This article was updated on March 24, 2010. To read MoneyWatch's article on what you can do to prepare now for the coming health care changes, click here.
A new blueprint for U.S. health care that promises to redefine health insurance coverage for millions of Americans is headed for President Obama's certain signature.
So how, exactly, will it change your life? Despite warnings of Armageddon from the right and promises of a new dawn from the left, the health care bill is not as sweeping as many had once hoped (or others had feared). It does not include, for example, a public option to compete with private insurers; it does include significant grandfather clauses that will enable you to retain your current policy long after the bill begins to take effect in 2014.
But make no mistake: Even in its scaled-back version, the new legislation will dramatically change the nation’s health care system — extending coverage to an estimated 32 million Americans while raising costs and reining in services for millions of others. Couples earning more than $250,000 will see higher taxes, which is one reason the Congressional Budget Office predicts the bill will reduce the federal deficit by $138 billion over 10 years. In addition, the bill shifts the cost of the uninsured from taxpayer-subsidized emergency rooms to insurance companies and their policyholders.
“The people who will gain the most are low-income people who do not get health insurance from an employer,” says Dr. John Goodman, president and CEO of the self-described right-leaning National Center for Policy Analysis. “Just about everybody else loses.”
Advocates, naturally, have a different view. They argue that winners include anyone with a pre-existing condition, recent college graduates who can now get coverage through their parents, small businesses who will have access to insurance pools, and doctors who will get paid for seeing uninsured patients they were treating for free.
Exactly how you will be affected is still a matter of intense debate. We spoke to more than half a dozen experts on both sides of the ideological fence to come up with our own list of winners and losers.
These five groups — and there may be some who fall into overlapping sets — will bear the costs of change.
1. Generation Y
In many ways, the health care legislation — like insurance in general — transfers wealth from the haves to the have-nots. The rich pay more to subsidize the poor, and the young and healthy pay more to offset the costs of the old and sick. On balance, most of the 19 million uninsured Americans between the ages of 18 and 34 will be forced to buy coverage — and those policies will be more expensive than the major-medical coverage they might have chosen otherwise.
For some young people — if you are a struggling playwright, for instance — there could be good news here: Because young people tend to work in entry-level jobs with low wages, many will fall within 400 percent of the poverty line and qualify for some government subsidies. However, the subsidies are unlikely to take the full sting out of the higher premiums: The most generous grants will be reserved for poor families, not single adults, and those who opt not to buy coverage will face penalties of $695 a year under the bill.
Proponents of the bill argue that young people can console themselves by thinking of the lower costs they will pay when they get older. “It is important to keep perspective,” says Volsky. “They will pay less 10, 20, 30 years down the road when they really become sick.”
2. Anyone Who Earns More than $200,000
The cost of expanded government health programs will be paid, in part, by new taxes on high earners. So if you earn more than $200,000 a year, or you and your spouse have a combined income over $250,000, you’ll pay an additional 0.9 percent in federal income tax to help fund the Medicaid expansion starting in 2013. In addition, under a reconciled package still awaiting a Senate vote likely this week, you would face a new 3.8 percent Medicare tax on all investment income: interest, dividends, royalties, rents, and capital gains.
3. People with ‘Gold-Plated’ Insurance
Workers with the highest-cost insurance plans are still losers, though they could have been much worse off.
The bill calls for a 40 percent tax on so-called “Cadillac” insurance coverage, but the reconciliation package raises the cost threshold from $8,500 per person, the standard in the Senate-approved bill, to $10,200 per individual. A family of four would now have to receive $27,500 in medical benefits — about $14,400 more than the cost of the average family plan — before paying the tax. And some workers are now exempt from the tax altogether — such as firefighters, whose plans carry high prices thanks to the risky nature of their work.
If your insurance plan meets the new definition of luxury, you have until 2018 to choose a new one in order to avoid paying the increased premiums that are expected to result from the tax. (The tax is levied on the insurance company, not the insured.)
4. Medicare Advantage Recipients
One way the government plans to control costs is to reduce spending on Medicare — the government insurance program that covers most Americans aged 65 and older. In particular, the government plans to cut reimbursements for benefits offered under its Medicare Advantage plans, which give members more choices than standard Medicare plans in terms of doctor networks and cost about 15 percent more than the average Medicare plan. (However, some of these cuts would be offset by a new deal with drug companies to sell medications not covered by Medicare at half price.)
Goodman says that “as many as 8.5 million seniors could lose their Medicare Advantage coverage altogether.” Democrats have long been critical of the program, however, claiming that the government is overpaying the insurance companies that administer it.
5. The Cast of Jersey Shore
The perpetually bronzed 20-somethings who populate MTV’s hit reality show will soon be paying more for indoor tanning salons, which will soon be subject to a 10 percent tax. Other activities linked to cancer and health problems would also face new penalties: That could be expensive for cigarette smokers, too.
The poor will benefit from the health insurance bill because they’ll receive subsidies to buy insurance and because Medicaid is being expanded. Here are four other groups of Americans who stand to gain.
1. Cancer Patients and Others with Chronic Conditions
A tragedy of our current health care system is that those who need coverage most are denied it most often, says Linda Blumberg, a health economist and senior fellow at the Urban Institute, a policy think tank. Insurance companies can refuse to pay for care related to pre-existing conditions and hike coverage for certain illnesses, so if you have chronic, ongoing conditions or diseases you are forced to either pay out of pocket or shoulder ever-increasing premiums. The new law would prevent insurance companies from denying coverage or raising rates based on illness.
There is hope that helping the sick will eventually have an upside for healthy taxpayers as well, says Igor Volsky, a health care researcher and blogger for the left-leaning Center for American Progress Action Fund. Affordable insurance coverage should encourage the chronically ill to receive treatment earlier, when it is less expensive, rather than wait until high-priced emergency room care is required. A reduction in such emergency care should pay broader dividends, since its cost is typically passed on to the insured, in the form of higher hospital bills, and to taxpayers, in the form of federal subsidies for unreimbursed care.
2. Small Business Owners and Employees
Today, if you are a small business owner you have few insurance choices and you have to pay for a plan tailored to the risks inherent in your small staff. One sick employee can sink the ship, making costs prohibitively expensive. Pooling risks with other small businesses would stabilize costs.
Among the biggest reforms in the new plan is the creation of a health care exchange through which small businesses (and uninsured individuals) can pool risk and buy coverage from competing plans.
“Right now, the struggling small employer has a lot of reasons not to have insurance. It is just extremely expensive ... They are getting whipsawed by the companies and agents out there who recognize there are not a lot of options available,” says Dr. Bill Wiese, associate director of the Robert Wood Johnson Foundation Center for Health Policy at the University of New Mexico, a philanthropic health care group. “The legislation will make it easier for the small employer to offer employer-based insurance.”
Small businesses will also receive a tax credit for providing coverage — while those that refuse to offer coverage will pay penalties of $2,000 per worker if their employees opt to receive government subsidies to purchase insurance on their own through the exchange. The penalties will only kick in for companies with more than 50 employees, however, and the first 30 employees will be exempt.
3. Accidental Consultants
Today if you work part-time, as a freelancer, or in an entry-level or non-union labor position, you probably do not qualify for employer health insurance. And if you were covered by an employer’s plan but you lost your job, your only realistic health care option is COBRA. The bill would subsidize insurance costs for those earning as much as 400 percent of the poverty threshold — about $44,000 for an individual, or just under $90,000 a year for a family of four.
The subsidies are tied to income, so the poorest workers would receive subsidies for 94 percent of their health care costs, while workers at the upper limit of the income qualifications would receive subsidies covering about 13 percent of their health care costs, according to estimates by the Congressional Budget Office.
4. Young 60-Somethings
On average, middle-aged Americans use more than five times the amount of health services as healthy young Americans. Today, their health care premiums often reflect that extra use ... and then some. The new legislation would cap age-related price variation, however. So if you are aged 60 to 64 — the highest age demographic not eligible for Medicare — you will pay no more than three times the cost of the premium paid by a health 20-something.
“People who are 60 to 64 are going to pay lower premiums than they otherwise would, because people who are 20 to 24 are going to pay higher premiums,” said NCPA’s Goodman.
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