Investment Workshop 25: Obamacare Repeal…Again

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Wanderer

The Wanderer retired from his engineering job at a major Silicon Valley semiconductor company at the age of 33. He now travels the world, seeking out knowledge from other wealthy people, so that he can teach people how to become Financially Independent themselves.
Wanderer
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Hello again and welcome back to the Millennial Revolution Investment Workshop! New readers, please click here to start from the beginning.

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We’ve been yammering away about the Canadian housing market for a few weeks so I thought it would be interesting to check in with our American friends and see what they’ve been up to.

Well, as it turns out, a LOT.

I thought we were over this crap weeks ago, but in the past few weeks the Republican plan to Repeal Obamacare has been showing back up in the news, and in rather alarming fashion.

The House Freedom Caucus announced Wednesday that with new changes to the Republican Obamacare repeal bill, the conservative lawmakers are now willing to support the bill and are urging the rest of their party to get behind it as well.

Freedom Caucus backs Obamacare repeal bill with new changes, USA Today

Why Is This Important?

Let’s back up for a moment.

To all our Canadian, British, and Australian readers, feel free to sit back and relax. You all have Universal Health Coverage, so your health care strategy in retirement is no different than your health care strategy when you were working: Do nothing, your government will take care of you.

However, to our American readers, this is a massively important issue. This is because in America, health coverage is tied to your job. If you don’t have a full-time job, you don’t have health coverage. So if someone were to, say, retire in their 30’s, the burden of providing health insurance would fall from the employer to the individual.

And that cost can be substantial. In 2016, the average cost of insurance premiums for a family in the US was $833 a month, or $10k a year. That additional continuing expenditure increases your retirement portfolio (as per the 4% rule) by $10k x 25 = $250k! So that shit ain’t cheap.

But all that changed with Obamacare, which introduced income-tested Federal Subsidies to help pay for health insurance premiums. Now, someone who’s FI could leave their job and retire without fear of not being able to afford health insurance, as our good buddy Justin McCurry from RootOfGood wrote about: OBAMACARE MAKES EARLY RETIREMENT EASIER AND MORE SECURE.

How Did We Get Here?

So for those of you who aren’t news junkies like me, let me recap. When the Republican Party came into power, they assumed control over the House, the Senate, and the White House, so everyone figured (including me) that Obamacare Repeal was a done deal. With nothing opposing them, Congress should have turned into a rubber-stamping legislation factory who would quickly make good on all of Trump’s campaign promises, of which one of the biggest-ticket items was Repealing Obamacare.

That didn’t happen.

Instead, the Republican party devolved into intra-party bickering, in which the Moderate/Centrist Republicans couldn’t support the bill because it threw too many people off of health insurance. Meanwhile, the far-right Freedom Caucus couldn’t support the bill because, and I shit you not, it didn’t throw enough people off of health insurance.

How politicians like this get elected, I will probably never understand.

Anyway, the end result was a messy and highly embarrassing/hilarious debacle in which the Republicans were forced to pull their own bill from a vote, leading to House Speaker and bill author Paul Ryan to declare in March that “Obamacare is the Law of the Land.”

So What Just Happened?

Well, as I mentioned back there at the top of the article, last week it came out that Republican Leaders had made a deal with the Freedom Caucus that was largely responsible for sinking the bill the first time, and that they were now willing to vote yes.

So what did they offer them?

Apparently, an amendment that allowed individual states to opt out of regulations mandating what insurance policies could or could not do. For example, they could now decide to drop maternity benefits from their policies. Ditto with mental health treatment. And they would once again be able to discriminate against people with pre-existing conditions.

That last point is HUGE, because the ban against charging different amounts based on pre-existing conditions was the single biggest change that Obamacare made to the health insurance market. Not the subsidies. Not the exchanges. The Pre-existing condition discrimination ban.

Before Obamacare, insurance companies would happily take your money and sell you insurance. But if you ever got seriously (and expensively) sick and it turns out you had a pre-existing condition, they could claim you lied on your initial application and drop you from your coverage. And because a “pre-existing condition” can be pretty much anything, this led to absurd situations where women were denied health care because they once had a yeast infection, or a baby being denied because they were too fat.

Obamacare fixed that loophole, and now they’re trying to roll it back.

So What Do We Do Now?

For now, nothing. We will continue to monitor the health care situation as it develops and provide updates as they come in, specifically how it affects our American readers who are trying to achieve Financial Independence.

The situation seems surprisingly fluid so far. Just a few days ago, Republican leaders were crowing that they were confident they could get this bill passed, but just yesterday, it was reported that key Republican House members were saying they were pulling support because it removed protections for exactly this issue.

“I have always stated that one of the few good things about Obamacare is that people with pre-existing conditions would be covered,” Long said in a statement. “The MacArthur amendment strips away any guarantee that pre-existing conditions would be covered and affordable.”

GOP suffers surprise defection on Obamacare repeal, Politico

And in a weird quirk of Senate rules, because the Senate normally requires 60 votes to get legislation passed (which the Republicans don’t have), they are relying on a legislative tool called reconciliation which only requires a simple majority. But for some reason, once they pass a budget to keep the government from shutting down this Friday, they will lose the ability to use a reconciliation measure. This has led to one news outlet calling this week a Make-Or-Break moment on this issue.

Republicans need a new budget in order to pass a tax cut or tax reform package. But once they pass a new spending blueprint, they lose their authority provided by the current budget to approve health care reform using the majority-vote tool called reconciliation.

GOP faces make-or-break moment on Obamacare repeal, Politico

So whether early retirees can continue to rely on Obamacare or have to come up with something completely new, we’ll know by the end of the week.

So what do you guys think? Are the Republicans going to be able to cram their repeal bill through? Or will it get bogged down and go nowhere? Sound off in the comments below.

Breaking Update: The House just voted to Repeal Obamacare!

 

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23 thoughts on “Investment Workshop 25: Obamacare Repeal…Again”

  1. It is worth adding that the $10k premium is just the start of healthcare costs in the US. That does not give you a gold plated health plan. You will need to pay the first $ 3-10k in medical services yourself. The insurance part kicks in only if you have a big expense, such as pregnancy, surgery, heart attack, or the like. If you get really sick, you’re covered.

  2. What do I think?

    You mean besides that you waste far too much of your precious retirement time following American politics? 🙂

    Well, we’ll know nothing about what US FIRE folks (or other Americans) will have for health care options at the end of the week.

    In the unlikely event this passes the House, it will never get thru the Senate short of major revisions.

    Stay tuned! 🙂

    1. My sentiments exactly Jim. However, I appreciate the update post all the same. This topic is probably the biggest reason I hesitate to consider myself FI at this point. The wife and I are pretty healthy 40 something’s, but the future cost of healthcare in the US really concerns me. The Affordable Healthcare Act made it much less scary. Unfortunately, the changes in our healthcare system are constant. What to do? My plan for now is to build a bigger cushion.

      1. There are ways to hack the system. This is a pretty active area of discussion behind the scenes amongst the FI bloggers, but until we know what the end result of what the administration does is we can’t say what the best solution is yet.

    2. True, but if it makes you feel any better I AM following US politics while eating nachos by the pool.

      The Senate fight will be even weirder (if it even gets there) because last I checked they were planning on ignoring whatever the House passes and just writing their own. So much for a rubber stamping legislature, huh?

  3. Uggg, yet again this thing rears its ugly head. This bill does absolutely zero to address runaway costs of providing healthcare to 300+ million people.

    I just got an insurance statement in the mail. Lab work during a recent physical was $330. Insurance paid nothing (which is okay!) because of the $100 deductible I have. What they did do was knock the cost down to $27 for me. A 92% reduction. 🙂 What the hell – I’d be totally screwed if I was poor and didn’t have insurance! That’s more than a week of work at our minimum wages (before paying tax on those earnings – better do some overtime!). Just for the lab work for a routine physical (doesn’t include the cost of seeing the actual doctor – which was free with insurance thanks to the ACA!).

    Why can’t our congresscritters make a national insurance card available to everyone that gives us access to negotiated rates that insurance companies offer, or use the rate sheet from medicare or Federal Employee’s Health Insurance? Seems like a first step toward making health insurance actually affordable. No more $10,000 ER visits, or $50,000 minor surgeries. No more $500,000 month long hospital stays (actual costs: 10-20% of those amounts IF you have insurance).

    Ok, back to enjoying life and ignoring this huge gaping hole in our healthcare system in the US. 🙂

    1. This bill does absolutely zero to address runaway costs

      —–

      Yeah.

      I still wonder why they charged $270 for a routine doctor’s office visit that lasted less than 5 minutes.

      The doctor was in and out in 4 minutes and 49 seconds. (I timed it with my stopwatch on my smartphone.)

    2. I retired early 10 years ago, am currently insured under ACA Silver 70. Wow, I could give some examples of how senseless billing for healthcare is.

      I had an appendectomy last year, medical bills for a 15 minute outpatient surgery (no hospital stay, laproscopic surgery) came to ~$60k (~$50k for the use of the OR). Insurance contracted rates knocked the OR bill down to ~$10k, of which I had to pay $2k. Surgeon bill came to ~$2k, insurance knocked it down to $700, I paid about $100. Not bad, reasonable, if you don’t consider the initial ~$60k bill.

      This year I had an abscess I had to have lanced, which was done by a Physician’s Assistant, not a surgeon. It was an office procedure, took less than 5 mins. Medical bill came to $2200, however this time the contracted rate was the same, $2200. Insurance paid $300, I am on the hook for $1900.

      Very different procedures, cost to me exactly the same. Does that make sense to anyone? This is only one of many examples.

      1. I should add, and I’ve stated this before, if you are counting on entitlements from the US government (i.e. health insurance subsidies) to help fund early retirement, I think you’re playing with fire. You would be betting your future and the future of your family on the whims of an unreliable government.

        Even with ACA, just my insurance premiums for my family of 3 total over $20k for the basic Silver 70 plan (this has more than doubled over the last 2 years). Add to that the deductibles, co-pays, etc, you could easily approach $30k even with no serious health issues. I do not receive any subsidies as my passive income is too high.

  4. Let’s just say whilst I’m very jealous of US house prices (and the vast amount of options they have for places to live that aren’t freezing/wet most the year), I am not at all jealous of their healthcare. If given the choice of where to retire early, it’d be hard to pick between the US and Canada.

    You can live in a lovely warm climate year round in the US and not pay much at all for housing, but then you have to be able to cough up $10,000+ per year for health. Here health is free but if you want to live in a more temperate climate (warm year round isn’t an option) you probably have to pay $10,000+ per year more in rent/ownership anyway.

    Perhaps it’s best to spend winter in Palm Springs and head back to Canada for the summer, ensuring you get year round sun and you’re back home in time to maintain your resident status for healthcare. Doesn’t sound too cheap though…

    1. How about renting your residences while you are away? Rent out Canadian house while you are in the US and then rent out American house/condo while you are in Canada.

    2. Yeah, hang on to that Canadian citizenship friend! Not only is the American health insurance system expensive, it’s unforgiving. Let your coverage lapse and get sick at the wrong time and boom, you might get bankrupted right then and there.

  5. 1) For the Canadian readers: our health care is far from universal or free. Some health interventions are indeed free, but most preventative healthcare and most items needed for good health at your later years are not. Optometry, dentistry and prescription medications are not covered, as well as counseling, dietician services etc. As you get older and require blood pressure pills, prescription glasses and other old-age related treatment, you pay out of pocket. If you need a heart surgery or hip replacement you’re good though…

    How is it for our colleagues from other countries?

    2) For early retirees who require health care: would you not recommend geographic arbitration? We hear stories of people flying to Cuba, India and even some European countries specifically for medical treatment and having it done cheaper than in the US.

    1. True, but the prospect of going bankrupt because of developing a disease is just something we never ever think about. Reading the stories of some Americans who fall afoul of their insurance industry is enough to give me sympathy-stress.

      And yeah, geographic arbitrage (or medical tourism) is indeed one option. Just from personal experience getting checkups/dental work done abroad is a fraction of the cost in US (or even Canada!) Some early retirees like Jeremy from GCC rely on this exclusively. I may interview him about it one of these days. If he can find the time to stop stuffing his face full of lobster in Europe right now.

      1. Awesome. I recall reading one of Jeremy’s articles a while back regarding healthcare costs and how shockingly uncomplicated and affordable it is. Id like to know as much as possible about geographic arbitrage and the cost of healthcare while doing so. This is one of the options we are considering, at least for a while anyway. As we keep exploring our options, we will keep building that cushion. Hopefully our jobs won’t make our heads explode in the meantime. Mmmmmm… Lobster.

        1. Unfortunately, I am afraid that if one needs an urgent medical intervention one might not have the time to go take a plane and go half-way around the globe to get it done =/

          Now for sure if you are visiting Bangkok and want to have your wisdom tooth removed, go for it. I did it for less than 30 euros a few years ago and the job was probably done better than in many places in North America.

          1. It makes sense for people who retire overseas. If you’re retiring in the States, it would make sense to buy insurance to only cover emergencies, then fly to Mexico or Central America to get the yearly checkups and minor procedures done.

  6. Well, I’m hoping this thing falls on its face in the senate. This is just a huge mess.

    Even on aca we are paying a ridiculous amount for healthcare ($900/month) and that comes with a lovely $5000 deductible. Oh and I was asthmatic as a kid so with that I would expect our premiums to increase drastically since I still carry an inhaler should this pass.

    Just dealing with the process to get treatment is a disaster. I’m dealing with the billing from an accident that happened over 6 months ago.

    This is really making us consider leaving the country and follow in your and gCC’s footsteps. It’s nuts!

  7. Hey guys, so just reiterating this, absolutely love the series. I wanted to know if you could post your spreadsheets online for us to download and use while we re balance every month.

    1. Hi Nadeem! Thanks for the kind words and glad you are enjoying the workshop. We are currently working on cleaning up our spreadsheets and we’ll have it available soon!

  8. Have read every article on this blog so far, and it is amazing. I love your thorough explanations and the way your voices both come through. Especially appreciate the badass female presence in the world of FI blogs, FIRECracker! Thank you for what you’re doing!

    Also… wanted to drop one super tiny grammar note. In the sentence that reads “specifically how it effects our American readers who are trying to achieve Financial Independence”, this should be “affects” instead of “effects”.

    Cheers!

    1. Thanks, Kelly! (Wow, you read every article and our insanity didn’t scare you off?!) And thanks for the grammar note. It’s fixed now 🙂

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