Paying the $600 Billion Bill For Healthcare is Now Your Problem

Rodney Johnson | Thursday, February 21, 2013 >>

We’re staring down the barrel of a loaded gun.

And the gunman’s trigger finger’s getting heavy.

The gun? Public pensions and retirement healthcare benefits.

The gunman? Money. Or lack thereof to be more precise.

We raised the alarm, back in 2006 already, about the crisis in funding these services. Back then the problem was estimated to be a combined funding shortfall to the tune of about $500 billion. By 2008 the problem had grown to a $1 trillion shortfall. Now we’re facing a $1.3 trillion black hole.

This situation continues to grow out of control because no one is making changes big enough, or fast enough, to stem the rising tide of costs.

Until now that is…

The Affordable Care Act, due to take effect in 2014, introduces a path for cities and states to move their retirees onto the rolls of public exchange healthcare systems… and have it paid for through federal subsidies.

In other words, we (that’s me and you) get to foot the bill.

Naturally cities, states and public worker unions are giddy at the prospect because it takes a monkey off their backs. Now we get to carry it around.

In case you missed it, the Affordable Care Act requires everyone to have health insurance or else face a fine. The act also requires large employers to offer affordable care to their employees (insurance that costs less than 9.5% of income) or face a penalty.
There are some gaps in this, like for people who work at small companies or who retired before they could enroll in Medicare… or even those that don’t work at all. For these people there’s supposed to be access to government-sponsored insurance exchanges in each state. Each person’s cost of healthcare will become part of their income tax calculation. At low levels of income people will receive tax credits in order to make their healthcare affordable.

Pensions that public entities offer tend to be backed by the full faith and credit of the entity, like the State of California or the city of Harrisburg, PA. In many states these pensions are constitutionally guaranteed and can’t be reduced.

However, the same is not true of healthcare benefits. In almost all cases, healthcare benefits for retirees are not guaranteed. These benefits can be reduced or even eliminated. Because these costs are the fastest growing part of the underfunded problems public entities face, the idea of reducing such benefits is gaining traction. However, it would cause a political firestorm to suddenly tell millions of 55-65 year olds they don’t have healthcare.

And this is where you and I unknowingly and involuntarily come in.

If an early retiree is too young for Medicare, they are required to seek out their own insurance from a government-sponsored exchange. Most will likely qualify for some amount of tax credit to pay for the insurance.

Voila!

Healthcare for millions of public pensioners now paid for by national taxpayers… thus alleviating a great burden for the original city, state or other grantor of the benefits.

Thank goodness the national taxpayers don’t pay close enough attention to block such a move.


Rodney

P.S. The healthcare system in the U.S. is in crisis and something other than fleecing taxpayers for more money must be done… and soon. We expect to see a revolution take place in this industry in the next few decades, which is why we’re positioning Boom & Bust subscribers in unique investments in this realm. If you have any interest is making money, I suggest you get into these investments too. Details here.

 

 

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About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.