Tuesday, September 8, 2009

Comparing the House Bill's Cost to the Baucus Proposal

By Ian Welsh

Emptywheel has crunched the numbers on the Baucus plan, and has come up with how much money it will leave families if they actually have to use the insurance for any significant health care problems.

Here are her numbers for a family of four earning 300% of the poverty levels or $66,150.

Federal Taxes (estimate from this page): $8,710 (13% of income)

State Taxes (using MI rates on $30,000 of income): $1,305 (2% of income)

Food (using "low-cost USDA plan" for family of four): $9,060 (13.5% of income)

Home (assume a straight 30% of income): $20,100 (30% of income)

Bad Max Tax: $20,610 (31% of income)

Total: $59,785 (89% of income)

Remainder for all other expenses (including education, clothing, existing debt, transportation, etc.): $7,215 (or 11% of income.

Now, the House bill stops subsidies at EXACTLY the same level, 400% of poverty level. We can use Emptywheel's numbers for all of this. The difference is that the House plan limits premiums to 10% of gross income at 300% (pg 137, pdf), and out of pocket expenses to $10,000 per family.
So that makes the House Tax: $10,000 + 6,615 = 16,615 or 25% of income (as opposed to 31%).

The difference between the House plan and the Baucus plan is $4,025. Total expenses are $55,7607, or The remainder for all other expenses is $11,240 or 17% of income.
It's not a meaningless difference, $4,025 a year is $335 a month. But it's not huge, either. (Note: see update at bottom of post.)

Now, one might say the real difference is that the House plan has a public option, which will drive down costs. At best that's questionable. I don't think so, neither does Taibbi, and neither do various other people. Yes, a good public option would, but the House plan has a crippled public option. I strongly expect that most people at 300% are going to be paying 10% of their income, because that's what insurance companies are going to charge them, since that's what they can charge them.

If you object to the Baucus bill because it will force families to buy insurance that will still financially cripple them, then there's little reason not to object to the House Bill for the exact same reason.

Update: Dave Johnson points out the following (which would be true of Marcy and my numbers):
It seems you want to deduct the $20K insurance premium from gross income before you calculate the federal tax, so fed tax shouldn't be $8710, it should be
$66,150 - 20,610 = 45,540 * 13% tax = $5920 tax.

The difference is $2,790 to both the Baucus and House plan numbers. Which is slightly better for both of them. I leave it to readers to decide if it's enough better to make either of them a good deal.


  1. This is why the best long term investment which will yield the greatest value is Single Payer [though expensive now will pay-off in the long run and will be sustainable if young and old alike are able to get 'Medicare-for-all-like coverage]...the math has been done. We spend more now for lower value (short term bandaid gain) or spend more now (corrective surgery) for greater value in the future. We will be here again. Think about it.

  2. The success of Single Payer and Public Option bills are dependent on the proportion of money spent on maintaining the Insurance Industrial Complex profits and campaign contributions. The Math and common sense are not in play here. If they were, we'd have had a bill months ago. This is the issue. Can we, as a Country, rise above the massive amount of money involved and do the right thing? Remains to be seen.