An objective look at the Healthcare bill (HR 3200)


I have been reading a lot of misinformation about the health care bill lately, and I decided to post a few things I have found from reading the bill myself. Here are my findings, organized by topic. I am using the version posted at http://energycommerce.house.gov/Press_111/20090714/aahca.pdf, which is up to date, as far as I can tell. I am not going to get into the Palin they are going to create a death commission for old people or Hulabaloo’s Republicans believe it is more immoral to raise taxes than have people dying in the streets with no health coverage, as both are worthless reactionary. I want to hit a couple of topics that are useful to real Americans and approach the bill in a non-passionate way. If you feel I have made a mistake, let’s talk about it, but please be willing to show me real numbers rather just rhetoric.

I have quoted the bill directly, and stated page numbers so you can read entire sections in context. I am not going to post the whole bill or do a line by line, as that is a worthless exercise for me.

What Will Government Healthcare Cost Me?

I cannot definitively answer, as there is no set formula for calculating costs in the bill, unless you fit between 133% and 400% of the poverty level. At these levels, you get what are called "affordability credits" to bring down the costs of national health insurance. Assuming that the actual costs will be somewhere near the max, we can start looking at the metrics mentioned and calculate the costs for an average family. First, let’s look at what the average person pays for health insurance now:

According to the National Coalition on Healthcare, the average cost for health insurance is $12,700, with $3,400 paid by the employee ($9,300 paid by the employer). A Mercer study shows the average deductible was $1,000 for a family in 2008. And the out of pocket max, according to a Market Watch article, were $5,000. Here is a summary table

Total Costs $12,700
Employer Share $9,400
Employee Share $3,400
Deductible $1,000
Out of Pocket max $5,000
Employee theoretical max $8,400

NOTE: I say "Employee theoretical max" from experience, as I have seen how co-pays can still add up after hitting out of pocket max. There may be a way to recoup them, but it is a fight I am not willing to participate in. Over the past few years, our out of pocket costs, premiums, co-pays and other bills, have been around $13,000, but we have dealt with childhood cancer and some expenses that simply were not covered.

To calculate the costs of the healthcare plan (HR 3200), we need to know the cost of premiums and the cost of deductible and out of pocket max. The government combines everything in a category called cost sharing. The cost sharing for families and individuals are spelled out on page 29 (lines 9-16):

9 (B) APPLICABLE LEVEL.—The applicable
10 level specified in this subparagraph for Y1 is
11 $5,000 for an individual and $10,000 for a
12 family. Such levels shall be increased (rounded
13 to the nearest $100) for each subsequent year
14 by the annual percentage increase in the Con15
sumer Price Index (United States city average)
16 applicable to such year.

So, we can see that a family will have a cost share of $10,000. Now we need the premiums. They are only published for familes making 133% to 400% of the National Poverty Level (NPL) and outlined on page 137. According to page 137, lines 1-3, the percentages are:

Percent of Poverty Level Initial Max % Final Max % Actuarial Value %
133% through 150%  1.50% 3% 97%
150% through 200%  3% 5% 93%
200% through 250%  5% 7% 85%
250% through 300%  7% 9% 78%
300% through 350%  9% 10% 72%
350% through 400%  10% 11% 70%

The government definition of the poverty level is also published. The following charts show what the poverty level is. The first two columns were copied directly from the site, I aadded the others to show you how much money each of the other percentages represent. This is so you can easily calculate your own percentage. I am in one of the upper categories.

49 Continguous States and the District of Columbia

Persons in family Poverty guideline 133% 200% 250% 300% 350% 400%
1 $10,830 $14,404 $21,660 $27,075 $32,490 $37,905 $43,320
2 $14,570 $19,378 $29,140 $36,425 $43,710 $50,995 $58,280
3 $18,310 $24,352 $36,620 $45,775 $54,930 $64,085 $73,240
4 $22,050 $29,327 $44,100 $55,125 $66,150 $77,175 $88,200
5 $25,790 $34,301 $51,580 $64,475 $77,370 $90,265 $103,160
6 $29,530 $39,275 $59,060 $73,825 $88,590 $103,355 $118,120
7 $33,270 $44,249 $66,540 $83,175 $99,810 $116,445 $133,080
8 $37,010 $49,223 $74,020 $92,525 $111,030 $129,535 $148,040
Per Addl $3,740 $4,974 $7,480 $9,350 $11,220 $13,090 $14,960

Alaska

Persons in family Poverty guideline 133% 200% 250% 300% 350% 400%
1 $13,530 $17,995 $27,060 $33,825 $40,590 $47,355 $54,120
2 $18,210 $24,219 $36,420 $45,525 $54,630 $63,735 $72,840
3 $22,890 $30,444 $45,780 $57,225 $68,670 $80,115 $91,560
4 $27,570 $36,668 $55,140 $68,925 $82,710 $96,495 $110,280
5 $32,250 $42,893 $64,500 $80,625 $96,750 $112,875 $129,000
6 $36,930 $49,117 $73,860 $92,325 $110,790 $129,255 $147,720
7 $41,610 $55,341 $83,220 $104,025 $124,830 $145,635 $166,440
8 $46,290 $61,566 $92,580 $115,725 $138,870 $162,015 $185,160
Per Addl $4,680 $6,224 $9,360 $11,700 $14,040 $16,380 $18,720

Hawaii

Persons in family Poverty guideline 133% 200% 250% 300% 350% 400%
1 $12,460 $16,572 $24,920 $31,150 $37,380 $43,610 $49,840
2 $16,760 $22,291 $33,520 $41,900 $50,280 $58,660 $67,040
3 $21,060 $28,010 $42,120 $52,650 $63,180 $73,710 $84,240
4 $25,360 $33,729 $50,720 $63,400 $76,080 $88,760 $101,440
5 $29,660 $39,448 $59,320 $74,150 $88,980 $103,810 $118,640
6 $33,960 $45,167 $67,920 $84,900 $101,880 $118,860 $135,840
7 $38,260 $50,886 $76,520 $95,650 $114,780 $133,910 $153,040
8 $42,560 $56,605 $85,120 $106,400 $127,680 $148,960 $170,240
Per Addl $4,300 $5,719 $8,600 $10,750 $12,900 $15,050 $17,200

We can now calculate maximum premiums under the health care plan and compare them. First, let’s find an average family of 4, so we know what we are dealing with. This is a tricky figure. According to the Census bureau, the average income for a family was $58,407 in 2006, with average of 3.13 per family. Using the table above, this family sits in the 300% to 350% percent of NPL. Below is a chart of premium costs using the health care tables. Those lines that are highlighted will pay more, on average, than they pay today in premiums.

  133% 200% 250%
Persons in family Salary Initial (1.5%) Final (3%) Salary Initial (3%) Final (5%) Salary Initial (5%) Final (7%)
1 $14,404 $216 $432 $21,660 $650 $1,083 $27,075 $1,354 $1,895
2 $19,378 $291 $581 $29,140 $874 $1,457 $36,425 $1,821 $2,550
3 $24,352 $365 $731 $36,620 $1,099 $1,831 $45,775 $2,289 $3,204
4 $29,327 $440 $880 $44,100 $1,323 $2,205 $55,125 $2,756 $3,859
5 $34,301 $515 $1,029 $51,580 $1,547 $2,579 $64,475 $3,224 $4,513
6 $39,275 $589 $1,178 $59,060 $1,772 $2,953 $73,825 $3,691 $5,168
7 $44,249 $664 $1,327 $66,540 $1,996 $3,327 $83,175 $4,159 $5,822
8 $49,223 $738 $1,477 $74,020 $2,221 $3,701 $92,525 $4,626 $6,477
  300% 350% 400%
Persons in family Salary Initial (7%) Final (9%) Salary Initial (9%) Final (10%) Salary Initial (10%) Final (11%)
1 $32,490 $2,274 $2,924 $37,905 $3,411 $3,791 $43,320 $4,332 $4,765
2 $43,710 $3,060 $3,934 $50,995 $4,590 $5,100 $58,280 $5,828 $6,411
3 $54,930 $3,845 $4,944 $64,085 $5,768 $6,409 $73,240 $7,324 $8,056
4 $66,150 $4,631 $5,954 $77,175 $6,946 $7,718 $88,200 $8,820 $9,702
5 $77,370 $5,416 $6,963 $90,265 $8,124 $9,027 $103,160 $10,316 $11,348
6 $88,590 $6,201 $7,973 $103,355 $9,302 $10,336 $118,120 $11,812 $12,993
7 $99,810 $6,987 $8,983 $116,445 $10,480 $11,645 $133,080 $13,308 $14,639
8 $111,030 $7,772 $9,993 $129,535 $11,658 $12,954 $148,040 $14,804 $16,284

Let’s calculate our average family in the United states. To give the best benefit of the doubt, I am going to calculate two ways: income and adjusted gross income. There is nothing in the bill that suggests adjusted gross income, but it is only fair to look at both sides of the coin. According to the IRS, adjusted gross income in the United States, for all tax filers, was $31,987. This would be low for our average family, but we will use it to hit a rock bottom figure of costs for this family under the new plan. I am also going to add deductible and out of pocket max, although that is not really how insurance works. But it gives a good idea of what a family with some health concerns could face.

Gross Income Adjusted Gross Income
Current Initial Final Initial Final
Premiums $3,400 $5,256.63  $    5,840.70  $        479.81  $        959.61
Deductible $1,000 $0.00 $0.00 $0.00 $0.00
Max Out Of Pocket $5,000 $0.00 $0.00 $0.00 $0.00
Cost Sharing $6,000 $10,000.00 $10,000.00 $10,000.00 $10,000.00
TOTAL $9,400 $15,257 $15,841 $10,480 $10,960
No illness $1,856.63 $2,440.70 -$2,920.20 -$2,440.39
Medical Issues $5,857 $6,441 $1,080 $1,560

This means our average family, with very few doctor’s visits, will save as much as $2,920.20 if the premium max is based on adjusted gross income, but will pay as much as $2,440.70 more if it is based on real income. If this family has medical issues, they will pay as low as $1,080 more to $6,441 more in out of pocket medical expenses. In reality, based on how insurance works, this family, at max comes out $1,440.39 ahead ($27 per week), but could come out as much as $7,441 behind.

If you would like to calculate your situation, it is an easy formula. Take your salary and adjusted gross income (from your tax return last year) and figure what category you fit in based on your family size. Take the percentages from the HR 3200 chart and multiply the two figures by initial and final percentages. These are your max premiums. Then add $10,000 to find your max out of pocket for expenses. to compare, take the amount you pay per paycheck and multiply it by 26 (if on a two week schedule). This is your premium amount. Then add your max out of pocket. This should be your true expense. If you want to give the best benefit of the doubt, add your deductible amount. This will help you better understand more catestrophic medical care.

In case you are curious, my current salary and family size would put my initial premium at about $9,500 initial and $10,500 final (round figures). With a $10,000 cost share, assuming that it covers everything that my current medical sometimes does not, I have a net loss, to my family of $6,500 to $7,500 dollars. This is a sizeable extra chunk of change for me personally. Calculate your own costs and see what the bill means to you, however.

Will My Company Dump Their Health Insurance Plan?

I can’t answer this one definitely either. Based on our average family insurance scenario, the company pays out $9,300 on a salary of $58,407. This amounts to 15.9227% of the person’s salary. The Kaiser family foundation has cost out healthcare at an average of $2.59 per hour per employee, or $5,283.60 (9.046% of the average family income) in 2005, with healthcare rising about $.20 per hour per employee. That would put the current costs, if the trend continued, at around $2.98 per hour per employee ($6,079.20 or 10.4% of the average family income). Studies have shown the smaller companies pay even higher percentages than large companies, due to smaller group size. Looking at various sites, I find the average expenditure for health insurance to be around 9% of payroll, but I cannot determine if this is 9%, but remember this is a percentage of the entire payroll and does not factor out the part time employees who do not receive healthcare benefits.

HR 3200 states that the government has a "contribution" amount of 8% of payroll for companies that do not have a company health insurance plan (page 149, lines 14-20+):

14 SEC. 313. EMPLOYER CONTRIBUTIONS IN LIEU OF COV
15 ERAGE.
16 (a) IN GENERAL.—A contribution is made in accord
17 ance with this section with respect to an employee if such
18 contribution is equal to an amount equal to 8 percent of
19 the average wages paid by the employer during the period
20 of enrollment …

If the total payroll for the preceding calendar year does not exceed $400,000, the percentage is subsidized (page 150, lines 9-13). I added the dollar amounts after the percentage, the rest of the lines are copied verbatim from the bill.

9 (1) IN GENERAL.—In the case of any employer
10 who is a small employer for any calendar year, sub
11 section (a) shall be applied by substituting the appli
12 cable percentage determined in accordance with the
13 following table for ‘‘8 percent’’:

If the annual payroll of such employer for                 The applicable
the preceding calendar year:                                      percentage is:

Does not exceed $250,000 ……………………………….     0 percent  ($0)
Exceeds $250,000, but does not exceed $300,000       2 percent ($5,000 – $6,000 total)
Exceeds $300,000, but does not exceed $350,000       4 percent ($12,000 – $14,000 total)
Exceeds $350,000, but does not exceed $400,000       6 percent ($21,000 – $24,000 total)
$400,000                                                                     8 percent ($32,000 total)

Now to the question of your employer. I see the following dumping healthcare group benefits, if they have it:

  1. Employers with low payrolls (those subsidized above)
  2. Employers with mostly full time employees that make below, and perhaps at, the average salary
  3. Employers who are not competing heavily for employees (using healthcare benefits as a perk to get talent)
  4. Employers with lots of part-time employees, if they are forced to cover them with benefits, as well (not spelled out either way in the bill)

On the other hand, the following will not dump policies

  1. Employers who have a healthy number of very highly paid employees
  2. Employers with a great deal of part-time employees, unless they have to provide them benefits, as well (not spelled out either way in the bill)
  3. Employers for whom having company insurance will be a great attraction for the best talent

The 8% figure appears to have come from a government study that shows healthcare costing 7.8% per family, but I cannot find the link right now and I cannot tell if it includes all American families or just those insured. I would imagine, looking at the other sites, 7.8% means all families, not just those covered by employers.

If you want to calculate your risk, figure out what you think the average salary in your company is and calculate the total payroll. If you think the average is much lower, you will have to adjust this percentage up. Multiply this total number by 8%. Now remove part time employees from the mix, as they do not cost the company benefits and multiple by 9% if the average is about $59,000 per year in salary. If you think it is less, you have to add more percentages.

If you have an employer who has 25 employees each making about $59,000, the total payroll is $1,475,000. The health insurance costs are $132,750 and the healthcare plan is $118,000, for a savings of $14,750. Unless this company can get rid of a few HR people by dumping the insurance plan, for greater savings, they probably will not. Even if we take the 10.4% figure, it is only $35,400 saved per year (plus any HR person they can get rid of when benefits are reduced). If you multiply this by 10 (250 employees), with a total of $350,400 in savings (plus probably at least one HR person), it becomes more attractive.

Will the Health Insurance Plan Cover Undocumented Workers

The undocumented worker/illegal alien question has spurred a lot of bad information. The people negative towards the bill point to SECTION 152 (pages 50-51), which states:

21 SEC. 152. PROHIBITING DISCRIMINATION IN HEALTH CARE.
22 (a) IN GENERAL.—Except as otherwise explicitly per
23 mitted by this Act and by subsequent regulations con
24 sistent with this Act, all health care and related services
25 (including insurance coverage and public health activities)

1 covered by this Act shall be provided without regard to
2 personal characteristics extraneous to the provision of
3 high quality health care or related services.
4 (b) IMPLEMENTATION.—To implement the require
5 ment set forth in subsection (a), the Secretary of Health
6 and Human Services shall, not later than 18 months after
7 the date of the enactment of this Act, promulgate such
8 regulations as are necessary or appropriate to insure that
9 all health care and related services (including insurance
10 coverage and public health activities) covered by this Act
11 are provided (whether directly or through contractual, li
12 censing, or other arrangements) without regard to per
13 sonal characteristics extraneous to the provision of high
14 quality health care or related services.

What is a high quality health care service? Once you answer that, you can determine whether "high quality" means anyone who needs health care has a card. If so, then undocumented workers/illegal aliens will be able to participate. But, as proponents of the bill have stated, they won’t get affordability credits:

3 SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED
4 ALIENS.
5 Nothing in this subtitle shall allow Federal payments
6 for affordability credits on behalf of individuals who are
7 not lawfully present in the United States.

This is the only thing in the bill that talks about undocumented workers. As I have read it, affordability credits only apply to individuals between 133% and 400% above the National Poverty Level. The question is whether or not someone can include undocumented workers/illegal aliens in the under 133% category. Overall, I would agree with the proponents on this one.

Will Health Care Expenses Go Down?

According to a CNN/Money article, the United States currently has a $2.2 billion medical industry, with around $1.2 billion in waste. It is this waste that is causing the incredible expenses related to health care. The following chart was on the site
health care waste chart

Just looking at the bill alone, it is unlikely overtesting will be solved by any of the sections in the bill. The expense of process claims will likely go up, especially if the filing system is designed like Medicare. The bill will do nothing about ignoring doctor’s orders either. There are some provisions that might help some with ineffective use of technology, but the problem is growing and the bill does not address the real problem here. Hospital readmissions will likely go down, but hospitals, which will be "fined" under provisions in the bill for too many readmissions might keep their more risky patients in the hospital, raising waste in admissions while reducing the waste in readmissions. Medical errors are not addressed directly in the bill. Unnecessary ER visits will go down. They might be replaced by some unnecessary doctor’s visits, but doctor’s visits cost less than ER visits. And there is nothing to address hospital acquired infections.

If you ask me, the improvement is largely in a small bucket, while one of the largest buckets will likely grow larger. The most likely outcome is an increase in health care costs and waste, not a decrease. With everyone having insurance cards, I am almost certain ER visits will reduce, however. But even a reduction of 100% will not offset a 10% increase in processing claims expense, which is also very likely.

I am done with the novel for now. I might get back with some more interesting tidbits later.

Peace and Grace,
Greg

Twitter: @gbworld

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