The Senate Draft Plan is out, and it is hard to believe that it, again, failed to create some kind of solution to the ongoing issue: affordability of health care. Key components include greater latitudes for states to opt out, the roll back of taxes, phase down of Medicaid expenses, and having subsidies based on income vs. age, but reducing these subsidies over time.
Phasing down of Medicaid means one thing: reduction in benefits. It means a narrower network with less doctors and longer waiting lists and less access.
Rolling back of taxes means less money. Less money means a bigger deficit. As long as the government continues to subsidize health care, the deficit will continue to grow. One way they could save significant money would be to dismantle the exchanges, but it is not clear that that is the intention.
Subsidies based on income and not age makes tremendous sense. Why would a person like Mark Cuban, who is under 65, need a subsidy? The people who need the money and need the care is where we should put in our safety net.
It is surprising to consider, though, that in certain circumstances, the self-employed and/or those who must purchase individual policies may be better off without insurance. The cost of a family policy is about $20,000+ dollars for 2018. For those not eligible for subsidies, for example someone making about $100,000, this is a significant expense. In addition, the deductible for such a policy is about $2,500 per person; or about $10,000 for a family of four. Given this, you are looking at out-of-pocket expenses of about $30,000 after tax. Which means that, after paying taxes, of every dollar that is left, 35 cents will be going out for health care before the family has eaten, paid rent, bought clothes, paid for transportation, etc. This is not workable. It is unlikely that such a family will spend $30,000 on health care in any one year. If they could save that money, or a significant portion of it to cover future catastrophic events, the family would be significantly better off.
As people on subsidies see their subsidized portion decrease, they will be in the same boat as the high earners who self-insure; except they will be earning less.
In reality, the fact that insurance costs $20,000 per family is where the problem is. And, the fact that of that $20,000 so little, across the board, is actually spent on care, makes it more of a problem. According to a study by the CDC, of all 18- to 64-year-olds, after subtracting the deductible form health care costs paid, insurance companies pay out less than 10 percent of the money they take in to cover the cost of care.
The solution is limiting administrative costs. Cutting senior level compensation in the three largest insurance companies would allow significant reductions in policy costs. So, if you look at it that way, if administrative costs were cut in half; a $9,000 savings could be achieved for next year and your policy, instead of costing $20,000, would cost $11,000.
It’s our money the politicians are using to pay for these policies. Why couldn’t the politicians figure this out?
