If you’ve paid any attention to the raging health reform debate, you probably think the key issue is whether we will get a public health insurance option or a system of government-supported cooperatives. Wrong. The main event for you is that your under-40 generation is about to be shafted by my over-50 one—big time. We’re about to enact yet another one of those intergenerational transfers from you to us that we’ve become so good at, having gotten away with it on Social Security ($17.5 trillion in unfunded liabilities), Medicare ($74 trillion), and the national debt ($11.7 trillion). To put these numbers into perspective, the entire U.S. GDP is only about $14 trillion. Oh, well, in for a penny…
While you’ve been busy with school or building families and careers, we’ve been paying attention to issues that affect our exchequers. We also have AARP (you don’t). But most important, we vote to put people like us in office. They make a big show of “taxing the rich” and then they quietly borrow against your credit for the really big stuff. The rest of us throw out a covering smokescreen about “not putting huge burdens on our children.” And then we do that.
Unfortunately, you can’t count on later shoveling these obligations onto your kids as age inevitably turns you into us—as we and previous generations have done. The accumulated liabilities are just getting too big. You’re probably going to be the generation that finally has to pay the piper in higher taxes and lower living standards. (Then you can read my book Cured! for the health care fix.)
Here’s how we’ll screw you with health reform. If you’re a child, we’re going to raise your insurance premiums by 59%, while lowering mine by 21%—overnight. That will be the inevitable result of a well-hidden technical provision I call the “2x Rule” that’s in both the House and Senate health reform bills. Understanding the 2x Rule is tricky, but that’s what makes it so easy to obscure. (Editor’s note: The Affordable Care Act that passed in 2010–subsequent to this post–mandated a 3x Rule, which has the effect of changing the calculations, but not the overall effect of the following analysis and conclusions.)
Right now, virtually all private insurance is age rated. That means the older you are, the higher the premiums your insurer charges you or your employer, because we older people consume a lot more health services than you do. There used to be something called “community rating” that tried one-price-fits-all, but it caused so many problems that nobody but the truly uninformed (e.g., the average member of Congress) or the terminally greedy (AARP) ever wants to revisit that.
The age-rated insurance premium for the average 64-year-old is about six to seven times as much as the average 20-year-old’s premium. Almost nobody knows this, because most people get their insurance from employers that charge them flat rates for their share of the premiums—regardless of age. So youngsters with employer insurance are already being screwed by having to subsidize their older co-workers who consume a lot more medical care and usually make a lot more money. That’s why so many young workers don’t take their employers’ insurance—it’s a bad deal. Nonetheless, we like to ignore that and blame them for thinking they’re invincible.
A growing number of you are going outside your employers and buying individual insurance directly from insurance companies. In most states, like my Colorado, it’s really cheap, because age-rating allows people like my own kids (ages 19 and 20) to buy really good insurance for less than $100 a month.
But Congress and President Obama want to impose the 2x Rule so that the oldest privately insured people (i.e., people like me) can’t be charged more than twice as much as the youngest (i.e., people like you). When the 2x Rule takes effect, premiums for children will immediately increase by at least 59% and those for 18-24 year-olds will go up by 44%. Mine will drop 21%. If you try to go without insurance, the government will slap you with either a 2.5% tax on your income (House version) or a penalty equal to the insurance premiums the government insists you pay (Senate version).
Either way you’re screwed. If you think this is somehow un-American, you’re wrong (it used to be, but things have changed). However, you’re not reading this anyway, and you’ve probably already reconciled yourselves to having a standard of living below ours. Still, you can try to stop your congresspersons by emailing them from www.senate.gov or www.house.gov. Good luck.