Amazing
It is clear that there is an incredible amount of complexity in ACA. We are only just starting to see the cost estimates for implementing and financing national reform. Here is yet another unintended consequence of the law. Yesterday, we talked about two surveys estimating that small employers will abandon their sponsored health plans in droves once the exchanges are created. National leaders are screaming that this estimate is way off and that it won’t happen. Today, comes the revelation regarding middle income early retirees and the potential $450 billion problem. The reality is that a full financial disruption analysis was never done on the law. We still believe that there is HUGE opportunity for proactive agents, brokers and consultants to be talking with their employer groups regarding the ‘efficient financing of their health plans’. All surveys point to the fact that there are employers who are beating trend and managing their plans to single digit increases. Hopefully, you are ahead of the curve informing employers about the strategy and tactics for the appropriate management of their plans. Plan sponsors are craving guidance. Jeff
The $450 Billion Glitch: 3 Million Extra Middle-Class Americans Eligible for Medicaid Benefits
Jun. 21 2011 – 2:59 pm | 3,856 views | 0 recommendations | 3 comments
By AVIK ROY
Richard Foster. Image by Getty Images via @daylife.
Wow. Philip Klein points us to this AP story, in which Richard Foster, Chief Actuary of the Centers for Medicare and Medicaid Services, says that, due to a glitch in Obamacare, married couples of early retirees making around $64,000 a year will become eligible for Medicaid. According to Foster, as many as 3 million Americans will qualify for the benefit. It’s “a twist government number crunchers say they discovered only after the complex bill was signed.”
If we do a back-of-the-envelope calculation, in which the average annual Medicaid expenditure per early retiree is $15,000 per year, the ten-year cost of this glitch could be as high as $450 billion. “It’s almost like allowing middle-class people to qualify for food stamps, [Foster] suggested”:
Medicare chief actuary Richard Foster says the situation keeps him up at night.
“I don’t generally comment on the pros or cons of policy, but that just doesn’t make sense,” Foster said during a question-and-answer session at a recent professional society meeting… “This is a situation that got no attention at all,” added Foster. “And even now, as I raise the issue with various policymakers, people are not rushing to say … we need to do something about this.”
Indeed, administration officials and senior Democratic lawmakers say it’s not a loophole but the result of a well-meaning effort to simplify rules for deciding who will get help with insurance costs under the new health care law.
The reason for the glitch, if you can call it that, is that prior to Obamacare, retirees’ Social Security benefits were counted as income in order to determine eligibility for Medicaid. Post-PPACA, Social Security benefits are no longer counted as income for this purpose, allowing millions of additional Americans to qualify for taxpayer subsidies.
I’ve been talking a lot recently about the problem of employer dumping under Obamacare, which could cost taxpayers trillions of dollars. This new early-retiree problem is a serious one as well. Obamacare’s defenders argue that the law is fiscally responsible—but they fail to remember that government spending almost always exceeds official projections. I’ll be interested to see what they have to say about this latest development.
UPDATE: The Congressional Budget Office says that “CBO took that new income definition into account in its estimate of Medicaid enrollment and costs. We have not separately estimated the number of early retirees who would be eligible under that income definition.”
Jeffrey Hogan|Northeast Regional Manager
Rogers Benefit Group
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