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The Real Healthcare Crisis: Retiring Seniors Need $500k To Cover Premiums Even With Obamacare

Courtesy of ZeroHedge. View original post here.

As Congress spends the next week and a half, if everything goes well, wrestling over how they can screw up healthcare in America even more, perhaps they should take notice of a new study from HealthView Services which highlights the fact that the real source of the healthcare crisis in this country is rising costs.

As Bloomberg notes, healthcare cost inflation is expected eclipse overall inflation and Social Security COLAs over the next decade.

U.S. retiree health-care costs are likely to increase at an average annual rate of 5.5 percent over the next decade. That’s nearly triple the 1.9 percent average annual inflation rate in the U.S. from 2012 to 2016 and more than double the projected cost-of-living adjustment (COLA) on Social Security benefits.

The premiums on supplemental insurance, also known as Medigap, that many people buy to cover costs that Medicare doesn’t, such as co-payments; on Medicare Part B, which covers payments for doctors, tests, and other medical services; and on Part D, prescription drug coverage. Here’s how your Social Security benefits are likely to stack up against some of those costs.

Shockingly, the reality is that a couple retiring today can expect to pay nearly a half million dollars in just insurance premiums over the course of the remainder of their lives.

For a healthy 65-year-old couple retiring this year with a future adjusted gross annual income of less than $170,000 after adding in any tax-exempt income, projected lifetime health-care premiums add up to $321,994 in today’s dollars.

Take a moment to appreciate that figure. It includes premium payments for Medicare Parts B and D, supplemental insurance premiums, and dental premiums. (The supplemental premium figure used is a national average, and premiums can vary greatly from state to state.)

Sadly, and shockingly, that doesn’t reflect the full range of likely expenses. Add in deductibles, co-pays, and costs for hearing, vision, and dental care, and the total rises to $404,253 in today’s dollars.

And, given the shocking inflation of healthcare costs in this country, the situation only looks worse for younger people.

Of course, excessively rising costs, for our legislators who may not be so good with the math, is usually the result of demand outstripping supply and/or perverse regulations that serve to distort free market forces.  In the case of Obamacare, we have both. 

As an example, before Obamacare many healthy young people, who we’ll refer to collectively as John Doe, chose not to even carry health insurance because it was a truly wasteful expense for them.  As it turns out, millennials can actually do some basic math and figured out that they didn’t need to spend $5,000 a year for an insurance plan when the odds are that they’ll get a cold one time, pay $150 to visit a doctor and $40 to buy some antibiotics.

But then Obamacare came along and forced John Doe to, not only purchase insurance, but to purchase a ‘souped up,’ expensive plan with all sorts of bells and whistles. 

Now, Democrats knew that that ‘souped up’ healthcare plan was really just a thinly veiled tax on John Doe…he wasn’t supposed to actually use it. 

But John Doe, didn’t see it that way.  From his perspective, if he’s paying for a service, he might as well use it…and hence the demand issue.

Moreover, that simple example says nothing about the adverse selection bias created by Obama’s subsidies and exchanges where people with absolutely no “skin in the game” can get ‘free healthcare,’ courtesy of the millionaire, billionaire, private jet owners in the country, and consume as much healthcare as they want basically free of charge. 

To make a long story longer, the net effect of Obamacare was that it added a ton of demand to an already undersupplied healthcare market which is why healthcare premiums are soaring.  Perhaps, just maybe, basic economic principles actually work and more ‘skin in the game,’ rather than less, and more people making their own decisions, rather than less, are actually good things?  Just a hunch but we hear that a lot of work has been done on the topic.

Of course, we highly doubt that any of this will stop our politicians from turning the healthcare debate into a fued between young and old and the rich and poor…afterall sowing division is how elections are won…and lost.


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