Wednesday, May 25, 2016

DAD



Dad

I got caught. One of my readers noticed that I had yet to say a word about Senator Bernie Sanders and his health plan. I have reviewed plans from Scott Walker to Donald Trump. I’ve even covered Obamacare-lite plans from the Senate Republicans. But like Secretary Clinton, I just kept waiting for him to go away. But he hasn’t…

I read Senator Sanders’ plan over the weekend. It is very easy to understand, especially if you are five years old. Go to the doctor and Dad pays the bill. You may, or may not, get a lollipop, but no one will ask you, at age five, for any money. Need a prescription? Go to the drugstore. Dad’s got it covered. Hospital? Physical therapy? Inpatient substance abuse? Whatever you need, don’t worry. Dad’s got you covered. Great Dad. Rich Dad. Really rich.

Dad is the federal government.

Senator Sanders plan provides 100% coverage. No deductibles. No coinsurance. No copays. He pulls all of the consumer money out of the system. He eliminates all patient incentives to limit or question care.

Where does the federal government get all of this money?
  • 6.2% income-based health care premium paid by employers
  • 2.2% income-based premium (after deductions) paid by households
  • Tax capital gains and dividends as ordinary income
  • Limit tax deductions for households earning over $250,000
  • Rejuvenate the estate tax
  • Increase marginal income tax rates to 37% for a $250,000 family income to 52% on incomes over $10,000,000
That is a lot of tax. It would take a very different Congress to pass a funding bill that looked anything like the wish list, above.

It is difficult to illustrate an apples to apples comparison. Your average 40 year old has an insurance premium, deductible, coinsurance, and copays. This plan has none of that. The closest I can provide would be Medicare.

My clients love Medicare. They’ll tell you how they don’t pay anything at the doctor’s office and how they never saw a bill after a hospital stay. Even prescriptions are manageable.

Of course, that’s not Medicare. That is traditional Medicare plus a Medicare Supplement Plan F plus a Medicare Part D (Rx) plan. But most people just see it all as Medicare once it is all put in place.

Medicare is not free. We have all been paying into it for years. The doctors and hospitals are paid on a fee schedule that is more subject to politics than market forces. This is what you would pay if you turned 65 next month and went on to Medicare.
  • Medicare Part A - No Charge
  • Medicare Part B - $121.80 per month
  • Medicare Supplement Plan F - @$150 per month
  • Medicare Part D (Rx) - @$20 per month
The total for someone just turning 65 would be about $292 per month or $3514 per year.

The Sanders plan does not factor in age, just income. A 22 year old pays the same as a 72 year old, probably more.

How much would an unemployed/retired 65 year old pay under Senator Sanders’ plan? Assuming a Standard Deduction:
  1. Annual Income of $20,000 - $281.60 per year
  2. Annual Income of $40,000 - $721.60 per year
100% coverage for $281.60, an annual savings of over $3,200! It takes a lot of income tax on rich people to make these numbers work.

Does this prove that the Sanders plan can’t succeed? No, but I believe that it would take a giant leap of faith to make these numbers fly. The lack of consumer/patient involvement dooms the program. I still believe that the Patient Protection and Affordable Care Act (Obamacare) has put us on the path to a single-payer system. I just don’t see how it could be a 100% plan.

Free. We want free. But we’re not five and Dad, even a Dad that can print money, can’t afford to give us everything we want.

DAVE

 

Picture is of a dad, but not one who can print money.

 

1 comment:

  1. Posted on the website:
    From my friend Sam:
    Bernie’s idea sounds wonderful to anyone who doesn’t care who pays and how much?

    What has really been Collected ( or was supposed to be set aside) for Part A pre-paid premiums since no more is due at 65 if you have paid in a certain number of years? You can’t analyze if a plan is financially viable unless you can actually use real numbers to do the math. Just because we collect a certain amount now for part B and we don’t know how much we have even collected in the past for A, you can’t actuarially determine the cost per member per month, especially since we borrow or steal $ form other hidden government bucks to pay current claims now and know we are not even collecting enough for future claims?. Dave made a great point “people think Medicare pays everything” wow! They really pay less because part of their coverage comes from the private funded post 65 policies available.

    Respectfully

    Sam Fiorentino

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