November 18, 2019

Welcome To The Patient Protection And Affordable Care Act

I am not sure that I understand the term “affordable” any more.  Congress passed Obama Care and it does not appear affordable at all. The total revenue from the Act will amount to $409.2 billion dollars over the next 10 years.  A brief summary follows:

Broaden Medicare Tax base for high income taxpayers ($210.2 billion); An annual fee on health insurance providers ($60 billion); 40% excise tax on health coverage premiums  which exceed $10,200 for an individual and $27,500 per family ($32 billion); Impose an annual fee on manufacturers and importers of branded drugs ($27 billion); Impose a 2.3% excise tax on manufacturers and importers of certain medical devices ($20 billion); Require information reporting on payments to corporations ($17.1 billion); Raise the 7.5% Adjusted Gross Income floor on the medical expense deduction to 10% ($15 billion); Limit contributions to flexible spending arrangements in cafeteria plans to $2,500 ($13 billion); All other revenue sources ($14.9 billion).

At first glance at the summarized copy that I received of 138 pages, there appears to be a great deal of benefits for patients such as:

Insurers are prohibited from imposing lifetime dollar limits on essential care; Insurers are prohibited from discriminating against or charging higher rates for any individuals based upon pre existing medical conditions; All existing health insurance plans must cover approved preventive care and checkups without a co-payment; Dependents (children) will be permitted to remain on their parents insurance until their 26th birthday; Insurers are prohibited from excluding pre-existing medical conditions for children under the age of 19; and Insurers are prohibited from dropping policyholders who get sick.

However, there are some provisions that many taxpayers might find offensive:

Effective January 1, 2012, employers must disclose the value of the benefits they provide for each employee’s health insurance coverage on the employee’s annual Form W-2.

A shared responsibility requirement, commonly called an individual mandate, requires that all persons not covered by an employer sponsored health plan, Medicare, Medicaid, or other public insurance programs, purchase and comply with an approved private insurance policy or pay a penalty.

Since Obama Care is developing over time, it is hard to analyze the overall effects of the legislation, but I would be concerned that all these excise taxes and fees are not also, over time, passed back to the patients and insured.  Health insurance companies become subject eventually to a new excise tax based upon their market share and this excise tax will increase with the rate of inflation. Few taxpayers are currently able to claim medical expenses when filing the long Form 1040 today due to the 7.5% floor based upon their adjusted gross income.  Raising it to 10% will eliminate even more taxpayers from utilizing this deduction. The excise tax on, what is referred to as the “Cadillac” plans, is another issue. This excise tax will be 40% of the premiums which exceed $10,200 for individuals and $27,500 for a family, obviously making this type of insurance more cost prohibitive than ever before.

The Congressional Budget Office estimated that the federal government’s share of the cost for Obama Care during the first 10 years to be $940 billion dollars, $923 billion taking place in the period from 2014 – 2019. The CBO also estimated that the legislation will reduce the number of uninsured residents by 32 million, but still leaving 23 million uninsured residents in 2019 after the bill’s provisions have all taken effect.

I retrieved my government calculator – the one that easily does billions and trillions with the red ribbons. Mr. Obama and Congress obviously did not do the “pay as you go exercise” when drafting this legislation. Now, I don’t think that $409.2 billion dollars of incoming revenue covers $940 billion in outgoing expenses. What bothers me even more as there are 23 million uninsured people still left out there without insurance after the program has been fully installed in the year 2019? The last time I looked at the National Debt clock we were in the area of $15,297,641,917,000 trillion dollars in the hole. I am not sure how Congress or Mr. Obama planned to cover this shortfall of $532.8 billion dollars? The same CBO that estimated the Obama Care shortfall of $532.8 billion dollars also projected that the 2012 federal budget will also be short by $1.1 trillion dollars!

I will start watching the European crisis more closely now – especially Greece. Whatever happens in Greece will be a guideline for the United States in about 3 to 5 years maximum. The Patient Protection and Affordable Care Act may be a good solution to our health insurance problems in the United States but the Act is like buying a Rolls Royce. It is a fantastic car but a car very, very few people can afford.

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Written by
Donald Wittmer

DONALD WITTMER is a retired business executive who held key roles in the automotive and banking sectors. For a time, he also served as a Fiscal Agency Manager for the Detroit branch of the Federal Reserve Bank of Chicago. He received his undergraduate degree from Cincinnati's Xavier University, an M.A. in business management from Central Michigan University, and earned certification in bank operations from the School of Banking at the University of Wisconsin-Madison. A husband, father, and grandfather, he teaches part-time at the Kent Place School for Girls in Summit, New Jersey.

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Written by Donald Wittmer
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