Will the new healthcare law make it easier for me to retire early?

[uofmbish]

Just heard that the new bill will cost big pharmaceutical companies $90 billion. Any ideas on where the next blockbuster drugs will come from that take billions to develop and get clinical trials on?

I'm guessing that the funding will come from a similar place as it does today. The drug you referenced, Herceptin, was developed in paternership with UCLA, so I'm guessing a mix of tax dollars and public donations.

To the OP, this would take care of my biggest concern about a very early retirement. I don't have to worry about depleting our assets if I get sick and dropped from our insurance, leaving my wife with nothing to live on until SS kicks in. If we end up making it into that 250k + income range at some point in the future (may happen if it isn't inflation indexed) then it would be perfectly fair that I share in the cost.

 

[donheff]

Even the CBO can't provide a good estimate because the cost of the "fixes" during reconciliation will undoutedly raise the number. I heard yesterday one of the "fixes" was to allow pre-existing conditions for CHILDREN, apparently the House bill only had pre-existing conditions for adults?? Talk about confusing...

Actually, there is no confusion. What we are talking about is how the Senate Bill, as modified by the reconciliation changes, will affect health care making it easier, harder, or neutral for us to ER. The CBO reviewed the reconciliation changes and agreed that they improved the picture (the $1.2T -- thus they could be considered under reconciliation.

 

[clifp]

One of the things that was interesting form the Kaiser calculator is they projected health care cost for a 53 (my age in 2014) year old as just over $500/month. If I can get my income down to ~40K/year it looks I can get ~2K/year subsidy to help pay for it.
That is the good news.

The bad news is my current Kaiser plan is only $250/month (and it jumped a lot last year when I turned 50). I sure hope they aren't planning on doubling my premium over the next three years

 

[plex]

The Kaiser premium costs were definitely higher in the 20-29 range I noticed. They were predicting $2100/year for premium costs, when right now, a high deductible plan for a 20-29 year old is only $600/year. I definitely expect a large increase on the young end of the scale in order for the insurance companies to stick to the 3:1 balance, going from $600/year to $2100+ would not be strange at all. It will likely be more expensive in the 30-45 range too, but less expensive in the 45-64 range. This assumes you have a high deductible plan, if you are already at the "cap," you might as well get the most comprehensive and low deductible plan you can.

 

[skyline]

Repeated references to American citizen or legal resident.

Every state has asset eligibility requirements for Medicaid – and they are quite strict.

Technically, on page one it says $938 dollars and on page three it reads says $938 billions. Still, good find.

So this is interesting. If I'm reading this correctly, it sounds like if you're like most of the folks here and are high asset but low income, then you need to make sure that you'll end up with at least 133% of poverty level AGI on your tax return each year starting 2014 - otherwise you get no federal subsidy since you would fall into the Medicaid bracket if you go under 133%, and you would fail the asset test for Medicaid?

Hopefully I'm missing something here?

 

[plex]

I believe they greatly expanded who Medicaid includes in the new health law. I know for certain that additional categories of persons were added which will force states to have to revise who is eligible for Medicaid (Medicaid never covered single people before), though I am not absolutely certain this includes anyone who draws income that is 133% PL or less, but has high assets. Based on the language though, and the intent to make sure everyone is covered (at whatever the cost...), I am pretty sure it asset testing will no longer be used, it will be a strict income test.

 

[dixonge]

found a link to this article on another site - may or may not add to the information on the impact:

Ways that health care reform will impact retirees - by L.B. Woodgate - Helium

 

[MichaelB]

An implementation timeline of the new legislation http://www.kff.org/healthreform/upload/8060.pdf

 

[winger]

Let's say a young couple makes $40k a year, with no health insurance today. The wife gets sick, goes to the emergency room and is admitted to the hospital for a couple days.

The total bill is $40k, owed to doctors, the hospital, radiologists, and who knows what else.

The couple was doing alright before the illness, but had nowhere near $40k. Selling everything might get them $4k. What do they do? Set up payment plans? File bankruptcy? Ignore the bills? Probably the last....

But if they had coverage..........all these providers could be paid. I can't see how this is bad for our future. It would certainly be good for the providers to be paid, instead of getting a check for $10 a week for the next 30 years.

 

[scrabbler1]

I second this. Having worked in the actuarial profession for 23 years (specializing in personal auto insurance) before I retired in 2008 at age 45, I do plan to chime in soon on this thread. I have a long, busy day ahead tomorrow so it will have to wait until Friday.

Keep on posting here, everyone. I am finding this a great read in the meantime.

Okay, here are my thoughts about some of the issues raised by others here, especially about hos the new law will affect us ERs.

I read with interest about the comparisons to personal auto insurance. It is not a perfect comparison, bus some things are relevant.

Assuming the personal mandate for buying HI withstands consitutional challenge, it is true that people don't need to own a car but everyone has a "body" to insure. Like PA insurance, one thing which keeps rates low is the fact that we have all those (good) drivers out there buying insurance via mandate. By comparison, the Assigned Risk pool made up of all those bad drivers has sky-high rates.

If the personal mandate ends up including more young, healthy people who were not paying into the system before, then this will have downward pressure on rates. Allowing more younger people to be included in their parents policies is a way to achieve some of this.

However, offsetting this downward pressure on rates is the upward pressure on rates caused by removing the exclusion for pre-existing conditions and lifetime caps on benefits. I am not saying these limitations on coverage are good or bad, only that removing them will put upward pressure on rates.

I do not know which rate pressure will dominate - having more healthier people paying into the system or having greater loss payouts by removing certain limitations on coverage. I have worked on many pricing of law changes in my 23 years in the PA actuarial field and several of them were complex and included offsetting effects.

As to the effect of the HC law on us ERs, it does appear that it will be income, not assets, which will determine any federal subsidies. I am glad for that, as I am asset-big and income-small since I retired in 2008 at age 45. I feel these subsidies will mitigate the unfavorable tax treatment I get since I began paying for my own HI via the individual market. When I was working, I had the employer subsidy tax-free and the employee portion paid by me totally tax-deductible, even if it did not exceed the 7.5% threshold needed to itemize my deductions. And I was in a higher tax bracket back then so the tax savings was bigger than it is now. My HI policy today is only about 3/4 tax deductible after figuring the 7.5% threshold.

 

[ERD50]

... What do they do? ... Ignore the bills? Probably....

But if they had coverage..........all these providers could be paid. I can't see how this is bad for our future. It would certainly be good for the providers to be paid, instead of getting a check for $10 a week for the next 30 years.

W/o judging if it is good or bad policy, I think your numbers analysis leaves something out.

The providers *will* get paid, one way or the other, in either case. One way now is, they charge higher rates to those who can pay. So we are not really talking about getting paid or not, we are talking about where the money comes from. The HC bill doesn't magically make money appear out of nowhere.

-ERD50

 

[TromboneAl]

My HI policy today is only about 3/4 tax deductible after figuring the 7.5% threshold.

How is it that your premiums are, in part, deductible? Is it because you are still on the plan from your former employer?

---------------

Another potential downward pressure on rates is that now-insured people may seek help for conditions earlier, avoiding the higher cost of treating those conditions after they've worsened.

 

[winger]

W/o judging if it is good or bad policy, I think your numbers analysis leaves something out.

The HC bill doesn't magically make money appear out of nowhere.

-ERD50

Magic? More people will be in the risk pool to share the costs.

 

[scrabbler1]

How is it that your premiums are, in part, deductible? Is it because you are still on the plan from your former employer?

---------------

Another potential downward pressure on rates is that now-insured people may seek help for conditions earlier, avoiding the higher cost of treating those conditions after they've worsened.

HI Premiums are deductible if you itemize your deductions on Schedule A and your out-of-pocket medical expenses exceed 7.5% of your AGI. The portion of your out-of-pocket medical expenses which exceed 7.5% of your AGI are deductible from your AGI.

I would have been able to deduct my COBRA payments (perhaps you were alluding to that?) in 2008 but I took a big lump-sum company stock payout that year when I left and pushed the AGI threshold way up!

I agree with your statement about downward pressure on rates. And it is cheaper to see your doctor than to go to the ER for treatment.

 

[ERD50]

Magic? More people will be in the risk pool to share the costs.

Yes. But you said the providers were not being paid versus being paid. That is different.

As I said, I was not judging if this is good or bad, but we have to state it for what it is. It is a *shifting* of payment sources.

-ERD50

 

[Gotadimple]

W/o judging if it is good or bad policy, I think your numbers analysis leaves something out.

The providers *will* get paid, one way or the other, in either case. One way now is, they charge higher rates to those who can pay. So we are not really talking about getting paid or not, we are talking about where the money comes from. The HC bill doesn't magically make money appear out of nowhere.

-ERD50

Good point, and I'm glad you raised it. It is disconcerting to me why people are considering how to take advantage of the federal subsidy, without considering the probable impact at the point of service.

Today, a retiree (not an early retiree) pays a premium for health insurance and the plan is subsidized by the federal government (Part A, Part B, and Part D). Today, that same retiree can find it difficult to find a provider -- either primary care or specialist -- due to low compensation rates.

Yes, it is true, that those with private insurance get charged a higher price (even if it is negotiated by their health plan) than those with public insurance (rates also negotiated by the government). But they also have greater access to health care services.

So, if the law allows those with private insurance -- or the ability to access private insurance -- to keep their plan, why would one want to change?

Yes, health care is a financial issue, but access to health care is also a physical, mental, and emotional issue. I suspect early on in the implementation, access to health care will continue to be a problem for anyone on publicly funded health plans.

The rules have yet to be written for this new public option, most specifically, I haven't seen anything yet that outlines what the providers will receive. As long as private companies are in competition with government plans, and there are payers (either employers or individuals) willing to pay the premium, providers will negotiate with the entity that gives them the highest rate for their services, and decline to do business with those not associated with the highest paying plans. They need to feed their families, too.

My point: don't look for a subsidy without understanding the implications for you in terms of the physical, mental, and emotional impact of health care.

-- Rita

 

[MichaelB]

HI Premiums are deductible if you itemize your deductions on Schedule A and your out-of-pocket medical expenses exceed 7.5% of your AGI. The portion of your out-of-pocket medical expenses which exceed 7.5% of your AGI are deductible from your AGI.

Keep in mind that the threshold rises to 10% in 2013 as part of the reform.

 

[ERD50]

It is disconcerting to me why people are considering how to take advantage of the federal subsidy, without considering the probable impact at the point of service.

....

My point: don't look for a subsidy without understanding the implications for you in terms of the physical, mental, and emotional impact of health care.

-- Rita

Maybe I'm misreading your intent, but I'm not following those comments (or maybe I just don't think they are realistic?).

Once Congress passes laws about who is eligible for what subsidy, I fully expect people to make financial decisions to optimize what they receive. It was up to Congress to figure the impact, we are just the pawns in this game, trying to figure out the rules. I'm not trying to be political with that, I just feel I am stating a fact.

In comparison, when someone claims a legitamate deduction on their tax form, are they supposed to say 'mmmm, what effect will this have on the deficit, maybe I won't take it'? Not realistic, is it?

-ERD50

 

[MichaelB]

Maybe I'm misreading your intent, but I'm not following those comments (or maybe I just don't think they are realistic?).

Once Congress passes laws about who is eligible for what subsidy, I fully expect people to make financial decisions to optimize what they receive. It was up to Congress to figure the impact, we are just the pawns in this game, trying to figure out the rules. I'm not trying to be political with that, I just feel I am stating a fact.

In comparison, when someone claims a legitamate deduction on their tax form, are they supposed to say 'mmmm, what effect will this have on the deficit, maybe I won't take it'? Not realistic, is it?

-ERD50

Agreed. In addition, I doubt there will be much subsidy for people with means, regardless of their income level.

 

[Gotadimple]

Once Congress passes laws about who is eligible for what subsidy, I fully expect people to make financial decisions to optimize what they receive. It was up to Congress to figure the impact, we are just the pawns in this game, trying to figure out the rules. I'm not trying to be political with that, I just feel I am stating a fact.

In comparison, when someone claims a legitamate deduction on their tax form, are they supposed to say 'mmmm, what effect will this have on the deficit, maybe I won't take it'? Not realistic, is it?

-ERD50

ERD50:

Health care is not a financial issue when it affects you or someone you love. While we focus on the financial aspect, people today make choices to buy their health insurance based both on emotion and financial ability.

My point is that currently those on Medicare and Medicaid (the public option) are becoming marginalized. The point of service for their care continues to erode as physicians and other providers refuse to provide services due to the negotiated payment schedule, which continues to be the lowest compensation available.

I am not suggesting any connection to a decision between the federal subsidy and being able to deduct expenses on Schedule A.

From a purely financial aspect, those who provide the care will chose the health plan payers who provide the highest compensation they can negotiate. The government's compensation is generally not negotiable.

A good segment of conversation in this thread relates to understanding how the subsidy could be applied in a personal situation. I am suggesting to those considering it, to also consider that you get what you pay for, and if you are able to pay for private insurance, you consider the consequences of moving from private insurance to public insurance. Yes, you're the pawn: consider the financial, emotional, mental, and physical impacts of the decision you make..

What was solved with this legislation is providing a means for those who cannot afford health insurance to get coverage, prevent those with health insurance from being cancelled unfairly, and provide a means for those who have pre-existing conditions access to affordable premiums. What was not solved is the provider payment schemes which continue to be the primary driver in why health insurance premiums are so expensive.

Most of us who have been trying to understand finance in preparing for early retirement understand there is an emotional aspect to money. That it is logical to make a financial decision is one point, but, logic doesn't often rule when spending money.

-- Rita

 

[winger]

There is still work to be done on HCR.

 

[donheff]

Good point, and I'm glad you raised it. It is disconcerting to me why people are considering how to take advantage of the federal subsidy, without considering the probable impact at the point of service.

My point is that currently those on Medicare and Medicaid (the public option) are becoming marginalized. The point of service for their care continues to erode as physicians and other providers refuse to provide services due to the negotiated payment schedule, which continues to be the lowest compensation available....

A good segment of conversation in this thread relates to understanding how the subsidy could be applied in a personal situation. I am suggesting to those considering it, to also consider that you get what you pay for, and if you are able to pay for private insurance, you consider the consequences of moving from private insurance to public insurance. ...

I find this confusing as well. People getting subsidies are not moving from private insurance to public insurance. They remain on private insurance. And, while it is true that some doctors are refusing to participate in Medicare because of reimbursement rates, that will not apply to private sector health plans under the plan approved. Most of us (until we are 65) will continue under the same old plans we are under or new plans under the exchanges. We will have the same advantages and disadvantages we have now (e.g. will my doctor participate in the BC/BS PPO, Aetna, GEHA, etc).

Just a final nit, you describe Medicare as "the public option." Medicare is a form of single payer -- not at all the "public option" that was proposed early in the health care debate.

 

[samclem]

What was not solved is the provider payment schemes which continue to be the primary driver in why health insurance premiums are so expensive.

I agree with you here. The "provider payment schemes" (that is, the fact that providers aren't directly paid by the people receiving the services) are the primary driver for higher health costs. These higher health costs are the primary driver behind higher "insurance" rates.

Phil Gramm said it very well today:

For every dollar's worth of health care that Americans received last year, they paid a dime and somebody else paid 90 cents. If you bought food the way you buy health care—where 90% of everything you put in your basket was paid for by your grocery insurance policy—you would eat differently and so would your dog.

 

[Gotadimple]

I find this confusing as well. People getting subsidies are not moving from private insurance to public insurance. They remain on private insurance. And, while it is true that some doctors are refusing to participate in Medicare because of reimbursement rates, that will not apply to private sector health plans under the plan approved. Most of us (until we are 65) will continue under the same old plans we are under or new plans under the exchanges. We will have the same advantages and disadvantages we have now (e.g. will my doctor participate in the BC/BS PPO, Aetna, GEHA, etc).
.

From the synopsis at the Kaiser Family Foundation
http://www.kff.org/healthreform/upload/8023-R.pdf

". . .States will create American Health Benefit Exchanges where individuals can purchase insurance . . . Premium and cost-sharing subsidies will be available to
make coverage more affordable.

Although there will not be a public plan option in the Exchanges, the Office of Personnel Management, which administers the Federal Employees Health Benefit Program, will contract with private insurers . . . Plans in the Exchanges will be required to offer benefits that meet a minimum set of standards. Insurers will
offer four levels of coverage that vary based on premiums, out-of-pocket costs, and benefits beyond the minimum required plus a catastrophic coverage plan."
==================================
So, subsidies/credits will only be available to individuals purchasing within the exchanges. Once an individual chooses a plan offered in a Health Exchange, they are signing up for one of four benefit packages. The benefit design is administered by the government (Office of Personnel Management).

While the rules for what OPM will "administer" haven't been written, they currently administer the FEBHP by setting provider compensation, designing the benefit plans, and setting the rates for premiums. Once you have government negotiating payment rates and benefit design (rather than the marketplace), you have a public option.

If the rates are not competitive with what the private insurers can offer, you have a continued problem with access to care. There will be no substantive change to what insurers do in the marketplace, and there is no guarantee that the plans offered in the Exchange will be represented by a majority of the private carriers -- only that there be at least two carriers, one being a not for profit.

You are correct, for the majority of people who currently have access to health insurance, nothing needs to change. For those thinking about how the Health Exchanges and subsidy/credit option can be beneficial, I am only saying one needs to be aware that the benefits might not be the same, and if Medicare is any example, there may be problems with access to the health care providers.

That doesn't mean that the Federal Employee program is one where the access or benefits are restricted -- because they are not. Federal employees enjoy benefit plans that can be broader than what an individual can buy in the marketplace today.

 

[ziggy29]

You are correct, for the majority of people who currently have access to health insurance, nothing needs to change.

Nothing *needs* to change, particularly with the employer-sponsored group plans. But if these do wind up adding higher taxes on the benefits they provide, then I'd expect them to be watered down -- or even eliminated and replaced by some extra pay to go out and buy our own.