A Reasonable Concern

It happened again this week.  A couple came in to ask an important question. “Is it safe for us to retire?”  My answer, as always, was a resounding “Maybe”.  This shouldn’t be so difficult.  The Patient Protection and Affordable Care Act (Obamacare) was supposed to put that issue to rest.



John and Mary (names changed) would like to retire and travel.  They had worked hard throughout their adult lives, saved responsibly, and prepared for their retirement.  John, 67, is employed by a major local company.  Mary, 58, is a self-employed consultant.  They are financially prepared for retirement.  The issue is health insurance.  Mary isn’t in perfect health and it is a long way to age 65 and Medicare.   These are professionals.  They read the papers.  They watch the news.  They want to know what is going to happen with the Texas lawsuit and whether or not Mary is going to be able to secure coverage.



These are reasonable concerns.



Health insurance is the way most Americans access and pay for health care.  Obamacare is the law of the land and is interwoven into our entire system.  And our health care system, medical industry, is approximately 20% of our economy.  Eliminating Obamacare, by Congressional action or by having the Supreme Court declaring the law unconstitutional, without a viable alternative could be devastating. 



What is at stake? What are some of the key consumer elements of Obamacare?

§  Guaranteed Issue

§  Preexisting Conditions are covered

§  No Health Screening – no penalty for previous illnesses or injuries

§  MEDICAID EXPANSION – coverage extended to the working poor

§  Tax Credit Subsidies – ongoing premium assistance that facilitates the purchase of coverage

§  Cost Sharing Reduction – a reduction in the deductibles and out-of-pocket expenses

§  Essential Health Benefits – compliant policies are comprehensive

§  No Maximum Benefit – elimination of the annual and lifetime limits

AND, the underlying guarantee that doctors, hospitals, laboratories, and drug stores will be paid for their goods and services.



If you eliminate Obamacare without an immediate alternative, you put most Americans and our entire system at risk.



Is that too hyperbolic for your taste?  Ok. Let’s keep this simple.  An emergency appendectomy with a week in the hospital could be between $50,000 and $100,000. If you’ve got an extra $50K, you’ve got nothing to worry about.  The rest of us are concerned.



We have been here before.  The Supreme Court rendered a judgement on King vs. Burwell in June 2015.  There was real fear that with the help of the Supreme Court the coyote would finally catch the roadrunner and the Obamacare would be ruled unconstitutional.  Senator Orrin Hatch (R-UT), now retired, drafted an alternative plan.  Much of it was, by necessity, rebranded Obamacare.  The key was that Hatch’s plan would have passed and could have   been implemented, if the Supreme Court decision forced the Republicans’ hands.  The decision was 6-3 in favor of retaining the Patient Protection and Affordable Care Act.  The hastily created Republican plans from Hatch and others were quickly discarded.



There isn’t an Orrin Hatch in the Senate in 2019.  That is a shame.  With President Trump and Attorney General William Barr joining the fight on the side of eliminating coverage for preexisting conditions and guaranteed issue, we are assured that the Texas lawsuit will make it to the Supreme Court.  We may even have a decision by June 2020.  And yet, I have hope.  There is too much at stake and when real action, not BS politics, will be needed to save the country, I think that we can count on two pairs of Senators to rise to the moment.  The Chair of the Senate Finance Committee is Charles Grassley (R-IA).  I can see him working with Senator Debbie Stabenow (D-MI) to draft meaningful legislation.  The most serious health care legislation would come from the Alexander/Murray partnership.  Senator Lamar Alexander (R-TN) is the Chair of the Health, Education, Labor and Pensions Committee.  Senator Patty Murray (D-WA) is the ranking member.  Their legislative efforts reflect mutual respect and a desire to solve problems.



It is reasonable to believe that Congress would turn to these four Senators in the event of a national emergency.  The sudden termination of our system would be such an emergency.



The question remains whether it is safe for John, or YOU, to retire if you or a loved one is under age 65 and will have a need to purchase health insurance.  Gosh I hope so.  Because if the answer is NO, then we are doomed as a country.  We must be able to believe that our elected leaders can be trusted to push politics aside for the good of the country. 



I am excited to share with you that John will retire by the end of this year.



We are in this together…



DAVE



www.cunixinsurance.com



Picture – Nothin’ But Blue Skies – David L Cunix

Two Wrongs Don’t Make A Right

The answer to the cynical exploitation of a large segment of the American population isn’t to cynically exploit the same people and others by weaponizing fear and undeliverable promises to assure a different electoral outcome.  Sure it is tempting.  For eight years the Mitch McConnell led Republican Party demonized the Patient Protection and Affordable Care Act (Obamacare), promised to repeal it, and pledged to replace the law with better / cheaper access to health care.  It was a lie.  There was never any viable alternative plan and most of the votes to repeal were strictly for show.  The question is whether the Democrats should stoop to Mitch’s level.

Some of these posts are easier to write (and read) than others.  Ten years ago we were discussing the run-up to the PPACA.  Our focus was primarily on the Democrats leading the debate.  After the passage of the law, the Republicans fighting the smooth implementation of the law became the story.  Some of my Republican readers objected, not to the indisputable facts of these posts, but to the tone.  The first casualty of Obamacare was intellectual honesty.  Whatever innocence we may still have possessed expired the next day. 

The Cynicism of Medicare For All

Medicare is Medicare / Medicare For All is not Medicare, as least not what we all understand the term to mean.   And this is where the cynicism begins.  Certain politicians, led by Bernie Sanders, want to trade off the reputation of Medicare, a well-regarded program designed to help senior citizens and the disabled access health care.  They want to usurp the good name, the perceived cost-effectiveness, and high level of acceptance with a program that would be significantly different, unlikely to ever be passed into law, and financially disastrous.  And we are left with one question, “Do the proponents of Medicare For All realize that their program has little in common with Medicare and even less of a chance for enactment and are simply exploiting their base, or do they really have no working knowledge of either of these programs?”

Medicare (real Medicare) is designed to pay approximately 75% to 80% of a beneficiary’s medical bills.  Our first detailed explanation of what was and wasn’t paid by Medicare can be found in this post from February 2010.  The Part A Deductible in 2010 was $1,068.  In 2019 it is $1,364, an increase of 28%.  The Medicare Part B Deductible in 2010 was $135.  Today it is $185, an increase of 37%.  After the deductible, Medicare Part B pays 20% of office visits while Medicare Part A pays a portion of the daily hospital room charges. Even the Medicare Part B premium, what most of us pay to participate in the program, has increased 22% from $110.50 in 2010 to the current $135.50 per month.  The deductible and premium changes are one way to insure the long-term viability of the program. As the cost of care increases, even with the controls Medicare imposes, the beneficiaries’ exposure also goes up.  Medicare Supplement policies are available to help cover the deductibles and other expenses not paid by the program.

Senator Sanders’ Medicare For All does not have a deductible, does not have copayments, and manages to add a number of new benefits including dental, vision, and long term care.  Here is the link to the actual legislation.  Where Medicare has from its inception kept an eye on cost sharing, Medicare For All is focused entirely on the word FREE:

IN GENERAL.—The Secretary shall ensure that no cost-sharing, including deductibles, coinsurance, copayments, or similar charges, be imposed on an individual for any benefits provided under this Act, except as described 6 in subsection (b).  (b) EXCEPTIONS.—The Secretary may set a cost sharing schedule for prescription drugs and biological products—(1) provided that— (A) such schedule is evidence-based and encourages the use of generic drugs; (B) such cost-sharing does not apply to preventive drugs; (C) such cost-sharing does not exceed $200 annually per individual, adjusted annually for inflation; and (D) such cost-sharing is not imposed on individuals with a household income equal to or below 200 percent of the poverty line for a family of the size involved.

How does Senator Sanders propose to pay for this?  Medicare For All is dependent on a major shift in tax policy coupled with a significant change in the payments to doctors and hospitals.  This grid from the American Hospital Association illustrates the substantial difference in fees paid by Medicare, Medicaid, and private insurance.  Medicare currently pays approximately 87% of the cost of care.  Private insurance pays 145%.  This cost shifting is what keeps our hospital doors open.  Could the hospitals and doctors absorb a 40% reduction in income?  Rural hospitals are already at risk under the current system.  The loss of the private insurance buffer could be devastating.


Before we address Senator Sanders’ tax proposal, we must first look at the last 20 years.  The Obama Administration was unable to sunset the Bush tax cuts.  The current administration passed another tax cut in 2017.  It is into this environment that the Senator is proposing a massive change in our concept of taxation.  These details are relevant because there are more than a few challenges to the math of Medicare For All with this funding.  Without…

• 7.5% income-based premium paid by employers.  The first $2 million in payroll would be exempt.  This is not a business deduction.
•  4% income-based premium paid by households (this is not capped)
•  Eliminate employer deductions for health care benefits (see above)
•   Increase the marginal tax rates to as high as 52%
• Tax capital gains and dividends as ordinary income
• Limit tax deduction for those households earning over $250,000 per year
• Increase the Estate Tax and eliminate certain methods of wealth transfer
• Create a Wealth Tax of 1% on households with assets of at least $21.5 million
• Impose a one-time tax on currently held offshore profits
• Charge a fee to large financial institutions
• We’re not done yet
• Close a loop-hole exploited by certain wealthy business owners
• Eliminate the “last-in, first-out” accounting method

Please look at the above list.  How many of those tax increases could be signed into law?  The relatively modest changes of Obamacare caused a major uproar in this country.  How many of the proponents of this legislation, the elimination of private insurance in favor of a government run system fueled by ever increasing taxes, honestly think that this is a viable option?

This is not the public option.  That is something different and another day.  This isn’t buying in to Medicare at age 55, a bill that Sherrod Brown co-sponsored in 2017.  The Kaiser Family Foundation has created a side-by-side comparison of some of the most discussed plans.  This is the link.  These and other ideas are very different from Medicare For All.  Just like Medicare For All is very different than Medicare.  And Senators Sanders, Harris, and Warren know that.  And two wrongs don’t make a right.


DAVE


www.cunixinsurance.com


Picture – The Taj Mahal, Or Not – David L Cunix