Obamacare And Its Marks

Conservative news sources, led by Fox News, are all over the falsifying of the President's big lie ("If you like your plan, you can keep your plan, period.") with the opening of the Obamacare exchanges.  So now the tune has changed.  The new party line from the President in the past week has been, the risk of cancellation of policies only applies to "about 5%" of the population in the individual market, whereas "the majority of folks will end up being better off" under Obamacare. 

I can't seem to find any calculation of how that "majority" thing has been determined.    But it's at least as dishonest as the "if you like your plan you can keep your plan" thing.  At very best they have a model projecting that effective premiums for healthcare will go down for 50+% of the population, but that's only one piece of whether a given individual will be "better off."   To figure that out honestly, you need to take into account that the subsidies in the system must be paid for either in taxes or inflation, and attribute those costs to individuals over time.  There is no way that the President and his crew have even tried to do that.    Their way is to treat government subsidies as free money that doesn't have any cost to anybody.  Same with the loss of freedom from the various mandates.   

So you are in your mid-20s and healthy, and with few assets.  Your income from your starter job or freelancing this year is only $25,000.  You're entitled to a big subsidy.   According to a chart of New York healthcare exchange prices here, it looks like you can get a plan for close to free, or perhaps $100 a month.  Are you "better off" with Obamacare?  Counting only the premiums for your healthcare, the answer is, maybe this year, and maybe for a few years, if you're planning to keep your income at that $25,000 for the foreseeable future.  But if you're like almost everybody your age, you are not planning to earn the $25,000 per year for very long.  As soon as you start moving up, you are on the hook for rapidly escalating premiums (the same chart shows monthly premiums of over  $300 by the time your income reaches $40,000) plus the taxes to pay the subsidies to the people who keep their incomes low.  Plus, of course, Medicare and Social Security taxes to support your parents.  And don't forget your student loans!  They are trying to convince you that you are "better off", but yes, you are the mark, the sucker. 

And by the way, did I mention that the effect of the subsidies is to make your escalating healthcare premiums function as a gigantic additional marginal tax as your income rises from about $25,000 to $40,000?  While your income goes up by that $15,000, existing taxes are going to take about $3000 of that, leaving maybe $12,000, and then as the subsidies phase out your healthcare premium is going to go from $100 to $300 per month, an increase of $2400 per year, which is a full 20% of what otherwise would have been your increase in take-home pay.  You are 27 years old, earning a lower-middle class income, and facing an effective marginal tax rate of 50%.  HAHAHAHAHAHAHAHA.       

A few days ago I predicted that people in the private economy would quickly get to work to find ways around the Obamacare debacle.  I came up with a few ways they might do that, from family re-definition to buying black market insurance from Canada.  But of course, the big idea is something I didn't think of, yet spotted on a tv commercial a couple of days ago.  This idea is prepaid care from a large medical group.   It's not "insurance" from an "insurance company," so it looks like Obamacare does not apply.  (In fact, the pre-paid care model is how the Blue Cross plans got started back in the 1920s.)  A group in this area called AMG is now offering unlimited doctor visits for a flat pre-paid fee of $79 per month, below even the cheapest Obamacare subsidized plans for people making as little as about $30,000.   OK there's no pediatric dental coverage, and no maternity care for young men.   More importantly, it doesn't cover hospitals, but your risk of needing hospital care is small and if you have the big accident they have to treat you and you can just not pay the bill.  Not perfect, but clearly a far better solution for many many young people than the Obamacare ripoff.