Monday, March 22, 2010

Just What Will Health Care Plan Actually Do?

Throughout the debate on whether Congress would actually pass health care reform and a bill that pretty much no one in Congress has even read (each version that has been passed has been more than 2,000 pages each), the key question that seems to get lost is what will actually happen and when.

The Daily News has a handy dandy guide for what changes will occur and when.

This year, there's a few changes:
- SMALL BUSINESSES: Tax credits start flowing to businesses with fewer than 50 employees, covering 35% of premiums, to help them afford coverage. By 2014, that will rise to 50%.

- SENIORS: They get a $250 rebate to help fill the "doughnut hole" in Medicare drug coverage.

- YOUNG ADULTS: Health insurers are required to let young people stay on their parents' policy up to their 27th birthday.
Note that there's nothing in that year that takes someone who currently has no insurance or the means to pay for that insurance and provides them with it. One could argue that requiring insurers to allow parents to insure their kids through their 27th birthday will reduce the number of uninsured people significantly, but if you are someone who has no insurance currently, you wont be able to insure your kids either.

The real changes come in 2014:
This is when all Americans will feel the bill's impact - in their wallets, if not elsewhere.

- INDIVIDUAL MANDATE: Almost everyone will be required to get insurance or face a fine - $95 in 2014, $325 in 2015 and $695 in 2016 (with a maximum of $2,250 for a family). There is an exemption for low-income people.

- EMPLOYER MANDATE: Businesses with 50 or more employees must offer insurance or pay a $2,000-per-worker penalty.

- HEALTH CARE EXCHANGES: These new state-based marketplaces should be open for business, giving individuals and small businesses a place to shop for affordable insurance .

- SUBSIDIES: To help pay for insurance, the feds will offer subsidies to families making as much as $88,000 a year. Out-of-pocket spending will be tied to a person's income and kept as low as $1,000.


- TAX ON HIGH-COST HEALTH PLANS: A 40% excise tax will be slapped on high-cost "Cadillac" plans starting in 2018.
Again, subsidies aren't going to help those who don't have money to afford insurance in the first place - subsidies or not, and the penalty provisions kick in earnest. At the same time, a significant chunk of revenue starts in 2018, with the taxation of high cost plans, but knowing Congress, watch for that portion of the plan to be shifted and/or reduced to avoid incurring the wrath of unions around the nation. The bill also does nothing for the millions of Americans who are unemployed and do not have access to health insurance.

So, if you're someone who currently doesn't have any insurance, you're not going to see any change in your ability to obtain insurance until at least 2014. This was done to purportedly keep the whole reform bill in balance without obviously raising taxes and fees across the board to pay for all this. Instead, we've got provisions that will raise taxes and fees, but not begin to provide benefits until down the road because to do otherwise would have been a budget buster.

As it is, this proposal will be a budget buster because once the full effects of the bill are implemented, the costs will be far higher than Congress and the Administration are willing to admit and the program will require significant tax hikes and administrative and bureaucratic fixes that will only add to the price tag - all while those who imposed this proposal will not be around to pay the price politically for this mess.

Just because you can tout that this is an historic event doesn't mean that it's good, or even sound fiscal policy. The devil is in the details with all the restrictions and mandates (funded and otherwise) that are buried in the proposals, and with so much of the process taking place years into the future, the chances that the proposal will remain intact isn't a sure thing - and insurance companies may well increase premiums and adjust their policies to build in their own cushions for their insurance operations so as to mitigate the higher costs being incurred by the health care reform. That means that many people who already have insurance will quite likely see their own insurance costs increase, forcing some people to make tough decisions about whether they should continue carrying their own insurance or wait until the government plans start in four years.

Once again, for all those who continue to rely on the CBO figures claiming that this reform package will reduce the federal deficit, bear the following in mind. The CBO scores bills based on what is presented before it - it examines a 10 year period to see the financial impact. It therefore does not attempt to show what an actual cost will be year to year once you go outside that 10 year timeframe. Now, that's perfectly reasonable because trying to figure out budgeting that far in advance is more reliable when reading tea leaves than trying to determine the tsate of the budget at any point that far in the future, but it does open the door to the kind of chicanery we see in this proposal.

10 years of revenues are being used to fund six years of spending. That's how you get a "surplus." It's all perfectly legal, but it doesn't reflect how much this will really cost.

In fact, once you start looking at the costs for a 10-year period once the spending ramps up in 2014, the deficit reduction disappears and is replaced by a massive deficit. The proposal also includes a federal takeover of the higher education loan program because that revenue is needed to help balance the books, even though there's nothing health related. It's merely a means to the end of passing the health care reform package.

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