• Does Congress know how Obamacare works?

    There was an awesome article in Politico yesterday on how certain members of Congress are trying to come up with a plan to exempt themselves and their aides from Obamacare. Specifically, they appear to be panicking about a provision that says they need to go to the exchanges to buy their insurance.

    I’m going to ignore the political implications of these negotiations, which are horrific. If they, themselves, don’t want to be under Obamacare, then how can politicians ask anyone else to be? But what concerns me even more is the fact that the arguments they are using don’t make any sense. It’s as if they don’t understand the law at all. Take this, for example:

    Sen. Richard Burr (R-N.C.) said if OPM decides that the federal government doesn’t pick up “the 75 percent that they have been, then put yourself in the position of a lot of entry-level staff people who make $25,000 a year, and all of a sudden, they have a $7,000 a year health care tab? That would be devastating.”

    Wow. It sure would be – if that were possible. But it took all of 5 seconds for me to go to the Kaiser reform calculator and plug in some numbers. I made up a 30-year-old single staffer, said he makes $25,000, and was looking for a single person plan. I found out that in 2014, such a plan will likely cost $3440. But this person actually makes only 217% of the poverty line (nice, Congress!) so he would qualify for a significant subsidy. Therefore, the cost to him would be only $1714. That’s not even close to the apocryphal $7000. And that’s if the federal government refused to pay for a staffer’s insurance at all! That’s not what we’re discussing here.

    But perhaps Sen. Burr is worried that this staffer might be supporting a whole family, and that once again the federal government will completely stiff him. Let’s rerun the numbers for a family plan. Now that $25,000 salary would qualify the staffer for Medicaid (again, nice Congress!), because for a family of four that salary is barely over the poverty line. While this staffer would likely not have qualified before the expansion, he would now, so his insurance is free. Of course, in some states (like Sen. Burr’s North Carolina), there will be no Medicaid expansion. But that’s not because of Obamacare, that’s because some states are unwilling to implement it fully.

    But all of this is almost besides the point. There’s nothing in the law that prevents Congress from paying for the insurance, and they will. Congress covers most of the cost of insurance now, just like tons of employers, and they will continue to do so in the future. This is only a change in purchasing venue for the plans. I don’t know whether the legislators interviewed for this story don’t understand the law, or are purposely making up facts about it for political gain. I also don’t know which of those two options is worse.

    @aaronecarroll

    UPDATE: Ezra Klein says the negotiations aren’t really about exemption. That still doesn’t change the fact that I don’t think they all understand how the law works.

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    • It’s not the $25,000 per year staffer they are concerned about; it’s the highly paid staffers and the members themselves. Going from the government health plan to the exchanges would concern me too, especially given the less than impressive implementation so far (though it’s not as bad as what Senator Baucus expressed last week, at least I hope not).

      • Feel free to try and massage their beliefs, but I used a direct quote.

        • Just to clarify my position, having different systems for delivery (payment) of health care for discreet groups (seniors, government employees, active military, veterans, the poor, the nearly poor, children, employees of large employers, employees of small employers, the chronically ill, etc.) is bad policy because the different groups end up competing against each other for the finite dollars we can (are willing to) spend on health care (“death panels”!). The simplest unitary system (single payer) has already left the barn, leaving us with . . . . the exchanges. Obama seems to like them (he agreed to put Medicaid expansion in the exchanges) and, I suspect, he would be willing to put everybody including seniors in the exchanges. Of course, he’s not going to say that. If the Congress and their staffs do end up in the exchanges, it’s only a short step to put everybody else in them. Having everybody in a unitary system would be good policy, but whether the exchanges are the best unitary system is open to debate. A debate that isn’t allowed, I might add.

          • Thirty percent of us seniors are already in exchanges and very. Happy with them. It’s incredible how people get the financing scheme completely mixed up with the sales venue. Exchanges are just web sites.

      • If a Congressman making $175,000 is worried about losing the employer tax exclusion and government contribution to their insurance because of what it will do to their budget, they have:

        1) absolutely no idea what life is like for people making only $15,000 who can’t even afford scrap metal-quality health insurance,
        2) absolutely no idea how to budget their own money, and
        3) probably shouldn’t be in Congress in the first place because they have less intelligence than an amoeba.

    • Although I am loath to rationalize the arguments of said senator:

      For a couple (each 25 years old) consisting of two entry level workers whose salaries combined are $50,000, the premiums after subsidy are estimated to be at least $396/month. OOP maximum would be $8,333.

      At 25% utilization the total costs would be $6835. (14% of income)

      At 100% utilization the total costs would be $13085.(26% of income)

      If these employees are currently getting the majority of their healthcare paid by their employer and then lose this benefit, this amounts to a significant pay reduction.

      I would assume this would apply to a single parent + one who makes $50,000 as well.

      The Single case at $25,000 is a little less % loss but still significant for them.

      Looking at the ITEP 2013 tax model,the plan as is significantly increases this populations total tax (Federal, State, Local) burden from 18-20% to the high 20s,low 30s.

      In the higher brackets, usually who have generous employer based coverage, their tax burden is essentially unchanged in the low 30s.

      This is not progressive taxation, it is taxation to fund health insurance system profits and elevated upper incomes ( compared with other Western Countries).

      *Used the AccessCT healthcare Calculator. We don’t actually know what the premiums and OOP costs are really going to be. Probably higher.
      http://www.accesshealthct.com/how-to-save/

      • You are also trying to twist what Rep Burr said. He referred to the 75% the federal government pays. That’s for premiums, not OOP costs. They don’t cover those. He also refers to a sudden yearly 7000 tab. Again, premiums.

        To make the numbers look better, you go for ALL costs, even those not covered now, married off the staffer, and gave him a spouse doubling his salary. That’s not the example here.

    • I’ll do the calculation on a 25 year old single person making 25,000 just so this can’t be perceived as purposeful obfuscation:

      At least $144 / month premium :
      OOP Maximum : $3125

      @25% utilization: $2500 = 10% of income

      @100% utilization: $4853 =19% of income.

      Still not a rounding error for that income group.

      • You’re still at it. He was describing premiums. The government does not cover out of pocket costs before or after Obamacare. And even if you include those, it’s still not $7000. He’s making up numbers.

        I’m not claiming that Obamacare reduced spending to 0. I’m claiming that a staffer making $25,000 sent to the exchanges wouldn’t “all of a sudden” have a $7000 tab they didn’t have before. Period.

    • Don’t see premium anywhere in his rationalization. I saw health care tab. i also didn’t speculate that his motivations are pure. actually I think otherwise.

      My experience is that government benefits tend to have lower than average oop costs, which can and should be used in the absolute benefit amount. this is my assumption, and I could be wrong.

      Focusing on the premium only is your assumption and you might be right.

      However, the main point is that if government employees have a benefit and it is revoked, it is a pay cut.

      I agree with you, his 7000 was an exaggeration and I put the total costs for the 25 year old and for a 25 y.o. Entry level staffer and her entry level staffer spouse.

      What level of pay reduction is acceptable to you at this level of income. 5%, 10%? I know the upper end complains about a 1% tax increase even when incomes go up 10% year over year.

      If an exchange plan total cost is less than their current benefits with 75% covered, I’m wrong.

      Shifting to high oop costs is not the just , progressive solution.

    • There’s a forest in those trees. The best way to fix the exchanges is to put the Congress and their staffs in them.

    • It has long been my assumption that congressmen do not understand the billls that they pass because the bills are too long and complicated. Compound that with interactions with our exists laws and a complex economy and you get a lot of unintended effects.

    • I am a 28 year old, single, healthy male that makes $41,000 per year before tax. According to the Kaiser calculator previously cited, I would be responsible for paying $3,391 in premiums with OOP expenses of up to $4,167. I currently pay approximately $800 per year for my employer-based coverage with a maximum of $2,000 OOP. If my employer were to drop coverage and send me into the Exchanges, I could expect to spend at least an additional $2,591 in premiums and up to $2,167 more in OOP costs. Sticking with the premium cost alone, my net income would be reduced to $38,409; an approximate 6% decrease. Believe it or not, but $41,000 is not that much money when you have $500 monthly student loan payments, rent, etc. So, how exactly are the Exchanges supposed to help individuals like myself? From my perspective they will only cost me more. In fact, if my employer were to drop coverage I would be one of the many who pays the penalty, if it is even enforced. As a potential contributor to the adverse selection dilemma, I am led to believe that adverse selection may actually worsen, especially if there is a substantial increase in employer crowd out. If this is the case, and the risk is not spread as hoped, should we expect huge increases in premiums? If this were to happen, would this feedback cycle continue, i.e., more healthy individuals forgoing coverage?Finally, if any of my calculations are misconstrued, please let me know; I would rather be corrected than misinformed.

      One last thing: could you please respond to John C. Goodman’s response to this post?

      http://healthblog.ncpa.org/schadenfreude-and-a-response-to-aaron-carroll/

      • Not clear to me why your employer is now willing to compensate you with $41k in salary plus a payment of thousands more toward your premium but would only compensate you at $41k flat as soon as the exchanges open. That’s a considerable loss of compensation, as you point out. If you were willing to accept that much less, why does your employer spend so much more on you now?

    • You bring up a valid point, but just because my employer pays a few thousand more in insurance costs as part of my fringe benefits now, does not mean that they would give me the difference in salary if they chose to drop coverage in favor of the Exchanges. Nor does it mean that they will help fund the Exchange premiums as I have also heard. If an employer chose to absorb most of the potential savings from dropping coverage, then my initial questions still stand, do they not?