Against the widespread wishes of the American people, Democrats
passed the Patient Protection and Affordable Care Act ("ObamaCare") of
PPAC into law in 2010 promising, among other things, to "correct the
deficiencies" of medical care. Yet the ironically titled law, in its
2,800 pages of federal intervention into the economy, is failing to
"protect" anyone as health insurance becomes even less "affordable."
Even
worse, ObamaCare is restraining an economic recovery and destroying
jobs by burdening entrepreneurs and employers with tax increases and
costly regulations. Congress can help end the economic uncertainty by
keeping our Pledge to America and repealing this disastrous law. This
month was a milestone for PPAC as the health insurance exchanges opened
to memorialize the legacy of Obama as his experimental economic policies
continue to plague our growth.
As the law became a reality on
October 1, 2013, over 50% of all Americans do not understand how this
new law is structured and even more of them do not understand the
economic ramifications. This became evident when I overheard a
conversation between two employees in my office this past week. Both of
them in the late 20's, the very demographic that proponents of the plan
are expecting to enroll in droves, the young and healthy millennials.
As
the conversation between these two people developed, through the door
outside my office, I overheard several conversations about the health
care bill. One of these people was anticipating the arrival of a
nationwide insurance exchange coming online in a few days to get his
"free health care plan" we will call him Keith. The other, we will call
him Scott, proceeded to explain to Keith that there was nothing free in
ObamaCare. I was astonished at the exchange between these two bright and
educated people. This is a classic case of a low-information consumer
vs. a highly informed person. Keith, apparently, has not recently had
health insurance coverage and was under the impression he was going to
get a limitless benefit from the federal government. Scott, to the
contrary, explained that this was the biggest political Ponzi-scheme on
the planet and that Keith was going to have to pay for his coverage. In
reality, Keith was hugely disappointed, no different from the millions
who recently discovered that no one is getting free health insurance.
What
is the reality of this controversial piece of legislation? Could it be
that the actuaries that the democratic pollsters hired to run the
numbers got it wrong? Let us look at some economic facts about this
legislation.
First of all, when the health insurance exchanges
opened up on 10/1, there was a lot of perplexity, not because the web
site had mal-functioned, but because millions were expecting to get this
new benefit for free! One can only imagine the bewilderment experienced
when these Americans realized that they actually have to pay for this
service. What happened? Didn't the democrats promise health reform and
didn't they promise health insurance coverage for the 45 plus million
Americans without? They sure did, but they failed to fully explain how
devastating this was going to be to all Americans by in large. According
to the U.S. Census Bureau current population survey, consider the
following statistics as part of the discussion as it related to the
number of un-insured Americans (the percentages are a comparison to the
total population):
Total number not covered by insurance 47.9 million - 15.4%
Total of these in families 35.8 million - 14.2%
Where do the uninsured live?
Living in the Northeast 5.9 million - 10.8%
Living in the Northwest 7.9 million - 11.9%
Living in the South 21.5 million - 18.6%
Living in the West 12.4 Million - 17.0%
How much money do people without health care make?
Income level of less than $25k 14.5 million - 24.9%
Income level between $25 - 49.9k 18.8 million - 21.4%
Income level between $50 - 74.9k 7.0 million - 15.0%
Income level of $75k plus 7.7 million - 7.9%
How old are the uninsured?
Between the ages of 25-34 11.4 million - 27.4%
Between the ages of 35-44 8.4 million - 21.1%
Between the ages of 45-54 7.8 million - 18.2%
BY
association, it would seem that the demographics of uninsured Americans
are relatively spread evenly between all social classes and economic
populace. In actuality, the overall concept to offer all Americans with
high quality health care coverage is a step in the right direction. But a
government sponsored bill to force people into a health exchange is not
the answer, especially when it is expected to be funded by citizens who
don't need it to pay for citizens who do, much like social security.
It is going to present a huge burden on taxpayers in America, so how much is it really going to cost the American taxpayer?
Actuaries,
who helped designed the plan, are expecting the uninsured Americans
between the ages of 25 and 34 to enroll with income levels from $25k
trough$50k. Unfortunately, this is not going to happen, first, young
Americans are struggling to make ends meet, if they do not have an
employer sponsored health plan, they are not going to take money from
disposable income regardless of the penalty. Especially when the penalty
is insignificant in contrast to the premiums which we will prove later.
A
family of 4 making $40,000 annually will pay an annual premium of
$8,290 with a tax credit of $6,325, this family will pay $1,373 after
the tax credit which is 3.9% of gross income but actually 13% of take
home pay.
A family of 4 making $60,000 annually will pay an annual
premium of $8,290 with a tax credit of $3,377, this family will pay
$4,913 after the tax credit which is 8.2% of gross income but actually
20% of take home pay.
A family of 4 making $80,000 annually will
pay an annual premium of $8,290 with a tax credit of $690, this family
will pay $7,600 after the tax credit which is 9.5% of gross income but
actually 24% of take home pay.
- This family of four, based on the government figures, is expected to pay health insurance out-of-pocket costs anywhere from 3.9% to 9.5%.
- In reality, ObamaCare is expected to cost this family of four anywhere from 13% to 25% of disposable income because of after-tax income. The percent illustrated in column (1), based on the government estimates takes the actual net tax premium and divides it gross income. In reality, it needs to be divided by net income after paying income taxes, social security deductions, Medicare deductions and other payroll taxes.
- This family of 4 will have $690.00 per month less income because they will have to pay the premium monthly with the tax credit coming in the following tax year. For example, in 2014, this family will have to fund the policy for 12 months from disposable and the tax credit from column (3) will not be realized until early in 2015. Once again, the government is using Obama accounting to present a really bad program.
- Tax Increases - Between the years of 2014 and 2019, there are a multitude of taxes that will be imposed on Americans from an increase in payroll taxes, mandates on business taxes, a decrease in Medicare payments for seniors that will need to be absorbed through other health insurance increases, and a myriad of other taxes imposed on middle to lower income tax payers. Please visit the heritage foundation website to review these taxes in detail.
- If the taxpayer opts out of ObamaCare, they will have to pay a penalty equal to 1% of gross income or $95.00 per adult in 2014, increasing to 2.5% of gross income and $695 per adult in 2016. It will be more cost-effective for the family to pay the penalty and not incur the annual out-of-pocket costs.
It's Cheaper to pay the tax penalty than to enroll in ObamaCare
- Based on this analysis, it is cheaper to pay the tax penalty than it
is to subscribe to ObamaCare. Why in the world would a healthy person
enroll in a government sponsored health plan knowing it will cost them
an extra $600 per month in disposable income? It's not going to happen.
So
who is going to enroll in ObamaCare? The indigent and the sick!
Taxpayers who could not afford any kind of health insurance prior to the
passing of the PPAC. This will drive up the cost of coverage in itself,
because the young and healthy are not willing to bear the cost burden
to fund the indigent and otherwise ailing population segment.
Widespread Ignorance
- That is correct, widespread ignorance best describes the concept of
this policy. The taxpayers enrolling in the program have no idea how
much it is going to cost them and the people employed to aid the
enrollees have even less knowledge on the details of ObamaCare.
At
the end of the day, this will cost Americans dearly, especially hurt
will be the low information Americans who believed that this
administration actually had their best interest in mind. Bigger
government and government administered health insures has failed even
before it got started. This will cost taxpayers and the economy anywhere
$100 billion annual y to as much as $300 billion annually depending
upon the number of people who actually enroll in the program.
Economically speaking, this is the most fragile time in American history
in the last 100 years, regardless of the outcome, whether are not
people enroll or don't enroll, they effect on our economic recovery will
be devastating.
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