Monday, October 28, 2013

LA Times on Obamacare: Middle-Class is not Middle-Income

Today MSNBC aired a segment saying that according the the LA Times, because of Obamacare, middle-class Americans will see their healthcare premiums go up. The LA Times reported:

"Middle-class consumers [in California] are staring at hefty increases on their insurance bills as the overhaul remakes the healthcare market. Their rates are rising in large part to help offset the higher costs of covering sicker [and] poorer people who have been shut out of the system for years."

The LA Times cites an aerospace engineer, a real estate agent and a couple earning $80,000 a year who will see their healthcare insurance rates rise under Obamacare --- but 50% of all wage earners take home $27,000 or LESS a year --- that is a huge difference when comparing a "middle income" to a "middle-class" income.

One husband and wife told the LA Times that they "don't qualify for federal premium subsidies because they earn too much money, about $80,000 a year combined." Their healthcare plan was $98 a month for an individual plan through Health Net Inc, but does not conform with the new federal rules, which requires more generous levels of coverage. The couple says the cheapest plan they found will cost them $238 a month (Does that sound high for a married couple?)

The wife tells the LA Times, "It doesn't seem right to make the middle-class pay so much more in order to give health insurance to everybody else" --- meaning Mitt Romney's 47%; but multi-billionaires are also helping to pay by having a 3.8% surtax imposed on their capital gains income to help fund the expansion of Medicaid. That's why the Republicans (via their wealthy campaign donors) have been so adamantly opposed to Obamacare --- to protect the rich (They could care less about the "middle-class" people cited in the LA Times.)

On balance, many (if not the vast majority of Americans) will benefit from the healthcare expansion. They are guaranteed coverage regardless of their medical history. And lower-income families will gain access to comprehensive coverage at little or no cost. The federal government picks up much of the tab through an expansion of Medicaid and subsidies to people earning up to four times the federal poverty level. That's up to $46,000 for an individual or $94,000 for a family of four.

It's important to note that "middle-income" earners are not the same as "middle-class" earners. The "median" income for wage earners in the U.S. $26,965 a year --- meaning half earn less and half earn more. (Using an "average" income number, which is $41,211 a year, greatly skews the real picture by including those earning millions of dollars every year.)

There are about 99 million Americans out of 151 million wage earners in the U.S. labor force (65.5% of all wage earners) who earn less than the couple mentioned in the LA Times --- assuming each spouse earned $40,000 a year to earn a total of $80,000 a year. But still, even this couple might not yet have exceeded the limit for any government subsidy.

Now add to those 99 million low-income working-aged adults and their children, another 19 million unemployed Americans (and their children) who have NO INCOME AT ALL. They may have either already exhausted all available jobless benefits, are too young to retire and/or were denied Social Security disability, but who could be existing on TANF and food stamps --- but who also may already qualify for Medicaid because they have children. Now others would also qualify for Medicaid, those without children after January 2014 (so long as they are not "pending Medicare" under any unresolved disability claim).

In California, Blue Shield sent termination letters to 119,000 customers last month whose plans don't meet the new federal requirements --- and about 79,000 of those will experience a rate increase from switching to a new health plan. And HMO giant Kaiser Permanente is canceling coverage for about 160,000 people, and offering to automatically enroll them in the most comparable health plan available. But...16 million other Californians who get health insurance through their employers won't be affected.

Deborah Cavallaro, a real estate agent that the LA Times cited, was angry: "All we've been hearing the last three years is if you like your policy you can keep it. I'm infuriated because I was lied to." She said a comparable Bronze plan would cost her 65% more and doubts that she'll qualify for much in premium subsidies.

Most Americans are required to have health coverage starting next year or pay a fine of $95 per adult or 1% of their income, whichever is greater --- and the fines could increase over time.

Individual policies must also cover a higher percentage of overall medical costs and include 10 "essential health benefits," such as prescription drugs and mental health services.

The federal law also adjusts how rates are set by age, a change that gives older consumers a break and shifts more costs to younger people (but also depending on the income). People in their 20s just starting their careers may earn so little they qualify for subsidies. But that might not be the case for consumers who are slightly older and earning more --- such as an aerospace engineer or a real estate agent. And the rich will also keep paying their fair share via the surtax on capital gains income.

But rates would be going up anyway, regardless of changes from the healthcare expansion. The average individual premium will climb 9% next year because of rising healthcare costs and increases in medical provider reimbursement. Some consumer groups have questioned whether insurers are inflating their rates under the guise of the healthcare law changes. (With so many people being added to the healthcare system, why wouldn't that drive prices down?)

Javier Lopez, 38 and a self-employed aerospace engineer in Huntington Beach, says his premiums may rise nearly 20% next year for a new policy because his current plan is being phased out. Lopez says he's willing to absorb that one-year jump if it means the government can rein in future rate hikes. "I'm hoping with this reform," Lopez said, "we won't see big increases year after year."

That's why we need to hire more government workers to investigate fraud in the healthcare industry. And let's pay them on a commission basis for all the waste, fraud and abuse that they find in Medicaid and Medicare.

In the traditional sense, whereas the father used to go to work while the mother stayed home to raise their children, the man (or breadwinner), now needs to earn at least $50,000 a year to be considered "middle-class" --- at least, in the true sense of the word --- which is about what the "median household income" is today. Because now, the mother has to work. That's why now we have so many dual-income households.

Before the middle-class was squeezed by stagnant (and/or nominally) declining wages and rising prices over the last 40 years, the mother could "opt" to bring home a second income to get the family ahead (such as saving for retirement or their children's college tuitions). Nowadays, the mother works more out of necessity rather than by choice...such as in a career choice. People like Ann Romney had the choice to be a stay-at-home mom.

Single men or women with children (divorced, widowed and others), as single earners, have the additional expense of childcare while working. If 50% of the labor force is only earning $27,000 a year or less, that in itself is tragic as people no longer have the resources needed for even the most basic necessities, never mind getting ahead, saving for retirement, or their children's education (or even taking a decent vacation).

Now factor in the very high cost of healthcare. Something needed to be done.

1 comment:

  1. This morning I saw Chuck Todd on MSNBC who ran with this LA Times story and had that real estate agent's interview on his show.