Letter from Langdon: Obamacare Math

As the second year of the health-insurance exchanges gets underway, some folks will see their premiums rise. For an example of an insurance system that works better than our current private plans, take a look at the system many politicians incorrectly insist is broken – Medicare.  

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For a self-employed farmer like me, the sound of healthcare reform rang a responsive chord from deep within. That’s because for decades, while employees of big corporations got their healthcare packages tax free, I was never even allowed form 1040 deductions for my health insurance.

That fact alone made my coverage costs higher than others, because I had to buy them with my own post-tax dollars.

Taxes aren’t the only things farmers know about. Ask a self-employed, retirement-aged farmer his experience with health insurance and you can get some pretty scary tales of high-deductible, low-limit, benefit-dodging insurance scams. Like the time I bought a policy because the company and their agent said it covered major medical costs like surgery.

When a family member needed an operation in the 1970’s, I thought we were covered. But once the surgery was done, my policy only paid about 40% of the cost, an amount equal to about three months of premiums, because the insurance came with a schedule specifying what it would reimburse on different types of surgery.

In this case the schedule said $600 was the allowable max, but the surgeon billed $1,500.

That didn’t include the hospital bill, which I also paid.

When I talked to my insurance agent about it, he said that was the problem with those types of policies. Then he recommended something else.

My initial reaction to his suggestion was “Gee. Thanks. Now you tell me”

It was worse than worthless, so I dropped that policy. After going uninsured for a few years mostly because I couldn’t afford insurance, I made sure the next policy covered everything with a reasonable deductible of about $1,000.

Today, healthcare costs in the 1980s look downright cheap. I used our insurance a couple of times then, when childhood illnesses put two of my three kids in the hospital. It was OK. Better, at least, than my first experience. And it made me feel safer knowing that if my children needed more help than I could afford, they would still be able have it. But as time went on, my offspring grew up, and I grew older. Even though fewer people here were insured, premiums climbed that freakishly steep beanstalk to the land of giant healthcare costs.

Then the affordable Care Act came along looking like Jack with an ax, and I thought finally, someone is going to chop that thing down to size. But instead of an ax, Jack was carrying a watering can in one hand and a bag of fertilizer in the other.  My healthcare costs just keep on growing.

At the rate this thing is going, I think it’s gonna take a chainsaw.

The only time in my life I’ve been hospitalized overnight was for surgery in 1960. These days, on average, I go to the doctor maybe once a year. Some years not at all.  But Blue Cross Blue Shield of Kansas City sent me notice last fall that my monthly health insurance premium would rise from $690 to about $830 a month come January 1 of this year.

Maybe they know something I don’t know.

Would going to the doctor more often make me healthier? That was the convenient conclusion government came to a couple of years ago when they discovered BCBS in Missouri was spending only about 65% of premiums on benefits for its customers. The other 35% went toward administrative costs. That’s a fancy way of saying BCBS was overcharging. So the Obama administration ordered them to return part of the overcharge to customers through things like free checkups and wellness plans.

My premium held its own for a year or so after that until it started growing again.

A recent New York Times article talks about unrest at the elite U.S. education destination known as Harvard, where higher health insurance costs have been passed on to employees and faculty unused to bearing that expense. Many are questioning the university’s decision to bear less of the burden, especially based on the size of Harvard’s $65 billion endowment. But as the Times reported, Harvard’s experts on health economics and policy advised the administration on the ACA.

Much of their advice was incorporated into the law.

Over the last 10 years if I had saved my health insurance premiums in a health savings account or set them aside I would have over $50,000 to show for it. That’s simply because I’ve never collected a benefit.

For all intents and purposes, that money is gone.

Now my insurance is going up presumably not only because of my age, but because according to the law and Healthcare.gov, my income shows that I should pay more. That cost will be driven even higher when the Cadillac Tax on expensive health plans kicks in with a tax on low deductible health plans themselves.

The choice is to pay an excessive rate for high deductible insurance, or an even more excessive rate for higher cost reasonable coverage, driven even higher by the 40% Cadillac Tax.

In the meantime Canada, Mexico and European nations make the U.S. government and Harvard look like bone-headed pawns of corporate healthcare in America. That’s because they have implemented plans covering entire populations of their nations that look eerily familiar to something we have right here at home.

We have the example under our noses in Medicare. In March upon the 65th anniversary of my life here on earth, my health-coverage costs will drop to one quarter of what most insurance companies want to charge, for what will actually be much lower net deductible–about $2,100 per year in what is now called “co-insurance,” or my out-of-pocket costs after premiums.

In my case, premium cost for Medicare Parts A & B, a high deductible Part F supplement, and Medicare Part D prescription coverage, should total about $235 per month.

Like magic, I save almost $600 per month … $7,000 per year … over what Blue Cross Blue Shield would charge with an almost identical deductible and no prescription coverage. A big plus for me is I avoid PPO’s (preferred network providers) that can drive up my own costs any time I want to go outside the network that may be across nearby state lines. That’s a big plus in rural areas, where hospital choices usually center on a few big metropolitan areas with both good and bad reputations.

There are some places you just don’t want to go.

With Medicare I can go anywhere that accepts Medicare-negotiated rates. But even if I go where they don’t accept negotiated rates, I have the same option granted to me by the more stringent ACA rules, which is to say “write the check for the difference.”

Now if I get sick, the savings I gain on cheaper Medicare pays my deductible three times over.

I could write a couple of checks for that.

One area where the Affordable Care Act has mimicked its more successful cousin Medicare is through universal access to insurance and accompanying health care. Private insurance companies can no longer deny coverage or charge unreasonably high premiums to people people who have preexisting conditions. That's the way Medicare works, and now it's the way health insurance purchased through healthcare.gov works too. The rub is that even though those premiums can be quite reasonable when based on policy-holder income, the old problem of high deductibles still haunts low-income patients the same way it did my family, almost 40 years ago. 

That can be a problem for some Medicare recipients too, but it's better than being uninsured.

We’ve been hearing a lot the last few years about how the most successful laws seen in three generations, Social Security and Medicare, are broken and need to be fixed. But the Affordable Care Act and those kinds of policies we’ve seen adopted lately are good examples of what we get when Congress itself is broken. That’s what happens when political gain seems more important to lawmakers than true service to the people.

In the meantime the Affordable Care Act is balanced between fantastic success and miserable failure, on a playground full of politicians who only want to bounce on the teeter totter.

They oughta fix that before they “fix” anything else. 

Richard Oswald, a fifth generation farmer, lives in Langdon, Missouri, and is president of the Missouri Farmers Union.

 

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