Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Monday, October 20, 2008

How The McCain Health Plan Would Affect Me

Hi Everyone,


I thought I would share with you how the McCain health care plan would affect me.  I make an above average salary but I'm not in the top 5% or anything.  I think I can safely consider myself "middle class" (as opposed to many people who think of themselves as "middle class" despite having incomes in the top 25% or bottom 25%).  

According to my pay stubs, my health care benefits through my employer are worth about $6000.  That's the dollar amount of the contributions to my health care as listed on my pay stubs.  I've been told that the market value of an individual health insurance policy of equal coverage would be far higher (more than double by some accounts).  But for the sake of this argument lets err on the side of making John McCain's plan look good.  According to my estimations, I normally owe about $15,000 in taxes before I figure in deductions.  McCain's plan would tax the value of my health benefits as if they were income.  That would increase my basic tax bill from just under $15,000 to just under $17,000 (a roughly 13% tax increase!!!).  But wait, you say, John McCain's plan offers a $2500 credit to every individual to pay for health care (this is often erroneously reported as $5000 but that figure only applies to families so if you are single like me you only get $2500 - I have no idea if you get more than $5000 if you have kids, I doubt it).  Anyway, isn't that $2500 more than the $2000 tax hike?  So aren't you $500 ahead? 

Ah, but there are some problems with the $2500.  First, you don't see the $2500 yourself.  It can only be paid directly to the insurance company you hire.  So if you keep your existing employer based health insurance, you won't get a penny.  Second, assuming I, as an individual bargaining alone in the market, can replace my $6000 worth of employer provided coverage for the same price (a big assumption, I'd probably have to pay more), I would still be $3500 in the hole even after I got McCain's health care credit.  

McCain's "choice" for me:  Either I keep my existing health care package and pay an additional $2000 year in taxes OR I dump my employer provided health care and go looking for a replacement on the market and pay AT LEAST an additional $3500 in health care premiums.  At best, I end up paying a lot more for the same coverage I get now (either through higher premiums or higher taxes).  At worst I could find myself not being able to replace my current coverage at all even with the $2500 a year credit.

If John McCain's health care plan were implemented I would be subjected to a significant financial hardship.  I urge all voters to consider this when they decide who to vote for.  Get out your pay stubs and figure it out.  This plan speaks volumes about who John McCain sees as his constituents and it ain't you and me folks!  Don't just take what these bozos say at face value.  Get out your pay stubs and look it up!

Also, in the context of McCain's assertion that Obama's tax plan is a socialist because it redistributes wealth, it is clear that this plan does exactly the same thing.  The only difference is that Obama would distribute more of the wealth to people like us and McCain wants to distribute it to the health care companies.

26 comments:

USwest said...

I did the caluclation back when he first mentioned his plan. It took me like 30 seconds to figure out that his plan would screw me. My benefit per year is worth a little over $3000 (my employer is much bigger than RBR's and thus gets a better deal) and another $1000 is what I pay. So its costs about $4000 a year for me. I would not be able to afford this type of coverage on my own. I know, becaue I was once laid off by an employer and saw what it would cost me to keep my coverage. Not even possible. Since I am being treated for genitically enduced high blood pressure, I am sure they would find a way to exlude me or charge me 3 times what I currently pay. You can't beat your genes. Loosing 50 pounds and changing my lifestyle wouldn't make my condition go away.

We have the same health coverage as Obama. And it works pretty darn good for us. My boyfriend's daughter had an accident that required nerosurgery and a 3 day stay in the hospital. The total bill was $80K. He paid $100.

McCain's plan is also pointless if no patient's bill of rights accompanies it. So long a private insurers can exclude people with pre-existing conditions, which are all of us really, then you will never find anything on the open market and if you do, it will cost an arm and a leg.


I would also point out, RBR, that McCain's plan would also cause you to loose a tax benefit you now enjoy. Your insurance premiums are taken from "pre-tax" dollars. So in essence, you already get a tax credit.

Raised By Republicans said...

My employer pays the entire thing so I don't have to pay any premiums and so don't get the tax credit US West mentions.

This is a HUGE tax increase on the middle class and McCain is being allowed to pretty much push it as if it's just a health care plan. This is the center piece of McCain's entire financial policy.

I hope this dastardly charge of "socialism" against Obama provokes Obama to step up the attacks on McCain's GIANT TAX INCREASE ON THE MIDDLE CLASS!

The Law Talking Guy said...

If your employer pays the whole thing, what is on your pay stub?

Many people don't know the true cost of their insurance because the premiums they pay at work are heavily subsidized. Few employees have any idea what the real cost of their insurance plan is. But McCain will tax you for 100% of that real cost!

Anonymous said...

read this first

http://american-platform.com/america/2008/10/20/the-mccain-health-care-plan-more-power-to-families/

The Law Talking Guy said...

My pay stub does not list the actual value of my health care plan. It only lists the deduction I get for my premium.

Raised By Republicans said...

Well, actually it's not a "stub" per se. The information is on my online paycheck summary which I can access through my "employee self service" website that is managed by our HR department. It includes a detailed summary of our salary and benefits.

Raised By Republicans said...

Anonymous,

The link you posted is to an obviously pro-McCain website. It has no information that contradicts anything I said in my post about having new costs imposed on me.

In fact, it raises the interesting point that since my current taxable income reflects not a base tax rate but a reduction of what you think my tax rate SHOULD be. In other words, you are saying "hey, it's not a tax hike, it's the removal of a tax break."

Why a crock! When Democrats make exactly the same argument about removing the tax cuts to the top 1% of the income distribution, Republicans accuse them of being "socialists."

As for the "choice" issue. Anonymous, can you explain to me how I as an individual will have more bargaining power vis a vis insurance companies than I have as part of a group of hundreds of employees??? You are probably a big fan of the market. So hit me with your knowledge of economics and explain to me how I can get a better deal on my own than I could get spreading my risk out among hundreds of co-workers?

Pombat said...

As someone who is entirely unfamiliar with the current US health system - other than knowing that it's horrendously expensive for the uninsured, and that travelling to the US without health insurance is super-dumb - could I get a run down of typical costs from someone?

E.g. what percentage of your salary is taken for your health coverage?
What kind of costs do you expect to incur above this, in terms of things the coverage doesn't cover?
And what are typical overall tax rates on salaries in the US?

Basically, I'm trying to get more of an idea of how much you guys are expected to pay out on things, so I can provide a full comparison to somewhere like Aus or the UK (part insurance model and supposedly full national coverage respectively), rather than just comparing one small part of the overall view (i.e. the actual dollar health cost). Plus I'd just like to understand a bit more!

Anonymous said...

Hi Pombat,

I'm American, but I also know nothing about our heath care system. I could tell you that I pay very little. I pay about $80 every two weeks for family coverage. The rest is paid by my employer. So that's about $2080 a year out of my pocket, pre-tax. On top of this, I have the regular $15 copay every time I see a doctor. Maybe over the year we pay another $700 for other procedural costs. But this is just a ball park.

If my employer didn't pay 85% of the costs, and if I weren't in the upper middle class it'd look a lot different. So don't take this as what it looks like in America, but you asked for one Case study, so here you go.

Alex said...

What are ur thoughts on Obama's health plan?

USwest said...

Pombat,

Trying to answer your question is very complicated.

Very little about our medical insurance coverage is standard in part because it is largely governed by states rather than the federal government. But, for the sake of simplicity, we have three types of insurance.

1) Medicare- for Senior Citizens. This is a federal entitlement that is meant to provide base coverage for those over the age of 65.
2) Medicaid: this is an public health insurance program for very low income people regardless of age. In California, this program is known as Medi-Cal. It is financed by both the state and the federal government.
3) private insurers whose main clients are medium to large businesses who bargain for coverage for their employees. But individuals can also purchase coverage.

There is also a patchwork of other public insurance programs, like CHIP (Children's Health Insurance Program) which was meant to patch holes in the public health insurance program that would allow more coverage for children.

Basically the US is taking the very slow, incremental approach to socialized medicine (i.e. euphemism=universal health care)

Most health care coverage is offered as a benefit by employers, usually medium to large size businesses. Super small businesses have a harder time because they aren't "buying in bulk" so to say. Coverage is usually limited to those who have full time jobs vs. part time or contract workers. Prices vary depending on what type of deal an employer has cut with the company.

In addition, there are local monopolies that will limit employer choice. Doctors will agree to be part of an insurance company network. This means that they, in effect, agree to accept as payment in full whatever the company will pay them. Many doctors will join multiple networks, others won't. In my local area, we only have Blue Cross/Blue Shield insurance. And let's not get started on dental and optical insurance. We are going to limit this to medical.

No one can tell what percent of our income goes to medical care or what percent of our salaries are taken for medical coverage because it is very subjective. For me, a minuscule percentage is taken. I pay $20 when I want to see a doctor who is part of my insurance network. And so long as my doctors send lab work out to a in-network lab, I do not have any additional fees for regular visits. If the doctor doesn't do this, I may incur additional fees. This is fairly typical in our medical system. That is a simple visit and it goes pretty well. I have also have a pretty good prescription drug benefit so long as I use generics. But woe to you of the visit is anything less than typical.

When I was unemployed, I found a basic plan with a $2000 deductible and a $40 copay that cost me $60 a month. That was 6 years ago and the cost for that was going up to $90 right before I found a job.

Where things get complicated and very nasty is if you have a major problem that requires long term treatment or if you wind up in an emergency room. Then you are at the mercy of the system. My insurance plan will cover 80% of the costs of a hospital stay if I am in a networked hospital. If not, I think they only cover 60%. And every doctor or technician who touches you will bill you. So you may not get just one big hospital bill. The primary care doctor will bill you, the lab will bill you, if you have surgery, there will hospital fees for the surgery room and the recovery room, the anesthesiologist will bill you, the ambulance company will bill you, etc. You will get an itemized bill for every aspirin and band aid that you used. If you see an specialist, she will bill you too. If you have to have X-rays, the x-ray center may bill you. Most of this, the insurance company will pay. But you will get a stream of bills for a year.

Now, if I stay covered, I'm all good. But if I loose my job, and let my coverage lapse, then get a job again with new coverage, and if I have a pre-existing condition, like diabetes or a heart condition, they will charge me more for the coverage because I am a greater risk to them. If I don't get a job, but go shopping around for coverage for myself as a free agent, it will be prohibitively expensive. We are talking premiums that can exceed $500 a month depending on the condition. For families, it can be even worse because the more people you cover, the more expensive. It's like auto insurance that way.

I'll stop there. Your head is probably already spinning. What I will say is that I believe that Americans pay a percentage that is equal to or greater than the percentage paid by most Europeans and they get far less for their money in terms of service.

Raised By Republicans said...

US West gives a good summary Pombat. The last paragraphs are why McCain's plan is such a huge threat to most American's finances. His plan would encourage a lot of shaking up in the system. That's all "Mavericky" right. But moving from one plan to another as an individual free agent imposes enormous costs on the person doing the switch.

By the way, I have a very good health plan. Universities tend to be quite generous. My employer pays for all the premiums and I have only a $10 co-pay. At my age and family history of colon problems, I'm certain I could not find anything like as good for an affordable price (if I had to look on my own).

Ms.BaBooCrit said...

Pombat- I think that there is a misconception here I need to clear up. In the post-WWII era, the US government first extended the income tax to regular people (beyond just the very wealthiest). Employers discovered they could give "benefits" instead of salary increases that were deductions for them, but not taxed to the employee. A corporation only pays tax on its income, which is NET of salaries. So we got a system of employer-financed health benefits. Very few people know how much their employer pays for their health insurance. Since, today, it is no longer totally free to the employe, most people pay some premiums at work. For example, I pay $106/month for my plan. If I had to cover my family, it would be $250/month. But that's a tiny fraction of the actual cost of the plan to the employer.

I really want to how RBR and USWest know the cost their employers pay for their health plans, because the numbers they give sound suspiciously low to me. On the open market, such plans usually run between $500 and $1000 per month.

In other words, health care is a benefit worth thousands of dollars to most people.

And then there's the other stuff.

Dental insurance is not included -that's a separate plan. It's a product that is so poor it only works by shorting the dentist. Seriously.

Also, health insurance no longer covers everything. Indeed, it often leaves quite a bit out. So many of us have "flexible savings accounts" allowing us to put aside some money for health care without paying taxes on that money.

Most people would be totally, royally screwed by McCain's health insurance scheme. Right now, I get a plan worth at least $6K-$10K for about $650. That's a bargain. McCain would tax me on that plan (which is now free) and give me a $2500 tax break instead. That is probably a net loss for me. Worse, if I lost the insurance, I'd have to replace the $6K-$10K plan with the $2500 tax credit.

Even worse, many employers would decide that it is no longer worthwhile to give health insurance benefits as is, because McCain says that his plan is just as good. So people will start losing their employer-based care and just get these $2500 vouchers.

Finally, my employer gets a much better deal than I could on the open market, because the employer is a big company with bargaining power. Small businesses pay more than big business on this (but they are usually run by Republicans who are so allergic to government that they don't see how this system puts them at a competitive disadvantage, and how much better they would be with health insurance provided by the government). So my $2500 tax credit should not be measured against my current plan's cost, but against the cost of a comparable plan in the market.

I won't even be able to get a new plan, btw, because I have "pre-existing conditions" meaning that I must agree NOT to have health insurance cover the only health problems I actually know I have!

This is why I feel like taking every Republican who screams about "socialized medicine" and kicking him or her in the face repeatedly.

Ms.BaBooCrit said...

Btw, that last post was LTG.

The Law Talking Guy said...

The reason employers will drop health coverage if McCain's plan is enacted is simple. Employees pay "payroll taxes" (Social security, medicare, etc.) totaling 7% of income. Employers are required to pay a matching amount of 7% of your salary. (Conservatives call that 7% employer tax a tax on the employee, and figure that into their tax burden. It's not clear why this is necessarily more an employee tax than, say, the cost of the electric bills to light the office).

But if health benefits are taxed as ordinary income, both the employee and employer will have to pay the 7% payroll tax. So McCain is going to tax the employer for providing health benefits.

USWest said...

I know how much because on my employer pays because, like RBR, I get a monthly summary of my annual leave, sick leave, an itemized accounting of my deductions. And there is a section on there that tells me what my employer has paid for me for social security, medical, pension, etc this month as well as a year-to-date amount.

Anyone should be able to ask their human resources division what the cost of medical insurance is. It is your right to know and if they can't tell you, I'd insist they find out because that is budgeted for and if they can't tell you, they are hiding something.

At my former employers, we discovered that we had been paying premiums, but that the HR department had failed to pay the insurer, therefore none of us had coverage. Why did the company fail to pay the insurer? The HR chick was a flake and the bill had fallen under her desk, so she didn't see it.

The Law Talking Guy said...

I've never seen a paycheck with that employer-side information on it. That's interesting. But most Americans, I think, don't see that info on their paychecks. So most don't really know.

Anonymous said...

Hi Pombat,

To give you an illustration about how batty all this is, consider the following. A friend and I had relatively uncomplicated pregnancies and were treated by two different doctors in the same practice office. I was charged no co-pays for prenatal visits under my health plan. She was supposed to be charged co-pays under her health plan, but was not (a clerical error she is not seeking to correct).

She had to pay several hundred dollars in lab fees since the doctor's office would not send test results to a lab approved by her insurance company. I got these same tests processed by the same lab at no cost to me.

I had to pay out of pocket for a special blood test that my insurance company promised would be covered. Her insurance company paid for the same special test without any charges to her. My insurance company kept asking for more and more information about the stupid test without actually denying the claim so I could file an appeal. After spending about 10 hours trying to get them to reimburse me for $75, I decided it wasn't worth it (which is probably what they wanted all along).

Her out of pocket costs totaled several thousand dollars (not uncommon). My out of pocket costs were $175 - $100 for the hospital stay, $75 for the test they were supposed to pay for.

Now here's the kicker - I had a c-section. She did not. I stayed in the hospital twice as long, had surgery, had more visits from the on-duty nurses, etc.

If this was at all rational, our out-of-pocket costs up until we went into labor would have been the same (it wasn't apparent I would need a c-section until I went into labor). But they are not, even though the actual cost of the prenatal care we received is probably identical.

My employer does list the employer-side information, and the total cost is about $9500. I pay 1/3 of that amount and my employer picks up the rest. I would argue that the insurance probably costs more than that (or would on the open market) since my employer is very large and has a lot of bargaining power. Also, that coverage includes Law Talking Baby. Many small to medium-sized companies have health plans that are prohibitively expensive if you want to cover a child or a spouse. My coverage has two prices - one for a single person and one for covering my entire family (whether that is one more person or 7).

The individual has no power on the open market. Big employers do.

-Seventh Sister

The Law Talking Guy said...

For those of you following this, guess what paycheck I'd never seen.

I do think the institutions that RBR, USWest, and Seventh Sister work for are not like every private employer.

USwest said...

It is to the private employer's benefit to show employees what they pay. Then they can claim with more justification, that what looks like a lower salary is relatively high. Why wouldn't they want you to know that?

They just haven't caught on with the times.

The Law Talking Guy said...

Private employers tend to do only the minimum the law requires. Hence a minimalist pay stub.

The Law Talking Guy said...

Payroll is often outsourced, and the outsourced company doesn't have all the HR records, just rate of pay info. so that's probably why.

Pombat said...

Oh god. I knew the US health system was complicated and expensive (hence the travel insurance!), but apparently I had no idea!

Ok, a quick run down of how things work in the UK and Aus, since they're two different systems, and I think it may be interesting...

UK first: home of the NHS, or National Health Service. Much criticised, over-stretched, and probably under-funded for what people expect of it. But still doing ok. All under-18s have NHS medical and dental cover, meaning it's *free*. Full-time students also get NHS medical & dental, although there's conditions there, about whether you live at home and so on (I think, bit rusty now sorry). NHS dental as a student can be hard since if you move away from your home dentist, it can be tricky to find a new NHS one to sign up with - they're pretty rare because they get a bad deal.

For adults on the NHS, visits to the doctor are "free", as is hospital stuff, and also oral contraceptives for women, which I think is a good thing (note condoms are not free from pharmacies, but family planning clinics hand them out free). Last prescription I picked up in the UK was in 2004, so prices have probably gone up a little, but there's a standing charge for all prescriptions, at that point it was about seven pounds (regardless of what the drugs are / cost in reality). I think pensioners get reduced rates on a lot of these things too, but having only ever been a child or working adult in the UK, I never found out...

The NHS is funded through "national insurance" contributions (hence my quotes around free earlier). All Brits have national insurance numbers - you get a card with it on around your 16th birthday, and supply it to all your employers after that. NI goes out of your gross pay in much the same way as your income tax, so you never see the money, and your employer makes a contribution too. Payslips detail both NI and income tax in the deductions column. It's banded, and having quickly found last FY's tables, you pay nothing on the first 5k you earn in a year (this is also broken out weekly & monthly - if you earn less than 5k in a year, but earn it at a rate of GBP150/week for however many months that is, you pay NI), then everything between 5k and 35k you pay 12%, your employer 12.8%, everything over 35k you pay 1%, your employer 12.8%. Or something like that! (link, figures taken from 2007-2008 table CA38, which is a pdf)

Private health care is also an option, generally taken up by people who want to have their operation / baby away from the NHS - waiting lists are shorter, facilities are often better due to more funds etc. I don't know anyone in the UK who has a private health care general doctor for example - private seems to be very much for 'serious' stuff (and possibly yuppies). Dental care in the UK is pretty much 100% privatised through insurance now (at around fifteen pounds a month for a "healthy" mouth, i.e. couple of fillings, nothing major).

Now Australia, which is different again, and sits somewhere between the UK & US here: I'll start with Medicare. Funded by, again, compulsory contributions from pay, taken at the same time as income tax. Having just checked the website, it's apparently also part-funded by income tax. The "Medicare levy" is just 1.5%, although estimates say that to fully fund Medicare, it would have to be 8%. There's an additional levy of 1% for anyone who earns over a certain amount ($50k I believe), and/or is over a certain age (I'll guess 30yrs old from memory), who does not also have private health insurance. I'm having to give these numbers from memory because their website is awful when it comes to finding these kinds of details.

The way it works is you go to the doctors or wherever, pay out-of-pocket, then head to the Medicare office to put in your claim. They have set amounts that they'll pay for things, for example I think they give $35 for a doctor's visit. So you can choose to go to a $35 doctor, or a $350 doctor (most are $35-60), totally your choice. Plenty of optometrists, as well as some doctors, "bulk bill", meaning that they don't charge you anything on the day, you just sign a chit to say you had a service, and later on they send a whole stack of claims to Medicare and get paid directly. Good option for those with poor cash flow, obviously. All Aussies are automatically eligible for Medicare, as are Kiwis, permanent visa holders, and some other visa classes (including working holiday visas). You just have to do the paperwork and hand it in to an office, where they give you a paper slip with your Medicare number on, the card comes by post later.

Medicare also includes things like the organ donor registration scheme and "pharmaceutical benefits scheme" - basically they subsidise prescriptions a bit I think.

Obviously, a lot of people have private health care, and this is often pretty good. Thanks to Spotted H's job, we've got Defence Health, which is probably the best one. Even includes things like a $15 rebate on deep tissue massage (up to a max of $200/yr), as it's a preventative thing. Can't remember what the premium is (Spotted H isn't here to ask - he'd know - will get him to update these numbers if I'm wrong) but I think it costs us about $50 a fortnight each, so $1,300 per year each, and isn't income based.

So, how does this fit with the US? Well, I can't see the US ever moving to a full NHS style system, mostly because I can't see the NHS continuing to function with it's present funding and patient loadings. And it'd be too big a shift from your current system, plus I can't see anything similar to NI contributions working - can you imagine the political death of the first person who decided to introduce an additional compulsory "tax"?

The Australian system however, is something that I think could work, and as far as I can tell is similar to what Obama's thinking about. Cover for everyone, particularly children, with the option of paying more for whatever extras you want - sounds to me like it'd fit with the US attitude, although it would take some adjustment obviously, and that first hit of taxes to pay for it? Well, can't see the reaction to that being good. I don't know how easy/hard it would be to make the necessary changes to the insurance companies and the way they get business though.

Thoughts anyone?

Pombat said...

ps thanks to all for all your info, explanations & time providing them!

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