Your Health Care Cost in 2016

Many people have asked what the bottom line cost of health care under the health care proposals will be for them. While cost is probably the major factor there are also other considerations in selecting an approach such as the extent to which the uninsured become insured and the comprehensiveness of the insurance being purchased. The costs to an individual or family in 2016 under several scenarios are compared below.

                              Cost to a Family of Four

With an      under the      the Senate  an Average    the Republican   

Income of  House Bill⁽²⁾  Bill⁽³⁾      Employer Plan⁽⁴⁾  Tax Credit⁽⁵⁾

$30,000       $1,100          $2,500        $10,000⁽⁶⁾            $17,500

42,000          3,100           5,800           10,000⁽⁶⁾             16,300

54,000          6,200           9,900           10,000                 14,800

66,000         10,000         12,700           10,000                 14,800

78,000         13,800         15,100           10,000                 14,800

90,000         16,600         16,600           10,000                 14,800

102,000        20,500        19,800           10,000                 14,800

All estimates assume the average out-of-pocket cost is incurred.

(2) House Bill-based on a total annual cost of $20,500; $15,000 in insurance premiums and $5,500 in out-of-pocket costs paid directly to health care providers-from the Congressional Budget Office (CBO). 

(3) Senate Bill-based on a total annual cost of $19,800; $14,700 in premiums and $5100 in average out-of-pocket cost (from the CBO).

(4) Based on a total cost of $24,150; $19,000 in premiums (from CBO) a 26% employee insurance co-payment (from the Kaiser Family Foundation), and the Senate Bill’s average out-of pocket cost of $5,100.

(5) Based on a tax credit up to $5700 to buy own insurance, and the House Bill’s estimate for insurance premium and average out-of-pocket cost. 

(6) Employers may adjust premium contribution from employee downward for lower salaries.    

                                      Cost to a Single Person

With an      under the     the Senate   an Average       the Republican 

Income of   House Bill⁽⁷⁾ Bill⁽⁸⁾      Employer Plan⁽⁹⁾   Tax Credit⁽¹⁰⁾

$14,700        $600              $1,000         $2,975⁽⁶⁾             $5,830

 20,600         1500               2,300          2,975⁽⁶⁾                5,300

 26,500         2800               4,000          2,975                   5,000

 32,400         4,400              5,400           2,975                   5,000

 38,300         6,100              6,600           2,975                   5,000

 44,200         7,300              6,700           2,975                   5,000

 50,000         7,300              6,700           2,975                   5,000

(7) House Bill-based on a total health care cost of $7,300; $5,300 in premiums and $2,000 out-of-pocket cost (CBO).

(8) Senate Bill-based on a total health care cost of $6,700; $5,000 in premiums and $1,700 out-of-pocket cost (CBO).

(9) Based on a total health care cost of $9,200; $7,500 in premiums (from CBO), a 17% employee premium co-pay (Kaiser Family Foundation) and the Senate Bill out-of-pocket cost of $1,700.

(10) Based on a tax credit up to $2,300 to buy own insurance, and House Bill total cost of $7,300.

 The major conclusions from the above numbers are,

1.Under any scenario-including employer plans, health care cost to individuals and families  in 2016  will remain very expensive and strain budgets; the effort to control and reduce health care provider cost is far from over.

2. Even with insurance, out-of-pocket costs paid to healthcare providers are expected to grow and become quite high by 2016, about$5,300 for a family of four and $1800 for an individual.

3. The costs to the individual/family under the House Bill are generally lower than under the Senate Bill primarily because the House Bill is better at subsidizing out-of-pocket costs-in addition to premiums.

4. Employer sponsored coverage will generally still be less expensive for employees than what will be available on the new insurance exchange under either the House or Senate bill, except at low incomes.

5. Despite the lure of a “tax credit” the Republican tax credit plan that was proposed by Senator McCain and that continues to be advanced by elements of the party would increase the overall cost of insurance for the 159 million Americans with employer coverage. If the tax credit were taken and used to buy insurance on the open market it would cost more, e.g. about an added $5,000 for a family of four (the difference between the 4^th and 5^th columns above). In addition, if the employee keeps the employer coverage, the employer contribution to the premium payment would become taxable to the employee, adding a new cost to the employee beyond that in the 4^th column above. For a family of four this new cost would range from $1900 to $3500 depending on tax bracket (10-25% of the employer premium contribution of $14,000).

6. Taking and using the Republican tax credit would result in a comparable cost to the insurance bought on the exchange for higher income levels, but most of the uninsured have lower incomes, so it would not be nearly as effective in covering the uninsured.  For lower incomes the insurance bought on the exchange under the House or Senate Bills will be less expensive than under the Republican tax credit approach (the difference between the 2^nd or 3^rd columns and the 5th column).

The Impact on Medicare from the Current Health Care Bills

The current Senate Finance bill looks toward getting about $50 billion a year in savings from Medicare or $500 billion over 10 years. The current House Bill seeks less, about $35 billion a year.

To put this in perspective, the current Medicare Program funding is $ 503 billion dollars a year and is projected to grow to $800 billion a year by 2018. So these savings represent on average about 7.5% of the program’s cost over that period.

The main savings is planned to come from new competitive bidding procedures for certain health care services that will introduce productivity measures in place of or alongside the traditional fee for (every) service system. This is expected to save about $182 billion (of the $500 billion) over 10 years. The second major savings is planned to come from reducing government subsidies to the Medicare Advantage Program. This program generally provides no greater benefits than Medicare but costs 17% more per person, an extra cost which is largely subsidized by taxpayers. A competitive bidding system is projected to reduce those costs and subsidies by about $123 billion over 10 years. The additional $200 billion in savings needed to reach the $500 billion estimate is expected to come by eliminating waste, fraud and abuse in the system. None of these initiatives should impact actual health care service to Medicare enrollees.

Additionally there are certain initiatives designed to improve care like reducing payments to hospitals with a high rate of preventable readmissions, to get them to perform better.

So the current Bills are not expected to diminish Medicare health care services, just provide for a more efficient and effective program. There are questions though as to why the Congress waited so long to make these reforms and why the savings were not put back into the Medicare program to increase its coverage levels, but apparently the Congress has chosen- as a higher priority- to use the monies saved to fund, in part, the new insurance coverage for the uninsured.

The Health Care Bills, What They Do and Don't Do

The Congess has labored to produce several health care bills. What will they accomplish? and what will remain to be fixed?

About 45 million people now without insurance will benefit,

by securing access to a set of regulated and government subsidized plans for individuals and small groups though a new insurance exchange or similar entity, but

only in the House Bill (HR 3200) so far, will they have access to a public insurance option designed to foster competition and keep premium prices low,

An estimated 11 million poorer people not currently eligible for Medicaid will benefit from expansions to and added federal funding for that program.

The 159 million people now with employer-based group insurance,

would - in HR 3200 but not in the Senate bills- see the same insurance coverage reforms (like not being denied based on a pre-existing condition) and insurance pricing reforms (like a limit on your annual out-of-pocket expense) that will be available to the uninsured in the health exchange, in their own insurance plans within five years, but

will not have access to a public insurance plan,

Both the uninsured or the currently insured,

will not get any relief against insurers overriding their doctor’s decisions, and

will likely not get any significant insurance premium or out-of pocket expense relief since none of the bills provide a mechanism for finding and controlling cases of excessive health care provider charges.

So you be the judge. Providing coverage for the uninsured is certainly laudable, but it seems there is still a long way to go to get to an affordable, quality system.

The Public Option, What is it ?

Following Senator Harry Reid's stated support of the so-called public health insurance option, a CNN correspondent trying to make it through a hurried piece on that news event realized that he, nor by his own admission, most of his viewers didn't have a clue what the public option really was. Turning to his "political expert" for help didn't help and only brought forth things like, well we don't know all the details on how it would work, etc.

Imagine that!, something that has been on the networks for months, struck fear and spurred protest from some, been blamed for huge budget deficits to come, and folks don't even know what it is.

To understand it let's look at the way the new insurance exchange would work, which aside from some number variations, is pretty similar in all the bills.

People who can’t get insurance through their employer -about 45 million Americans-could buy it through an insurance “exchange”. In a particular geographic area, the exchange would offer a few private insurance plans and maybe a public insurance plan as well. All the plans offered would have to meet the same criteria in terms of coverage like insuring those with pre-existing conditions, providing annual limits on consumer out-of- pocket expenses(what the insurance doesn't cover and you pay directly to the health care provider) etc. If you earn less than 400 % of the poverty level the amount you would have to pay in premiums is limited based on your income, and is the same whether you choose a private or public plan. For example in the current House Bill if you are a family of three earning three times the poverty level ($ 54,930 per year) the maximum you would pay in premiums is 10 % of your income or $5,490 per year (Note ; you still may have to pay deductibles and out-of-pocket expenses). The less you earn the lower the percentage of your income you pay.

Depending again only on your income level, the government would subsidize the purchase of your insurance. You would get the same subsidy whether you buy a public or private plan. The amount the government pays (and the pressure on the deficit) is the difference between the average cost of the three least expensive plans in the exchange in your area and what you pay. So the lower that average is the less the government pays. It is likely that the government option would be a lower cost option because it doesn’t have to make a profit, and will bring down that average number. So compared to having three private plans to make that average it should cost the government less if there is a public option. Therefore the pressure on the deficit is actually likely to be less with a public option. Most importantly, the government's contribution and pressure on the deficit doesn't come from the public option, it comes from the bill's purpose which is provide health insurance-any kind, public or private- for those who can no longer afford it. If you support that objective note that the government cost will still be there even without the public option. It's also legitimate to not support the objective if you choose to, but recognize that your beef is with the overall objective, not the public option.

So why the furor over the public option? It seems to be an ideological, emotional thing. Some just fear and oppose government involvement. Alternately, others see it as welcome relief from the poor profit-driven claim payment practices of some private insurers.

This leads to the proposal in the Senate to allow individual states to “opt-out” of it, i.e. not have it offered in a particular state if the state legislature and governor decide to do that. For undecided Senators that makes it easier to vote for it. For those ideologically opposed to it this should remove their fears. In the end it probably won't weaken the public option much because -despite all the sound and fury against it -state legislatures will be reluctant to deny their citizens the choice of a health insurance plan that is likely to be just as good as a private one in terms of coverage and cheaper.