It passes, What Now?

[Rustic23]

First of all let's try and keep this non political. Second, I know the bill will undergo some changes, but who know what or how long.

So here is the question:

Considering the bill as passed, what effect does it have on retiree health care? At least two categories come into mind, a) before medicare and b) after medicare.

What does the bill call for? What does it provide? Are there increased cost? Will Medicare recipients have to get a 'Primary Care Phys.' if so when does that start? What is the effect on Medicare Advantage i.e. does it take separate legislation to stop funding or are the details in this bill?

I am sure there are other things I have not thought of, it just seemed like the bill has passed, now what does it mean to those of us are here. While economic assessments may be worthwhile, predicting bond rates, or future inflation may be thought provoking, but I would like to see a discussion on the health aspects.

Rich, it would be nice to see your opinion as to what it might mean to the average patient or doctor.

Moderators, if this goes political, feel free to delete post or the whole thread, but here's hoping it does not.

 

[plex]

As best I can tell, the broadest summary for pre and post medicare changes are these:

Pre-medicare: Subsidies/caps on costs for those making up to 400% of the what is defined as the poverty line. Those in-between 400% and making $200K have no changes, and those making $200K+ are subject to a 3.8% increase in taxes on dividend/gains (but this is limited in a number of ways to what this applies too). The subsidies (at least by my estimations), will cost something like $250 Billion/year, and then will increase in cost at the rate at which health care costs are increased, because the amount paid by persons under these subsidies is capped (so massive increases in what these subsidies will cost will likely occur).

Post-medicare: Something between 250B-500B in cuts occurred for Medicare. Medicare will cover less, and pay out even less than the market rate than it did before. Most likely, it will become a basic level of care, after which people will need to pay substantially more to get quality/elective care.


A great calculator for understanding the subsidies and caps:

Health Reform Subsidy Calculator -- Premium Assistance for Coverage in Exchanges/Gateways

As an example:

Since I live on about $9-9.5K/year right now as a single, according to this, I would be within the 85-90% poverty level range (if I was in the sort of situation where I was pulling income to meet my cost of living). That would put me well within Medicaid territory according the calculator, not sure how I feel about that. Health insurance was quite cheap for those 30 and under before this subsidy system took effect (500/year or so), so certainly not a big change for someone in similar circumstances to mine in the future.

I tested out another run as well, to see what I would be paying in a FIRE type situation. From 40-64, as a single, if I lived on $20k/year (which is fairly comfortable) with a paid of house, it says that my insurance costs would be capped at 1.1K/year, which is about $4k less than I would expect to pay under the non-subsidy system.

These subsidies are going to be pretty expensive to maintain, that is a lot of money for the government to be paying out each year for a person's entire life. The median household income is 45K (http://en.wikipedia.org/wiki/Househo..._United_States), so most people would be getting pretty hefty subsidies. My example with a 20k single person's subsidy overlaps pretty well with the median household would get as a subsidy, since the median household contains about three people, instead of one.

Living in a box under a bridge just got very inexpensive.

 

[samclem]

For those of us covered by some type of employer-sponsored medical insurance, it looks like our kids can/will now be covered under those policies until they are 26. That's a major benefit for me.

In general, as reimbursement rates for Medicare go down (if they do--that's what budget projections called for), we can expect to see waiting lists get longer and the quality of care will decline. I'm not sure how much a supplement will help--it might depend on whether care providers will be allowed to accept Medicare reimbursement as partial payment, with additional payment from the recipient or his private insurer. I don't believe that provision is in the present bill, but it might morph into that as a means to keep a lid on Medicare costs.

And, doing everything possible to lower your income (per Rewahoo's "live well but get your annual income down" plan) will pay off big time by allowing folks to qualify for bigger health insurance subsidies and other wealth redistribution ("Making Work Pay" credit, etc). At least until they start means testing.

I'm also re-concerned about inflation. There are only three ways to pay off the huge bill we'll have due in the future:
-- Cut government spending
-- Raise government revenues
-- Inflate the currency and pay off the debt with cheaper dollars. In the past, this has often been the choice that the government has made.

 

[bbbamI]

Yeah...I'm wondering what it will mean to us. We have retiree benefits through Megacorp. I wonder how long it will be before we get a letter that says..."Due to the recent changes in healthcare....."

Hmmm...I think I'm gonna go sip a cold one...

 

[plex]

Subsidy and all caps go away after an income of $43,320 for a single, and an income of $88,200 for a family of four. Once you go just $1 over these amounts in income, your premiums go up drastically (somewhere in the $1K-4K/year range).

 

[Rustic23]

Perhaps more concierge medicine? My SL, who is presently on Medicare, was told by her doctor that he was converting his practice to such, and a $2,000 a year fee would now be due. She is now looking for another doctor.

 

[walkinwood]

I have some questions
Is "income" for the subsidies Adjusted Gross Income? Or is it Taxable income?
What about a couple with no kids? Are they treated as two single adults for the subsidies/premiums?
And if so, what happens to "income" Is it halved for each person?
Edit: I may have found an answer to the married with no children question: http://tinyurl.com/ydtxgxj
Thank you.

 

[Janet H]

..... Moderators, if this goes political, feel free to delete post or the whole thread, but here's hoping it does not.

Your somewhat shell-shocked mods are fervently hoping it stays non-partisan AND FIRE related. Heath care related threads are prone to speeding off the tracks and will be closed or removed if they stray too far from our CR's.

 

[ERD50]

For those of us covered by some type of employer-sponsored medical insurance, it looks like our kids can/will now be covered under those policies until they are 26. That's a major benefit for me.

That aspect could work in my favor also. What is unknown to me at this time, (and maybe un-knowable) is whether this is an overall benefit. A few influences I could thing of:

1) In order to provide this extra coverage, my ins co certainly needs to raise rates (all rate increases fall 100% on the retiree in the plan I'm in). Will they raise it only for those affected? How much? If they raise it for all family policies (in my plan, family means more than one), will all the years I pay extra make this a 'non-benefit', overall.

2) When #1 kid fell into this group - I got a high deductible policy for him. ~ $60/month, and he didn't ever need it (and he now has other coverage). Will these policies dry up? It might be cheaper than the higher rates on my main policy.

3) Will companies (maybe those under 50 employees?, or those who determine the fines are cheaper than the coverage?) just not offer ins for those under 26? Go talk to Mom & Dad, we will cover you (or fire you) when you turn 27?

I have a feeling we might need a separate thread for each category of issues. Like the way taxes get split between IRA, conversions, RMD, Cap Gains, etc....

I appreciate that Rustic23 started the thread - "what do we do now" is separate from "do we like/love/hate it and what should they have done". I've learned a lot from the tax and SS and other threads, hope to learn from this one.

-ERD50

 

[FUEGO]

I'm very interested in this topic as well. Though still at least 7 years from FIRE, the subsidies will be implemented soon before we are FIRE ready. I hope this thread remains as apolitical as possible, since this new law could potentially be a game changer (a paradigm shift) for USA based FIREs and young dreamers.

From the calculator Plex just posted, it looks like our family of 4 who will probably have income in the 200-300% of poverty level during ER will be paying something like $3000-6000 a year for health insurance. This is 50-75% less than the $12,000 average per year that I thought necessary to cover health insurance premiums under the pre Obamacare world of premiums increasing with age and premiums increasing at a rate much faster than CPI.

My initial off the cuff thoughts:
1. Is the $3000-6000 a year a sustainable amount I will have to pay, or as the costs spiral, will the subsidy tables be rejiggered every so often to my detriment
2. Will the subsidy structure change significantly in 2010 or 2012 or 2014 with elections coming up? Not trying to guess what political party will prevail, just thinking ahead that if the party in power switches, what would be the policy ramifications as to amendments to the Obamacare?
3. Ignoring the reality of the costs of Obamacare, this thing is a huge benefit for young ER's concerned about availability of health insurance without excluding pre-existing conditions. And for those in their 50's and 60's particularly, the subsidies mean big bucks vs what they would otherwise pay.

 

[chinaco]

I cannot see how it will benefit DW and I directly. But if our Mega-Corp someday chose to dump the retirement health coverage... then the new healthcare program will be a safety net.

Our indirect benefit is; It reduces our risk of financial ruin due to health problems if we lose Megacorp Health Ins.

 

[FUEGO]

Subsidy and all caps go away after an income of $43,320 for a single, and an income of $88,200 for a family of four. Once you go just $1 over these amounts in income, your premiums go up drastically (somewhere in the $1K-4K/year range).

Based on that calculator you provided, it looks like some people could face a $10,000 increase in premiums for that extra dollar of income. I'm looking at the chart for family of 4 at age 60. The subsidy drops from 10,000 at incomes 400% of poverty level to $0 at 425% of poverty level. Obviously for some people, it may make sense to tell your boss to NOT give you that raise, bonus, promotion, etc. if it factors into your HIGI (health insurance gross income).

On a different note, I hope I see a development of strategies to maximize the gain from whatever system we end up with and minimize the expenses (at the personal level). I'm thinking Roth's may have gotten a little prettier. Assuming Roth withdrawals would not add to HIGI. I believe I read that DSS would be the arbiter of what is HIGI, and hopefully they would base it on some form of IRS/tax related income (AGI, MAGI, etc plus/minus some things).

 

[Gumby]

This might affect the "payoff the mortgage" question. If you need to generate income to make the payments, you risk rising above the threshold income levels, but the imputed rental income from owning free and clear is not recognized.

 

[REWahoo]

This might affect the "payoff the mortgage" question. If you need to generate income to make the payments, you risk rising above the threshold income levels, but the imputed rental income from owning free and clear is not recognized.

Yep. For some this could be a game changer and make carrying a mortgage into retirement a costly tax strategy.

 

[FinanceGeek]

So...let's talk another aspect of how this affects RE.

Namely pre-existing medical conditions. There is a stopgap plan of some sort being put into existence between 6 months after enactment and 2014. But, said plan seems to only be available to those who have a pre-existing medical condition AND have been without insurance for at least six months.

So if someone has a pre-existing condition, and has therefore been holding off ER and remaining employed to obtain mega-corp health coverage, this provision doesn't help right? Such a person would have to terminate coverage and wait for at least 6 months to qualify for this new program?

 

[Bimmerbill]

I plan on looking into what happened in MA when they did a reform a few years ago. I've heard Primary care doc shortages and a three fold increase in premiums as those who previously didn't qualify (sick? pre-existing?) got coverage.

Then I plan on doing a cost benefit to see if I should keep working.

 

[donheff]

Post-medicare: Something between 250B-500B in cuts occurred for Medicare. Medicare will cover less, and pay out even less than the market rate than it did before. Most likely, it will become a basic level of care, after which people will need to pay substantially more to get quality/elective care..

My understanding is different. There are no direct cuts in Medicare as I understand it. Medicare Advantage (which is not Medicare) will gradually have its supplements cut. Currently, insurance companies that offer Medicare Advantage programs as a private alternative to Medicare get a 14% supplement from the taxpayers. Over time the supplement will drop to zero and they will offer what they can competitively offer.

In general, as reimbursement rates for Medicare go down (if they do--that's what budget projections called for), we can expect to see waiting lists get longer and the quality of care will decline. I'm not sure how much a supplement will help--it might depend on whether care providers will be allowed to accept Medicare reimbursement as partial payment, with additional payment from the recipient or his private insurer. I don't believe that provision is in the present bill, but it might morph into that as a means to keep a lid on Medicare costs.

Correct me if I am wrong but there is nothing specific in the Bill that will force this is there? I understood that the COB estimates assumed efficiencies in Medicare from audits of abuse and electronic records but no specific mandated reduction in benefits/reimbursement rates. that is why I assumed the costs will exceed the CBO estimates -- I don't expect those efficiencies to develop to the extent assumed.

 

[samclem]

Correct me if I am wrong but there is nothing specific in the Bill that will force this [Medicare cuts] is there? I understood that the COB estimates assumed efficiencies in Medicare from audits of abuse and electronic records but no specific mandated reduction in benefits/reimbursement rates. that is why I assumed the costs will exceed the CBO estimates -- I don't expect those efficiencies to develop to the extent assumed.

No, there's nothing in the bill (AFAIK) that mandates real cuts in Medicare (other than Medicare Advantage--and until something is fixed, this story varies by state). But the political dynamic is a powerful one--by deliberately leaving out the cost of the annual Medicare "Doc Fix," when asking the CBO to do the projections for the cost of this new entitlement, we winded up with budget numbers that won't pay for the cost of the program as it is today. So, unless Congress votes additional funds, Medicare will be cut. This vote will be problematic, as it might cause some members of the public to believe the CBO cost estimates were less than honest. That would be an unwelcome perception, especially coming just months before the 2010 midterm elections. I think there may be some problems in mustering any bipartisanship to address this particular issue.

Not to veer into the politics of this, but they kinda impinge on the real world in this case . . .

 

[Rich_by_the_Bay]

So...let's talk another aspect of how this affects RE.

So far, this is the best short summary I've seen so far. Key points:

• A big chunk of the millions of American citizens who are currently uninsured will get coverage help in 2014. That's when state Medicaid programs will expand to cover people living between 133 and 400 percent of the federal poverty level.
• Subsidies ...to provide affordable plans on new insurance marketplaces. Individuals and businesses can shop around to buy insurance on these "exchanges."
• requires most Americans to have insurance by 2014 or pay a penalty.
• Starting this year, dependent children could remain on their parents' health insurance plans until they turn 26.
• All existing insurance plans will be barred from imposing lifetime caps on coverage
• insurers can no longer cancel a person's health insurance retroactively for things other than outright fraud.
• Six months after the bill's passage, insurers will no longer be able to refuse children insurance because of illness. By 2014, the same rule will apply to adults.
• people with pre-existing conditions will soon have the chance to enroll in special insurance pools and receive subsidized premiums.
• Senior citizens would get more help paying for drugs.... the so-called doughnut hole in the program's drug plan will get a $250 rebate this year.
• Next year, their cost of brand-name drugs in the coverage gap will go down by 50 percent.
• Preventive care...will be free of copayments or deductibles starting this year.
• insurers will now have to sell policies to all comers at rates based on community averages

This is a complex Act - lots of homework to do. My sense is that for the typical FIRE-type here, you will still be dealing with the same players (insurers and Medicare) and costs would be similar (unless your household earns > $259k), but your coverage will be less vulnerable and with fewer gaps. The long term push toward primary care, community health centers, and options for small business and individuals should allow at least some wannabe REs to pull the trigger since they can now buy health insurance regardless of risk.

 

[oliverdickens]

Does anyone have a feel how this bill will affect retirement plans that are self insured with insurance company providing the admin of said plans?

They talk about having insurance thru your employer vs from the market.

What is the definition of a person who pays over 60% of the premium but get's their insurance as part of former employer retiree plan? Is it insurance provided by employer, even though you are not working for them anymore, or considered same as purchase of insurance from third party?

Second part of the question, in 2014, if you have this aforementioned insurance thru retiree plan, will you be able to get the Federal subsidy
based on the income? In our case below $40,000 per year for two and my projections are having to pay $13000 per year for insurance for the two of us, no kids, in 2014.

Any idea on how to find these answers as most everything is based on family of 4, individuals and no much on RE couples.

Last, Will the no cap limit also apply to self insured plans? If so, seems premiums will go up at even higher rates. How about the preventative care mandate. Think I understand that this will be a requirement for all current plans, that is relatively immediate and not waiting until 2014.

Thanks

 

[Zathras]

A big change for us is that we will require less of a saftey cushion in the event of being dropped by our insurance company. While we will always keep an 'emergency fund'. We won't need a seperate 'emergency medical fund'. As such we can invest this emergency medical fund.
This is all 'pre medicare' as we have a number of years before we get there. So we were feeling especially vulnerable. Now, not nearly as much.

 

[FinanceGeek]

So far, this is the best short summary I've seen so far.

Thanks Rich_in_Tampa, but the summary didn't address my question. Reading it straight from Subtitle B, Section 1101, clause d2 (attention all humans: its on page 48) of http://docs.house.gov/rules/hr4872/111_hr3590_engrossed.pdf seems to say that only those who have been without coverage for 6 months are eligible for inclusion in this pre-existing pool. Since the provision takes effect 3 months from enactment, I'd have to guess that means someone who has a pre-existing condition and no insurance from approximately "3 months before tomorrow" onwards.

So it seems that those who are forced to keep working to obtain group coverage without pre-existing exclusions are outta luck until 1/1/2014 unless they want to "go naked" for 6 months. Or perhaps they're good 18/36 months before 1/1/2014 assuming their group coverage gives them COBRA eligibility.

Unless the next Senate reconciliation bill changes all this.

 

[Rustic23]

Preventive care...will be free of copayments or deductibles starting this year.

Rich,
Is an annual physical considered 'Preventive Care'. I believe that Medicare does not cover an annual physical now, will that change? Most likely too soon to ask that question.

 

[ziggy29]

I think the current subsidy model puts a premium on debt reduction and paying off the house as it allows one to retire sooner and on much less income (and receive a larger subsidy). An unintended consequence, I assume, or one they don't think enough people will trigger to warrant extra asset-based rules, but still, the more production is taxed and the more new goodies are means-tested, the more it pays to get all your debt out the way so you can get off the hamster wheel and get by on a lot less income.

In short, barring more changes it's a great time to be seeking FIRE when you're completely debt-free and live simply and frugally. As long as we don't have too many people do that to maintain solvency.

 

[DeborahB]

I'm retiring this summer at 62. I can get COBRA for 18 months but then there are those other 17 - 18 months until I am 65. I have preexisting conditions. Have no idea how this will affect me. It should be interesting.

The MO high risk pool is already in existence - the $5K deductible plan is a little over $800 a month and covers pretty much nothing - but I think it limits your out of pocket (not counting premiums? - not sure) to $10K for the year (including the deductible). That keeps me from being bankrupt if I have a medical catastrophe.

Does anyone know if there's a provision going in soon-ish that says they can't exclude for pre-ex conditions if you've had continuous coverage? I thought I saw it, but now I'm not sure.

Also - oh guess what, mega-hospital where I work self-insures. But I can't see that changing.

Hope medicare continues to be available at 65 (or before) - otherwise I'm in trouble. I'm budgeting around $19K a year for medical for that last 18 months. Better than losing the house....