Why the White House Is Panicking

After delaying the employer mandate to provide ObamaCare health insurance to all full time employees for a year, the administration has delayed the mandate for medium size business for a second year. It has also relaxed the mandate for large businesses (they only have to cover 70% of their workers the next year).

All of this is lawlessness of course. The statute clearly says that the mandate is supposed to kick in this year. So why is President Obama taking the extra-constitutional step of letting employers temporarily off the hook?

The reason is not hard to understand. Millions of workers are in danger of losing their jobs or their other fringe benefits (such as matches to a retirement savings plan) or being forced to work part-time. Many of them are employees of hotels, restaurants and large retail stores. And these workers just might take out their anger on Democratic candidates in next fall’s election.

Take a low-wage worker earning, say, $10 an hour and working 30 hours a week. This worker’s annual income is a little more than $15,000 a year. But the average cost of employer-provided coverage in the United States is more than that.

That’s right. Health insurance for a family costs more than this worker’s entire annual income!

Here is what the new health reform law does.

First, it requires the employer to provide a rich package of benefits or pay a hefty fine. Employers must pay $2,000 per employee per year to Uncle Sam if they fail to offer affordable insurance to their full-time employees. The fine climbs to $3,000 if the employer offers the wrong kind of insurance and the employee seeks subsidized insurance in a health insurance exchange.

Second, the law requires employers to offer the same kind of insurance on the same terms to low-wage employees as it offers to high-wage employees — although this provision has also been temporarily delayed. Employers don’t have to pay any of the premiums for the employees’ dependents. But if the employer is paying most of the premium for the dependents of highly compensated employees the company must do the same for low-wage employees.

Third, the law provides no financial help to the typical business to make the mandates affordable. Say a low-wage employee is not offered health insurance by his employers. Then he can get almost fully subsidized insurance in a health insurance exchange. But there is no new subsidy for those forced to get insurance at work.

Economics teaches that fringe benefits (like health insurance) are not gifts from employers. They are substitutes for money wages. And the sum total of a worker’s compensation tends to equal the value of what the worker produces. Employees don’t suddenly become more productive just because government mandates a benefit that doubles the worker’s compensation. Something has to give. For millions of employees, what may give is their job. At least a full-time job.

For the moment, many employers of low-wage workers are providing “mini-med” insurance. These plans typically provide $1,000 or $2,000 worth of coverage and in some cases as much as $25,000 — but nowhere near the full coverage with no annual or lifetime limits required under ObamaCare. Here is the interesting twist, however: the mini-med plans many of these workers have may be more attractive to them than ObamaCare insurance.

The reason is that the mini-med plans pay upfront medical costs, with little more than a token copayment from the patient. ObamaCare, by contrast, allows thousands of dollars in deductibles and copayments. As I wrote previously:

Health insurance is a way of protecting one’s financial resources against the expense of a catastrophic illness.

But if you don’t own a house, you have no need for homeowners insurance. If you don’t own a car, you have no need for auto casualty insurance. Similarly, if you have no assets at all (other than your human capital) why would you want health insurance?

For low and moderate income households, the reason why mini med plans are attractive seems to be this: People living paycheck to paycheck have trouble maintaining a reserve for unexpected medical expenses. So as an alternative to personal savings and higher wages, they appear to be willing to take less in take home pay in return for a modest amount of health insurance.

All that is rational. What is irrational is to use almost all of your paycheck to buy a health insurance plan with an unlimited benefit ― one that, say, is able to pay a $1 million medical bill. Why would you buy a million dollars’ worth of coverage if you don’t have a million dollars of assets to protect?

As I have written previously, there are things employers can do to minimize the burdens of ObamaCare. But minimizing burdens is not the same thing as making them go away.

So the White House is understandably worried. One wonders why it took them so long.

Comments (39)

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  1. Ken says:

    Very good post, as usual.

  2. Blake Woodard says:

    Another great post, John. Unfortunately, while they are well received by your loyal audience and other enlightened persons who are not yet fans, when it comes to liberals, who promote such nonsense as a minimum wage, your Economics 101 essays are like pearls to swine.

  3. Jeffrey C says:

    I don’t think the White House is the one panicking, the Democratic Party as a whole is freaking out as elections loom. They know that if they don’t amend something fast, many will lose their seats in Congress. Obama is not scared of the consequences, he has nothing to lose. The President is modifying the mandate because his party members are pressuring him to do so. We are entering a time period in which every action taken, or not taken, will have an impact on the elections, thus every decision made will have them in mind.

    • Thomas T says:

      I think the ones that should be panicking are those who voted for the Democratic Party and Obamacare. They voted with the utopic ideals of a perfect health care system, with universal coverage and affordable to everyone. That is not what we got. There will be the naïve few that won’t budge with reason, and will support Obamacare until the end of the days, regardless of how worse off they are at the end. Those individuals are a lost cause. Others will understand the magnitude of the flaws of ACA; they will see themselves worse than before and realize that this wasn’t what they voted for. Those are the ones that are indignant with the health care reform, and will demand action form their representatives. The problem is that neither party is offering them a viable solution that suits their needs. Thus they will be panicking in the coming months, not knowing from whom to vote and with an eager desire for a change.

      • Walter Q. says:

        Or even worse, they voted because it was a popularity contest. They ate up everything that he was feeding them. Voters won’t be panicking until they see the adverse results. Which may only be for years to come until it hits them.

    • Thomas says:

      Obama has gotten what he’s wanted in his second term, he has no reason to panic. He can’t run for office again so I am sure he will coast his way out atop the Obamacare wave.

  4. Ron says:

    Letting people buy what they want and need,….what a novel idea! Now, if we could only buy a government we want and need it too would be mini.

  5. Marti Settle says:

    John, I don’t think the “White House” or Obama is in a panic or worried. I believe this was never about medical care. It is about collapsing the economy to send us into third world nation and allow him to take over a banana republic, The United States of fools.

  6. Buddy says:

    “And these workers just might take out their anger on Democratic candidates in next fall’s election.”

    Let’s certainly hope they will, to get these yahoos out of office and repeal Obamacare. All the liberal government is doing is hurting the American people.

  7. Matthew says:

    “the law requires employers to offer the same kind of insurance on the same terms to low-wage employees as it offers to high-wage employees”

    This can become a slippery slope, as stated above when low wage employees could simply not be worth the cost of insuring.

    • Alberto L says:

      Not only that the problem with providing exactly the same coverage to the high-wage employees and to the low-wage employees is that the cheapest way to do so is by buying a cheap plan with high deductibles. Meaning that the employees have to pay a huge amount in deductibles, and this will make low-wage employees worse off. If every employee has the same coverage, it would be harder for low-wage employees to pay for the treatment. For example, imagine two workers of the same company, both of the same age and equally healthy. One is an executive with a salary of $75,000 and the other one is a common worker that earns $25,000. Due to the legislation both employees have plans with the same coverage. They live in a small town with only one hospital. Imagine that one day both have appendicitis, they require a procedure urgently. Both underwent the surgery successfully and the cost for it was the same. Because both have the same coverage both individuals get the same bill. Let’s suppose the bill called for a $5000 out-of-pocket payment. Both individuals paid the bill, which of the two had the higher burden?
      This example shows that even having the same coverage doesn’t mean that there is equality. The high-wage employee will have enough to cover the bill, with a dent on that person’s financials. The low-wage employee on the other hand, will have a troublesome year, now that 20 percent of his salary just went to pay for the operation. Obamacare mandate that forces the same coverage to every employee is not beneficial and it doesn’t achieve what it was intended to achieve on the first place.

      • Vince says:

        This is the perfect example of what we are seeing in the real world. Just because they have insurance does not mean they have increased access to health care. If one did not have insurance, they would/could either go to the ER and get free care or possible work out an out of pocket charge to a provider. Now that they have insurance they have premiums to pay – partially subsidized possibly – plus they have deductibles and/or high co-pays that the provider cannot easily work around due to the contracts we sign to be part of their networks. Therefore the person actually has lower access to the system due to what is built into this law. Even if more people actually become insurance under the ACA – doubtful, less people will have access to medical care.

  8. Christian F. says:

    Workers were happy with their “mini-med” insurance plans. These plans suited them perfectly, receiving a fair coverage for the right price. They were paying only for those things that concerned them, not all the things that Obamacare plans forces them to pay for. Those workers knew that the eventual sickness was covered with the “mini-med” plans and that if they got sick it wouldn’t be a calamity for their finances. But Obamacare destroyed their plans. They have to pay for more things that they need and have higher out-of-pocket costs. These where the individuals for whom the reform was intended, but politicians never cared to ask the common man for their thoughts on the matter, the reform is messing up the status quo of the common man and leaving them worse off.

  9. Don McCanne says:

    The mini-med argument explains why some of us would prefer to talk about prepaid health care rather than catastrophic insurance. Coverage should provide more than protection of assets; it should provide access to care by eliminating financial barriers.

    This presumes a nation of solidarity – that we’re all in this together. Having been raised during the war, to me solidarity was a given. Whatever happened to it?

  10. Paulo V says:

    I can infer why it took so long for the White House to worry about the consequences of Obamacare. They are feeling the heat of the elections; they know that if they don’t do something fast there is a high probability of losing control of the Senate and the House. They are worrying about the possibility of the Republicans reclaiming the White House and change what they fought for. They are anticipating a Republican candidate that will challenge them with “real” proposals. It seems that in the United States politicians only see the consequences of their actions when elections are going to be held.

  11. Bob Hertz says:

    The administration’s argument against mini-med plans was that they did not cover serious illness such as cancer or a heart attack or a crippling injury.

    Faced with a diagnosis of cancer, requiring many tests and expensive drugs, the mini med buyer was effectively uninsured.

    Now this happened pretty rarely, but Obamacare is a perfectionist plan so mini meds had to go.

    In order to revive the minimeds, advocates must have some solution for the one case in a hundred that drains the policy very fast.

    Personally I would favor establishing Medicare Part A as the payor of last resort. This would require a small bump up in the payroll tax….not the end of the world.

    • John Fembup says:

      “Personally I would favor establishing Medicare Part A as the payor of last resort.”

      But Bob, Medicare Part A has the same fatal flaw you mention for the “mini-med” plans.

      Specifically, in the case of a serious injury or disease, Medicare Part A can simply run out, leaving the insured person with no insurance at all.

      Medicare A provides 90 days of coverage per admission, plus 60 “lifetime reserve days.” A really serious condition would exhaust all of those days – and then what?

      I think that fixing this particular Medicare A coverage inadequacy would cost considerably more than a small bump in the payroll tax. That’s because the fix would have to apply to all Part A participants in order to reach the highest-cost ones. IOW, the lifetime coverage days would likely have to be raised without limit for everyone. This would clearly boost benefits not simply the people with catastrophic expenses – but people with lesser expenses that nevertheless exceed the present inadequate Medicare A coverage limits. That boost in benefits would carry a much more meaningful additional cost than you to think.

      (the overall inadequacy of Medicare benefits – and there are more instances besides the Part A days of coverage – is the reason that a Medigap or Medicare Advantage plan is absolutely necessary for Medicare-eligible individuals).

  12. Stan Firebaugh says:

    This law has dealt a devastating blow to the American people. It will take years to understand
    the full extent of the total costs. The losses of coverage, options, personal comfort of losing long standing
    relationships with doctors and other providers
    are just the tip of the iceberg, unfortunately.
    Our low stop loss plans have been replaced With high out of pocket expenses and surprises
    or out of pocket expenses which was routinely
    covered in the old plans. People with limited incomes will not be able to pay the out of pocket
    expenses and even middle class America won’t
    be able to build retirement savings with the double whammy of high out of pocket expenses
    and companies cutting costs on sponsored retirement plans. A friend of mine got an
    MRI
    the other day and under the PPACA plan he would have to pay 2400.00 of the cost himself.
    Would the problem get worse If delayed?
    Would the costs be more in the long run ?
    Is there more human cost this way?

    large out of pocket expenses

  13. Lance says:

    The key point should be the conflict between healthcare and affordability. Even though the claimed goal of Obamacare looks glorious, the policy makers do make a fatal mistake that they overestimate the employers’ capability of paying the bills. If Obamacare achieves the goal at cost of unemployment, this policy then would be a disaster.

  14. charlie bond says:

    Happy President’s Day,

    Forgive me, but I think it a bit cynical to suggest that the President is in a panic, just as I think it is unpatriotic to suggest that the President has sought failure in this policy. With health care representing one in five dollars in the economy, anyone tinkering with the system knows they are playing with the third rail of our financial well-being. It is appropriate, therefore, that we all be concerned, regardless of party or political persuasion.

    The underlying problem is that health care economics have been distorted for three generations: Health insurance was invented during a massive depression just in time for a war-time economy to make it a less costly alternative than wage hikes and unionization, so employers embraced health insurance as a benefit to WWII workers. It continued to fit a manufacturing economy, especially when the Baby Boom meant that most insureds were young and healthy.

    With the passage of government programs in ’65, it was clear the government (using its massive market power) was going to force a pricing differential, thus beginning the cost shift in health prices. In the 80′s the insurance carriers realized they too could use their buying power to lower prices and so they began to use managed care and health plan contracting to further distort the market. Now, we don’t know what basic procedures cost, and so insurance is not predicated on real economic forces.

    It was for this reason that I argued (unsuccessfully) with Milton Friedman that health care coverage was NOT a substitute for wages, because the employer (via the insurance company) was buying something the employee could not get on his or her own at a price not available to him or her. Furthermore, the employers’ purchase of coverage itself was distorting the market by warping prices of medical goods and services to fit what the market would bear.

    We now live in a world of Alice-in-Wonderland health care costs and wonder why we can’t afford it. Health care is the largest bubble in the history of economics, and when it bursts we will all be in it.

    Because it is one in five dollars in the economy, we will have to restore the market by disincentivizing the cost shift, eliminating artificial subsidies to providers, disincentivizing overtreatment and inefficiencies, replacing the absurd tort system with first party medical adversity insurance (thereby dramatically cutting the cost of defensive medicine) and establishing cost-based pricing, Upon doing so, the actuaries can then work with real numbers and health care can be made affordable. All of these things will require us to bar-b-que some very sacred cows.

    If we do not do so, our kids and their kids will have a lower standard of living than we have enjoyed, because all the money–all of our international competitive advantage–will have been squandered feeding a dysfunctional and economically irrational health care delivery and payment system just to take care of us Boomers.

    It is time that we address the delivery system and its pricing, and upon doing so the health care financing system will begin to sort itself out. At the Patient-Physician Alliance we are developing a model for an alternative health care economy that can be introduced in parallel to the existing system and gradually displace it with a medium of exchange based on real value.(It is not “bitcoin” but has the potential redefining how health care is priced and paid for.) Anyone interested in developing this model with us is most welcome to contact me at cb@patientphysicianalliance.org.

    While the President may be appropriately concerned (perhaps not in a panic), some of us want to work to create grass-roots, non-governmental, non-political solutions. We’d love any help we can get.

    Cheers,
    Charlie Bond

    • Bob Geist says:

      Charlie, good note, but you missed the cause of medical cost inflation.

      It is not medical prices that are the problem– they have been fixed below cost for public sector patients for decades. The HMOs followed the fed/state price-fixing lead once they had control of the majority of nation’s insurance money and could screw down payments plus create drive-by mastectomies and deliveries in the early 1990s. When the HMO managers suddenly wore the black hats, they quickly stopped overt rationing and simply raised prices to cover the increased “free” care utilization.

      Unrelenting medical cost inflation abruptly began after 1965, a tipping point in time when 85% of the populace(employed workers and the official old, poor and disabled)suddenly had acquired cheap tax-subsidized insurance. This is Econ 101, not the conventional “wisdoms” of “market failure” or culprit doctors driven to costly avarice by “evil” FFS pay.

      So what’s next? The ObamaCare fix of the cost control failure of the HMO gatekeeper corporate system is create a corporate-public cartel system by FTC and CMS waivers of, yes, patient protection laws legalizing massive HMO/ACO mergers to collude in profiteering behavior by bedside rationing of care and legalizing splitting of the resulting capitation fee profits (“gain sharing”).

      This is not a pretty picture. Is there a way out?

      Yes, but it is not ObamaCare, which is nothing more than managed care on government protected steroids leading to ever higher premium and tax rates, as well as phony inflated prices to game the system and totalitarian-like cartel regulations (price-fixing and franchising)in exchange for popular “free” care.

      As you and John Goodman have pointed out, we are in serious trouble, when economically illiterate populists control our medical and fiscal futures.

      John Goodman has a good way out.

      Bob

  15. Brittany Larson says:

    One small wording bone to pick. Both the $2000 and the $3000 penalty require the employee to seek “subsidized insurance in a health insurance exchange.” The article reads as though it is only the $3000 penalty which requires the employee to both go to the exchange and receive a subsidy.

  16. Centrist says:

    Looks like feeding frenzy today, except there isn’t any meat in the water. Congress passes laws; the President executes them … faithfully and with Care. Insomuch that Obama has not eliminated any part of the ACA, simply used his prerogative in postponing certain parts, we will find that the President is within his Constitutional scope.

    The Heritage Foundation puts it succinctly …

    “… Both English and American experience support reading the Executive Vesting Clause (Article II, Section 1, Clause 1) as enabling the President to execute the law and to control the law execution of others. Given this understanding of the Executive Vesting Clause, the Take Care Clause should not be read to limit the President to the role of an aloof overseer of law execution. Consistent with this view, contemporaneous discussions of the Take Care Clause emphasize the President’s power over law execution; they do not support the claim that the President’s law-execution role is one limited to ensuring faithful execution by others. Furthermore, there is no historical evidence supporting the notion that Congress can use the faithful-execution duty as a means by which it may strip away any presidential prerogative, let alone the executive’s essential task of executing the laws. Such a reading would make the Constitution’s Executive Vesting Clause surplusage and would undermine the Constitution’s separation of powers.”
    http://www.heritage.org/constitution/#!/articles/2/essays/98/take-care-clause

  17. Mike Ford says:

    Thanks for all your good work.

  18. Patrick Pine says:

    While I agree with your discussion of the value of mini-med plans to serve low wage households, I do think you did not clearly spell out the penalty scheme applied to employers who do not offer coverage or employers who offer plans that are not ‘minimum value’ (a/k/a skinny benefit plans). The penalty for no coverage is $2000 for all employees less the first 30. The penalty for offering coverage less than ‘minimum value’ is $3000 but only for any employee who goes to a public exchange and receives a subsidy. So let’s take a 100 employee case. If employer does not offer coverage, the penalty is 100 less 30 times $2000 or $140,000. But if employer offers a less than minimum value plan – let’s say at a cost of $150 per month per employee and 95 of the 100 elect that but 5 go to public exchange and get a subsidy. The employer pays $1800 times 95 for the coverage or 171,000 but it is a deductible expense plus 5 x $3000 or $15,000 in penalties.

    Your discussion suggests that the $2000 penalty escalates to $3000 if the employer offers a less than minimum value plan which is not accurate because the first applies to all employees less 30 while the second penalty applies only to those choosing a public exchange plan and who get a subsidy.

    • Centrist says:

      Patrick, can you clear something up for me.

      With respect to the threat that some employers would reduce hours to avoid the business mandate and penalty, and using your 100 employee scenario … If an employer has (100) 40-hr employees (4000 labor hours) and chooses to reduce their working hours to 29 (2900 labor hours), common sense would necessitate him to hire an additional (38) 29-hr. employees to make up the 1100 hours of lost production?

      1) In doing so, would he then still be subject to a ((4000 lab.hr./ 30 fte hr.) – 30 employee exclusion x $2000) $206,000 penalty?

      2) And if he chose to turn away 1100 hours of customer revenue and not hire additional staff, wouldn’t he still be liable for ((2900 lab. hr. / 30 fte hr.) – 30 fte exclusion x $2000) $134,000 penalty?

      Self-Rhinoplasty can be costly.

      • Patrick Pine says:

        I am not arguing a particular point – just clarifying the way the different penalties may apply.

        This gets more complicated if one considers the potential for the $100/day excise tax applicable to anyone who is impacted due to a plan’s failure to provide all mandates. The mandates vary somewhat between plan types (insured v. self insured or grandfathered v. nongrandfathered). That issue opens a proverbial can of worms.

  19. Patrick says:

    I think the article has some great points but some not so good. I do not understand this quote “Health insurance is a way of protecting one’s financial resources against the expense of a catastrophic illness. Similarly, if you have no assets at all (other than your human capital) why would you want health insurance?” So who is supposed to pay for the care of someone who has a catastrophic illness and is not covered or covered under a mini-med policy? $25,000 of coverage will not go very far. Are we saying that the tax-payers should take care of these people? Under any good insurance planning, there should be self-insurance for a portion of a need while using insurance companies to protect us if things are worst than planned… That’s how it works for auto insurance, home insurance, long-term care insurance. Deductibles are self-insurance. High deductibles help keep healthcare cost low. If I need to have an MRI and I have a high deductible, I will probably shop around and get the test where it is more cost efficient… I understand that many would be financially devastated from these high deductible, but maybe the answer lies with having a deductible as a portion of income just like the premiums are. Someone making less than $90,000 gets subsidies to pay for their premiums, so that healthcare insurance cost do not amount to more than 10% of their income (it’s actually a range of 2% to 10% of income… So no one will spend their entire paycheck on health insurance… another wrong point in the article). Why can we do this for deductibles as well to level the paying field? There has to be a way to have a program where we share the nation’s healthcare cost while slowing its rise in cost. We are all in this together and it is together that we will find a better way…

  20. Wanda J. Jones says:

    Patrick:

    “We are all in this together” is a nice sentiment, but it is not one on which to base public policy as liberals tend to believe that together means “equal” so put together policies that seek to bring lower income people to parity with higher income people. We are not the same. We don’t even have a “village” attitude about each other anymore. It’s much better to have the concept of appropriateness, where the insurance solution “fits” the differences among people.
    Mini-meds would fit into this. So would policies that self-insure for primary care if the money goes directly to a primary care group practice without going through an insurance company.

    We have to get over the idea that the only way out is to amend or replace one awful government plan with another one. It’s the government itself that is untrustworthy to understand healthcare and to make good policy decisions about it. As much as possible, the solutions should move closer to the private sector, even in Medicare and Medicaid. There is one thing that the government is not: able to manage: a massive program over time without distorting it so that its goals are achieved in reverse: higher prices, less access, and lower quality.

    Cheers..

    Wanda J. Jones, MPH
    San Francisco

    • Patrick says:

      Wanda,

      I said we are in this together because want it or not, we are together in this. There are some things we just cannot let people do as they please because their decisions affect the rest of us. This is part of living in a society. As human beings, we take care of our own. Hospitals treat people who are not insured all the time, but this raises the cost for the ones that are insured. So by having everyone do their fair share just makes sense… The Mini-Policies make sense to a lot of people on this post, but what happens when the insured runs out of benefit? Who pays for the rest? We do. Mini-Meds should be complementary to catastrophic policy not a policy on its own…

    • Don McCanne says:

      Wanda,

      You say that liberals tend to believe that together means “equal.” We aren’t asking for equal; we want our social systems to be equitable.

      • John Fembup says:

        “We aren’t asking for equal; we want our social systems to be equitable.”

        Don, please explain.

        • Don McCanne says:

          Ted Marmor and his colleagues have written a great book on social insurance, in terms of a broader concept than what we usually think of as social insurance. At the following link I have selected a few excerpts from their book which can convey much better what I mean by equitable social systems:

          http://www.pnhp.org/news/2014/february/social-insurance-what-you-need-to-know

          It’s really worth reading, and you can get the gist of their book without having to read it (though I recommend doing so).

          • John Fembup says:

            Thanks Don, and all those words from Marmor et al are fine, I suppose. But I was really asking you to explain why YOU think “equitable” is not the same as “equal.” Or or that matter, why you seem to take issue with Wanda Jones’ “concept of appropriateness.”

            Is that possible to do in some small number of simple, declarative sentences?

            Thanks.

            • Don McCanne says:

              Equal: the same
              Equitable: fair

              Most liberals are not striving for a rigidly egalitarian society in which all wealth is distributed equally. Rather we strive for a state of solidarity in which our individual basic needs are met through joint community effort.

              The work of Marmor, Mashaw and Pakutka is apropos since it describes social insurance as a means of achieving equitable transfer to protect us against major threats in life, but without requiring equal redistribution.

              • John Fembup says:

                “Equal: the same
                Equitable: fair”

                Don thanks for patiently responding, but I think now I’m even further from understanding what you are trying to say.

                Are you suggesting that Americans are not all created equal? Or that Americans are not all endowed by their Creator with the same unalienable rights?

                Are you saying that governments need only require some sort of societal equity that is not equality but is rather some partial equality; and such partial equality is really the same thing as “fair”?

                I’m also don’t understand the term “state of solidarity.” What is solidarity exactly? Is solidarity equitable for everyone? What markers show that solidarity has been achieved (or by their absence, show it has not been achieved)?

                Thanks again.

              • John Fembup says:

                “He who would do good to another must do it in Minute Particulars: general Good is the plea of the scoundrel, hypocrite, and flatterer, for Art and Science cannot exist but in minutely organized Particulars.”

                William Blake

  21. Bob Hertz says:

    Note to John Fembup on Medicare Part A as backup for minimed plans:

    Thanks for your comments.

    Medicare surely has some gaps, but the 90 day maximum on hospital days would I thnk be a minor one. The number of patients who exceed 90 days in one year without passing away must be tiny, and some of those patients would be under 65 in any event.

    If 10,000 patients on Medicare exceeded 90 days and the average excess billing was $100,000, the extra costs to taxpayers would be about $1 billion a year.
    My numbers may be off of course but in Medicare context, $1 billion is a tiny bump.

    My own proposal runs something like this:

    if a person only carried minimed private coverage and then suffered a major illness and then suffered a major illness, Medicare would be the payor of last resort after about a $10,000 deductible.

    Let’s say that 10 million persons went this route.

    In any year about 5% of them would suffer a major illness. That is 500,000 persons.

    Medicare would pay an average of $20,000 per person.

    That comes to $10 billion. The persons themselves would pay an extra payroll tax.
    If that was insufficient, the overall payroll tax would be increased, by a lot less than one percent of payroll.

    Overall, my proposal is consistent with ideas from Martin Feldstein, Avik Roy and Megan McCardle in recent years —- namely, a floor federal plan for catastrophic illness, and let people find their own way for everyday expenses.

    Is it free or self-funding? No.

    Is it less expensive and bureaucratic than the ACA? By a mile.