Smart Bombs: Health subsidies aren’t new
Last week, I wrote that Medicare beneficiaries pay roughly $1 dollar in tax for every $3 in benefits. This is a generalized ratio based on a report by the Urban Institute. Results vary per person, depending on the amount of payroll tax paid and the level of health care services used. Some readers wondered how this was calculated. As I wrote on May 29, 2011:
“To counter the point that taxes paid could’ve been saved and earned interest, the think tank added 2 percent to the total above inflation. On the benefits side, average life spans and payouts were used. All amounts are in 2010 dollars.”
I also noted two examples from the Urban Institute report: A dual-income couple each earning an average wage ($43,100) and retiring in 2010 would pay lifetime Medicare taxes of $109,000 and get $343,000 in benefits. A dual-income couple with one spouse earning $68,900 and the other $43,100 would pay $140,000 and get $343,000 in benefits.
Thought that you had prepaid for Medicare? Only partially. As I wrote last December:
“When Medicare was passed in 1965, a payroll tax was grafted onto the existing one for Social Security to pay for Part A (hospital care, nursing care). This is what people think of when they say they’ve prepaid their Medicare. However, Part B (doctor visits, lab tests, surgeries, etc.), Part C (Medicare Advantage) and Part D (prescription drugs) are substantially subsidized with general revenues.”
Last April, the New York Times reported: “Late in 2012, for a sixth straight year, Medicare trustees issued a warning required by law whenever more than 45 percent of the health program’s costs must be covered by general revenues from all taxpayers.”
To sum up: The amount of spending on retirees has nothing to do with how much they paid in taxes. The only qualification is to turn 65 years old. So most folks on Medicare are subsidized, and I think that’s fine. We all get old (knock on wood) sooner or later.
What isn’t fine is for Medicare recipients to complain about other people’s subsidies. This also goes for people in employer-provided health care plans, which are also subsidized. On what grounds do these two categories of folks feel they’re entitled to their government assistance, while those in the individual market are not?
I’ve heard them say, “We can’t afford it.” I’ve not heard them volunteer for cuts.
heads should roll. The latest blow for the Affordable Care Act came Wednesday when the Obama administration announced that enrollment for small businesses must be delayed until late next year. That’s on top of the one year delay for large employers and the missed deadline for having a workable website for the individual market.
Have to wonder how bad this has to get before President Barack Obama fires somebody. Shortly after the Internal Revenue Service scandal, which still hasn’t turned into Watergate, Obama fired the acting IRS commissioner. But this botched rollout is far more consequential, and Health and Human Services Secretary Kathleen Sebelius remains employed. Her current task is to lower expectations.
Finally, a challenge she can meet.
INSURANCE 101. Shoot me now. I’m about to defend health care insurers.
The carping about Premera Blue Cross excluding the Providence health care group is the latest symptom of the U.S. health care system’s long-running malady: Americans want it all, no matter the cost. Compiling provider networks is the way insurers compete to lower costs.
This is typical with group coverage. In fact, several group insurance features are being treated as news now that they apply to Obamacare. Might have to switch doctors; might lose your plan; the young and the healthy subsidize the rest. All are commonplace in the workplace.
If we’re going to keep the insurance model (not my choice), we have to abide by insurance principles. Otherwise, it won’t pencil out.
Associate Editor Gary Crooks can be reached at firstname.lastname@example.org or (509) 459-5026. Follow him on Twitter @GaryCrooks.