for Political Economy
February 6, 2013
Paul Craig Roberts
The article below is
the most comprehensive analysis available of “Obamacare” – the Patient
Protection and Affordable Care Act. The author, a knowledgeable person who
wishes to remain anonymous, explains how Obamacare works for the insurance
companies but not for you.
formulated on the concept of health care as a commercial commodity and was
cloaked in ideological slogans such as “shared responsibility,” “no free
riders” and “ownership society.” These slogans dress the insurance industry’s
raid on public resources in the cloak of a “free market” health care system.
You will learn how to
purchase a subsidized plan at the Exchange, what will happen when income and
family circumstances change during the year or from one year to the next, and
other perils brought to you by Obamacare.
It is one of the most
important articles that will be posted on my website this year. Americans will
be shocked to learn the extent to which they have been deceived. The legislation
neither protects the patient nor are the plans affordable.
The author shows that
for those Americans whose income places them between 138% and 400% of the
Federal Poverty Level, the out-of-pocket cost for one of the least expensive
(lower coverage) subsidized policies ranges from 2% to 9.5% of Modified
Adjusted Gross Income (MAGI), a tax base larger than the adjusted Gross Income
used for calculating federal income tax.
What this means is
that those Americans with the least or no disposable income are faced in effect
with a substantial pay cut. The author provides an example of a 35 year-old
with a MAGI of $27,925.
The out-of- pocket
cost to this person of a Silver level plan (second least expensive) is $187.33
per month. This cost is based on pre-tax income, that is, before income is
reduced by payroll and income taxes. There goes the car payment or utility
The lives of millions
of Americans will change drastically as they struggle with a new, large expense
– particularly in an era of no jobs, low-paying jobs and rising cost of living.
The author also
points out that the cost of using the mandated policies will be prohibitive
because of the large deductibles and co-pays. Many Americans will find
themselves not only with a policy they can’t afford, but also with one they
cannot afford to use.
Those who cannot
afford the insurance, even with a subsidy, will be faced with a costly penalty,
and in many cases, this, too, will be difficult, if not impossible, to pay. As
each year’s subsidy is based on last year’s income, there will be a substantial
year-end tax liability for those who must repay the subsidy in whole or part
because their income increased during the year.
The stress alone from
such a regressive scheme is, without a doubt, not conducive to good health and
Diets will worsen
for millions of Americans as they struggle with a new large expense. Thus, the
effect of Obamacare will be to worsen the health of millions. Indeed, a
“glitch” in the legislation allows millions to be priced out of coverage. http://www.huffingtonpost.com/2013/01/30/
Americans might be able to acquire health insurance coverage but have no
doctors willing to treat them. http://www.californiahealthline.org/road-to-reform
The demand that
Obamacare places on household budgets in which there is no slack makes me
wonder where the president’s economists were while the insurance lobby crafted
the product that serves the profits of insurance companies. Two well-known
economic facts are that real family income has been stagnant or declining for a
number of years and Americans are over their heads in debt.
How does Obama
preside over a recovery when consumer purchasing power is redirected to
insurance company profits?
Obamacare not only
rations health care by what a person or family can afford, but also has
implications for Medicare patients. Hundreds of billions of dollars are
siphoned from Medicare to help pay the cost of Obamacare.
The health care
provided to Medicare patients will decline with the reduced payments to care
providers. Health care seems destined to be rationed according to the age and
illnesses of Medicare patients. Those judged too old and too ill could be
denied expensive treatments or procedures that would prolong their lives.
Obama will rue the
day that his name was put on this special interest legislation, and most
Americans, once they realize what has been done to them, will be angry that
special interests again prevailed over the health of the nation.
OBAMACARE: DEVILS IN
The Patient Protection
and Affordable Care Act of 2010, commonly referred to as the ACA or Obamacare,
will go into full effect in 2014. This decree mandates that all Americans must
purchase and maintain government-approved health insurance or pay a penalty to
Touted as a plan to
provide all Americans with access to medical care, in reality, this compulsory
shakedown commands everyone to purchase insurance that for many will be too
expensive, even with government subsidies – or unaffordable to use – or both.
The ACA was not
selflessly designed with the intent of providing affordable and equitable
medical services to those in need, but rather to acquire taxpayer money for the
private insurance companies under the seemingly helpful guise of health care
and the ideological excuse of personal responsibility.
It takes money from
ordinary people and gives it to a medical insurance industry that profits handsomely
from this legally-enforced corporate welfare – all while keeping Americans
locked in the same broken system that puts profit before patients. The law was
essentially written by business executives from the industry so that special
interests would not be upset and profits assured.
There’s a lot to
digest about how the ACA works and much is buried in a complex, convoluted maze
of regulations and procedures. A few websites contain explanations, but very
important details have either been left out or glossed over. These details are
well worth understanding so you will know what’s at stake for you and your
family. This lesson is not meant to convey a political opinion. This is how the
ACA works and under this law, there are no sacred cows.
In today’s lesson, you
will learn why 2013 is an important year for many of you with regard to your
income and the ACA. We will discuss 1) use of Modified Adjusted Gross Income,
2) tax credits (help paying for insurance), 3) your share of the premium, 4)
paying back the tax credits to the IRS, 5) expansion of Medicaid and estate
recovery which could affect you if you are put into that plan, 6) inadequate
coverage in most subsidized plans, 7) penalties,
exemptions and 9) a
few tidbits. We’ll also take a look at the agenda of Enroll America and the
Health Insurance Exchanges, and what you can expect to hear in the very near
Here we go. Fasten
your seat belts.
1. HEALTH INSURANCE
In 2014, each state
will have an Affordable Insurance Exchange where qualified individuals and
families with incomes between 138 and 400 percent of the Federal Poverty Level
(FPL) can shop for commercial insurance policies. Most individuals and families
with incomes at or below 138 percent FPL will be put into Medicaid. You may be
eligible for help paying for your insurance in the form of a tax credit. In
most states, the Children’s Health Insurance Program (CHIP) will continue to
cover children in families with incomes up to at least 200 percent FPL. Some
states may offer a Basic Health Plan for those who earn up to 200 percent FPL
and are not eligible for Medicaid. Under limited circumstances, you may also be
eligible for a cost-sharing credit.
Eligibility to receive
a tax credit, the amount of your tax credit and your out-of-pocket share for
the insurance will be determined by your income and where you fall in the
Federal Poverty Level Guidelines (FPL). This is easy to understand.
Your annual gross income determines which FPL you’re in.
For example, based on 2012 FPL Guidelines, an individual with an annual income
of $33,510 is at 300 percent FPL; a family of 4 with an annual income of
$69,150 is at 300 percent FPL. To see where you’re at, try the handy calculator
at this link. FPL Guidelines are revised every January, so the 2013 edition
should be up soon.http://www.safetyweb.org/fpl.php
The ACA requires use
of MODIFIED ADJUSTED GROSS INCOME (MAGI) instead of Adjusted Gross Income for
all determinations made by an Exchange including eligibility for Medicaid
except in certain cases. So, in this lesson, we’ll refer to annual income as
Gross Income (MAGI) is defined as Adjusted Gross Income PLUS
a) all tax exempt interest accrued or received in the taxable year;
b) the non-taxable portion of Social Security benefits provided under
Title II of the Social Security Act which includes old-age benefits, disability
benefits, spousal benefits, child benefits, survivor benefits and parental
c) tier 1 Railroad Retirement benefits that are not includible in gross
d) the exclusion from gross income for citizens or residents living
The adoption of MAGI,
created by the ACA, is defined in a new section of the IRS code.
ELIGIBILITY FOR A TAX CREDIT
The tax credit is to
help you pay for insurance. The ACA says it must be based on annual income for
the tax year it’s received, but since you will need help paying for your plan
during that year, the ACA allows for advance payment of the tax credit.
Here’s an example of
what that means: Let’s say you apply for insurance at an Exchange in 2014.
Therefore, 2014 is the tax year you will receive your tax credit, and per the
ACA, the amount you receive must be based on that year’s MAGI. But, that year’s
MAGI won’t be available until 2015 when you file your 2014 tax return and you
need help paying for your insurance plan when you buy it in 2014. So, the
amount of your tax credit has to be determined on information that is available
such as your prior-year (2013) tax return. Thus, the tax credit morphs into an
‘advance payment of the tax credit’ (also referred to as an advance premium
assistance credit). Now you see why 2013 is an important year for many of you.
The ACA allows for
limited disclosure of tax return info in order for an Exchange employee to
verify your citizenship status and MAGI, and, not only to let you know how much
your advance tax credit will be, but also to see if you are eligible to receive
this in the first place. An Exchange can also consider using your real-time
income by looking at your state’s most current quarterly wage database, or it
may agree to accept paper verification (pay stubs, etc.) as a last resort or an
attestation of your income with no verification. Creation of a federal ‘data
services hub’ is in the works so your income information will be more readily
accessible. But, no matter how this plays out, you’ll still receive an advance
payment of the tax credit because your actual MAGI for 2014 will not be known
by you nor can it be verified by an Exchange until you file your 2014 tax
return in 2015.
Ultimately, no matter
which method is used – prior year or partial current year – this advance
payment of the tax credit carries with it some heavy-duty consequences which
are discussed in topic 4 of this lesson.
3. TAX CREDITS AND
YOUR SHARE OF THE PREMIUM
The amount of your tax
credit will be based on the second lowest-cost Silver plan in the area where
you live and your MAGI. Here’s how this works – it’s quite simple:
a) First, the
amount you will pay out of your pocket for that Silver plan – copays and
deductibles not included – will be a specific percentage of your MAGI, and you
will pay this to the insurer on a monthly basis. The way this percentage will
be calculated is described a few lines down.
b) Next, your
share will be deducted from the cost of that Silver plan and the difference
will be your tax credit which the government will pay directly to the insurer
on a monthly basis when you purchase a plan.
percentage you will have to pay for the second lowest-cost Silver plan will be
based on your FPL using a well-greased sliding scale. As your FPL increases
little by little, the percentage you will pay increases. The same percentage
applies to an individual or a family. Here’s how much of your MAGI you will pay
for that Silver plan:
— up to 138 % FPL: 2%
for people legally present less than 5 full years and residents of states that
do not expand Medicaid
— 138-150% FPL: 3 to 4%
— 150-200% FPL: 4 to 6.3%
— 200-250% FPL: 6.3 to 8.05%
— 250-300% FPL: 8.05 to 9.5%
— 300-400% FPL: 9.5% – there’s no range, but the dollar amount of your share
will change because 9.5% of a lower MAGI is less than 9.5% of a higher MAGI.
Here are two examples
in dollars using 2012 FPL Guidelines and an estimate for a second lowest-cost
Silver plan which will vary depending where you live – actual costs are not yet
a) You are 35
years old and the price of the second lowest-cost Silver plan for an individual
in the area where you live is $4,750 with no tax credit. If your MAGI is
$33,510 ($2,792.50 per month) putting you at 300 percent FPL, your share for
that Silver plan, per the chart above, would be 9.5 percent of your MAGI which
comes to $3,183 ($265.25 per month). Your tax credit would be $1,567 which is
the difference between the unsubsidized cost of that Silver plan and your
b) You are 35
years old and your MAGI is $27,925 ($2,327 per month) putting you at 250
percent FPL, so, your share of that Silver plan would be 8.05 percent of your
MAGI which comes to $2,247.96 ($187.33 per month) and your tax credit would be
If the second
lowest-cost Silver plan is too expensive, you can apply your tax credit to a
Bronze plan which will be cheaper but less comprehensive. If you want a better
plan than the Silver, you will have to pay the full difference in the premium.
Don’t forget that your
share of the monthly premium will be figured on your MAGI which is pre-tax
income. So, after you deduct your income taxes and your share of an insurance
plan, will you be able to cover your monthly basic living costs including
paying off debt you may owe and still have some cash left to pay for medical
care if you have to use your insurance? Check out topic 6 in this
lesson for a rundown of plans and coverage you can expect to find at an
Exchange. Hope you don’t faint.
￼Once you purchase a
plan, your share and your tax credit won’t change until the next enrollment
period unless, before that time, your income goes up or down enough to bump you
into a different FPL or you get a job with insurance. You can let your Exchange
know by phone or via your online account, or, your Exchange might notice while
cruising the data services hub you learned about in topic 2 and notify you that
you must ‘up’ your coverage or that you’ve been tossed into Medicaid if your
MAGI has decreased enough to make you eligible for that plan. Exchanges will be
encouraged to use as many different avenues as possible including private
databases to keep tabs on your income.
Thus, you could end up
bouncing from Medicaid to a subsidized plan or vice versa. By the same token,
you could take some extra work to help pay the bills or to save for a vacation,
and, oops, you went over 400 percent FPL and are no longer eligible for a tax
credit. The Exchange may not find out about this unless you spill the beans,
but, no matter how it all plays out, income changes will catch up with you when
you file your tax return.
To be eligible for a
tax credit you must file your tax return no later than April 15. Married
taxpayers must file a joint return. Individuals who are listed as dependents on
a return are ineligible for a tax credit.
If you are eligible
for Medicaid, you will not be allowed to receive a tax credit or a cost-sharing
credit although some states impose premium and cost-sharing charges on certain
Medicaid enrollees per the Deficit Reduction Act of 2005 (DRA) and clarified in
the Tax Relief and Health Care Act of 2006.
On January 22, 2013, the Centers for Medicare &
Medicaid Services (CMS) proposed allowing states to further increase Medicaid
premiums and out-of-pocket costs by 5 percent. The most egregious part of this
proposed rule says that states may allow providers to deny services for failure
to pay the required cost-sharing in certain circumstances. The Obama
administration is behind this proposed rule hoping to persuade states to expand
Medicaid since many have refused and others are still undecided – the expansion
of Medicaid is an integral part of the ACA. Allowing states to further increase
premiums and cost-sharing for the poorest segment of the population under-
scores the existing political bias toward low-income Americans despite rhetoric
which claims otherwise. https://www.federalregister.gov/articles
Affordability rates (the percentage of your MAGI the government has decided you
can afford to pay for insurance) are based on boardroom formulas which don’t
take particular individual needs into account such as housing costs, property
taxes, debt, education, transportation, retirement savings, etc. Also, FPL
Guidelines are standard across the country and do not take into consideration
those who reside in a more expensive region or vice versa. They are
one-size-fits-all with the exception of Alaska and Hawaii. See topic 8 in this
lesson to learn about exemptions.
Check out what self-proclaimed health care expert Jonathan
Gruber says about affordability and get a load of all the “formulas.” According
to Mr. Gruber, you may be having too much fun in life and need to get serious,
buy health insurance and live under a rock in order to pay for it. He was
involved with Romneycare in Massachusetts and was also Mr. Obama’s go to man
under a no-bid contract. Per a bar graph on page 6 of a report prepared by Stan
Dom for the Urban Institute, subsidized plans under the ACA are estimated to
cost 2 to 3 times more (give or take) than the subsidized plans under
Romneycare. Per several surveys during the years that Romneycare has been in
effect, many low and modest income MA residents have had difficulty paying for
those plans and the out-of-pocket costs to use the insurance, particularly
4. PAYBACK OF TAX
CREDITS TO THE IRS
Perhaps you recall
hearing politicians including Mr. Obama say if you can’t afford to pay for
health insurance, the government will help you. That was one of the key talking
points repeated non stop. We just went over the help part – the tax credits.
Now we’ll look at what Mr. Obama et al didn’t tell you which is important to
understand because it could cause you some serious financial distress.
Remember the “advance
payment of the tax credit” in topic 2 of this lesson? Well, essentially, that
was a loan from the government which was paid in advance to the insurer on your
behalf when you purchased your plan, and, as you know, loans have to be paid back.
So, when you file your tax return for the year you received your “advance tax
credit” (your loan), if your income has changed, you have to settle this with
the IRS. Here’s the deal:
a) If your MAGI
is higher and the increase puts you into a higher FPL, you may have to pay back
a portion or all of the tax credit because it was based on a lower MAGI. In
other words, you could have an additional tax liability on top of the income
taxes you already paid (or still owe) because you received a higher tax credit
than you were entitled to.
￼b) If your MAGI
is lower and the decrease puts you into a lower FPL, a refund could be coming
to you because you were eligible for a larger tax credit than the government
paid to the insurer. In other words, you overpaid for your portion of the
c) If you earned
a bit more or less, but your extra earnings or loss didn’t bump you into
another FPL, you’re home free.
To figure out your
payback, you will have to enter the relevant figures on the reconciliation page
of the tax return. Changes in filing status such as the number of people in
your household will also have an impact. For those of you who marry or divorce,
the rules for the payback amount as well as the amount of the tax credit you
are eligible to receive will make your head spin – the computation includes
pre- and post-marriage FPL and uses the highest FPL of the two people involved.
Ditto for divorce.
Here is one of the
reconciliation explanations in IRS-speak: Your liability for an excess tax
credit you received must be reflected on your current year income tax return
subject to a limitation on the amount of such liability.
Oh! Limitation on the
amount of such liability. That sounds good.
Let’s take a peek at
the payback limitations on record at the time of this writing. “At the time of
this writing” are the operative words because the cap has been increased twice
since the ACA was signed into law. The original payback was capped at $400 for
families under 400 percent FPL and $200 for individuals. We’ll skip over the
first increase. The story behind the second one is that a particular revenue
stream was removed from the original law, so something had to be done to
compensate for this lost money. Thus, an amendment was passed that increased
the cap using a sliding scale, thereby putting a huge financial burden on the
backs of the very people the ACA claims to help. In other words, tag, you’re
it. You are the cash cow.
Here are the current
If the household
income (expressed as a percent of poverty line) is:
less than 200 percent, the applicable dollar amount is $600
at least 200 percent but less than 300 percent, the applicable dollar amount is
at least 300 percent but less than 400 percent, the applicable dollar amount is
Effective date: the
amendment made by this topic shall apply to taxable years ending after December
31, 2013. Very truly yours, House Ways and Means Committee
The name of this bloodsucker is The Comprehensive 1099
Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.
But wait, there’s
a) Update: Today (Feb. 17) (2011) the House Ways and
Means Committee approved the 1099 repeal bill which requires consumers earning
more than 400 percent of the poverty line to pay back the [entire]
b) Also, per IRS final regulations: for taxable years beginning after
December 31, 2014, the payback caps may be adjusted to reflect changes in the
consumer price index.
Payback amounts are
reduced to one-half for unmarried individuals who are not surviving spouses or
filing as heads of households. There is no help if you get hit with a payback
and many of you will have difficulty paying this liability.
Chances that you may
have received an incorrect tax credit are not exactly slim because this poorly
thought-out scheme does not take into account the unpredictable and complex
financial situations that confront the low and modest income population.
Keep in mind that by
ending up in a higher FPL, you may also have to pay more out of your pocket for
an insurance premium. You learned how that works in topic 3. If you can’t
afford a higher premium and drop your insurance, you may still owe a payback plus
a penalty for being uninsured which is also MAGI-based. Penalties are discussed
in topic 7. If your MAGI puts you over 400 percent FPL, you just knocked
yourself into left field and are on your own paying for an insurance plan on
the open market. And, you may also be required to payback the entire tax
If you get a job
during the current year that offers health insurance which is not more than 9.5
percent of your total salary and the coverage is not less than 60 percent, you
must take that insurance or pay a penalty for being uninsured. But, you may owe
a payback for the months you received a tax credit before you landed the job.
How large that payback is will depend on your MAGI for the entire tax year, not
just on your income during the months you received the tax credit. Or, you may
lose a job during the year and have a significantly reduced income even though
the amount reported on your tax return is high because you had a job for part
of the year. In this case as well, your payback will be based on your MAGI for
the entire tax year.
More interest income
from taxable and tax-exempt savings or a year-end bonus could also contribute
to an increased MAGI and the possibility of a payback as well as taking extra
work to help pay the monthly bills, house and car repairs, educational
aspirations or a vacation. So, whether or not you end up in payback land will
depend on how close you are teetering on the edge of an FPL. Ditto for your
share of the premium and the amount of your tax credit.
The payback may stop
many of you from purchasing insurance at the Exchange because you know in
advance you will not have the money to pay it. If this is the case, you may be
allowed to negotiate a lesser tax credit by paying more out of your pocket for
your monthly insurance premium in order to avoid or decrease the payback. It’s
a crap shoot. Considering what you’ve learned so far in today’s lesson, many of
you will find yourselves between a rock and a hard place under the ACA, and you
will be forced to make unten- able choices. Given the skyrocketing costs of
food, heat and other basics, how will you even tread water under this set-up,
nevermind get ahead?
Being told you will
receive help from the government if you can’t afford to purchase insurance and
finding out at tax time this was really a loan and you owe the IRS a
substantial debt on top of your income taxes is outright shameful. But most
politicians have no shame – which brings us to the next topic.
5. MEDICAID EXPANSION
AND ESTATE RECOVERY
In order to expand
Medicaid, several Medicaid regulations were changed:
a) the income
limit for eligibility was increased to 133 percent FPL, but since states must
apply a 5 percent disregard, this effectively raises the eligibility to 138
b) Modified Adjusted Gross Income will be used in most cases to determine
eligibility (also applies to certain CHIP applicants)
c) the age limit was increased to 64, childless adults will be eligible;
d) the asset test was dropped except for certain groups such as the
elderly and people on Social Security Disability – BINGO!
The fact that the
asset test was dropped is very important, but before we look at why, you must
first understand that if an Exchange determines you are eligible for Medicaid,
you have no other choice. Code for Exchanges specifies, “an applicant is not
eligible for advance payment of the premium tax credit (a subsidized plan) or
cost-sharing reductions to the extent that he or she is eligible for other
minimum essential coverage, including coverage under Medicaid and CHIP.”
Therefore, you will be tossed into Medicaid unless there are specific rules as
to why you would not be eligible. If you are enrolled in a private plan through
an Exchange and have been receiving a tax credit, and your income decreases
making you eligible for Medicaid, in you go. If you are allowed to opt out
because you don’t want Medicaid, you will have to pay a penalty for being
uninsured unless you can afford to purchase insurance in the open market.
Just so you’re clear
on this: the ACA stipulates that the system will ensure that if any individual
applying to an Exchange is found to be eligible for Medicaid or a state
children’s health insurance program (CHIP), the individual will be enrolled in
such a plan.
increase enrollment in health coverage without requiring people to complete an
application on their own, states are advised to automate enrollment whenever
possible by using existing databases for social services programs such as SNAP
(food stamps) to enroll people who appear eligible for Medicaid but are not
currently enrolled. Therefore, you could find yourself auto-enrolled in
Medicaid against your will if your state acts on this advice.
Many times over Mr.
Obama et al told you that all Americans would have choice. Choice was another
big talking point. Are poor and low-income Americans undeserving of choice? Is
the ACA a class-based system? Maybe they meant that for this segment of the
population, the choice would be between Medicaid or a penalty for remaining
uninsured. This is blatant discrimination.
Here’s why dropping
the asset test got the BINGO – Estate Recovery! You won’t find the following
info in the ACA. It’s in the Omnibus Reconciliation Act of 1993 (OBRA 1993) – a
federal statute which applies to Medicaid, and, if you are enrolled in
Medicaid, it will apply to you depending on your age.
a) OBRA 1993
requires all states that receive Medicaid funding to seek recovery from the
estates of deceased individuals who used Medicaid benefits at age 55 or older.
It allows recovery for any items or services under the state Medicaid plan
going beyond nursing homes and other long-term care institutions. In fact,
The Centers for Medicare & Medicaid Services (CMS) site says that states
have the option of recovering payments for all Medicaid services provided. The
Department of Health and Human Services (HHS) site says at state option,
recovery can be pursued for any items covered by the Medicaid state plan.
b) The HHS site
has an overview of the Medicaid estate recovery mandate which also says that at
a minimum, states must pursue recoveries from the “probate estate,” which
includes property that passes to the heirs under state probate law, but states
can expand the definition of estate to allow recovery from property that bypasses
probate. This means states can use procedures for direct recovery from bank
accounts and other funds.
c) Some states
use recovery for RX and hospital only as required by OBRA 1993; some recover
for a few additional benefits and some recover for all benefits under the state
plan. Recovery provides revenue for cash-strapped states and it’s a big
Your estate is what
you own when you die – your home and what’s in it, other real estate you may
own, your bank account, annuities and so on. And even if you have a will, your
heirs are chopped liver. Low-income people often have only one major asset –
the home in which they live and, in some cases, this has been the family home
through several generations.
So what this boils
down to is: if you are put into Medicaid – congratulations – you just got a
collateral loan if you use Medicaid benefits at age 55 or older! States keep a
Estate recovery can be
exempted or deferred in certain situations after your death, but the
regulations for this are limited and complicated with multitudes of conditions.
You may not have an attorney on speed dial, but with regard to this hundred
pound gorilla, it sure would be handy.
Should you decide to
ask your congresscritter about estate recovery, be prepared for responses such
recovery doesn’t apply to you.” (Great news. Please overnight a copy of the
amendment to OBRA 1993 that stipulates estate recovery is no longer required
and no longer allowed. Here’s my address.)
— “Oh, estate recovery is state, I’m federal.” (Wrong – estate recovery is
federally mandated although the estate recovery program itself is administered
by each state.)
— “I don’t know anything about this.” (Highly unlikely because the
expansion of Medicaid is an integral part of the ACA and estate recovery is not
— “The ACA wasn’t about revamping Medicaid.” (As explained above, Medicaid
regs were revised in order to expand Medicaid.)
— “I’ll look into that and get back to you.” (Don’t hold your breath –
they don’t want to go there.)
If you ask about
estate recovery when you contact an Exchange or speak with an outreach agency,
you’ll probably run into a brick wall or be told it doesn’t apply to you –
whatever. But, it doesn’t matter because what you are told is not legally binding.
What is legally binding is your signature on the Medicaid application which
indicates that you agree to the terms of the contract – which brings us to
another item in OBRA 1993. Read on.
OBRA 1993 also
contains procedural rules intended to ensure that individuals are informed
about Medicaid program requirements including disclosure of estate recovery
before they complete the application process and also during the annual
re-determination process. Notification of estate recovery should be on the signature
page of your state’s Medicaid application and is usually a one-liner: I
understand that if I am aged 55 or older, (name of your state’s Medicaid plan)
may be able to get back money from my estate after I die. (Use of the word
‘may’ doesn’t mean if the state feels like it – it means recovery will take
place unless there are specific circumstances for exemption or deferment as
mentioned above.) There are also strict recovery/repayment clauses for
injury-related settlements disclosed on the signature page and a few other
ditties that apply to you or a family member who is enrolled in Medicaid. All
of these items must also be disclosed in your state’s Medicaid handbook.
Under the ACA and
proposed federal rules for implementation, states will be required to provide a
single, simple application to apply for and enroll in Exchange plans, Medicaid
and CHIP, and consumers must be able to apply by phone, in person or online.
The Secretary (HHS) is charged with this task and it’s in the works. This begs
an answer to the following questions:
— Will Medicaid
applicants be diligently informed about estate recovery and other rules that
apply to Medicaid enrollees on this single application? Failure to do so would
be in non compliance with OBRA 1993 and would also be deceptive.
— Will applicants be provided with a signature page that contains
appropriate disclosure of these rules so they can be reviewed before signing on
the dotted line?
— How will appropriate disclosure and obtaining a signature work for those
who are bumped into Medicaid due to a decrease in income or who might be
auto-enrolled because they were presumed eligible through a database.
If an applicant or
someone who has been bumped or auto-enrolled in Medicaid is not satisfied with
the terms of the Medicaid contract, lack of another health insurance option
that is in the best interest of low-income earners represents undue and
unconscionable advantage being taken of this segment of the population under a
law that mandates health insurance or a penalty.
Do the health
insurance policies enjoyed by lawmakers on Capitol Hill and paid for by
taxpayers include an estate recovery program?
Medicaid is poor,
underfunded, overstretched and constantly bombarded by state budget cuts – even
before an ACA expansion. It offers a low quality of care in many states, and,
in general, represents inequities in care. Office-based doctors typically
refuse to accept Medicaid patients, thus, millions thrust into this plan will
have difficulty finding a primary-care doctor or a specialist.
A perfect example is the December 2012 federal appeals
court decision that allowed California to cut reimbursements by 10 percent to
doctors, pharmacies and others who serve low-income residents under the state’s
Medi-Cal plan (a version of Medicaid) due to state budget issues. California
was already at the bottom of the rate-reimbursement heap which made finding
doctors difficult for residents in Medi-Cal. This decision will further reduce
the number of health care providers willing to take new Medi-Cal patients, thus
jeopardizing their access to primary and specialized care. Under the ACA’s
expansion of Medicaid, state budget crises across the nation will exacerbate
the ongoing problems regarding access to care for Medicaid patients,
particularly in states that have a high low-income population. http://www.sfgate.com/health
6. INSURANCE PLANS AT
Below are the 4 plan levels that will be offered at
Exchanges for people between 138 and 400 percent FPL. Each one has government-
approved benefits including prescription coverage. You will be entitled to one
free preventive visit each year. Per the most recent study commissioned by the
Kaiser Family Foundation, several cost-sharing options were estimated for
non-group (individual and family) Bronze and Silver plans. Cost-sharing is the
amount you must pay to use your insurance. Your share of the premium is not
part of cost-sharing. http://www.kff.org/healthreform/upload/8303.pdf
The way this works is
you will pay for all your medical care until you reach the annual deductible.
Then you’ll pay the applicable percent- age of coinsurance until you reach the
annual out-of-pocket spending cap which will be set on a sliding scale. Annual
means these amounts start again the following year, and if they change, you
will find out when you re-apply for insurance. There will also be copays – an
amount you will pay to the doctor for an office visit.
Here are the current estimates:
Bronze: cheapest and
dry as dust with 60/40 coverage – a win-win for insurers
a) annual deductible of $4,375 for an individual (double for a family)
with 20 percent coinsurance, b)annual deductible of $3.475 for an
individual (double for a family) with 40 percent coinsurance
Silver: next cheapest
– offers an illusion of coverage at 70/30
a) annual deductible of $2,050 for an individual (double for a family)
with 20 percent coinsurance, b)annual deductible of $650 for an individual
(double for a family) with 40 percent coinsurance
Gold: expensive –
80/20 – better coverage
Platinum: most expensive – 90/10 – most comprehensive coverage
A fifth plan will be
available for the under-30 crowd and people who have been granted a hardship
exemption. See topic 8 in this lesson. Coverage in this plan will be less
comprehensive than the Bronze – it is primarily for major-medical expenses
except that it has a free preventive visit. Cost-sharing for people at 138 to
200 percent FPL is estimated to be a bit less than the Bronze and Silver
estimates mentioned above.
The high deductibles in all but the two most expensive plans could saddle you
with mounting bills for routine care and may stop you from seeking necessary
treatment for illness or injuries. Many of you will find that the promise of
access to affordable health care really means access to inadequate coverage at
a price the government has decided you can afford to pay.
The number of drugs in
each plan at an Exchange will vary from state to state. In some states, plans
will offer up to 99 percent of available drugs and others only 45 percent which
means you may not have access to the specific drugs you need. Perhaps Big
Pharma will change its stance on this before 2014.
The cost of plans at
an Exchange will vary from state to state based on where you live and your age.
The ACA allows insurers to charge older customers up to three times more for a
plan, even if they are in good health, as long as the state in which an
Exchange is located doesn’t have a law that caps age-rating. Some Exchanges
will tuck an administrative fee of 2 to 4 percent into premiums to help cover
credits will be available if you are below 250 percent FPL to protect you from
high deductibles and copays – but only if you purchase a Silver plan. If you
buy the cheaper Bronze plan, you won’t be eligible for these credits, which are,
by the way, direct federal payouts to private health insurance companies.
Obamacare has no cost
controls. There is nothing stopping the insurance companies from increasing
their rates, and Washington has already estimated higher premium costs at the
Exchange for 2016 which doesn’t mean that 2015 won’t have an increase. Sounds
like 2014 prices will be an Introductory Offer. Get ‘em while their hot!
7. PENALTY FOR BEING
The ACA requires that
people who have been deemed able to purchase health insurance but decide not to
buy it starting in 2014 will owe a penalty (a tax) to the IRS. Here’s what this
a) In 2014, the
annual penalty will be $95 per adult and $47.50 per child, up to a family
maximum of $285 or 1 percent of family income, whichever is greater.
b) In 2015, the penalty will be $325 per adult and $162.50 per child, up
to a family maximum of $975 or 2 percent of family income, whichever is
c) In 2016, the penalty will be $695 per adult and $347.50 per child, up
to a family maximum of $2,085 or 2.5 percent of family income, whichever is
The IRS collects the
penalty, but the ACA stipulates that taxpayers shall not be subject to any
criminal prosecution or penalty, tax liens, seizure of bank accounts or
garnishment of wages for failure to pay it and no accumulation of interest on
the unpaid balance. So, it appears that all the IRS can do is deduct the
penalty from a refund it owes you, and if you’re not due a refund, then you’ll
have an out- standing tax obligation.
Keep in mind that the
penalty is described in annual amounts but is really monthly. So, if you are
uninsured for only part of the year, you will accrue only 1/12 of the total for
each month you are uninsured unless you qualify for an exemption.
8. EXEMPTIONS FROM THE
You may be eligible
for official permission that excuses you from having to pay the penalty for
being uninsured. The requirements are:
a) If the
cheapest health care plan available costs more than 8 percent of your MAGI
after subtracting the tax credit or employer contribution, whichever is
b) Your income is so low that you aren’t required to file federal income
c) You are between jobs and without insurance for up to three months.
d) You have a sincerely-held religious belief that prevents you from
seeking and obtaining medical care.
e) You are in jail.
f) You are an undocumented immigrant.
g) You are a member of an Indian tribe or a religious group currently
exempt from paying Social Security tax.
If item d) is the case,
you must file a sworn statement as part of your tax return, and should you
obtain care during the tax year, the exemption will no longer apply and you
will have to pay a penalty for being uninsured. Per H.R. 6597, medical care is
defined as acute care at a hospital emergency room, walk-in clinic or similar
facilities. Medical care excludes treatment not administered or supervised by a
medical doctor such as chiropractic, dental, midwifery, personal care
assistance, optometry, physical exams or treatment where required by law or
third parties such as an employer, and vaccinations.
If you think you can’t afford the amount the government has decided you can
afford to pay for your insurance plan, and you don’t fit into any of the
categories described above, you can apply for a Hardship Waiver. Details have
not yet been provided regarding hardship eligibility requirements under the
ACA, but, for an idea of what they might look like, let’s check out what the
deal is in Massachusetts which already has a mandated health insurance law –
Romneycare! In fact, Romneycare was the model for Obamacare. That’s why some
people call Obamacare, Obamneycare.
To qualify for a
Certificate of Exemption under Romneycare, a Massachusetts resident must
demonstrate that health insurance is not affordable due to one of the
following: 1) homelessness; 2)eviction or foreclosure
notice; 3) domestic violence-related medical
trauma; 4) major long-term illness of a child; 5) death of
your spouse; 6) your house burned down; or 7) “you can establish
that the expense of purchasing health insurance would cause you to experience
serious deprivation of food, shelter, clothing or other necessities.”
Ya gotta luv number 7.
And in Massachusetts, exemptions come with an expiration date, so you have to
clean up your act in short order. Under the ACA, the Secretary of Health and
Human Services will determine if, indeed, you have suffered a hardship that
keeps you from being able to pay for coverage.
9. OTHER TIDBITS
There is much more in
the ACA including all kinds of rules and penalties for employers, employees and
the self employed as well as the Accountable Care Organization (ACO) model
which will be mandated starting in 2014. The latter works as follows: under the
simplest option available, a small group of doctors and hospitals – an ACO –
will manage your care and be graded and paid based on the outcome of all
patients who seek treatment with that ACO. The ACO will also be rewarded with a
share of the savings in health costs it achieves by following best treatment
practices and reaching specific benchmarks set by CMS. The second option,
“shared savings plus risk,” is for larger ACOs. Providers will receive a
lump-sum payment to treat their patients and assume a portion of the risk for
above target spending but are eligible to keep a greater portion of the
Either of these
options reduce patient care to numbers and paperwork because doctors are
essentially controlled and incentivized by an administrator in some far-flung
office. The ACO model is the insurance industry’s version of “budgeting” the
cost of health care which ultimately benefits insurers at the expense of
doctors and their patients.
Doctors say that basing their pay on treatment outcomes
creates an incentive for them to avoid tough cases whose outcomes could “kill
my numbers.” “Paradoxically,” writes Dr. G. Keith Smith, “doctors who are doing
sham surgery will be the ones with the best outcomes, as their patients, many
of whom don’t need surgery in the first place, will exhibit great, basically
perfect outcomes. Physicians who don’t do unnecessary surgery will be pushed to
do so to improve their ‘scores.’ ‘Pay for performance’ trends in medicine are
not a good idea in my opinion. Paying based on patient outcomes will have
perverse effects, not the least of which will be the complete denial of care to
the very sick.” http://www.medibid.com/blog
The ACA also requires
Health Insurance Exchanges to establish a navigator program to inform the
uninsured about the availability of government-approved subsidized plans at an
Exchange and to facilitate enrollment in these plans, but it leaves the design
of the program up to each Exchange.
Depending how an Exchange sets up its program, some
Navigators will sell plans offered by an Exchange while others will be
responsible for maintaining the existing market but may also be allowed to sell
Exchange plans. All seller Navigators will be compensated either by Exchanges
or insurance carriers for the plans they sell. Many options are being
considered by Exchanges including using insurance agents. Hopefully, Navigators
and insurance agents will not be knocking on your door or contacting you by
phone. That would be over the top. Here’s a link to read what the California
Exchange is pondering with regard to its Navigation program. http://www.healthexchange.ca.gov/StakeHolders/Documents
10. ENROLL AMERICA,
HERNDON ALLIANCE & THE EXCHANGES – MASTERS OF SPIN
Since many Americans
don’t know about the ACA, somehow the word has to get out and people must be
encouraged to purchase health insurance either in the open market or at an
Exchange. And who better to do this?
Enter “Enroll America”
– a nonprofit 501(c)3, financially backed by Aetna, Blue Cross Blue Shield,
UnitedHealth, America’s Health Insurance Plans, hospitals, associations that
represent drug manufacturers and nonprofits with vested interests. For insurers
and pharma, the ACA is manna from heaven – scratch that – manna from Capitol
Hill – and the dollar signs in their eyes are on fir