Nate Silver on the Senate Bills Affordability

[SpartanDem]

Nate Silver and Marcy over at FDL have had an interesting conversation over the last couple of days about this subject

I've searched high and dry for empirical data on what families in the individual market are actually paying for health care -- both out-of-pocket expenditures and insurance premiums -- and I can't find it. But Kaiser estimates that the cost of family coverage in employer-based settings is already about $12,680 per year. Coverage in the individual market may actually be slightly cheaper, but for substantially less robust coverage -- the CBO estimates that the scope ofate coverage in the individual market will improve by 30% under the Senate's bill.

And without stringent out-of-pocket caps, as would be implemented under the Senate's bill, the downside risk remains very high to this family. Or, they may not be purchasing health insurance at all, in which case they'll save a little bit of money in some years but lose a lot of money -- and perhaps their livelihood -- in years where a member of the family gets sick.

I don't want to get drawn into a sematic debate about what is "affordable" -- particularly when I agree with Marcy that the health insurance for working families should be made more affordable before President Obama signs this bill. Certainly, if you use my estimates for this family's expenditures, most people would define the coverage as being "affordable" -- it fits into their budget and leaves them with some money left over, even after a significant allowance for out-of-pocket expenditures. Marcy's initial estimates would obviously put "affordability" strongly into question -- but they're significantly too pessimistic. The areas where she was leaning high, especially housing, significantly outweigh those where she was leaning low, like food and utilities.

And what's unambiguous is that the Senate's bill makes the coverage much more affordable than the status quo. If we were to accept Marcy's estimates, and this family had to pay $12,680 for family coverage on the individual market, they'd run a deficit of $5,346 per year -- before out of pocket expenditures. That's not affordable. Or, more likely, they'll choose not to provide coverage for their families at all, with all the financial and physical risk that entails.

http://www.fivethirtyeight.com/2009/12/health-insurance-and-family-budget.html

[frazzled]

1. $13,200 for transportation?

Whoa ... and people are complaining about the cost of health care? Are they counting in the cost of a car payment into that?

Granted our situation may be very different than the example here (I'm assuming they are talking about a suburban family of 4, where maybe one of the people has a long commute and there's a lot of kid schlepping; we no longer have that). I just figured out our transportation costs, a couple who lives in the middle of a big city but still has a car. We have been putting on 8,000 miles per year in this situation . We also have a high-mileage car (a Prius). We get around 50 mpg average, but let's even lower that to 48. The cost of gas right now is around $2.89; let's round that up to $3. Then we take the train or bus, I figure on average of 10 trips per week (we are in walking distance of quite a bit). And then once a month or so we'll spring for a taxi at an average cost of $10. So:

8,000 miles per year / 48 mpg = 166 gallons x $3 = $500 total expenditure gasoline
10 CTA rides per week x $2 per ride +$20 per week x 52 weeks = $1040 public transit
12 taxi rides per year x $10 per ride = $120

Now let's add in car payments. For us that is $375 per month for a 2006 Prius. But we'll be done with that this year, so the cost will go down to $0. We expect to keep the car for another 5 years minimum after that, for a total of 10 years. So let's cut our monthly car payments for the year in half--this assumes most people will pay off their car in 5 years and keep it another 5 years.

$375 x 12 = $4,500 / 2 = $2,225

And then there's insurance. Mr. Frazzled just looked at a bill: $80/mo. x 12 = $960. Let's round it up to $1000 for convenience' sake.

Okay, we've got $500 + 1040 + $120 + $2,225 + $1,000 = $4,005 per year


The family of 4 in the example, with a lower income than we, is using more than 3 times the transportation costs. I see that as a problem. They are consuming almost 20% of their income on transportation. That's a hell of a lot. I'd say their car payments are too high, or they need to carpool more, or I don't know. I am sympathetic, because I remember the days when I had to drive my kids all the time to various music lessons, sports events, etc.

But here's the rub: the government is saying that no one should spend more than 9.8% of their income on health insurance. People are screaming about that. Yet both these examples have the same family spending 20% of their income on transportation. And I imagine that most people will say, yeah, that is necessary. Maybe what we need (in addition to a health care bill) is some reprioritizing of our transporation habits in this country. To me, this is unsustainable.

[Jeff In Milwaukee]

4. I saw that figure on KOS

and was equally perplexed. I believe the origin is two cars at $0.55 per mile times some number of miles per year. That yielded the $13,200 number. I know that my two cars, with insurance, gas, repairs, and misc. doesn't get even close to that amount.

[dsc]

2. I am going to use only one figure of theirs where I think Nate is more likely to be off than she is

Housing at 1000 a month. The current median price of a house is 174,000. Assuming a 6.5% rate, 10% downpayment and no property taxes nor insurance, yields $989.82. That leaves 10.18 per month for insurance, taxes, and any and all repairs. Sorry, but that seems very optimistic.

http://www.mortgagecalculator.org/

[Jeff In Milwaukee]

3. I think they use rent...

Avg. for a two-bedroom apartment. But where? Des Moines? Manhattan?

[frazzled]

5. I agree ... that is totally off

That housing cost represents 18% of this family's income. I defy anyone these days to easily find decent housing for a family that would amount to only 18% of income.