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.