Maybe Kevin Costner should build the new health exchanges.
Would you pay $52 per month for health insurance coverage?
Palm Beach County officials thought people would. They were wrong.
The county established its program in 2006 to cover people who did not qualify for Medicaid despite low incomes. With an estimated 250,000 uninsured people out of a population of 1.3 million, county officials were surprised that so few eligible uninsured people (individuals with incomes below $34,470 or three times the federal poverty guidelines) snapped up their generous offer. By the end of the first year, fewer than 500 had enrolled. In the program’s seventh year, that number has grown to 11,000, still just a fraction of those eligible.
What went wrong?
According to those involved with the program, the problem wasn’t price. Focus group research convinced officials that low income people would gladly shell out $52 a month for coverage. Seven years into the experiment, they still think they got the price right. So why have so few people signed up?
“A lot of people who are uninsured and can afford it, don’t buy it because they aren’t sick,” Paul Gionfriddo, a consultant who worked to enroll people in the program, told the Tampa Tribune.
In Washington health policy circles, Gionfriddo would be considered a heretic. One of the underlying principles of the President’s “Patient Protection and Affordable Care Act” (PPACA) is that if insurance is made more affordable, people will buy it. They point to Massachusetts, which has achieved virtually universal coverage, as a model.
But that model may not work so well elsewhere. It hasn’t in Palm Beach or in Jacksonville, Florida, which runs a similarly unsuccessful program for small businesses with low-income workers.
Washington policymakers expect that the public response will look more like Massachusetts than Florida. One reason, they say, is that people who buy coverage will receive subsidies that will make care more affordable, while people who don’t buy coverage will have to pay penalties. The subsidies essentially cap premiums that individuals will pay at a percentage of their pre-tax income. The table below shows, for example, that an individual who earns $28,725 will pay no more than $2,312.36 annually for coverage, representing 8.05 percent of her income. Someone earning $40,215 would pay no more than $3,820 for that same coverage, or 9.5 percent of wages. But as this chart shows, not only will the subsidized premiums be much higher than Palm Beach County’s $52 per month, but those premiums will be 8 or 9 times as large as potential penalties.
|
Subsidized Premiums and Penalties Under Health Care Law |
||
| Individual Income |
Annual Premiums |
Penalties |
| $28,725 (250% FPL) |
$2312.36 |
$287.25 |
| $34,470 (300% FPL) |
$3274.65 |
$344.70 |
| $40,215 (350% FPL) |
$3820.43 |
$402.15 |
| Family of 4 Income |
|
|
| $58,875 (250% FPL) |
$4739.44 |
$588.75 |
| $70,650 (300% FPL) |
$6711.75 |
$706.50 |
| $82,425 (350% FPL) |
$7830.38 |
$824.25 |
The IRS will have a tough time assessing those penalties. Unlike with other taxes, the IRS can’t use its usual tools to enforce the new levy on the uninsured. They can’t garnish their wages, for example, or put them in jail. If you’re uninsured and the government catches you, the most IRS can do is withhold the penalty from your income tax refund.
The health care law also eliminates much of the risk of remaining uninsured. Consider a 27-year-old who decides not to buy insurance for a few years, pays the penalty (or not), then signs up at age 33 after hurting her knee while playing volleyball. She can get coverage at the subsidized rate during the annual open season and her insurance will pay for treatment of her pre-existing knee injury. Once she recovers, she can drop her insurance, stop paying her premiums and wait to re-enroll when she needs medical care again.
Perhaps social pressures can bend the young and healthy to the government’s will. Not buying health insurance will be portrayed as selfish, irresponsible and boorish behavior, akin to opposing same-sex marriage or voting Republican. That’s one tool that Palm Beach County officials didn’t have. The government will drive that message through television, text messages and social media. The President’s mastery of Twitter and Facebook and his capacity to deploy cultural icons to press his message proved enormously successful in the recent election. But it’s one thing to convince a young person to vote for you or re-tweet your latest meme on gun control and quite another to get him to part with 9.5 percent of his pre-tax income for something he doesn’t want or need.
Millions of older and sicker people have been shut out of the health insurance market because their medical costs are likely to greatly exceed whatever premiums they pay. They can be expected to flock to health insurance exchanges to buy coverage once they open for business on October 1. In order for the system to work, millions of young and healthy people will have to buy a product they don’t expect to use. If the Palm Beach experience is any indication, it will take more than subsidized premiums and simplified enrollment to succeed.
As Linda Quick, president of the South Florida Hospital and Health Care Association, put it, “The ‘if you build it, they will come’ philosophy doesn’t work in health care.”
Doug, I’m still confused as to why health care is only discussed in context of “Health Insurance”. I’m not sure when the national dialogue changed from just “going to the Doctor” to “going to the Doctor with Aetna”. It seems like it all began in the late 60’s when my company first offerred me some incrance for 6 bucks a pay check. We all gobbled it up apparently and here we are tofday. Prior to this pay check deal, we had a sore throoat and went to the Doc for a $5.00 shot oir we just rode it out. Some of us had Blue Shield for hospital events.
Tell me what would happen if someone started a movement encouraging all Americans to opt out of insurance on Jamuary 1, 2014. If we all stopped paying premiums, would the price of health care not go down? It would have to. There is no way the cost would be as high as today if we paid ala carte for service as back in the 50’s, American Insurance companies are the largest investors in the world; they are extremely wealthy. Cutting them out of the deal would have to drive prices down. With them out of the picture, health care providers would have to be accountable and survive in the free market like hair dressers and plumbers (well maybe plumbers was a bad example). I’m tired of these outfits knowing all of my business and deciding what treatment I need. They also cause unnecessaty paper woprk and tend to make a loy of mistakes causing refiling claims and cost the MD’s monry tracking all the paper.
Talk to me, Doug.
JD
That’s a great point, Jack. We’ve become accustomed to thinking that health care, unlike other life necessities like food, housing or clothing, should be free (or nearly so) at the point of service. The growth of third party coverage — both private, like employer-sponsored insurance, and public, like Medicare and Medicaid — certainly fostered this expectation. Of course, just because an insured person doesn’t have to pay at the doctor’s office for a preventive exam doesn’t mean that the care was free. He paid a higher health insurance premium because the insurer is prohibited by the government from charging a copay for preventive care. This is all part of the illusion that dominates the health care debate, as you note — the illusion that somehow we’re getting all of this care but not actually paying for it. In reality, we’re paying for health care in all kinds of ways — through lower wages as the health fringe benefit claims a larger share of our compensation; through payroll and income taxes for Medicare and Medicaid; through property, sales and state income taxes for Medicaid and other assistance to the poor; and through higher premiums to make up for the fact that Medicare and Medicaid stint on payments to providers. So we have a big, complicated system that disguises what we’re actually paying. The health reform law renders this system more complicated, more misleading and more costly … but certainly not better. I agree with your approach although, since medical bills can wipe people out financially, I do think people should be able to purchase major medical coverage. It makes sense to self-insure up to a set amount but to purchase insurance to cover big, unforeseeable events.
That’s a great point, Jack. We’ve become accustomed to thinking that health care, unlike other life necessities like food, housing or clothing, should be free (or nearly so) at the point of service. The growth of third party coverage — both private, like employer-sponsored insurance, and public, like Medicare and Medicaid — certainly fostered this expectation. Of course, just because an insured person doesn’t have to pay at the doctor’s office for a preventive exam doesn’t mean that the care was free. He paid a higher health insurance premium because the insurer is prohibited by the government from charging a copay for preventive care. This is all part of the illusion that dominates the health care debate, as you note — the illusion that somehow we’re getting all of this care but not actually paying for it. In reality, we’re paying for health care in all kinds of ways — through lower wages as the health fringe benefit claims a larger share of our compensation; through payroll and income taxes for Medicare and Medicaid; through property, sales and state income taxes for Medicaid and other assistance to the poor; and through higher premiums to make up for the fact that Medicare and Medicaid stint on payments to providers. So we have a big, complicated system that disguises what we’re actually paying. The health reform law renders this system more complicated, more misleading and more costly … but certainly not better. I agree with your approach although, since medical bills can wipe people out financially, I do think people should be able to purchase major medical coverage. It makes sense to self-insure up to a set amount but to purchase insurance to cover big, unforeseeable events.