Makin’ shit up – by Joe Biden

September 27, 2008

It’s almost unbelievable because it is unbelievable, Joe. Joe forgets to mention McCain’s (refundable) tax credit for health insurance. If your employer provides health insurance for you, that tax credit is tax cut for you. As someone who is self employed, I already pay income taxes on the money I’ve spent on health insurance. This would help me out, too.

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15 Responses to “Makin’ shit up – by Joe Biden”

  1. superdave524 Says:

    Except, it sounded like Joe said that the average health plan is valued at $12,000 per year. In last night’s debate, McCain said the tax credit would be $5,000 per year. If both those statements are accurate… well, you do the math.

  2. Quakerjono Says:

    Actually, it’s only a “tax cut” if one assumes that employers will continue to provide health insurance at the $12,000 level AND provide health insurance to employees at all AND that the tax credit isn’t obliterated by the rest of the McCain plan which is to start taxing employee-sponsored health care. None of these are safe assumptions. Even the notion that there will be something left over from this magical credit that McCain is proposing to be rolled over into an HSA is hilariously misguided and just shows how out of touch he and his team are with the real costs of health care in this country (and the fact that we don’t have the positive health outcome numbers to show for spending the most on health care in the world).

    As SD points out, the average cost for a family health plan is around $12,000, which covers only the monthly premiums and possibly some sort of drug coverage. When one considers this is an average and factors in out of pocket expenses for copays, medications, procedures not covered by insurance and any ancillary healthcare costs, such as vision or dental, that number is conservative at best. Indeed, even with employee-sponsored health insurance (something which McCain’s plan seems bound and determined to do away with entirely), it’s becoming difficult if not impossible for many families to get the health care that they need.

    The issue is not strictly origination of plan; group or non-group. The issue is that health care costs continue to spiral out of control and the non-group market continues to be highly disunified in its offerings.

    McCain’s tax credit swap-out will do nothing to mitigate these factors. In fact, it actively seeks to push those already struggling with even employee-sponsored health insurance into the non-group market where their costs will skyrocket, further exacerbating the underlying problem. For those who are lucky enough to have their employer continue to provide health insurance, a vanishingly small minority, the credit would still provide no relief for a number of reasons.

    First, it would be remarkably incredulous to think that as federal taxes are instituted, state taxes won’t be following shortly. Again, this cuts directly into that credit producing little if any forward momentum in making health care “affordable” and basically just moving numbers around on the government’s ledger.

    Second, there’s the “adverse selection death spiral” to contend with, which we’re sort of seeing a version of now in the Treasury’s bailout plan. In short, the McCain plan encourages healthy (or cash-strapped and felling lucky) workers to exit their relatively high cost employee-sponsored health plans in favor of individual, high-deductible, lower-premium plans who’s costs might in fact be covered by the credit…so long as no actual claims were made against the policy. This would then leave any employee-sponsored plans holding only those who would be unable to secure attainable-priced coverage in the non-group market, the sicker and lossier employees, causing the employee plan to spiral out of control in cost until it collapses. This effectively mutes the “Keep your employee health plan” option McCain promotes.

    So then everyone will be dumped on the open market to fight for higher priced plans that offer lower coverage. This massive influx of people, many of whom have more need of health care than the “healthy few” who left to begin with, is prime instigation for non-group plans to not only raise rates protectively but offer less coverage. Thus, eventually, EVERYONE’S rates skyrocket, even the healthy who thought they were being financially smart and we’re all back in the shit, only this time it’s worse because there’s no collective bargaining structure.

    McCain’s tax credit will have been, at best, just enough to cover increased group and non-group rates and his tax increase so the average family or single person will, in effect, be paying the exact same amount or more for their health care insurance as they are now and getting a lower level of care.

    Even worse, McCain’s plan evidently intends to move the money people are paying for health care insurance in group plans from benefits to wages which makes them subject to payroll taxes as well as McCain’s plan does nothing to affect the “compensation in lieu of benefits” structure. This is a further, hidden tax increase “gotcha” which could cause a thousand dollars or more in additional taxes using the $12,000 number. In effect now, a family or single person is paying a substantial amount MORE for their health insurance and actually receiving less coverage and higher deductibles (and, again, this does nothing for ancillary health care such as dentistry or vision).

    Thomas Buchmueller, Sherry A. Glied, Anne Royalty, and Katherine Swartz give the McCain plan a thorough going over in their study “Cost And Coverage Implications Of The McCain Plan To Restructure Health Insurance”, published in Health Affairs, and their findings are not positive.

    The one “makin’ shit up” here is McCain and if you for a second think that you’ll actually be helped by this misguided plan unless you’re already filthy rich and can afford the much-vaunted (although not true) “best care in the world” already because of your string of cars and houses and rich wives, even if you’re currently in the non-group market, then you’re not only drinking the kool-aid, you’re taking a bath in it.

  3. superdave524 Says:

    Nobody knows healthcare like QJ.

  4. John in IL Says:

    SD:
    Joe said that the average health plan is valued at $12,000 per year. In last night’s debate, McCain said the tax credit would be $5,000 per year. If both those statements are accurate… well, you do the math.

    You might want to recheck your math, Dave. You make the mistake of believing Joe. McCain is proposing a tax credit. If you have an employer sponsored health plan, you would have to pay taxes on that $12,000. You are not paying $12,000 in additional taxes. Your effective tax rate would have to be more than 40% to consider this a tax increase. That’s higher than the rate paid by top 1% of taxpayers.

    QJ:
    it’s only a “tax cut” if one assumes that employers will continue to provide health insurance at the $12,000 level AND provide health insurance to employees at all AND that the tax credit isn’t obliterated by the rest of the McCain plan which is to start taxing employee-sponsored health care. None of these are safe assumptions.

    OK. Assume the worst. All employers quit offering health insurance as a benefit. All employees have to purchase insurance on the open market. They purchase a (much) lower cost, high deductible plan. From what I’ve been quoted with my imaginary family of four, it runs around $200/month with no co-pays and a $10,000 deductible (after the deductible is met, all costs are covered including prescription drugs). So you pay $2,400/year for health insurance instead of $12,000. You get a refundable tax credit of $5,000. That leaves you with $2,600 a year to pay for routine medical things like physicals, glasses, etc. If nothing extraordinary happens, any money not spent goes into a Health Savings Account to insure you and your family against any future problems.

    So then everyone will be dumped on the open market to fight for higher priced plans that offer lower coverage. This massive influx of people, many of whom have more need of health care than the “healthy few”

    “Healthy few”? No one would offer insurance if there was only a “few” healthy people in the country. That’s the way private insurance works. If there were only a “few” good drivers out there, the car insurance industry would collapse. It works because most people are good drivers.

    if you for a second think that you’ll actually be helped by this misguided plan unless you’re already filthy rich

    I may be filthy but in no way can I be considered rich.

  5. superdave524 Says:

    I’m too tired to check anything right now. I did get you a present, though: a 6 second action film of my neighbor saying, “Awesome”- all for your viewing pleasure.

  6. Quakerjono Says:

    From what I’ve been quoted with my imaginary family of four, it runs around $200/month with no co-pays and a $10,000 deductible (after the deductible is met, all costs are covered including prescription drugs). So you pay $2,400/year for health insurance instead of $12,000.

    Okay, I’m so hungover this morning that only the phrase “tore up from the floor up” seems to encapsulate the shenanigans going on in me at the moment, but let’s see if I can do this.

    Fine, but you’re not assuming the worst. You’re not even assuming the likely.

    First, part of the reason that number is lower and that deductible higher is that non-group plans offer less coverage. Deductibles aren’t even an issue if the plan doesn’t cover. Simply throwing out those numbers and saying, “This plan is comparable to group plans and is cheaper,” doesn’t make it so. In fact, for that deductible with that low of a monthly premium and no copay, I’d bet that the coverage offered is far less than what you’d get in the meanest of group plans. In order for the comparison to be valid, you have to take the mythical family and compare plan to plan and make sure the coverage between the group and non-group is the same. The report I referenced points out that in those situations, where a family moves from group to non-group and retains the same basic level of coverage, their premiums would actually increase by around $2,000.

    This doesn’t even presume that the insurance company is being greedy. As the report points out, it just costs more administratively to sell insurance to 1 million people 1 or 2 to 4 people at a time than it does to sell it to 5,000 to 100,000 people at a time. But, since we’re assuming the worst, we can safely say that not only will the insurance company be greedy and pass on inflated administrative costs to consumers, but that’s if they even insure them in the first place.

    Sure, a single person or family could seek out coinsurance to try and solve the gaps in their main non-group plan, but then you have more premiums as well as possibly more co-pays and deductibles. Again, in practice, the family doesn’t see anywhere near that $2,600 to roll over into their HSA.

    Second, in this economy, show me the family or even single person, sitting on top of the bell-curve distribution’s bulge when it comes to income that can shrug off a $10,000 deductible. Again, even with group plans, families facing a serious medical crisis which can quickly tally a bill in the tens of thousands, have trouble meeting deductibles far less than that. Hey, if you’re feeling lucky and want to be that you’ll never be in a situation to have to meet such a high deductible while in the middle of a health crisis that may cause your income to reduce, feel free to play those ponies. For many, though, that’s a level of risk they’re not comfortable with and shouldn’t have to be comfortable with.

    Third, and this touches on the “healthy few” remark, that quote is based on a family with no health care history and no projected immediate health care need. Go get a quote on health care for a family of four, but give the dad an ulcer and heart issues, give the mother a family history of breast cancer, give the kids a couple of broken bones and some allergies. Give one kid ADD, even. In other words, give them a fairly typical medical need history with pre-existing conditions and the anticipation of further non-routine medical care and see how that affects not only who will cover them, but how much they’ll charge. Then, just for fun, give them a really acute chronic condition to deal with, like Down’s syndrome.

    So you’re back to where you began. Families forced out of group, employee-sponsored plans, end up paying more for less and McCain’s tax credit is gobbled up before we even get to the notion of compensation in lieu of benefits and payroll taxes.

    “Healthy few”? No one would offer insurance if there was only a “few” healthy people in the country. “

    You’re quibbling on a word choice, here. Those who will never draw on their health care insurance coverage other than the occasional checkup or antibiotic prescription are a minority. Yet, health insurance companies, particularly non-group ones, base their rates on them.

    I may be filthy but in no way can I be considered rich.

    Don’t worry about the filth. Continue to support McCain’s health care plan and you’ll be taking a bath soon enough! 😀

  7. John in IL Says:

    Simply throwing out those numbers and saying, “This plan is comparable to group plans and is cheaper,” doesn’t make it so. In fact, for that deductible with that low of a monthly premium and no copay, I’d bet that the coverage offered is far less than what you’d get in the meanest of group plans.

    I didn’t say that they were comparable plans. That’s part of the reason these generous group plans are so expensive. They overinsure. Why should routine, predictable medical expenses be covered by insurance? With those expensive plans, you are simply prepaying your medical expenses whether you incur them or not.

    show me the family or even single person, sitting on top of the bell-curve distribution’s bulge when it comes to income that can shrug off a $10,000 deductible

    If your employer currently pays you $50,000 plus $12,000 in health insurance benefits and then drops coverage, do you think your employer will continue to pay you only $50,000?

  8. John in IL Says:

    Oh and thanks for that, Dave (hubba fucking awesome hubba). I’ll also be leaving you a comment at chez vous.

  9. kate Says:

    You guys should take your show on the road. You’d make millions.

    I’d be your groupie.

  10. Jamie Says:

    Can y’all clear something up for me? John, you said:

    That leaves you with $2,600 a year to pay for routine medical things like physicals, glasses, etc. If nothing extraordinary happens, any money not spent goes into a Health Savings Account to insure you and your family against any future problems.

    Not if it’s anything like a Federal employee’s HSA.

    And you said:

    With my fedemp (disclosure) HSA, whatever money I put in that I don’t use by the end of the fiscal year gets swallowed up–gone. So wouldn’t I be prepaying for those expenses either way?

    As it is now, if I overestimate my expenses I just lose the money, and if I underestimate I have to use taxed dollars for health care. Who’s fixing that particular mess? Keep in mind the number of civilian federal employees, and you see the scope I’m talking about.

  11. Jamie Says:

    Er, that “and you said:” was meant to be taken out. I had another quote from you that I took out there. Yah dude.

  12. John in IL Says:

    You don’t have an HSA then. You probably have a medical FSA (Flexible Spending Account)


  13. John’s right; if it’s a use-it-or-lose-it, that’s a flexible spending account.

    There are three different types of “medical savings accounts”:

    — Flexible spending (FSAs), to which the employee, NOT the employer, contributes pretax dollars. These do not have to be associated with any form of health insurance and are use-it-or-lose-it, meaning they expire at the end of each calendar year and cannot be taken to a new job.

    — Health reimbursement accounts (HRAs) or consumer-driven health plans (CDHPs), to which the employer, NOT the employee, contributes dollars. These are usually coupled with some form of high-deductible health insurance and do roll over from year to year, but they are not portable between employers.

    Basically, they work like this; the employer offers a policy that has a $1,500 deductible, then creates a $1,000 reimbursement account for you. As you go to the doctor and buy prescriptions and whatnot, you tap the account first; once that’s exhausted, you have a $500 deductible gap, and then coverage kicks in.

    — Health savings accounts (HSAs), to which BOTH the employer and employee can make contributions. These must be coupled with a high-deductible health plan, do roll over from year to year, and are portable between employers.

    An HSA is basically a medical 401(k); you contribute money to it pre-tax, which then can be invested. The nice thing about it is that the money can also be withdrawn tax-free as you need it for qualified medical expenses.


  14. Meanwhile, as luck would have it, Hewitt just released the results of their annual survey of employer-provided healthcare plans.

    Long story short, your average healthcare coverage costs the company $8,863 per year, with employees picking up an estimated $1,946 of that in premium costs. If you were to shift the burden directly to employees, which is what the whole remove-the-tax-credit-for-companies thing does, you’d have a net cost of roughly $7k ($9k – $2k) in addition to what the average person is already paying, which you then offset with a $5k or more tax credit.

    I like this idea for self-employed folks. I’m not quite so wild about taking away the business tax credit for providing health insurance, even though not providing health insurance would take roughly $17 million off my expense line per year.

  15. John in IL Says:

    Thanks for the info, NDT. You would be the guy to talk to.

    One thing:
    I’m not quite so wild about taking away the business tax credit for providing health insurance

    Under the McCain plan, there would be no change in the way that businesses that provide health insurance are taxed. He wants to eliminate the current income tax exemption for health insurance that employees now receive and replace it with a refundable health insurance credit. The only income tax change would be on the employees part (SS/Medicare taxes would still be exempted).


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