Obamacare is a Catastrophe That Cannot Be Fixed

by Charles Hugh Smith

Obamacare is a catastrophe that cannot be fixed, because it doesn’t fix what’s broken in American healthcare.

I just finished a detailed comparison of my current grandfathered health insurance plan from Kaiser Permanente (kp.org), a respected non-profit healthcare provider, and Kaiser’s Affordable Care Act (Obamacare) options. I reviewed all the information and detailed tables of coverage and then called a Kaiser specialist to clarify a few questions.

First, the context of my analysis: we are self-employed, meaning there is no employer to pay our healthcare insurance. We pay the full market-rate cost of healthcare insurance. We have had a co-pay plan with kp.org for the past 20+ years that we pay in full because there’s nobody else to pay it.

What we pay is pretty much what employers pay. In other words, if I went to work for a company that offered full healthcare coverage, that company would pay what we pay.

Kaiser Permanente (kp.org) is a non-profit. That doesn’t mean it can lose money on providing healthcare; if it loses millions of dollars a year (and some years it does lose millions of dollars), eventually it goes broke. All non-profit means is that kp.org does not have to charge a premium to generate profits that flow to shareholders. But it must generate enough profit to maintain its hospitals, clinics, etc., build reserves against future losses, and have capital to reinvest in plant, equipment, training, etc.

As an employer in the 1980s, a manager in non-profit organizations in the early 1990s and self-employed for 20+ years, I have detailed knowledge of previous healthcare insurance costs and coverage. As an employer in the 1980s, I paid for standard 80/20 deductible healthcare insurance for my employees. The cost was about $50 per month per employee, who were mostly in their 20s and 30s. In today’s money, that equals $108 per month.

In other words, I have 30+ years of knowledgeable experience with the full (real) costs of healthcare insurance and what is covered by that insurance.

Our grandfathered Kaiser Plan costs $1,217 per month. There is no coverage for medications, eyewear or dental. That is $14,604 per year for two 60-year old adults. We pay a $50 co-pay for any office visit and $10 for lab tests. Maximum out-of-pocket costs per person are $3,500, or $7,000 for the two of us.

We pay $500 per day for all hospital stays and related surgery; out-patient surgery has a $250 co-pay.

So if I suffered a heart attack and was hospitalized and required surgery, I would pay a maximum of $3,500 for services that would be billed out at $100,000 or more were Kaiser providing those services to Medicare.

(Yes, I know Medicare wouldn’t pay the full charges, but if Medicare is billed $150,000–not uncommon for a few days in the hospital and surgery– it will pay $80,000+ for a few days in the hospital and related charges. All of this is opaque to the patient, so it’s hard to know what’s actually billed and paid.)

In other words, this plan offers excellent coverage of major catastrophic expenses and relatively affordable co-pays for all services.

The closest equivalent coverage under Obamacare is Kaiser’s Gold Plan. The cost to us is $1,937 per month or $23,244 a year. The Gold Plan covers medications ($50 per prescription for name-brand, $19 for generics) and free preventive-health visits and tests, but otherwise the coverage is inferior: the out-of-pocket limits are $6,350 per person or $12,700 for the two of us. Lab tests are also more expensive, as are X-rays, emergency care co-pays and a host of other typical charges. Specialty doctor’s visits have a $50 co-pay.

The Obamacare Gold Plan would cost us $8,640 more per year. This is a 60% increase. It could be argued that the meds coverage is worth more, but since we don’t have any meds that cost more than $8 per bottle at Costco (i.e. generics), the coverage is meaningless to us.

The real unsubsidized cost of Obamacare for two healthy adults ($23,244 annually) exceeds the cost of rent or a mortgage for the vast majority of Americans. Please ponder this for a moment: buying healthcare insurance under Obamacare costs as much or more as buying a house.

A close examination of lower-cost Obamacare options (Bronze) reveals that they are simulacra of actual healthcare insurance, facsimiles of coverage rather than meaningful insurance. The coverage requires subscribers to pay 40% of costs after the deductible, which is $9,000 per family. Total maximum out-of-pocket expenses are $12,700 per family. This coverage would cost us $1,150 per month, and considerably less for younger people.

How many families in America have $9,000 in cash to pay the deductibles, plus the $13,800 annual insurance fees? That totals $22,800 per year. If some serious health issue arose, the family would have to come up with $12,700 (out-of-pocket maximum) and $13,800 (annual cost of insurance), or $26,500 annually.

Is healthcare that costs $26,500 per year truly “insurance”? I would say it is very expensive catastrophic insurance in a system with runaway costs.

The entire Obamacare scheme depends on somebody paying stupendous fees for coverage which then subsidizes the costs for lower-income families and individuals. How many households can afford $23,244 a year for Gold coverage plus $12,700 out-of-pocket for a total of $35,944 annually? How many can afford $26,500 for Bronze coverage?

Recall that the median household income in the U.S. is around $50,000.

How many companies can afford to pay almost $2,000 a month for healthcare insurance per employee? Even if employees pay a few hundred dollars a month, the employers are still paying $20,000 a year per (older) employee.

If an employer can hire someone in a country with considerably lower social-welfare/healthcare costs to do the same work as an American costing them $2,000 per month for healthcare insurance, they’d be crazy to keep the worker in America, unless the worker was so young that the Obamacare costs were low or the worker was a contract/free-lance employee who has to pay his own healthcare costs.

Uninformed “progressives” have suggested that “Medicare for all” is the answer.Their ignorance of exactly how Medicare functions is appalling; recall that Medicare is the system in which an estimated 40% of all expenditures are fraudulent, unneccessary or counter-productive, where a few days in the hospital is billed at $120,000 (first-hand knowledge) and a one-hour out-patient operation is billed at $12,000, along with a half-hour wait in a room that’s billed at several thousand more dollars for “observation.” (Also first-hand knowledge.)

Medicare is the acme of an out-of-control program that invites profiteering, fraud, billing for phantom services, services that add no value to care, and services designed to game the system’s guidelines for maximum profit. If an evil genius set out to design a system that provided the least effective care for the highest possible cost while incentivizing the most egregious profiteering and fraud, he would come up with Medicare.

Does Medicare look remotely sustainable to you? Strip out inventory builds and adjustments from imports/exports and the real economy is growing at about 1.5% annually. As noted yesterday in What Does It Take To Be Middle Class?, the real income of the bottom 90% hasn’t changed for 40 years, and has declined by 7% since 2000 when adjusted for inflation.

Here is Medicare’s twin for under-age-65 care for low-income households, Medicaid:

As I have observed for years, Obamacare and Medicare/Medicaid do not tackle the underlying problems of Sickcare costs in America. If you haven’t read these analyses, please have a look:

Why “Healthcare Reform” Is Not Reform, Part I (December 28, 2009)

Why “Healthcare Reform” Is Not Reform, Part II (December 29, 2009)

Type sickcare into the custom search box at the top of the left-hand column of the main blog page and you will find dozens of essays addressing what’s broken with American healthcare.

Obamacare is a catastrophe that cannot be fixed, because it doesn’t fix what’s broken in American healthcare. It is a phony reform that extends everything that makes the U.S. healthcare unsustainable sickcare.

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  • Fred

    I think I give up on this place. I’m moving back to Canada. They have a healthcare system that works.

    • sandollar_man

      Yeah, they like their system. And it’s not just that they like their system – they laugh at our system. And especially how we are unwilling to learn from others and even admit that we “can” learn from others. Instead we wallow in this sad defeatist attitude. American exceptionalism at it’s worst.

    • jack

      Cold up there — freeze your balls off – what does a ball transplant cost? Suggest Mexico.

      • Fred

        Canadian healthcare will pay for medical treatment in other countries if it’s not available in Canada.
        I’m not kidding, try that down here. So I’ll head down to Cabo for the transplant..:-)

  • Eric Swan

    Recently I was told by a neural surgeon that the cost of a surgical stainless steel screw was $1,100.

    • Chin

      Expensive way just to say “screw you”.

  • stealth

    Wait a minute…health insurance and deductibles costing as much as a house payment? I remember the “affordable” health care act was supposed to decrease health insurance costs to be equivalent to a monthly phone bill. Unbelievable what a train wreck this has turned out to be.

  • jack

    Why I get medical treatment in Mexico — cost is reasonable — treatment is superb and timely. Highly recommend doctors in Mexico!

  • majorx

    Obamacare and the election of Obama are a plot to transform America into a socialist state, hence destroy Freedom and Democracy. And do you think there will be civil rights in this new socialist state. Just the opposite because the Constitution will have been torn apart by then.
    You pathetic Obama supporters make me sick. If the Devil had run for President, you Obama supporters would have voted for him because he promised freebies for life; but like the Devil he was really promising Hell.

  • EdwardUlyssesCate

    These frauds and schemes are simply the ruling mob’s way of lyin’ and stealin’ from folks. Until we have a REAL House of Representatives to lookout for the 99%, frauds like the Federal Reserve, “Affordable” Health Care, Patriot Acts and other nonsense burying the working class will continue to exist and get worse. If you can’t imagine 435 independent districts sending a non-sociopath to represent the local 99%, then live with it. It’ll only get worse.

  • singlepayer

    Single Payer, Simple Payer… This whole charade of free market insurance based medicine is fiction, a ‘sick’ fantasy supported by an elite benefitting at the expense of the many

    • tham

      Read the damn article.

  • Rick

    OH Canada……….Thanks but one thing I enjoy is whatever happens and whatever services I need, I will get it 100% coverage………..You may have to wait , unless your need is urgent , then you jump to the front of the line but I never get a bill.
    WHY , is it impossible for Americans to see the system work the same.
    Honestly, if you see a 5% jump in federal taxes to pay for it, would it not be worth it ?
    Going broke and forking over your life’s work if you have a heart attack or need cancer treatment….That is just not right and having people turned away from a hospital because they don’t have money , how can that be OK ?
    Third world countries treat people better. Even Cuba , we just got back from there and they have doctors sitting in the resorts waiting for patients ( Canadians and Europeans mostly) $30.00 for a visit and medication for my wifes cough …Kid you not…Medication may have had some cocaine in it ( from Venezula) but her cough was gone in two days…………..Anyways….for what it is worth.
    I know when a Canadian travels out of country, the insurance companies say get on a private jet and fly home ( they will pay) rather than pay American rates for Hospital care……….What does that say….TOO EXPENSIVE !

  • Paul Lake

    As a Canadian with a spouse in the medical system, I would caution folks who think that the Canadian system is sustainable. We have indeed managed to carry on so far with a single payer formula but the law of exponents shows that a snapshot of the current status does not justify confidence that the system will continue as-is in the future. In particular, aging demographics, increased incidence of diabetes, dementia, increased cost of new medical technologies and capabilities, etc, have medical costs a a proportion of GDP rising faster than the rate of GDP increase.
    It is inevitable that ‘the system’ will have to adjust to these cost pressures, whether by rationing care, wait lists, de-listing covered services, means testing, or what have you. Remuneration in our system is far too high compared to the incomes of the productive sectors creating the wealth that supports it all. The educational ‘empires’ are partly at fault. Nursing no longer resembles the quasi-apprenticeship that it used to be. Rather, everybody seems to need a Bachelor’s degree, wasting years of time in instruction at great cost, with NO improvement in the quality of the program graduate compared to the older model of training.

  • eric swan

    I was told recently by a neural surgeon that the stainless steel screws that he occasionally uses cost $1,100 each! That sums to 20 or so of them for a fairly good brand new car!!! If step’n fetch it were really intent on reducing health care costs he would do something about this.

  • Canuck

    I’m a Canadian living in a border city and am totally stunned with the absolutely shitty American, insurance purchased, health care system. My wife and I are in our 60″s, on a pension and have a home worth about $500,000. We have had numerous surgeries in the past, and had we lived 20 miles to the east in America, our total equity would be a small trailer next to a factory! Never had we had to wait for important medical attention! Canada is a capitalistic country with a great many billionaires/millionaires living here. However, unlike America, Canadians have a “social conscience” with many universal Canadian benefits (health care/maternity/minimum wage etc) benefiting everyone in Canada. America, never think that life is great in your country!! As a nation, regarding universal benefits, you are worse off than many third world countries. Deal with that America; strive to change this disgraceful situation now.