Nick Troiano | If We Can Keep it

Apr/10

14

A Generational Fleecing

19 Comments | Posted by Nick Troiano in On Politics

A few months ago, Michael Gerson wrote, “Amazingly — out of idealism, ignorance or both — people in their 20s remain the strongest supporters of health care reform. They are also the most likely group to wake up the day after passage of Obamacare with a health reform hangover — forced to buy coverage at higher premiums to reduce the cost of someone else’s health insurance.”

Well, the hangover is upon us.  An Associated Press analysis recently found that young people’s health premiums could rise at much as 17 percent under the new law. Although the analysis did not factor in potential benefits to young people such as being allowed to stay on parents’ insurance to age 26 and tax credits that vary for those making under $42,320 a year, it’s safe to say that a 27-35 year-old making more than $42K a year will see a pretty steep increase in the cost of health insurance.

The increase is a result of the law’s limiting of the price discrepancy between policies offered to young and old people. What was a 1-6 or 1-7 ratio is now capped at 1-3. Despite having lower income and higher unemployment, the Millennial Generation is being forced to subsidize the new health care entitlement, which by its very nature benefits older Americans as they are more likely to use health care services.

Bet you didn’t hear that in all of the debate. But that’s not all.

When President Obama signed the health care legislation, the federal government also transitioned all student loans into the Direct Loan program, removing third-party federally-subsidized lenders. This saved $61 billion, which was mostly reinvested into higher education. Sounds like a good deal for young people, right? Indeed, many cheer about the direct and immediate benefit of increased Pell Grants. Yet these grants will only increase by $350 over the next ten years, which the New York Time calls “minuscule.”

It seems if Congress was really looking to do something to benefit all young people, rather than spending savings that could otherwise reduce the budget deficit (which young people will ironically eventually have to repay) on narrow constituencies, it would have simply reduced student loan interest rates. Instead, students will be overcharged by the government, which borrows money at 2.8% and then lends it at 6.8%, to subsidize other federal programs (i.e. the new health care entitlement). Lowering interest rates would have been a much greater financial benefit. In fact, one piece of legislation, introduced by Senator Lamar Alexander, reduces rates by 1.5% and saves the average student $1,800 over ten years (on an average $25,000 loan). Don’t expect that piece of legislation to go anywhere.

It seems in both scenarios, the Millennial Generation was told it would benefit, while in reality, the wool was being pulled over our eyes. This all shouldn’t come as a surprise, partially because there is no AARP equivalent for Millennials. We simply don’t have the political power to advocate for ourselves. (Do you think seniors would ever see a 17 percent increase in their premiums?) To me, the surprise is that so many young people are (still) willing to support these policies. In both cases, we could have achieved health insurance reform and the Direct Loan program transition without digging our generation deeper into debt and facilitating an inter-generational transfer of wealth. I presume the best explanation, besides Gerson’s suggestion of ignorance or idealism, is that there is just plain loyalty to the President and the Democratic Party among some young people, although according to a recent Pew report, it is fading.

Michael Frank noted that once Millennials connect higher prices, constrained wages, and fewer job opportunities to the policies that cause them, he predicts “then those healthy, and generally conservative, policy instincts can kick in.” We can only hope. Millennials are not doing themselves any favors by ignoring these realities.

, ,

RSS Feed

19 Comments for A Generational Fleecing

Bill Greenlaw | April 16, 2010 at 7:44 am

I am uncertain about your premise here.

First of all, insurance for the young has increased sharply in recent history. Plans have become stingier, costs higher and preexisting conditions excluded. They have not been good bargains, since insurance companies know the only people seeking individual plans expect to use them.

Most Americans get their healthcare through their employers. When I was young, I paid exactly what my co-workers who were older than 60 paid for my insurance. That is the idea behind insurance. You spread the risk across a wide pool, some pay much more than they are likely to receive.

I would have to assume the lack of parity you cite relates to individual policies. Yes, young people will be required to get health insurance now. They will also be guaranteed coverage, regardless of preexisting conditions, and without annual or lifetime caps. These are benefits that will help those that actually need health insurance, and will lessen their lifetime out of pocket costs. If you look at the cost over a lifetime, the cost for a young person may be lower than what existed before. It certainly will be less for many individuals who would be uninsured or unable to ever switch insurance plans due to their medical history.

The societal cost may be less under the new law. Right now young people that are not insured may have a medical problem, then find themselves unable to get an individual plan when they need it. They find they have some need for insurance, and the insurance companies declare them uninsured due to their need. The cost for their care is borne by the rest of us. If they have access to good basic care, some of these preexisting conditions may be discovered and treated early, reducing costs. This is certainly a good thing for the individual.

Insurance is always unfair to those that don’t need it, but a bargain to those that need it most. That is the nature of insurance.

The best feature of the healthcare reform law: Young people will not be tethered to less than ideal jobs just to have coverage. They will be able to be more independent and less beholden to an employer. This will increase freedom to work independently, or in small companies. I see this as a transformative idea. Individuals may choose to leave their job and become independent contractors more easily. This may invigorate the economy and free some constraints on elements of the labor market. Free markets are more efficient, so I would expect this to be good for American GDP.

Yes, young persons seeking individual plans will pay more for that plan now. There are offsets that may make that seem like a good investment over their lifetime.

Perhaps this is what your generation knows instinctively. Your generation seems to be able to recognize societal costs and benefits better than us older folks. We tend to be more focused on our individual situations. The gut feeling of your generation may be right on this one. Despite possible higher costs for individual plans, this may still be a bargain, and an acceptable start to the solution.

Christian Louboutin Shoes | June 3, 2010 at 7:43 am

great experience, dude! thanks for this great

Articles wow… it’s very wonderful report.

WP Themes | June 13, 2010 at 8:15 pm

Good fill someone in on and this enter helped me alot in my college assignement. Gratefulness you as your information.

Registry Cleaner Reviews | June 18, 2010 at 11:30 am

thanks for this great post wow… it’s very

wonderful

cna training | June 24, 2010 at 9:31 am

Great information! I’ve been looking for something like this for a while now. Thanks!

TERRENCE | July 22, 2010 at 4:49 am


Medicamentspot.com. Canadian Health&Care.No prescription online pharmacy.Special Internet Prices.Best quality drugs. No prescription drugs. Buy drugs online…

Buy:Prednisolone.Arimidex.Zovirax.Retin-A.Human Growth Hormone.Zyban.Accutane.Mega Hoodia.Actos.Prevacid.Synthroid.Nexium.100% Pure Okinawan Coral Calcium.Lumigan.Valtrex.Petcam (Metacam) Oral Suspension….

blogfreegamepark | July 30, 2010 at 11:42 pm

Welcome to free game park play free game pc, there have more free game to play, as family feud free game & chess free game.

emusicorg | August 5, 2010 at 6:17 pm

[b][url=http://www.mtvstorm.net]Download free music[/url][/b] is true? Who among us does not like to listen to a song every now and then? But how many of us are willing to pay money in order to listen to our favorite album? Now, you can downloadable free purchase music from [b][url=http://www.mtvstorm.net]Mtv Storm[/url][/b].

ford ranger guy | August 19, 2010 at 7:56 pm

Where did you learn about this? Can you give me the source?

gourmet coffee gift | August 23, 2010 at 11:08 pm

Now I would’ ve used ChickHen to flash custom firmware to his psp but he updated to 5.55. So I was wondering if the Half Byte Loader program would be able to run the 5.50 D3 installer at all, since I noticed the program is beta and apparently as many problems left, long enough to flash firmware without bricking his psp.

k-cups coffee | August 25, 2010 at 8:42 am

Hey guys i want to share with you a peice of software that submits your articles (Blogs) and multiple websites very easyily and fast, making your site get LOADS more visitors. Just take a quick look at their website, if you own a website/want to make one and want to make alot of money then this is definatly something you should take a quick look at.

personal loans | August 25, 2010 at 2:51 pm

It’ s the first time I have heard that in Macedonia, obits are an unusual observe. You have wonderfully written the post. I have liked your way of writing this. Thanks for sharing this.

discount magazine | August 27, 2010 at 10:26 am

This is a really good read for me, Must admit that you are one of the best bloggers I ever saw.Thanks for posting this informative article.

Leave a comment!

« The Problem of the Living Constitution

EPA’s Pick 5 – An Analysis »

Theme Design by devolux.org
To top
web counter