Health Care (Over)Simplified


Now that the Supreme Court has ruled that ObamaCare is a tax, what does this mean…without reading 2700 pages of law? First, there is the law and secondly, there is the practical and rational outcome. This is based on human nature and has nothing to do with politics, but rather it has to do with individuals and businesses.

Let me know if you agree….or disagree!

The law says, and I am paraphrasing, that an individual without insurance will pay a minimum tax of $385 (or 1% of income if over $38,500) in 2015 and increases to a minimum of $695 (or 2.5% of income if over $28,800) in 2016. There is no limit in place after 2016. A family will pay a minimum of $975 in 2015 and a minimum of $2085 in 2016. Again, no limit is put on the tax for years following. Almost all working people will be subject to this tax if they do not have insurance in some manner, meaning through work or on their own. The Wall Street Journal estimates that 75% of the tax will come from individual who earn less than $120,000, meaning the middle class.

Businesses that have all their employees (50 or more) on healthcare will have no tax due (unless it is considered a “Cadillac Plan” then tax will be due). If the business does not have all employees on healthcare, there will be a tax on the non-participating employees. If some of the employees are on the employer’s insurance but choose the government run healthcare to save money, the business will be taxed on those individuals who are on the government program even though the company offers it.

This is the overall gist of the tax law, but please realize it is much more complex.

Now for the most likely affects of the law.

The first point is what will businesses do in the next 5-10 years? What would you do if you owned a business?

How long, for instance, would you personally stay with a CAR insurance company where you pay $2000 more per year than with one of their competitors? You would not, so businesses will not either, just like you would not.

How do I figure this $2000 extra cost?

A company with 50 employees will be taxed $42,000 for NOT having healthcare. To purchase Individual health care (and we know family plans are much higher) for 50 employees would cost them $150,000 ($3000 per year x 50 employees) or a savings of $108,000 divided by 50 employees is a per employee savings of $2160. Which is more economical? A $42,000 tax or $150,000 expense? I know a rational person would choose $42,000. Now, since business will cancel health insurance to save money, you are on your own for healthcare to either buy it straight-out, or join the government healthcare. Because government healthcare buy-in is cheaper, most will join the government program so they are covered. If not, your 1040 will include $695-$2085 more in taxes (and your tax of $695 or $2085 is cheaper than the cost of any health insurance, including ObamaCare). If you need a doctor or hospital and you do not have insurance, you will have to purchase insurance before being treated unless exempt according to the law.

Why would you join the government healthcare? Because it is cheaper and will save you money. That seems good, but what does it mean for you?

Well first of all, as people join the government health care, the private healthcare companies will have fewer customers. Because of fewer customers, they need to either raise the price to cover expenses, reduce their size, or both. If they raise prices, more customers will leave. If they reduce size, will one reduction be enough? Or will they be perpetually reducing because of the cheaper government option? If the government tax is cheaper than their product, eventually they will be forced out or become a branch of the government healthcare program-government employees. Since many people hate the insurance companies for their profits, they may think that sounds good, but will the government be better…or worse?

Based on American history, with the government in total control of healthcare, costs will sky-rocket. Has there ever been a government agency that has gotten smaller throughout our history? No, (and if so please let me know what program that was) there has not been a single major program that the government has run that costs have not dramatically increased because of waste, fraud, multiple levels of bureaucracy, and politicians trying to buy votes by offering more “free” services.

So what does the government do to contain costs-or just cover costs? Either (1) raises the tax rate, or (2) pays the doctors and hospitals less…or (3) both. With less pay, services will be less (or assembly line) because of the doctor/hospital cost. If your pay is cut at work, do you work as hard? Or would that not make you angry and less caring? That is one of the reasons for long waits on medical procedures in countries with socialized medicine. Less pay also makes medicine a less attractive field for the brightest minds.

Furthermore, to contain costs, the government will have to decide who gets treatment…and who does not…and what treatment is cheaper (but maybe not better). Older citizens (please realize that each of you will eventually be an older person) or disabled/impaired citizens may have to make do with pain pills instead of an expensive surgery to correct a problem. This will be controlled by IPAD, Independent Payment Advisory Board, whose task it is to control costs. There is a cost to get a surgery done now and you have to decide whether to do it or not, but you still choose. With government healthcare, that decision, by necessity, must be with the government, not you. With the government as the only provider of healthcare, you have no choice. The President has unequivocally stated publically as a fact that it may be necessary to give older/less productive people pain pills instead of life saving care. In cases where the government determines your value to society is not as important, most likely senior citizens and the disabled, expensive corrective actions will be disallowed in favor of pills which are less expensive. That sounds fine except when it is your Mom, Dad, or Grandparents who have the diminished quality of life.

In conclusion, when your family’s 1040 tax increases by $2085 in a few years, realize that is the smallest increase you will see. As healthcare costs for the non-working people, non-tax paying, and non-insured people, goes up, your tax rate must go up to pay for not only your medical costs, but the other non-payer’s medical cost. If you are concerned about the very poor who do not have healthcare, ask, what would be more efficient? Pay for the poor to be taken care of with ObamaCare-estimated at 10-15 million people who cannot afford it (not those who choose not to buy healthcare); or put 300 million people on ObamaCare. Which would be cheaper and more easily administered? Which is better for you and the country? You decide.