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Saturday, July 25, 2009

Rural Millionaire's Asset Protection Feature Of Affordable Health Care

Among the things that completely amazed me about this bill was the fact that, out of the abundant kindness of your hearts, the government is apparently planning to provide massive subsidies to the genuinely wealthy. There is no asset test at all for the public subsidies for healthcare premiums and copays in this bill. None. Some people with millions of dollars of assets would qualify for thousands of dollars of public money some years.

Is this a good use of the public funds, especially when you consider our government debt held by the public, which was 5.1 trillion as of 12/31/2007, and as of Friday, July 24th 2009, had risen to 7.26 trillion? Look it up yourself. That is quite some burden we are bequeathing our children.

Perhaps this is a feature incorporated by Ivy League law school dropouts who found that law school was just too unbearably sordid for their refined sensibilities, and so left to go into public service where, you know, they could "really make a difference". Or perhaps it is a feature derived from years of rantings in NYC and DC about the stupidity of the violent, stupid and unteachable hominids roaming Kansas and various other districts of flyover country, including but not limited to Ivy professors who are waiting for some Jane Goodall type to come along and teach them how to communicate with the Homo Sapiens Plumberus (a primitive hominid found in the outskirts of urbania along with feral cats, coyotes, and urban foxes). This perspective on the great unwashed was capped by our current president's musings over the desperate, haunted lives of small town Americans, who are forced to turn to religion because nothing else in their lives works any more. I'm not sure that the movers and shakers grasp the concept that some of these folks are exceedingly comfortable.

This aspect of the bill leaped right out of me, because I immediately realized that some years the Ivy League professors were going to be giving me a lot of money. Tears of laughter rolled down my face as I blessed Jane Smiley and law school dropouts. Eventually, a residual sense of public responsibility and basic ethics kicked in, and I realized that this feature of the bill was a major flaw.

There are a lot of people like me - people with high assets who may not have a lot of income in any particular year. Based on what I've seen over the last few years, there may be a lot more of us now than formerly.
Perhaps the Ivy League professors are too communication-impaired to be able to discuss such things with the flyover trogs, but many of those trogs are holding large non-dollar assets. There is no need to go into this too deeply, but if Ron Paul had his way and we had a hard currency, literal convoys of Brinks trucks packed full of gold and silver would have been rolling up 95 and 75 from Florida into Georgia.

A lot of my friends and acquaintances sold out of Florida land and Florida banks and converted the proceeds out of dollar-denominated assets out of a violent, unteachably ignorant suspicion that the financial system had overreached itself and a major crash was coming. And a bulk of the liberated proceeds went into the type of hard assets that produce no income at all, such as land and so forth.

I strongly suspect that there are a lot of urban millionaires who are carefully managing their assets who may be reporting very little income this year either. You recognize some losses to offset our gains, and wala! The tax bite is very little.

In any case, surely there should be a net worth provision in this bill that blocks subsidies for wealthy individuals.

The section which I am discussing begins on page 132, and it is Section 242 - Affordable Credit Eligible Individuals, who are defined as legal residents not eligible for Medicaid and having family incomes below 400 percent of the Federal Poverty Level (FPL), and who are not covered by an employee health plan that costs 11% or less of their family income.

Very generous subsidies are provided for such individuals who are buying insurance through the health insurance exchange. The subsidies, which are on a sliding scale related to income, cover both the premiums and increase the benefits paid. This is the table (found on page 137) in Section 243:

You should be able to click on it for a larger image.

Federal poverty levels for 2009 can be found here.

This is the basic table:
The 2009 Poverty Guidelines for the
48 Contiguous States and the District of Columbia
Persons in family Poverty guideline
1 $10,830
2 14,570
3 18,310
4 22,050
5 25,790
6 29,530
7 33,270
8 37,010
For families with more than 8 persons, add $3,740 for each additional person.

There are different tables at the link for Alaska and Hawaii.

So the way this works out is that that a family of 2 can have MAGI (AGI plus tax-exempt interest) of $29,140 and qualify for federal health insurance and medical benefit payments as follows:

The annual insurance premium would be limited to $1,457. Beyond that, the federal government would cover it. For all actual medical expenses covered by the plan, 93% of them would be covered by the government. So let's say a 30% share of medical payments charges of $40,000 for would produce a $10,000 bill for the normal subscriber (this portion is capped at $5,000 individual and $10,000 family) under the bill. This family would only pay 1200 0 of cost-sharing that a non-subsidized individual would pay, this family would only pay $2,800. That total subsidy for this example year is well over $10,000.

All of that's very fine if this is a family without assets. But what if the family owns over 2 million in assets? The example I have given is not that unusual for many of my acquaintances. Or, for that matter, for the Chief and I. When you have major assets and no debt, you don't need much in income and a lot of years you won't be trying to maximize your income. Some years you will show a very high income, but most years you won't.

And suppose you are an early-retired couple with a house (paid off), a farm and $1,000,000 in bonds paying you 20K a year? You are still going to get a nice subsidy from the government. This is ridiculous.

Particularly in rural areas, you can live very well debt free with very low cash income if you have land. Families have hogs, or chickens, fish ponds, hunt a few deer. Let your neighbor hunt, you get wood. The ground has this interesting feature - if you put seeds in it, food pops up. Rural families can have major assets with very low cash income, especially when interest rates are so low. The other part of it is that when you are holding large chunks of property in non-dollar assets, you can go to a bank and get money any time. Even today, few banks are unwilling to give you 100K on a million-dollar asset. If you have assets, you don't need income most years. Low income doesn't mean that you are poor.

There are parts of this bill that just seem completely crazy to me. It's definitely a rush job that has not been analyzed or thought through. That, or Congress Critters are strongly in favor of asset protection plans for millionaires, which is, I suppose, possible.

Shhh. Do not tell them where to find more money. They will just find more ways to spend it!
This is just one more reason why, as John Stossel put it, it is unbelievably arrogant that these people believe they can run an industry that represents 17% of the economy. None of these people have read Adam Smith or, if they have, did not comprehend it.
...surely there should be a net worth provision in this bill that blocks subsidies for wealthy individuals...

Let's all pretend you never said that, MOM.

Low income doesn't make you poor, but high assets don't make you rich, either. I can think of some factories with lots of capital assets that don't earn much for the owner. You'd put every machine shop in the country out of business. Or force them to take on debt to lower their net wealth on paper, which would have the same result.

The big problem is that if they start a wealth-test for subsidies, it'll only be a blink of an eye before they're taxing wealth directly. They already do it through the back door--inflation plus cap-gains taxes. Let's not have a direct wealth tax on top of that!
Neil, currently those people with high assets are providing for their health care. You are not making anything worse by not subsidizing them.

I'm not saying that we should be subsidizing all these other people to such an extent either. Just that it is witlessly insane to contemplate passing a welfare program for millionaires. The people who have these assets do have a vested interest in not seeing the country go to hell.
MOM - I'm not really talking about the merits (or lack thereof) of subsidizing health-care for wealthy folks. I'm just noting that if Congress were to start thinking along these lines, it would devolve into wholesale wealth confiscation in a trice.

(tongue in cheek)Besides, you'll need the subsidies so you can pay for real health care. Those black-market statins and air-ambulance rides to the Bahamas can get expensive.(/tongue in cheek)
Tell me again how the food pops out of the ground thing works? Do I call ahead? Does it work for Sushi?
CF - The sushi comes out of bodies of water called "ponds". You have to fish ahead for it, which provides you an excuse to pretend you are doing something. In our neck of the woods, we cook the sushi. I am not sure how this would work for most city dwellers, because there is a cleaning step in between.

The ground thing is simple, but does require planning ahead a few months. You just scuffle up the dirt and drop some seeds in there.
Observed frequently that is undesired people with little credit, the one that it indicates for automatic device of the information entrance. It is to use sufficiently, the government responsible for the person in such type? It is my opinion that the rich individuals have relation of excessive processing of the energy in this country. Checks, empty, without the substance or content of the delay must their speech and stop the control of the addition. I had received the energy, from that receives the movable type. I did not obtain good to this country, that I worked very with my work with the plant of me I speculate on ignition, the end to think it my family. Abdul
Abdul,have you considered running for office in California? you make MUCH more sense than pelosi,feinstein or a host of others.
MoM I am having some difficulty cognitively with the realization that our political system is well and truly broken,that no amount of duct tape or chicken soup will fix it.I have a bone deep expectation that there enough people who care and who have influence,and that they will somehow some way get things more or less back on track.I have had the same difficulty in excising the phrase "No one is THAT stupid" from my vocabulary despite years of trying.
Hmmm, I've been reflecting on Tom's comment. Perhaps you were correct MOM, and I was too cynical.

Perhaps it's time to stop making allowances for a Congress that acts like a 2-bit grifter. Perhaps it is, in fact, time to start talking about what makes sense, and hold our representatives to a higher standard of responsibility.

I'm honestly not sure we can safely do that. But I'm quite sure the time is past for the feckless ba****ds we put up with now.
Neil,I am in california.Due to gerrymandering and the incestous nature of out politics it is not possible to hold our politicians responsible within the current system.
Tom, for a long time I thought it was a Democrat versus Republican thing and neither were particularly good. More recently I've begun to think it's them versus us. They expect to be our landlords and we're their tenants because you're right...nobody is THAT stupid
No one is that stupid, but my guess is that the bill is being railroaded to prevent the legislators from reading it.

I think most people realize we will have to deal with problems in both our health insurance systems and our health care system. Therefore I believe there is a good chance of any reasonable measures passing.

This, however, is not reasonable. I do think we will have to find a way to make our legislators accountable.
Well, as a home care nurse, working often with families who speak little or no English, I do the Medicaid thing all the time. There is rationing, of course. There is also, so far, the possibility of comparing what they are allowing to what a private insurance carrier would allow. This is a bit unfair, because, while the privates might spring for a new device or more expensive drug, they would not pay for sixteen hours a day of nursing care for eighteen years, as Medicaid has done for my patient. Still, I use what I can when I advocate for her.

For me, though, the larger issue, at least the one directly concerned with healthcare is this: If we have a lot of unwieldy bureaucracies now, how in the world do we expect we could make them more efficient by combining them all into one huge bureaucracy? Don't even try to persuade me that we would eliminate overlap, etc. Most people do not have two insurance policies. For the few who do, the insurance companies have easy rules to determine which one is primary and which one secondary. Beyond that, what one company does not cover, another does.
It's the middle of the night and I am at work. The ventilator keeps screaming false alarms. Besides the fact that I have a strong Pavlovian condition to respond to the damned things, I don't want them to awaken my patient's family. So, I jump back and forth and have done something to Blogger so that I can not log on. I m not Pusillanimus Anonymous. I am Michael Adams.

OK So, the larger idea is that no socialist scheme ever produced more efficiently than a private one, not cars, not schools, not health care, not ever.

Furthermore, I could pay a bit more heed to the people advocating this government takeover, if I did not catch them in so many obvious deviations from fact. First, we do not have forty six million people with no health care. We have forty six million uninsured, although even some of those have insurance for most of every year. We have people who choose not to pay for health insurance,because they are young and invulnerable. When they go to the hospital emergency room, they get treated, and admitted, if necessary. Yes, ER charges are higher than clinics. OTOH, if the kid (Anyone under thirty, to me, is a kid.) is sick enough to go to the hospital, he is probably going t need more than the usual clinic provides, anyway, so the ER charge is a drop in the bucket. Then there is the life expectancy scam: Europe and Japan do not count babies who die in the first couple of weeks as live births, which improves their average. Here, we count them all, which lowers our average. However, for those of us who live past a year, life expectancy is way better. Sorry, being at work, I can not provide links, but probably MoM has them at her fingertips, anyway.;)

We need to reintroduce some more market forces into the healthcare economy, and then we might need to expand Medicaid eligibility to cover the ten or twelve million folks who can not get coverage, because of income or pre-existing conditions. There is only one flaw: Such a course of action would do nothing to increase the amount of largess politicians could distribute to enhance their power.
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