Should the Middle Class Pay More for a Loaf of Bread than the Poor?

Mish

Iowa seeks to become the first state to dump Obamacare in favor of a state-run program that will allegedly lower costs. I suggest Iowa's replacement plan can't work. My reason pertains to the title question.

Please consider New Test for Obamacare, Iowa Seeks to Abandon Marketplace.

With efforts to repeal the Affordable Care Act dead in Congress for now, a critical test for the law’s future is playing out in one small, conservative-leaning state.Iowa is anxiously waiting for the Trump administration to rule on a request that is loaded with implications for the law’s survival. If approved by the federal Centers for Medicare and Medicaid Services, it would allow the state to jettison some of Obamacare’s main features next year — its federally run insurance marketplace, its system for providing subsidies, its focus on helping poorer people afford insurance and medical care — and could open the door for other states to do the same.Iowa’s Republican leaders think their plan would save the state’s individual insurance market by making premiums cheaper for everyone. But critics say the lower prices come at the expense of much higher deductibles for many with modest incomes, and that approval of the plan would amount to another way of undermining the law.Iowa calls its request a stopgap plan that would allow the state to opt out of the federal health insurance marketplace, HealthCare.gov, for 2018 and create a state-run system that its insurance commissioner says would lower premiums for the 72,000 Iowans who currently have Obamacare health plans, including 28,000 who earn too much to get subsidies to help with the cost.But the cheaper premiums would come with a big trade-off: higher out-of-pocket costs. The only option for customers would be a plan with deductibles of $7,350 for a single person and $14,700 for a family. The proposal would also reallocate millions of federal dollars that the health law dedicates to lowering costs for people with modest incomes and use the money for premium assistance to those with higher incomes, no matter how much money they make.The individual insurance market is particularly fragile in Iowa, partly because the state has allowed tens of thousands of people to keep old plans that do not meet the health law’s standards. Aetna and Wellmark Blue Cross & Blue Shield, the state’s most popular insurer, are both withdrawing at the end of the year. The only insurer planning to remain, Medica, is seeking premium increases that average 56 percent, blaming Mr. Trump’s ongoing threats to stop paying subsidies known as cost-sharing reductions that lower many people’s deductibles and other out-of-pocket costs. Wellmark has said it will stay if the stopgap plan is approved.“What we are trying to address is a really large number of people being priced out,” said Doug Ommen, the state’s Republican insurance commissioner.

No Medical Insurance Available

Aetna and Wellmark Blue Cross & Blue Shield will both pull out of Iowa starting in 2018. Only one insurer, Medica, plans to remain. But Medica wants a 56% premium hike. Wellmark will stay if the stopgap plan is approved.

If the stopgap plan is not approved and Medica does not get approval for a 56% premium hike, the state will have no providers for individuals or families not in a corporate plan.

Step in the Wrong Direction?

Is this a good idea or a bad idea? The alternative might be no insurance providers to choose from.

But what percentage of families can afford $14,700 if something happens?

The proposal adds subsidies based on federal poverty levels to make things more affordable for low-income earners.

Federal Poverty Levels

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Sock it to the Middle Class

Individuals making more than $48,240 and couples making more than $64,960 get crucified under the plan. The stopgap plan table shows why.

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Cliff Synopsis

  • An individual, aged 25 making up to 150% of the poverty level ($18,090) will pay $108 per year.
  • An individual, aged 25 making up to 301%-400% of the poverty level ($48,240) will pay $792 per year.
  • An individual, aged 25 making up to 401% of the poverty level ($48,241) will pay $3,516 per year.
  • An individual, aged 60 making up to 150% of the poverty level ($18,090) will pay $300 per year.
  • An individual, aged 60 making up to 301%-400% of the poverty level ($48,240) will pay $2,136 per year.
  • An individual, aged 60 making over 400% of the poverty level ($48,240) will pay $9,504 per year.
  • A couple, both aged 60, making over 400% of the poverty level ($64,960) will pay $9,504 per year.

In addition. an individual would have a deductible of $7,350. A family would have a deductible of $14,700.

The article claims "The proposal would also reallocate millions of federal dollars that the health law dedicates to lowering costs for people with modest incomes and use the money for premium assistance to those with higher incomes, no matter how much money they make."

The posted table says otherwise.

Fatal Flaw

The fatal flaw in the pan should be obvious.Those making over 400% of the poverty level will opt out.

Those pie-in-the-sky premiums of a mere $300 a year for those aged 60 making the poverty level will never cover costs because a huge percentage of those making over 400% or the poverty level will opt out.

Should the Middle Class Pay More for a Loaf of Bread?

A major flaw in Obamacare is the notion that everyone should pay the same price. Under the plan, young and healthy millennials overpaid, effectively subsidizing older and/or physically obese persons. The millennials opted out.

The Iowa plan may capture millennials, but because of the screw job on the wealthy, those making over 400% of the poverty rate will drop out.

Effectively the state said if you can afford to pay more you must pay more. Imagine grocery stores charging $15 for a loaf of bread if you make $48,241 but only 48 cents if you make up to $18,090.

The idea is preposterous.

Insurance for those older should cost more than those younger. Insurance for unhealthy individuals should also cost more. But that's where it has to stop.

Obamacare is blowing up because it seeks to redistribute costs in a way that cannot possibly work. The Iowa replacement plan will fail for similar reasons. One plan screwed the young and the healthy, the other screws those the state deems to be able to afford to be screwed.

That cliff is a mere $48,240 for individuals and $64,960 for a couple.

A couple making $64,961 would have to pay over $24,000 out of pocket before insurance covered a dime.

This is a huge screw-job not on the wealthy, but on the middle class!

For those unaware why I moved my site, please see Welcome to the New MishTalk.Those struggling to see posts in date order, need to adjust the settings on the icon to the right of Ask Mish. For email notifications of new articles, please turn on the notification setting.

Mike "Mish" Shedlock

Comments (37)
No. 1-37
robin
robin

MIke: you are absolutely right. socialism is distortion in the market, so everyone looses. Robin

Tony_CA
Tony_CA

We have no market economy anymore. Just excepted.

Stuki
Stuki

Everything government does, is a screw job on the middle class. The truly destitute have nothing left for the government and the privileged to steal, hence aren't very profitable to do a screwjob on. While the upper, and increasingly even upper middle, classes are by now comprised almost entirely of incompetent toffs who owe every little inch of their privileged status exclusively to government robbing the middle classes on their behalf. Hence aren't much of a threat to the rulers. The middle class is overwhelmingly where value is created, and where whatever little remains of competence is situated. Hence is both the only place the leeching classes can go for their loot, and is a group of people who would do perfectly fine without neither government nor the rest of the leeching rabble government is forcing them to carry on their backs. So the name of the game is to take the resources created by the middle class. First to render them less able to pose a threat, then in order to distribute the loot; primarily to the idles comprising the King's court; but also secondarily by way of enough breadcrumbs to the truly destitute, to buy their support in the ongoing looting circus.

Seenitallbefore
Seenitallbefore

So the $150K Mercedes should cost me about 40K. Yea I can handle it. The less you make the cheaper everything is. We can live like the rich because they are paying more and we are paying less. My question is how little do I have to make before you just give it to me for free.

madashellowell
madashellowell

The average age of those in my company provided plan is about 60. Our rates went up another 28% this month to a uniform premium of $830 per employee of which I pay 100%. That is for NO copay and a $6550/yr deductible. My agent tells me the rates have gone up in part due to our aggregate age increasing, so I'm not sure why Mish is saying everyone pays the same. Maybe that's the way it is for those on some Obamacare plan, but ours definitely increases with age.

madashellowell
madashellowell

I'm not sure how we are supposed to opt out. Go to the hospital for ANY service and then look at the bill. INCREDIBLE prices that of course no one pays as insurance always reprices to considerably less, but I do find it instructive that hospitals put these vastly inflated numbers on their invoices to keep every scared to death to go without insurance. A two hour lithotripsy procedure as an out patient....hospital bill NOT including doctor or anesthesia, $27k. Insurance paid something like 6k.

truthseeker
truthseeker

Mish what is going on here? I am so confused and overwhelmed by way too much information. At one point I found names of guys I'm familiar with who were saying the same sorta thing but I lost them so I don't know what to do next. I certainly want this new format to work for you but I'm only interested in what you have to say, so will that work? Where do I post?p

truthseeker
truthseeker

OK I found out where I think I need to be, and hit return to post, but have nothing to say on this subject sorry to be such a pain in the ass.

Realist
Realist

The US health care system is the most expensive in the world, costing over 17% of gdp vs 10% in most other developed countries. In addition, the other countries cover 100% of their citizens while the expensive US system doesn’t cover everyone. Finally, the citizens of those other countries live longer, healthier lives compared to Americans. Yet the US won’t look at how other countries achieve this. Instead they bicker among themselves, tinkering with their broken system in ways that only make it worse. Whatever changes the current administration makes, will likely continue to make the American system worse. Perhaps in 10 or 20 years, the US will finally copy one of these other countries, but not before they try everything else first, and raise the systems cost to 20%.

Tony_CA
Tony_CA

Ultimately, we need to move to single payer system where the pool of resources is massive.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Single payer system cannot possibly work in the US. Costs will be infinite. In Europe, there are controls on what Doctors make, what hospitals make, what education costs etc. Silge payer will spiral out of control in seconds

joelg5
joelg5

Opting out is the only sensible solution. I am amazed at the low number of people enrolled in Iowa, and wonder why so much fuss over so few. Mandatory health insurance, with tax penalties for not buying the product, was a stupid idea hatched by harebrained people, some with PhDs. Add in politicians and special interests, and voila Nancy Pelosi’s 4 a.m. unread legislation written by lobbyists. What cannot work, will never work. Single payer, a million payers, a billion payers, makes no difference when the source premises are so fatally flawed that they can never make mathematical dollars and sense. The idea of passing it all onto deep pockets USA.gov is equally moronic, and would lead to a Wiemar Republic style hyper-inflation to pay for it. But Obamacare is a war of ideology, and mathematical realities and national bankruptcy are secondary considerations. George Orwell got this one right in his book Animal Farm. Socialism is the road to Insolvency, and health care is proof of concept.

Tony_CA
Tony_CA

Mish, Controls we have to be implemented here as well. Once there is one primary buyer they will push the providers to adjust.

Tony_CA
Tony_CA

MIish, Contorls will have to be implemented here as well. Once there is one primary buyer they will dictate the payout to providers.

Tony_CA
Tony_CA

I'm not sure if you are aware since Obamacare was passed providers have been already rapidly consolidating. It's inevitable we are heading for a socialized healthcare system.

Tony_CA
Tony_CA

Mish, As the system currently operates, the providers charge the best rates to insurers with the most individuals in the region. Hence, Medicare payees usually receive the best rates at most hospitals.

joelg5
joelg5

We are headed back to private health care and religious medical charity. Or maybe atheist and socialist charities, or Clinton Foundations will take care of those too sick to afford health insurance? Health insurance works as a workforce incentive, but as a socialist mandate the path is steadily downhill over time. Obamacare is just the latest example that forcing everybody does not work. As to controls, people in the USA cannot even control their own body weight or personal pain. Demand for obesity related ills and pain/opiod problems will overwhelm any and all controls. Obamacare is just a tax, as Justice Roberts correctly reasoned, and adding an Obamacare tax to social security and federal, state, local and sales taxes was just more than people could bear. Hence, Hillary and her campaign to double health taxes and penalties lost, and Trump won. All the controls in the world cannot make Obamacare work. Obamacare, like Humpty-Dumpty, has had a great fall, and cannot be put back together again.

Shemp
Shemp

Wrong way to look at entire system. Health care is a crisis because we are, as a collective, extremely unhealthy society. Ironically the nutritional studies and practices are now showing how diet can reverse disease, keep us healthy, or leave us with CVD, diabetes, cancers and so forth. In order for us to get our house in order it has to start with what we eat. One can read greger or whom ever you like, there is much available on this topic, even reversing coronary occluded vessels. But, if the collective believes it can ingest fast food, processed food, refined foods, and sugars to the extent we currently do then expect the issue to get worse. The hormones and crap we feed animals to the shit we spray on plants, to the sugar drinks with 18 ingredients we are poisoning ourselves slowly. So, start by taxing the fuck out of processed and fast foods. 100% tax. Because no matter what we do with healthcare, taking pills for most part without l

Shemp
Shemp

without lifestyle change is money wasted. We will never fix the cost of care if we don't keep our own body in order. If we don't this will end up being a huge economic crisis to boot. Its not that hard to figure out. Save those health care dollars for those who can't correct the diseases they have, there is too much good data coming out from nutritional studies to be ignored at this point. Read em!

Blacklisted
Blacklisted

It's understandible why career politicians and the rest of the establishment avoid the truth behind unsustainable health care costs - they pray at the alter of perks and power and will sell their soul for campaign donations that pay for propaganda intended to deceive the masses. Enforcing EXISTING ant-trust laws and forcing prices to be posted like all other businesses is a fundamental change that must occur if costs are ever to be brought in line with incomes. he food industry has also bribed politicians and regulators to turn the food pyramid upside down

Blacklisted
Blacklisted

All of the reforms that must occur will not happen proactively until the career politician is made extinct, which will require voting out EVERY incumbent, EVERY election until term-limits is made the law of the land. Until then, change will come only through crisis, meaning hardship severe enough to get people off the couch.

madashellowell
madashellowell

People have been dying since the beginning of time and we live longer today than ever in history. What has changed to make healthcare a crisis is EXPECTATIONS. People are alive today due to technological advances that we seem unwilling to pay for.The constantly escalating costs only create ever greater sense of entitlement to premium healthcare. This ultimately leads to a expectation of the right to live forever, and technology hyped by fictional TV programs leading people to believe that it is all possible. Healthcare will forever be in crisis as there is NO existing technology that can meet our expectations, so until then we will demand that our enabling government provide that which no one can.Meanwhile our sense of entitlement to healthcare has NO attached responsibility to actually take care of ourselves through proper exercise and diet.

madashellowell
madashellowell

On top of all of this we appear to resist paying for for the one thing that will keep us alive. Many of us claim to want "free markets" defined by laws of supply and demand, but when the costs go against us we naturally scream "foul". Healthcare costs are competing with entertainment.....the INJUSTICE!

madashellowell
madashellowell

Don't get me wrong. I hate these escalating costs as much as anyone....maybe more as I'm providing for all of my employees as well, but until we understand ALL the factors driving these costs, there will be no solutions.

Blacklisted
Blacklisted

Yes, and only a career politician can force people that take responsibility for their health to pay for the unrealistic expectations of an unhealthy lifestyle. Career politicians are also the scum that force unsustainable taxes, fees, and asset forfeitures on the productive class to pay for unrealistic pensions, subsidies, and political wars. You can eat healthy, exercise, and save for a while, but you can't outrun a tyrannical govt that will sacrifice it's citizens to save itself.

Realist
Realist

Many US businesses complain about their inability to compete with foreign businesses for a multitude of reasons; tax rates, wage rates, regulations, and so on. For many businesses the biggest issue that makes them uncompetitive is their requirement to pay health insurance premiums, which many of their foreign competitors do not have to pay. Why does the US system put the onus on businesses, which makes them less competitive, while making the health care system more complex, more fragmented, and more expensive than anywhere else in the world?

hmk
hmk

We should try to emulate the horrific Canadian healthcare system. Everyone pays because its financed by a national sales tax. So there is no gaming of the welfare system to get free heath insurance like here, and people aren't held hostage to a job for the benefits. Their per capita healthcare costs are about 45% less and they have much better health and healthcare outcomes. We rank 38th in the world, dead last of all the industrialized nations. BTW because their healthcare system is so shitty they voted the politician who was the architect of the national healthcare system the most popular politician in Canadian history. Sure they have some issues nothing is perfect. BTW the number one rated healthcare system in the world is France. Hard to believe but its true.

mpowerOR
mpowerOR

sky-high premiums + enormous deductables... did they think people wouldn't notice this burden?

Realist
Realist

Hmm makes a good point. The US could emulate the Canadian health care system or one from almost any other developed country

Realist
Realist

They all cost much less than the US and the citizens are very happy with their health care, in spite of the systems not being perfect. Americans who tell you these other systems don't work are either uninformed, or simply spreading lies.

JonSellers
JonSellers

Just pay regular doctors $300/hour with a 15 minute minimum payment, surgeons $500/hour with a 30 minute minimum, and all hospital stays at $500/day, 1 day minimum. Regardless of procedure performed. Get rid of insurance altogether. Problem solved.

MissionAccomplished
MissionAccomplished

The "fatal flaw" is that somewhere in their thinking the retarded concept of 'ceteris paribus' was invoked when 'fairies' would have been perfectly adequate.

KidHorn
KidHorn

The problem isn't insurance costs. The problem is health care costs. Insurance is expensive because health care is expensive. Drug companies cannot be allowed to have a patent and charge whatever they want. If they want a patent, they have to have price limits. If they want to charge whatever they want, then they don't get a patent.

WildBull
WildBull

Obamacare wasn't designed to provide healthcare for all. It was designed as an extortion racket to make sure everyone pays the healthcare cartel. The federal government is the muscle. The same government that will throw you in a cage if you refuse to pay exempts the drug companies from anti trust laws, so they can pretty much fix prices at will. I'm pretty sure that also goes for the medical supply companies. Scrap it all.

DrDog
DrDog

Is the Middle Class already paying more for a loaf of bread?

DrDog
DrDog

Of course they are! The middle class is subsidising every EBT card utilized. The marked price maybe the same but the effective cost for the bread has an imputed tax to certain tax brackets. But I would also point out why would a 60yo participate in Iowa's plan? They can opt for Medicare @ 62.

srig
srig

testing


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