Obamacare Tax Shock

[photoguy]

I am not saying that having insurance is a bad thing, just that the ACA create some perverse incentives because of the subsidies.

It seems reasonable to me that premium subsidies decrease as your income goes up. Do you think it should be structured in a qualitatively different manner? Or perhaps that the increase should just be less steep on marginal income?

I do agree that the cliff at 400% can be a huge distortion.

As a practical matter, the $1,700 medical insurance, plus the $6,600 deductible, plus the lost wage for being out of work for the cancer treatments, will more than likely push most self-employed 28 year olds making 25K into bankruptcy.

The cost sharing reductions of deductible / max OOP are supposed to address this (which start at 250% of FPL). However I think the decrease isn't significant until 200% where it is around 2k and unfortunately she is above that threshold.




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[travelover]

Without insurance, it is unlikely she would have found any hospital to treat her. She would die...........

Is this right? I was under the impression that hospitals were required to provide care regardless of the patient's ability to pay - pre and post ACA.

 

[scrabbler1]

But deductions do not affect your ACA subsidy because that is driven off MAGI - not taxable income.

But as I wrote earlier in that same post, bunching my deductions does affect my MAGI because I have to add back the state property tax rebate which counts as income (MAGI). If I don't bunch my deductions, I'd be taking the standard deduction every year and would not have to add back any state property tax rebate and increase my MAGI.

 

[NW-Bound]

It seems reasonable to me that premium subsidies decrease as your income goes up. Do you think it should be structured in a qualitatively different manner? Or perhaps that the increase should just be less steep on marginal income?

The cut-out of ACA subsidy should be more gradual, such as a linear fade-out as one's income rises. I cannot fathom how they came up with a cliff. It's simply idiotic.

Is this right? I was under the impression that hospitals were required to provide care regardless of the patient's ability to pay - pre and post ACA.

As I understand, they are only required to stabilize the patient to prevent instant death or suffering, such as traumas from accidents, gunshots, appendicitis, etc... I do not know how acute medical conditions are defined, but they are not required to provide long-term care for chronic conditions like diabetes, high-blood pressure, etc... For example, if you have a stroke, they will do their best to keep you alive, but rehab for stroke debilitation is not included. Cancer treatment is a long process. Cancer is not treated in regular hospitals anyway.

PS. My state, and I assume all others, has a program where the indigent can apply for free care in cases like cancer. You will have to deplete your resources first though. Sell your home, empty all your accounts first to pay for your care, then the state will help.

 

[travelover]

.....As I understand, they are only required to stabilize the patient to prevent instant death or suffering, such as traumas from accidents, gunshots, appendicitis, etc... I do not know how acute medical conditions are defined, but they are not required to provide long-term care for chronic conditions like diabetes, high-blood pressure, etc... For example, if you have a stroke, they will do their best to keep you alive, but rehab for stroke debilitation is not included. Cancer treatment is a long process. Cancer is not treated in regular hospitals anyway.

PS. My state, and I assume all others, has a program where the indigent can apply for free care in cases like cancer. You will have to deplete your resources first though. Sell your home, empty all your accounts first to pay for your care, then the state will help.

So, I think it is fair to say that she (the kidney tumor patient) would not die. She might get choppy intervention, though.

Without insurance, it is unlikely she would have found any hospital to treat her. She would die.........

 

[jim584672]

PS. My state, and I assume all others, has a program where the indigent can apply for free care in cases like cancer. You will have to deplete your resources first though. Sell your home, empty all your accounts first to pay for your care, then the state will help.

We have two Medicaids since the ACA.

The original which still exists, which was for Disabled, Blind, and Elderly (>=65). This has resource tests, income tests, spend downs. Long term care also falls in this.

MAGI Medicaid includes the expanded group, (18-64), which has only an income test. You do not need to become destitute before being eligible in this group.

 

[MRG]

....snip.....

Cancer treatment is a long process. Cancer is not treated in regular hospitals anyway.

PS. My state, and I assume all others, has a program where the indigent can apply for free care in cases like cancer. You will have to deplete your resources first though. Sell your home, empty all your accounts first to pay for your care, then the state will help.

Agree cancer can require long term treatments. A mentor of mine recently lost his 40 something wife to the disease. They spent over a year in a cancer treatment place. From the start they were told hers was 100% terminal. The treatments extended her life, hopefully made it higher quality.

One thing he noticed was many patients making a choice to eat or get treatment. He told me many folks would choose to only eat once a day so they could afford treatments. To that end he's started an organization to assist people in that situation. Most of the people there were not indigent, had insurance, just not enough resources, they didn't want to leave the family broke. Tough situation.

Edit to add: So we stay on topic, I'm going to get bit this year too. My plan was perfect, till KMP got pulled into KMI. It's the guy in the mirrors fault. I didn't understand everything I should have. Live and learn.

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[photoguy]

The cut-out of ACA subsidy should be more gradual, such as a linear fade-out as one's income rises. I cannot fathom how they came up with a cliff. It's simply idiotic.

Below the cliff at 400% of the FPL, the decrease in premium subsidy is basically linear with income. For example, I took a few data points from covered CA to generate the below plot.

I agree that the cliff at 400% is very stupid though. However, the person in Clifp's example is in the middle of the range and is not hitting the 400% limit. Now I might also buy the argument that the slope of the line is too steep though.

 

[2B]

Is this right? I was under the impression that hospitals were required to provide care regardless of the patient's ability to pay - pre and post ACA.

The cut-out of ACA subsidy should be more gradual, such as a linear fade-out as one's income rises. I cannot fathom how they came up with a cliff. It's simply idiotic.


As I understand, they are only required to stabilize the patient to prevent instant death or suffering, such as traumas from accidents, gunshots, appendicitis, etc... I do not know how acute medical conditions are defined, but they are not required to provide long-term care for chronic conditions like diabetes, high-blood pressure, etc... For example, if you have a stroke, they will do their best to keep you alive, but rehab for stroke debilitation is not included. Cancer treatment is a long process. Cancer is not treated in regular hospitals anyway.

PS. My state, and I assume all others, has a program where the indigent can apply for free care in cases like cancer. You will have to deplete your resources first though. Sell your home, empty all your accounts first to pay for your care, then the state will help.

Our imaginary tumor patient needs to get on Medicaid. She is in the interesting position where her working will keep her off Medicaid and from getting cancer treatment anywhere in Texas. Everyone I've talked with says that before treatment starts the hospital verifies coverage. I know one person that was told their insurance wouldn't cover the full treatment cost and a $100,000 payment was required before they would start. I can't speak for other states.

Every country in the world rations medical care in some way or fashion. The "universal coverage-single payer" systems put some sort of "social value" on people based on the treatment needed. Government run health care seems happy to let you see a doctor for a rash but become more stingy when major treatments are needed. I would predict that if the US ever converted to a single payer system there would be a massive shock as to what would have to be done to change peoples' expectations of coverage. Right now, for better or worse, the US rations health care on the basis of employment coverage or the personal ability to pay for it and/or the insurance needed.

 

[jim584672]

She should shop for a state that has expanded Medicaid and move there. Apply immediately. If she stays in Texas they will deplete all her assets and spend down any income before they start paying for anything.

 

[audreyh1]

So, I think it is fair to say that she (the kidney tumor patient) would not die. She might get choppy intervention, though.

She would not have had her cancer treated until she eventually got on Medicaid. So, yes, I think she would likely die without timely intervention. Treating cancer is a race against the clock.

 

[mickeyd]

It is great for me to not have to worry about ACA subsidy issues. All we have to do is pay for other peoples health insurance as well as our own healthcare.

 

[travelover]

It is great for me to not have to worry about ACA subsidy issues. All we have to do is pay for other peoples health insurance as well as our own healthcare.

You must have missed out on the deal I got. When I was w*rking, I got my healthcare tax free, while other suckers that paid for their own health insurance had to buy it with after tax money.

 

[mickeyd]

You must have missed out on the deal I got.

Congratulations. I'm happy for you.

 

[NW-Bound]

Below the cliff at 400% of the FPL, the decrease in premium subsidy is basically linear with income. For example, I took a few data points from covered CA to generate the below plot.

I agree that the cliff at 400% is very stupid though. However, the person in Clifp's example is in the middle of the range and is not hitting the 400% limit. Now I might also buy the argument that the slope of the line is too steep though.

In late 2013 when ACA first came online and there was a lot of discussion at this forum and I was paying attention to learn about it from more informed posters, I remember that someone, MichaelB or perhaps Paquette, posted a link to the following Congressional Research Paper: http://www.healthreformgps.org/wp-content/uploads/crs-premium-credit-7-18.pdf.

There's a lot of details in that paper, and I admit that I only glanced through it, but what caught my eyes was the following graph near the end. The plot shows the subsidy indirectly in the form of premium as a percentage of income, hence it takes some thinking to comprehend and to compare it with a graph that shows dollar amounts.

It is easy to see that the cliff is much more pronounced for a married couple; yet another marriage penalty in the US tax code.

 

[travelover]

She would not have had her cancer treated until she eventually got on Medicaid. So, yes, I think she would likely die without timely intervention. Treating cancer is a race against the clock.

Thanks - I should have been more clear. What I was trying to tease out was whether hospitals' obligation to treat the uninsured had changed with the ACA and mandatory health care coverage.

 

[dtbach]

Obamacare shock. I'm "Shocked, I tell you, shocked"


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[wolf]

I have a slightly different issue coming up and I have no idea how it's going to play out come tax time, but I think it's going to be ugly.

We moved from one California county to another in June 2014. Before the move, our premium was quite high, but our tax credit was high as well. After the move, our overall premium dropped about 25%, but our tax credit also dropped, making our share 6 times what we'd paid.

It took me over 2 months and many phone calls to get CoveredCA to process our new address. In the meantime, I kept throwing money at Anthem, per CoveredCA's direction, to make sure we didn't lose coverage. We kept the same plan and had the same income; we only changed address.

It took CoveredCA another few months to send our updated information to Anthem, so Anthem kept returning my now-increased premium checks. I knew Anthem didn't have our new address because I kept getting the forwarded premium invoices.

When I called Anthem to tell them we'd moved, they said they would not accept this from me. It could only come from Covered CA.

The upshot is that CoveredCA sent the wrong move date and we ended up getting billed in our new area for the whole year. We found this out in December. Any premiums we'd paid all through the year at the lower cost were piled together to pay those new, higher premiums.

As a result, a doctor's visit claim in December got denied; Anthem told our doctor that we had not paid any premiums since March of 2014! I talked to the doctor's office and told them what was going on. It's hard enough to find doctors who even take that insurance, so I wanted not to leave them hanging.

Once again I called Anthem, who explained how those premiums were applied--albeit wrongly--but they would not accept my word for it, so I've tried to call CoveredCA. No luck with that, during Open Enrollment. I could never even get to a real person to talk to.

Today I'll send a letter out to CoveredCA, asking them to give Anthem the correct information.

According to what I've seen from Anthem, we also lost the tax credit, which was substantial, for the first 5 months of the year. I am hoping that if CoveredCA changes the date with Anthem, they'll also wake up and fix the tax form that should be coming our way.

On a positive note, I sent Anthem some more money, and they kept it this time, which unlocked the benefits for the December doctor's visit. Since we're on a Bronze HSA plan, of course we're only benefiting from the negotiated rates, but still, we're glad to have insurance.

PS We left Anthem and moved to Kaiser for 2015. So far, we're really happy with Kaiser, but we still want to get Anthem sorted out for 2014.

Agree. Had similar issues with Covered California "talking" to our Blue
Shield Carrier. Any changes, HAVE to go thru Covered CA. But it takes
Months, (not days as promised) for Covered CA to inform Blue Shield of
any changes. In the meantime, We, like you, were paying premiums to
the wrong plan, just to insure coverage. Also, like you, when Covered CA
did "talk" to Blue Shield, they gave the wrong dates, when coverage stopped and started.

I can only imagine what will happen when we have to fill out income tax
forms.....Expect another mess, HOPE the press does not do a coverup

 

[photoguy]

In late 2013 when ACA first came online and there was a lot of discussion at this forum and I was paying attention to learn about it from more informed posters, I remember that someone, MichaelB or perhaps Paquette, posted a link to the following Congressional Research Paper: http://www.healthreformgps.org/wp-content/uploads/crs-premium-credit-7-18.pdf.

Thanks for posting the link to the paper and graph. I had not seen it before and skimming through it there's some interesting information in it.

The graph presents the premium as a percent of income (so different from absolute subsidy $) but to me seems also fairly well behaved (no discontinuities) until you get to the 400% cliff. In the back of my mind, I knew that there is a "marriage penalty" as the FPL for 2 people is not 2x the level of an individual -- it's actually only about 35% more. However the graph really hits home how large it can be (depends on age and is worse for older folks).

The article argues that two can live more cheaply than one, and I do believe this should be a factor in determining what the FPL for different family sizes. I'm not sure though that they put a lot of thought into the adjustment size. When I look at FPL tables it seems that for every person added to the family, the FPL goes up by a constant $4060. I'd expect some variation here. On the other hand, I know humans often expect to see complex models when sometimes a simple one will do fine by objective criteria.

Agree. Had similar issues with Covered California "talking" to our Blue
Shield Carrier. Any changes, HAVE to go thru Covered CA. But it takes
Months, (not days as promised) for Covered CA to inform Blue Shield of
any changes. In the meantime, We, like you, were paying premiums to
the wrong plan, just to insure coverage. Also, like you, when Covered CA
did "talk" to Blue Shield, they gave the wrong dates, when coverage stopped and started.

I've had similar problems with covered CA and blueshield as we switched accounts/plans from 2014 to 2015. I think someone on this board (maybe brewer12345?) has suggested shopping for a new plan every open enrollment but my experience this year has just been terrible. I won't want to touch it again once it's finally setup properly.

 

[bingybear]

In late 2013 when ACA first came online and there was a lot of discussion at this forum and I was paying attention to learn about it from more informed posters, I remember that someone, MichaelB or perhaps Paquette, posted a link to the following Congressional Research Paper: http://www.healthreformgps.org/wp-content/uploads/crs-premium-credit-7-18.pdf.

There's a lot of details in that paper, and I admit that I only glanced through it, but what caught my eyes was the following graph near the end. The plot shows the subsidy indirectly in the form of premium as a percentage of income, hence it takes some thinking to comprehend and to compare it with a graph that shows dollar amounts.

It is easy to see that the cliff is much more pronounced for a married couple; yet another marriage penalty in the US tax code.

This is really scary for me. I took my 2013 taxes... dropped the income to the 2.5 months I'll get paid for this year + the 6 weeks vacation buy out for my wife and ended up just under the cliff. But looking closer.. I don't think I'll stay under unless I sideline some investments.

 

[gerntz]

Always a good idea to leave some extra space in your income plan for unseen spikes. Best to adjust our MAGI to be about $10K short of the cliff and be able to pull it in after the numbers come in, than to be $1 over!

Yep. Got caught in that last year by about $1100.

 

[pb4uski]

I agree the cliff is stupid but I suspect if the subsidies had been graded out more sensibly that the subsidies would have broken the budget more than it already did.

 

[aaronc879]

I definitely feel sorry for the self-employee contractor healthy folks in their late 20s who previously didn't have insurance, cause it was too expense. Imagine a 28 year old woman making $25K a year, she reluctantly signed up for $140/month silver plan, thanks in part for a $1100/year subsidy. At the end of the year she gets a $5,000 contract causing her to have to work through the holidays. As a reward she is hit with $750 in Federal tax $700 in FICA, say 5% $250 in state income tax,and whooping $800 in ACA subsidy reduction. Congrats she hit the 50% marginal tax bracket.

If she had been savvy she would have insisted they pay her next year, but she is too busy to hang around on forums like this..

This is very similar to my situation for 2014 except i'm a 35 year old male. I'm self employed doing contract work. I got a contract at the end of the year for $5250. I was able to get them to pay me $3000 in 2014 and $2250 in 2015 but it still had a very similar effect to what you described. Definitely a hard hit for someone who already is not making a lot of money.

 

[aaronc879]

I am not saying that having insurance is a bad thing, just that the ACA create some perverse incentives because of the subsidies.

As a practical matter, the $1,700 medical insurance, plus the $6,600 deductible, plus the lost wage for being out of work for the cancer treatments, will more than likely push most self-employed 28 year olds making 25K into bankruptcy. It really doesn't matter if the cancer cost $50K or 200K almost nobody ends up paying that.

Another problem comes into play for the states that didn't expand medicaid(like mine). Lets say I had to have surgery that put me out of work for months since my job requires me to be healthy. I don't know the exact numbers but lets say $11,500 qualifies me for a great subsidy and cost sharing with $500 OOP max and $500 deducible. Lets also assume $11,499 or less means I get no subsidy or cost sharing and a deductible of $6000. The full premium is probably $3000 more without the subsidy. Add that to the $5500 extra deductible and I have to pay $8500 extra because I made too little money. How do I pay $9000 in medical bills if I made under $11,499 AGI.

I think the ACA is a big improvement over what we had before but it has a lot of flaws. Some are big. The one described above is huge. I think the solution is medicaid gets expanded at the federal level. I know many will not like that but it's necessary.

 

[jim584672]

I think the solution is medicaid gets expanded at the federal level. I know many will not like that but it's necessary.

The original law got Medicaid expanded at the federal level. The Supreme Court ruled that the ACA was coercive to the states due to the fact it threatened to take away all Medicaid funding if they did not comply with the expansion. So each state has the right to NOT expand without any loss of existing Medicaid funds.

Each state legislature must decide to expand, no other way it can be done.