Hey Paul: I am 60 years old and just retired. I have $500K in my retirement accounts, $200K in mutual funds, and a $300K home. I know I can’t start Medicare until age 65. What should I do for the next five years to secure health insurance?
Well typically you’d have to look into private insurance (expensive) or COBRA (expensive) or just try to stay healthy and pay out-of-pocket for medical expenses (risky). Maybe I shouldn’t be telling you this but just between you and me, Obamacare provides a great deal for people in your situation. The eligibility for health insurance premium subsidies is solely based on annual income not wealth. So someone like yourself with a net worth of $1M but without earnings, not withdrawing too much tax-deferred retirement income and not yet drawing social security benefits can be qualified for significant subsidies to your insurance.
I am starting to sound like one of those “one weird trick will save you thousands” pop-up adds but you do have to have the right mix of taxable income. If it is below 100% (or 138% in KY) of the Federal Poverty Level then you could be eligible for Medicaid. But Medicaid also has a wealth test that you miserably fail — essentially you can have a home and car but essentially no financial assets. You need to have income between 138% and 400% of the FPL to remain eligible for Obamacare subsidies.
Potentially you could use your retirement funds to hit the right taxable income and then use your mutual funds to maintain your desired standard of living. Of course the only goal in life is not to appear poor to draw government assistance so perhaps your insurance plans will necessitate looking into other options.
Hey Paul: What do you think about Obamacare?
First let me concur with Senator John McCain on his characterization of our President: “He’s a decent family man and citizen that I just happen to have disagreements with on fundamental issues. He’s not an Arab.”
On the positive side Obamacare has provided about 500,000 Kentuckians with free or heavily subsidized health insurance. There has likely been more work provided for medical professionals and their associates. I am not aware of any significant layoffs as employers couldn’t afford to pay another expensive employee benefit. This is due in part to the exemptions for small businesses to provide employer-based insurance.
On the downside I think Obamacare “worked” for two reasons. First the U.S. medical and insurance industry was and still is bloated with inefficiency and unexplainable high costs. Obamacare has soaked up some of this waste and put it towards health insurance premiums. However the health system remains on an unsustainable path. Second, as the examples in this column have illustrated, the large uptake in insurance is basically due to the huge subsidies. No company would claim success on an extraordinary give-away program.
So what’s wrong with Obamacare? Let me relate my own personal experience in taking my wife in the middle of the night to the ER for severe stomach pains. While waiting to get her admitted we sat in the lobby area. I put my hands over my face and doubled over letting out a dull grown. My wife asked me if I too was feeling sick. No, I said, I just was reacting to being in place without prices — a living hell for an economist. She felt no sympathy.
The problem with the American medical industry and the attendant insurance business is not that we need government subsidies or to allow interstate competition or anything else being put forward by our current or next President. We need to let people make decisions based on information including prices and quality of services. Our current system including Obamacare invites a “buffet strategy” with very limited incentives to economize on our use of precious resources.
About 15 years ago there was a push for high deductible (catastrophic) plans coupled with Health Saving Accounts. This was a big step in the right direction. But prices remained a mystery so the system remains broke. In the mean time, I’ve found that after a doctor’s appointment that wondering through Lowe’s observing the posted prices restores my belief in the capitalism system.
Dr. Paul Hamilton is an Associate Professor of Economics at Asbury University and a CFP providing financial coaching to middle-class Americans. He is available to provide free workshops to churches, local businesses and other groups.