The Devil in the Details, Part II

Who can afford health insurance after reform?

Every lobbyist swarming Capitol Hill these days knows that, when it comes to legislation, the devil is always lurking in the details, not lounging in the concepts. Yet it is concepts, not details, which are drifting down to the public—who will be in for a surprise when they realize that reform is not what they think it is. How these details are hashed out or slipped into a bill at the eleventh hour is crucial to the success or failure of reform. This is the second of series of occasional posts that will look at where the devil lies in key provisions of the health care bill. The entire series is archived here.

One of the great untold stories of health reform has been whether Americans who will soon be required to buy insurance can really come up with the cash to do so—oh dear, that meddlesome “affordability” question, to lapse for a moment into wonk jargon. The crux of any health reform bill is the percentage of income families will be required to spend on coverage, a point drowned out by all the hoopla surrounding the public option. The press has yet to focus on what ordinary people will have to spend.

A table produced by the Center on Budget and Policy Priorities shows some of the financial calculations that should by now have been finding their way into stories produced by the nation’s media. The numbers aren’t pretty. The table shows how much families with different incomes will have to pay for coverage under a proposed bill that combines provisions from the Senate Finance Committee and the Senate HELP (Health, Education, Labor, and Pensions) Committee.

A three-person family with an income at one-and-a-half times the federal poverty level—$27,465—would be required to cough up 4.8 percent of that income, or $1,318, to pay for a policy. Government subsidies would aid with the rest of the cost. A three-person family with an income of $54,930, a bit more than the median income of about $50,000, would pay 10 percent, or $5,493. But if, instead of a merged bill, the one approved by Senate Finance Committee triumphs, the family with the lower income would pay only $1,236; the family with higher-income would pay $6,592, or 12 percent of their income.

Either way, these are hefty amounts for families that don’t have much income to begin with. As blogger Robert Laszewski has noted repeatedly on his blog, Health Care Policy and Marketplace Review, few families with an income of $55,000 have $6,500 or even $5,500 lying around that they can spend on health insurance. If families don’t qualify for hardship exemptions, insurance would compete with money needed for the electric bill, or for gasoline, or for whittling down high-interest credit card balances. “Where will people be if they knew this?” Laszewski asks, arguing that “they need to know that before deciding whether an individual mandate makes sense or not.” So far, the press has not linked the raw numbers to the individual mandate.

But wait! It gets even worse. Fine print buried in the Finance Committee bill threatens more budget stress for already strapped families, especially those with low or moderate incomes. Even if families can afford to spend what Congress decrees, over time they will find themselves paying much more for their coverage—perhaps far more than the 2, 4, 10, or 12 percent that bill drafters have in mind for them right now. Last week, Julie Appleby of Kaiser News Service exposed this little devil lurking in the details. And it’s a doozy. Appleby reported:

The cost of coverage would shift from a percentage of income to a percentage of the premium, no matter how high the premiums go. Because premiums generally rise faster than wages, consumers getting subsidies would pay a larger percentage of their incomes toward premiums over time.

Appleby explained that the first year the legislation takes effect (2013, as of now), people getting subsidized coverage would have to pay between 2 and 12 percent of their incomes for the insurance, depending on how much they earn. The government, of course, would pay the rest of the cost—that’s the carrot to entice people to buy in the first place. Those with lower incomes would pay less; those with higher incomes more. Okay—seems reasonable.

But in the second year and afterward, Appleby reports that the subsidies will be “based on a percentage of the premium that was paid the first year, no matter how far premiums rise.” Because wages don’t go up as fast as premiums, families, particularly those at the lower end of the income ladder, could easily find themselves paying far more for coverage as a percentage of their income than they were led to believe they would pay. And with premiums going up and up, which is the likely scenario, they will struggle and perhaps forgo insurance altogether. It’s possible these families will have to choose between paying the electric bill and satisfying the government mandate to buy health insurance. Is this the 2009 sequel to The Poor Pay More? (Historical note: that was the title of a 1967 book, by David Caplovitz, that detailed the consumer practices of low-income families.)

The point of this sleight-of-hand is to keep the total cost of the government subsidies as low as possible, and shift the burden of the rising cost of medical care—and thus insurance—to the consumer/patient. The best quote in Appleby’s piece came from Karen Pollitz, who directs Georgetown University’s health policy shop:

‘They did this to make subsidies a little cheaper. But it means that if you’re (a low-income policyholder) struggling in the first year, it will get harder and harder…unless we have some massive breakthrough in cost containment and the growth of premiums slows.’

Folks, that’s not likely to happen. As Campaign Desk has reported many times, there is little serious cost containment in the reform bills. This budgeting trick courtesy of the U.S. Senate needs some scrutiny and fast. Assignment editors take note: Why not send a reporter out to see how this devil in the details would treat families in your area—and while you’re at it, explain the games lawmakers are playing with family budgets in an attempt to give a patina of acceptability to the federal government’s budget. Sounds like a great story to me.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.