Pay cuts for government health care subsidies

An eagle-eyed reader let me know that the Kaiser Family Foundation has a nice subsidy calculator up that you can play with.  You enter information about your income and situation, and you get to see how much health insurance and care will cost you in 2014.

It’s not all good news.

Let’s say you are a 60 year old divorcee in 2014.  You make $46,136, which is 401% of the poverty line.  You are therefore eligible for no subsidy from the government.  Your premium will be $10,162.  Should you actually need care, your out of-pocket costs will be capped at $6,250.

So in a best case scenario, your health insurance/care will cost you 22% of your income.  In a bad year (or a regular year if you have a chronic illness) your health insurance/care will cost you 36% of your income.  That’s not affordable.

Granted, the cost is so high that you would likely not be subject to the mandate.  Great.  So you continue to have the option to be uninsured.

The people who are going to be hit hardest by this are those making just over 400% of the poverty line.  Because, ironically, if you make just a little bit less – say $45,906 (399% of the poverty line), then – due to subsidies – your premium will cost you $4,361.  That’s less than 10% of your income.  And your out-of-pocket costs are capped at $4,167.  So the most you could pay in a year would be 19% of income.

That’s still a lot.  But it’s way less than if you make just over the 400% line.

I have yet to see a good answer for what the government is going to do when people start asking for pay cuts to get under the 400% line.  I don’t see why it won’t happen.

Aaron E. Carroll is an associate professor of Pediatrics at Indiana University School of Medicine who blogs at The Incidental Economist.

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  • Marc Gorayeb, MD

    C’mon; get with the program. Bow down to Obamanomics! And please don’t call the mandate a tax on the middle class. Oops. My bad! In Federal Court we are calling it a tax. For the rest of you unwashed masses, it is merely Congress exercising its Commerce Clause authority. Part of the Change You Can Believe In is our new moral code: The means are irrelevant; it’s the ends that count.

  • http://wellescent.com/health_blog Wellescent Health Blog

    These hard cutoffs in the bill seem to be one of the most difficult parts to swallow for a great number of people. The administration would be better off to use graduated subsidies above the limit in order to lessen the pain for those whose income floats around the limit.