentive killer for people to improve themselves and therefore improve their income.  What is the motivation for the head of a household who currently earns $30,000 a year to improve their skills and add another $12,000 a year to their families income.  NONE!  By doing that, the out-of-pocket medical related expenses jump from $2,900 a year to $6,100 – more than double!

I know that people are hurting, that unemployment is high, and costs are up.  But, numbers don’t lie.  There is no relief in this bill for the average American family.  The burden on the middle-class is very high and the downside is quite real. 

This is a bad bill.  This is a bad idea.

Footnotes:

[1] An Analysis of Premiums Under the Chairman’s Mark of the America’s Healthy Future Act http://www.cbo.gov/ftpdocs/106xx/doc10618/09-22-Analysis_of_Premiums.pdf

[2] Preliminary Analysis of Specifications for the Chairman’s Mark of the America’s Healthy Future Act http://www.cbo.gov/ftpdocs/105xx/doc10572/09-16-Proposal_SFC_Chairman.pdf