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Obamacare Arithmetic

There are many reasons to defund Obamacare. The detail and minutiae are mind-numbing enough, but for the purpose of engaging your Senator or Representative, stick to the arithmetic.

I was curious about the subsidies available to those enrolling in the Obamacare exchanges. The exchanges provide coverage options to those not currently covered by Medicare, Medicaid or employer-provided coverage.

Medicare expenditures are, to some degree, offset by premiums. Medicaid is 100 percent financed by the taxpayer. So, employer-provided coverage is  the optimal result for both the employee and the taxpayers (adequate coverage with no attendant federal obligation). Unfortunately, the penalties incurred by companies opting out of employer-based coverage are modest. Many employers voluntarily absorb the penalties, drop coverage and dump workers into the exchanges.  Because most of the enrolled are eligible for subsidies, it is a far less appealing option for the taxpayers.

Let’s examine the arithmetic of the subsidies. Any family of  four making less than 133 percent of the federal poverty level is eligible for Medicaid. The FPL is currently set at $22,075. Those with incomes ranging from 133-400 percent of the FPL ($29,425-$88,200) are subsidized in large part by the taxpayer. For instance, at 150 percent of the FPL, the taxpayer’s responsibility for medical premiums is limited to 4 percent of total income or $1323.

A 30 year old head-of-household can purchase a mid-grade Silver plan for between $10,000 and $13,000 a year in the most favorable premium demographics. In other markets, premiums have already exceeded $13,000. The difference between the actual premium and the $1323 threshold is provided in the form of a tax credit. It can either reduce net taxes or increase a refund. .

At 400 percent of the FPL $(88,200) , the taxpayer’s obligation is limited to 9.5 percent of income or about $8341. This may strike you as progress. The taxpayer is now paying a substantially higher share of the premium. But in Obamacare, the premiums are based almost entirely on the age of the head of household. A 50 or 60 year old person with family of four can easily be facing an insurance premium of $20,000 to $24,000 per year. The federal assistance (measured in actual dollars) could be even more costly than in the first example.

Obamacare creates incentives for employers to dump coverage and force employees on to the exchanges. The penalties the employers incur pale in comparison to the obligation the government absorbs. The penalties will never offset the government’s obligation. And a substantial number of those in the exchanges will receive subsidies for much or all of their working lives.

We will be writing $10,000 checks to many taxpayers for years on end. If your Republican representative supports funding Obamacare in the upcoming CR, politely suggest that he/she should publicly defend and endorse the financial viability of this program before casting his vote.

Should he ask what your alternative is; 1) Defund Obamacare  2) pass a measure making all medical expenses (insurance, devices, medications and medical care) dollar-for-dollar deductible from the taxpayer’s gross income. All medical expenses will be paid for with pre-tax income. This will encourage consumers to seek insurance coverage appropriate to their age, financial capability and likely health risks. (A person needing dental insurance or major medical coverage will be free to do so, instead of buying the mandated product.)   3) use the enormous savings from the effective repeal of Obamacare to shore up the existing Medicaid process.

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