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An Analysis of the Obamacare Tax

Walter Wit Man's picture

What follows is my napkin-level analysis of Obamacare for a hypothetical 40 year old single American. If anyone has more precise numbers I would appreciate it. But the analysis is useful to show the broad effect of Obamacare. It does not look good for the average American.

Here's my hypothetical: say an individual can't afford to buy health insurance and he's a 40 year old American making near the median income, $50,000 a year. Let's assume the individual also has $50,000 in savings for retirement.

Under Obamacare, the government subsidies for insurance won't help because there is no real subsidy at this level of income. So, our individual, being 40, tries to go the next 10 years simply paying the fine (assuming it's $1,000--don't know where they ended up on that for reals) instead of paying the premiums which we will assume are $8,000 a year and which our individual can't afford because he's got the bills of a typical American (see here for an up to date snapshot of the typical American's balance sheet). So he's paying his Obamacare fine, not paying for insurance, and not adding to his savings because he was putting away only about $1,000 a year anyway.

Well, at 49 the individual gets cancer and has 2 years to live. He's not covered under an insurance policy but gets care. His two years of care cost $250,000. He's already paid or owes the government $10,000 over the last 10 years. And since he has $50,000 saved he can't go on Medicaid (have to be in poverty), and he has to declare bankruptcy. He would be able to keep probably half of the money through bankruptcy--say keep $25,000. But he's got care and was able to live a little more "extravagantly" over the last 10 years because he didn't have to come up with outrageous premiums (and probably dip into that savings and worse, take out credit cards).

This scenario is worse than the status quo for this individual. Under the status quo this individual would do all the above except pay $10,000 to the government. He'd be bankrupt and have cancer but not have to pay the government.

Under Obamacare he gets the two worst options. Say he chooses to pay for the crappy insurance. He stretches really hard and pays $80,000 over the coarse of the decade, his 40s, to the insurance companies. Then, his insurance only covers $150,000 of his $250,000 bill for care when he gets cancer. He's on the hook for $100,000 but only has $50,000 saved up (and likely he had to dip into this to afford the premiums).

He's still bankrupt, even under Obamacare. In fact, he would be much better off under the status quo. They all end up at the same place. Bankrupt and cancer at 52. But under Obamacare they shook him down for as much as they could before he died.

I would love to see someone quibble with the numbers . . . but I bet the basic analysis holds.

No votes yet


Submitted by lambert on

And there are millions facing it, and/or going naked, so thanks for raising it.

There are people here who do numbers, and I'm not one of them, so I won't address that. Readers?

So, two quibbles:

1. You've got to be in poverty for Medicaid, not Medicare. What ObamaCare does is raise the income level (to 133% of poverty, IIRC) at which you're allowed to lose your house in order to not die.

2. There's no link at "see here for an up to date snapshot..."

3. Which makes me think, also, that a balance sheet approach would be a really effective way of getting these ideas across. (Of course, the income levels and eligibility requirements and subsidy amounts and the forthcoming regulations and all that are so obfuscated and riddled with rent-seeking that it's probably very hard to do the math to see how things net out; that's a feature. But trying to do it would be a very useful thing for many, many people. We need an ObamaCare calculator....)

That's 3, not two. See what I mean?

Walter Wit Man's picture
Submitted by Walter Wit Man on

1. and 2. are fixed.

And yes, many people will be in this situation. And the analysis will be slightly different for those in their 30s and 20s because for these generations education is so much more expensive. A balance sheet approach certainly does a good job of showing how the average American will be effected.

And bankruptcy is a critical component to this analysis. No one thinks it will happen to them. But this is the backstop for all of us. A prudent person would plan so that if they were insolvent they would be able to use the law to protect themselves.

Gotta run now but thanks for the response.

Walter Wit Man's picture
Submitted by Walter Wit Man on

A massive win: "The health care bill did something spectacular for the lower class. It created massive subsidies for access to health care. "

madamab's picture
Submitted by madamab on

The best thing we could do for poor people is give them access to Medicare rather than throwing a few bucks at them. THAT would be a massive win. And of course, Booman doesn't give a sh*t how many women will now be denied access to any coverage for abortions - states are now using the Nelson language to ban PRIVATE insurance companies from including it in their policies.

Are women not "the lower class" in Booman's mind? Because it seems to me that the bill makes health care not just unaffordable, but unavailable for quite a few of us. And no, crying a crocodile tear over the fate of millions of women does not make up for the amorality of the "progressive" stance on this issue.