Official Brief Comparison of House/Senate HC plans

[samclem]

The pdf file at this link was posted at Speaker Pelosi's site. It contains an 11 page synopsis of the differences between the two bills. Of course, the problems, challenges, and underlying rationale for the differences in the two pieces of proposed legislation are not provided, and the earmarks and sweetheart deals are not mentioned.

Apologies if this was posted before, I wasn't reading everything over the holidays.

 

[FinanceDude]

The pdf file at this link was posted at Speaker Pelosi's site. It contains an 11 page synopsis of the differences between the two bills. Of course, the problems, challenges, and underlying rationale for the differences in the two pieces of proposed legislation are not provided, and the earmarks and sweetheart deals are not mentioned.

At least she posted something....... I wonder if Nebraska is really going to be allowed to let the other 49 states pay their share of Medicare.....

 

[ziggy29]

At this point, at the very least I hope those [-]bribes[/-] earmarks to buy votes from reluctant Senators are stripped out of whatever reaches the president's desk. And this time they will only need 50 votes, not 60, in the Senate.

 

[FUEGO]

Good to see features/numbers on paper in this type of comparison. And assuming this bill passes, this should be the rough range of features, benefits, costs etc.

Just taking a quick look at the maximum premiums, these act as a roughly 18% effective marginal tax. In other words, earning an extra dollar will decrease your health insurance credit by 18 cents. That's just from plugging in a few incomes and credit amounts on the Senate plan. If I were using this for health insurance (instead of employer provided) and were self employed, my marginal tax rate would be roughly 55%. 48% at a W-2 job. Interesting financial ramifications and set of incentives. I'll leave it at that to avoid any political commentary.

 

[ziggy29]

Just taking a quick look at the maximum premiums, these act as a roughly 18% effective marginal tax. In other words, earning an extra dollar will decrease your health insurance credit by 18 cents. That's just from plugging in a few incomes and credit amounts on the Senate plan. If I were using this for health insurance (instead of employer provided) and were self employed, my marginal tax rate would be roughly 55%. 48% at a W-2 job.

Suffice it to say that retiring early in 2013 with no debt and a sustainable ~$40,000ish household income just got a lot more attractive if this passes. That's enough to live on with no debt, a paid off house and very highly subsidized health care, and any dollar I make from w*rk after that would effectively leave less than 50 cents in my pocket.

 

[FUEGO]

Suffice it to say that retiring early in 2013 with no debt and a sustainable ~$40,000ish household income just got a lot more attractive if this passes. That's enough to live on with no debt, a paid off house and very highly subsidized health care, and any dollar I make from w*rk after that would effectively leave less than 50 cents in my pocket.

Yep. And maybe get a little side hussle going to bring in some untaxed* extra money. Ebay sales, auto repair, lawn care, child care, etc.

Increasing the marginal effective tax rate will serve to incentivize the grey/black market for labor.

Edited to add:
Roughly $40000-45000-ish per year was what I was planning on to ER, along w/ a paid off house. Plus $12000 a year of health insurance. But now it looks like it will be closer to $2000-3000 for health insurance. That $9000/yr savings is worth $225k-300k.

With clever tax loss harvesting, I could probably pull a bit more than $45000 a year out, since part of the "withdrawal" would be the sale of assets with some cost basis that would not be taxable.

* see tagline, and your accountant

 

[samclem]

Right. But all we can do now is static analysis, which is unlikely to tell us much. We'll see the story unfold as people, not being dumb, react to the "incentives" in the plan. For example, as Fuego and Ziggy observe, lots of folks will "drop out" of the work force or take active steps to reduce their income in order to qualify for more government subsidies (i.e. money from the declining pool of remaining taxpayers). Which drives government costs up (more assistance payments to the "poor") and government revenues down (fewer folks paying taxes, and at lower rates).

I think the final picture will be ugly.

Somebody needs to demand that the CBO do a 20 year projection of costs (to overcome the present shenanigans of taxing for 3 years before providing benefits, thus making the 10 year balance look "good") and then publicize it in a way that allows taxpayers to see what the bill will be to them. An added govt deficit of $10 trillion means nothing to Joe Sixpack, but "added taxes to you of $4K per year plus the cost of your insurance premiums" would grab the needed attention. But that's the problem with our tax system--the complexity makes it difficult for people to know how much they'd have to pay for each buck of spending. Almost like it was designed to do that . . .

 

[ziggy29]

Right. But all we can do now is static analysis, which is unlikely to tell us much. We'll see the story unfold as people, not being dumb, react to the "incentives" in the plan. For example, as Fuego and Ziggy observe, lots of folks will "drop out" of the work force or take active steps to reduce their income in order to qualify for more government subsidies (i.e. money from the declining pool of remaining taxpayers). Which drives government costs up (more assistance payments to the "poor") and government revenues down (fewer folks paying taxes, and at lower rates).

Though I would point to at least *one* silver lining in this cloud -- people voluntarily retiring create job openings for people currently looking for w*rk and collecting unemployment benefits and perhaps other subsidies as well. So at least some of the potential mess might be offset by reduced outlays in unemployment and other public benefits paid to the unemployed, underemployed and low-income households. I don't think that would offset the losses caused by many 40-something and 50-something higher-earning taxpayers suddenly finding retirement feasible and a lot more financially attractive, though.

 

[Texas Proud]

At this point, at the very least I hope those [-]bribes[/-] earmarks to buy votes from reluctant Senators are stripped out of whatever reaches the president's desk. And this time they will only need 50 votes, not 60, in the Senate.

Are you sure The way everyone talks, including the politicians is they still need the 60.... I think they can filibuster it when it comes back...

 

[samclem]

A substantive meeting took place between President Obama and House and Senate leaders. Here's AP's report. Some excerpts:

The White House was put on the defensive Wednesday after President Barack Obama pushed congressional leaders to fast-track health care legislation behind closed doors despite his campaign promises of an open process.

. . .
The decision was made in an Oval Office meeting Tuesday evening with House Speaker Nancy Pelosi and House Majority Leader Steny Hoyer. Senate Majority Leader Harry Reid and his No. 2, Sen. Dick Durbin, D-Ill., joined in by phone.
They agreed that rather than setting up a formal conference committee to resolve differences between health bills passed last year by the House and Senate, the House will work off the Senate's version, amend it and send it back to the Senate for final passage, according to a House leadership aide, speaking on condition of anonymity in order to discuss the private meeting.

I'm fairly sure that AP has their facts wrong, and that the deliberations will be open to the public. The President feels very strongly about this openness, it was a major part of his campaign. During his campaign he explained the importance of open deliberations, covered on C-SPAN, regarding the crafting of the health care legislation. It hasn't happened in the House or Senate, so I assume the president was probably referring to the conference committee process. Anyway, his passion and sincerity come through loud and clear in the videos.

Again from AP:

The House wants to raise income taxes on individuals making more than $500,000 and couples over $1 million. The Senate would slap a new tax on high-cost insurance plans. Although the Obama administration supports the Senate's insurance tax as a cost-saver, labor unions, which contribute heavily to Democratic candidates, oppose it.
. . .
There also could be common ground on a Senate proposal to raise Medicare payroll taxes.
In place of a new government insurance plan House Democrats plan to insist on stronger affordability measures for the middle and lower classes, and they also favor revoking insurers' antitrust exemption. Obama agreed at Tuesday evening's meeting to help strengthen affordability measures beyond what's in the Senate bill, the aide said.

Those "affordability measures" surely refer to transfer payments from some Americans to other Americans. The present Senate and House plans have taxpayers providing subsidies for people with incomes up to 400% of the poverty level ($43,320 for an individual, $88,200 for a family of four in 2009).

It also bears repeating that a lot of those "individuals earning over $500,000" are small business owners who simply file the tax returns for their unincorporated businesses as individual tax returns. Higher taxes will reduce the amount available for employee pay in these small businesses.

 

[ERD50]

.... to overcome the present shenanigans of taxing for 3 years before providing benefits, thus making the 10 year balance look "good"). . .

Just a data point on this - I was a dinner party recently, and as the 'menfolk' gathered to solve the world's problems (sans cigars & brandy these days), I brought this up. Of the three other guys, one was fully aware of these shenanigans, the other two were surprised, and seemed a bit upset by it.

But these guys work for a living, they don't have as much time as I do to follow this stuff. But they probably represent the average voter better also.

-ERD50

 

[samclem]

Are you sure The way everyone talks, including the politicians is they still need the 60.... I think they can filibuster it when it comes back...

Yes, they can. A conference report (the bill that will result from House/Senate negotiations) can be fillibustered once it returns to the Senate. At that point, it would require 60 votes to invoke cloture and end the fillibuster. So, 60 votes still needed (as far as I know).

 

[ERD50]

This was apparently more transparency than they could handle. I had it, but when I came back and hit refresh:

http://www.speaker.gov/pdf/HScomparison.pdf

Site Error

An error was encountered while publishing this resource.

Resource not found

Sorry, the requested resource does not exist.

Check the URL and try again.

Resource: http://www.speaker.gov/pdf/HScomparison.pdf

I did a google search, does not seem that it was just moved - it's gone!

-ERD50

 

[Gone4Good]

Suffice it to say that retiring early in 2013 with no debt and a sustainable ~$40,000ish household income just got a lot more attractive if this passes. That's enough to live on with no debt, a paid off house and very highly subsidized health care, and any dollar I make from w*rk after that would effectively leave less than 50 cents in my pocket.

Strange how on an early retirement forum where w*rk is considered a 4 letter word this isn't seen as an unequivocally good thing.

 

[ziggy29]

Strange how on an early retirement forum where w*rk is considered a 4 letter word this isn't seen as an unequivocally good thing.

Because I think it's unsustainable and, if enough people catch on to it, I think it could be economically ruinous. Some things are more important than our own self-interest.

I want to retire early, but only if both my own finances and the nation's finances are set up to be long-term sustainable. And I'm not willing to make the generations after me a step removed from being indentured servants for my benefit.

 

[samclem]

Just a data point on this - I was a dinner party recently, and as the 'menfolk' gathered to solve the world's problems (sans cigars & brandy these days), I brought this up. Of the three other guys, one was fully aware of these shenanigans, the other two were surprised, and seemed a bit upset by it.

I had a similar discussion with my FIL over the holidays. He had found out about this only very recently, and was really disgusted by it.

There's just so much "stuff" going on right now, such an artificial air of "too urgent to allow full deliberation and discussion, and so much opaqueness and obfuscation that I think it is just not practical for folks to be aware of the highjinks on every front.

 

[dgoldenz]

How come nobody ever talks about the wonderful results of states that have already implemented "reform"? I'm looking at you Massachusetts, New York, New Jersey, Maine, New Hampshire, Washington, Kentucky (already repealed). What do all of these states have in common? I'll give you one guess.

 

[Gone4Good]

How come nobody ever talks about the wonderful results of states that have already implemented "reform"? I'm looking at you Massachusetts, New York, New Jersey, Maine, New Hampshire, Washington, Kentucky (already repealed). What do all of these states have in common? I'll give you one guess.

Insurance that can't be denied if you're sick?

Insurance that can't be dropped if you become sick?

Am I close?



You might reconsider the value of "low cost" insurance in other states against the risk of having that insurance "rescinded" once you file a large claim. Often times you get what you pay for.

 

[samclem]

How come nobody ever talks about the wonderful results of states that have already implemented "reform"? I'm looking at you Massachusetts, New York, New Jersey, Maine, New Hampshire, Washington, Kentucky (already repealed).

There are lessons to be learned from the state experiments, but I agree with those who caution that in many ways they aren't applicable to a national system.
A few examples:
-- If a state institutes a big taxpayer-funded medical giveaway program, businesses will emigrate and sick people will immigrate. There are very low barriers to interstate movement for people or businesses. While the same thing will happen on a national level, the scale will likely be smaller (though I think some businesses will relocate).
-- Some of the cost savings from a national system were supposed to come from standardization and economies of scale. These are harder or to achieve at a state level.
-- Any state system would be an "add-on" to the existing (partially) federally-funded Medicaid and Medicare systems. They have to abide by the arcane rules of those systems. Many hoped a federal system would better coordinate the care provided through various funding sources. States will always be dragged around/responding to the federal 900 lb gorilla's movements.

Yes, the big problems in the state reform efforts should be a flashing warning sign, but we'll have to be careful in taking lessons from them.

 

[Gone4Good]

Peggy Noonan, who is always enjoyable to read and usually very thoughtful, had this fairly unthoughtful thing to say about reform . . . .

The public in 2009 would have been happy to see a simple bill that mandated insurance companies offer coverage without respect to previous medical conditions. The administration could have had that—and the victory of it—last winter.

Instead, they were greedy for glory.

So if you were to pass Noonan's "simple bill that mandated insurance coverage without respect to previous medical conditions." You'd also have to mandate that individuals buy insurance to avoid adverse selection problems. And if you have an individual mandate then you have to either exempt people who can't afford insurance from the mandate or give them subsidies.

Which kind of sounds like the bill we got.

 

[ziggy29]

So if you were to pass Noonan's "simple bill that mandated insurance coverage without respect to previous medical conditions." You'd also have to mandate that individuals buy insurance to avoid adverse selection problems. And if you have an individual mandate then you have to either exempt people who can't afford insurance from the mandate or give them subsidies.

Which kind of sounds like the bill we got.

To me the funding mechanisms are the worst problem because of its disproportionate impact on "effective" middle class tax brackets. The phaseout of the subsidy occurs entirely within the solidly middle class brackets and then goes away. So people needing to buy their own health insurance on a middle class income take the brunt of reform.

As a result, every extra dollar a $60K household earns can effectively have its take-home equivalent pay reduced a lot more than someone earning $200K because the former is losing somewhere in the neighborhood of 15-18 cents on the dollar in the form of reduced subsidy to buy health insurance.

Remember the old income tax "bubble" right after the 1986 Tax Reform Act when the tax brackets went 15-28-31-28, with the 31% bracket being a phaseout of the 15% bracket until it was all gone? That's similar to the middle class "tax rate bubble" here, only this one is gargantuan compared to the upper-middle class tax bracket bubble that occurred after '86 -- and hits at considerably lower inflation-adjusted income levels.

 

[dgoldenz]

Insurance that can't be denied if you're sick?

Insurance that can't be dropped if you become sick?

Am I close?


You might reconsider the value of "low cost" insurance in other states against the risk of having that insurance "rescinded" once you file a large claim. Often times you get what you pay for.

Some plans in New Jersey are upwards of $14,000 per month. That's not a typo. The absolute least expensive plan with the lowest coverage for someone under 25 years old is about $300 per month. How many people do you know that are 23 years old who can afford $3600/year for health insurance? Two of my friends just moved from Virginia to New York - they're both 24-25 years old and were paying $140 per month for a high deductible plan here in VA. In NY, the least expensive plan they could get was over $800 per month, and most were $1100-1400 per month. The average plan for a husband/wife in many of these states exceeds $1000 per month already - where will that be in 5 years?

Do you know what the percentage of rescinded policies is for states that underwriter coverage? Slim to none, and 98% of the time there is a good, valid reason for it. Many people have selective memory when filling out insurance applications, whether it be for health, life, disability, etc.

 

[Gone4Good]

Because I think it's unsustainable . . . and I think it could be economically ruinous.

As is the status quo.

Although it doesn't get any press, this is the first bill that ever tries to do something about the cost of health care. According to David Brooks . . .

The third reason to support the bill is that the authors have thrown in a million little ideas in an effort to reduce health care inflation. . . . If you’ve ever heard about it, it’s in there — improved insurance exchanges, payment innovations, an independent commission to cap Medicare payment rates, an innovation center, comparative effectiveness research. There’s at least a pilot program for every promising idea.

He ultimately comes down against the bill. But it seems his complaint is that the current bill doesn't completely blow up the existing system and start over, which, although perhaps desireable, isn't exactly realistic.

My view is that this is the start of a process and a step in the right direction. It solves one problem (that our existing system attempts to control costs by kicking out sick people) and highlights another (how to pay for health care over the long-term). But this second problem isn't new. We currently have a system of massively subsidized and cost shifted insurance. It is really not much more so under the new bill. Only under the existing system the cost is mostly invisible (lower wages). Now it will be a budget item, and one that will need to be addressed directly.

Probably the best of a bad situation.

 

[ziggy29]

My view is that this is the start of a process and a step in the right direction. It solves one problem (that our existing system attempts to control costs by kicking out sick people) and highlights another (how to pay for health care over the long-term).

That's fair. But it seems to ignore one thing: as I see it, the biggest problem with the health insurance mess, bar none, is the runaway rate of health care inflation. This bill attempts to deal with the universal access issue -- which is important -- and how to pay for it -- also important (even if I have strong feelings that it's a terrible funding mechanism).

But it does next to nothing to make changes to the system that will stop double-digit inflation in health care. THAT, to me, is the 800-pound gorilla in the room; solve it and ALL the other problems become much more solvable. Ignore it and no matter what you do, in another couple of years you have another crisis. Health care reform is an intractable (if not impossible) problem to solve without getting costs under control.

We should address the health care inflation problem first, or at least concurrently. That is the problem which has made all the others so much worse.

 

[Gone4Good]

To me the funding mechanisms are the worst problem because of its disproportionate impact on "effective" middle class tax brackets.

The options to fix this are:

1) No subsidies
2) Subsides that phase out above the middle class
3) Single payer insurance

Of the three, the third option is actually the best but the one you probably like least.