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The Kaiser Family Foundation is a often a good source of health care information. I appreciated what they a trying to do with their subsidy calculator, but, unfortunately, it could leave many Americans with a false impression of how much reform will cost them once the bill is implemented.
The issue is that the calculator is presenting the results “in terms of 2009 premium and income levels to enable better comparisons to current circumstances.” This glosses over the biggest problem with our health care system. Not only does our health care cost too much now, but our health care inflation is out of control. For example, for the last several years the average premiums for a family of four have been increasing by roughly a $1,000 a year. I don’t think most economists expect either reform bill to really reduce the growth rate in premiums over the next five years, and I doubt there is a single economist who will bet premiums will not grow at a rate faster than wages over the next five years.
By calculating results in today’s dollars and premiums, the subsidy calculator will give a segment of people an unduly rosy prediction about how much insurance will cost as a result of reform and the affordability tax credits. For people who the calculator currently says will receive subsidies, the relative cost of their health insurance premiums compared to their income should be similar to what it will be in 2015 when reform is fully underway (since tax credits are determined by a percentage of income). But for people who make over 400% FPL, or make less than 400% FPL, but, due to their age were told by the calculator that their premiums would be low enough they would not need tax credits, the calculation will not reflect reality.
For example, the calculator for the Senate bill says a 30-year-old single adult making $33,000 would only pay $2,676 (8.1% of their income) on health care premiums and would receive no subsidies using today’s premium prices. While this might be true if the rules in the bill were already in place in 2009, reforms will not really be in effect until 2014. Premiums are sure to rise faster than wages between now and 2015. By 2015, it is very *likely that insurance premiums for a 30-year-old will be much higher than 8.1% of his income, and probably higher than 9.8% (the limit at which one starts getting government subsidies).
The Kasier Family Foundation subsidies calculator is a useful but flawed tool. They can not actually predict what the exact growth rate in premiums will be between now and when reform starts, so the calculator ignores this important variable by making all the calculations based on today’s costs and wages. For some, the calculator will be a relatively accurate prediction of relative premium costs compared to income. But, for a significant segment of people, the calculator is giving individuals the false impression that their premiums would be noticeably lower than they will almost certainly turn out to be.
*article incorrect said “unlikely” and not “likely”
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A good point to make. But two things:
1) Isn’t there a typo in this:
2) How about some reasonable guesses as to wage inflation vs. premium inflation between now and 2014. I know we can’t predict, but reasonable guesses are better than nothing at all.
Excellent point. I’ve been referring people to the KFF calculator and they’re usually surprised how little the subsidy is. But you’re right- since cost containment is no where to be found and subsidies usually just inflate prices, there’s no reason to believe that this bill will in fact stop that upward spiral.
Allowing people the opportunity to purchase junk, scaled-back, stripped down, “affordable” insurance through inadequate subsidies has always been the goal of this reform. If members of Congress/Senate had to purchase same junk coverage through an exchange themselves they might reconsider expanding Medicare for all.
thank you Jon. solid, reasoned and thoughtful as always
at what point in the process does ‘the Public’ realize they are on the hook for these amounts ? I’m asking because I don’t think the general public is fully aware what the bobblehead’s mean by “mandate” and it’s not like all the Congressional back slappers are gonna let em in on it -
Let me repeat it: “for the last several years the average premiums for a family of four have been increasing by roughly a $1,000 a year. I don’t think most economists expect either reform bill to really reduce the growth rate in premiums over the next five years, and I doubt there is a single economist who will bet premiums will not grow at a rate faster than wages over the next five years….”
THIS IS THE ISSUE THAT VOTERS UNDERSTAND & CARE ABOUT! Most voters are on a budget that’s being squeezed. These voters aren’t impressed with insuring 30 million more, especially if the Gov’t. is paying for 1/2 of them. Voters don’t care about a public option IF they can get good HealthCare & save money without one.
What we’re absolutely against is MORE Gov’t. policies that reward greed, MORE Gov’t. giveaways to those who sunk our system, i.e. big banks and insurance companies like AIG. We’re certainly not interested in MORE Gov’t. programs that will be have to be paid by what used to be the middle class.
SO, why aren’t these clearly stated arguments Jon repeatedly raises THE criteria for addressing the Senate HealthCare Bill? Why do those opposed to this sham continually let the discussion be misdirected? If I could teach people interacting with media one thing, it would be to respond: That’s nice, but can we get back to the ONLY issues that voters care about – the cost & quality of HealthCare.
You’d think someone talking about what a great bill this is would have answered question #2 many times over, but it’s totally missing. CBO says U.S. health care costs will go up 71% over inflation in the next ten years. Would premiums go up even more than that? Could be. Wages, it seems, are likely to not go up very much if at all over that period.