Monthly Archive: October 2013

Obamacare

There is a lot that might be wrong with Obamacare, but Obamacare got it spot on with the creation of uniform eligibility requirements and internet registration. So today I am blogging on this one area of Obamacare involving how Americans become eligible to participate in Obamacare programs. Let me first explain with a little background history. If you are old enough to remember a government program called “welfare” you might also know about Lyndon Johnson’s 1965 Great Society and its focus on eliminating poverty in the United States. With much fanfare Welfare was replaced with a Great Society program called Aid to Families with Dependent Children (AFDC). Coupled with free health care called Medicaid these two programs combined to provide a safety net for poor Americans below the then established poverty level who could not find work.

As we all know, Great Society programs were very expensive and undertaken during the 1960s in the backdrop of the Vietnam War. Back then sixty years ago National Debt was not an issue. But National Debt soon became a big issue. By the end of the 20th century Congress was focused on reducing National Debt and creating annual balanced budgets. As a result there was a movement to cut back many of the expensive Great Society programs with particular emphasis on cutting out government waste and fraud. Of all the expensive programs riddled with waste and fraud, AFDC was the poster child for a program that was simply not working. There was a great interest from both political parties in getting AFDC families off government assistance and back to work so as to make that program more cost effective. President Clinton in 1996 signed legislation replacing AFDC with the Temporary Assistance for Needy Families (TANF) block grant. At the core of the TANF program were new federal work standards that required able-bodied welfare recipients to work, prepare for work, or at least look for work as a condition for receiving aid. Welfare reform turned “welfare” into “workfare.” There was only one problem: Parents in families receiving cash assistance under TANF were no longer automatically eligible for Medicaid. With Medicaid being administered by each state a little differently paperwork requirements to become eligible for Medicaid mushroomed into a bureaucratic and expensive mess. Asset based tests in particular were costly for state governments to administer as they were very labor intensive. In many cases the complex eligibility requirements delayed applicants from receiving immediate medical attention. Some applicants with non-liquid assets were simply unable to quickly get the medical attention they needed. Others simply flocked to the already overcrowded emergency rooms of the local hospitals driving up medical costs and ultimate insurance premiums for all Americans.

As States began to do away with these asset based requirements to save money there was at the same time more and more reliance on electronic internet applications to further cut labor costs and to expedite the approval process. So by the time Obamacare did away with asset based tests there was little disagreement that electronic internet based applications would dramatically speed up the screening and approval process. Beginning in 2014 Modified Adjusted Gross Income (MAGI) will be the sole determining factor in Medicaid, the Children’s Health Insurance Program (CHIP) and any subsidies received for purchase of private health insurance coverage through the government Exchanges. What is MAGI? MAGI is simply Adjusted Gross Income (AGI) increased by all tax exempt income and a few other adjustments. So long as your tax return shows your MAGI to be less than 133% of the poverty level eligibility in 2014 you are “in” even if you live in a $10M mansion Beverly Hills.

Will there be abuse by some wealthy folks. Possibly, but more likely though, the Medicaid applicant will have just lost his or her job has two children in public school, and perhaps has six months of savings in the bank with a house and mortgage to pay. Americans will now get a chance to get back on track, apply for a new job, and keep their house without depleting their life savings to qualify for Medicaid and health care, and this is why uniform eligibility requirements is but one of the few bright spots in Obamacare. Finally, it is indeed ironic that the Obamacare software has major performance issues as this Blog goes to press. Nevertheless, once the software is tweaked to work, it is my humble opinion that the eligibility process will revolutionize the administrative side of health care delivered to American taxpayers, hopefully for the better.

Kindest regards from Chris Moss CPA