Obamacare premium subsidies go to millionaires

What were  they thinking?

When the Affordable Care Act (ACA), or Obamacare as it is most commonly called, was being debated,  we were told that it would provide premium subsidies to low and middle income people to help out with the high cost of health insurance.

But while helping the truly needy people is a worthwhile goal which I fully support, I was shocked this past open enrollment period to learn that the Obamacare subsidy is going not just to low and middle of the road folks—but also to millionaires.

People with significant wealth and assets are qualifying for the Obamacare subsidy in surprisingly large numbers. In fact every single agent that I’ve talked to that specializes in health insurance has witnessed millionaires qualify for government help with their health insurance. Here are a few examples:

  • One real estate investor who owns 20 properties, along with his wife, both qualified for free health insurance through Medicaid.
  • A restaurateur sold a chain of 10 fast food restaurants and retired. His wife, has qualified for free Medicaid health insurance under the new Obamacare law despite their having a large portfolio of many millions of dollars. (Medicaid is a welfare program and should not be confused with Medicare.)
  • One retired engineer who manages a large 401K portfolio receives $400 each month to subsidize his family’s health insurance premiums with a commercial carrier.

Programs available to help with health insurance

There are two main programs available to help with health insurance.

  1. Medicaid: Not to be confused with Medicare, Medicaid is actually a welfare program that traditionally has required proof of both low income and low assets. Those with incomes below 138% of the Federal poverty level qualify for free health coverage through Medicaid. Although the coverage looks good on paper, many doctors refuse to participate in Medicaid because of extremely low reimbursement rates.
  2. Private insurance subsidy payments: Those whose income is too high for Medicaid, can often qualify for a tax subsidy to reduce the cost of their private health insurance premium if their income is below 400% of the Federal poverty level. These subsidies are formally known as “Advance Premium Tax Credits” or APTC.

How are millionaires able to get subsidies meant for low income individuals?

Why are well-to-do individuals qualifying either for expanded free Medicaid or for APTC to help reduce the cost of private insurance? The shocking answer is because Obamacare does away with the requirement that people must prove they have low assets before qualifying for Medicaid or a subsidy for private insurance. If a millionaire can arrange his or her finances so they are receiving a low income—low on paper at least—they will qualify for help with their health insurance premiums.

I asked Chris Wyrick, a Fort Collins  CPA and attorney handling tax, business and estate law, how someone with 20 rental houses was able to get his income low enough to look dirt poor—even though they lead a very comfortable lifestyle. He explained that a combination of depreciation, various deductions such as mortgage interest, and expenses really could make a person look poor on paper. An investor’s net worth portfolio could easily be worth several million dollars, even after accounting for what they owe to the bank due to the increase in home prices from when the houses were bought.

Similarly, business owners and retirees with large retirement portfolios are often able to legally manipulate their income to get under the income thresholds to obtain an Obamacare subsidy that lowers the cost of their insurance from private insurance companies.

Curious as to why we’ve suddenly stopped asking people how much they have in assets before handing out premium subsidies or qualifying people under Medicaid, I spoke with Mike Fierberg, the Public Affairs Officer for the Centers for Medicare and Medicaid in Denver, the agency that oversees both Medicaid and Obamacare. He clearly explained that “the reason is that this is the way the ACA was written.”

When I queried him as to what possible rationale there might have been for changing the law to disregard assets, Fierberg’s succinct answer was: “You’d have to ask Congress.”

Following that advice, I called Senator Udall requesting an explanation. Unfortunately, numerous calls over several weeks went unanswered.

So where do we go from here? Clearly, it’s wrong to ask taxpayers to give out subsidies to people with substantial net worth. But where do we draw the line? Do we cut subsides off for someone with $500,000 in assets? One million? Two million? Do we include the value of one’s home in the calculation?

The answers won’t be easy or simple. But Congress must have that conversation with the American people and draw the line somewhere. Will we prevent every person of substantial means from getting a subsidy? Of course not—but we can, we must make substantial improvement over the current situation.

In the meantime, those who voted for Obamacare owe the public an explanation as to why they allowed subsidies for millionaires to stay in the bill.  Maybe they have a good explanation as to what they were thinking… or were they thinking at all?

 

Peter Trozan
970-224-5500
Peter@InsuranceDoctor.com

 

12 Responses to “Obamacare premium subsidies go to millionaires

  1. search engine

    First of all I want to say terrific blog! I had a quick question that I’d like to ask
    if you don’t mind. I was interested to know how you center yourself and clear
    your mind before writing. I’ve had a hard time clearing my mind
    in getting my ideas out. I truly do enjoy writing but it just seems
    like the first 10 to 15 minutes are lost just trying
    to figure out how to begin. Any recommendations or hints?
    Thanks!

    Reply
  2. JimT

    It was a screwup in the law. There are probably dozens in that law, and in any law that complex. The problem is that Republucans. Are refusing to pass any bill to fix the errors because they want to repeal the whole Act.

    Maybe when the Republicans take over both houses and the White House, and still can’t get the votes to repeal Obamacare, they will decide to fix all these errors as a face-saving quasi-repeal.

    Reply
    • JoSo

      This is the most ridiculous comment I’ve ever read. The Democrats had control of the Senate, the House, and the Presidency when they passed the ACA. They could have passed any law they wanted. This is what they chose, so don’t blame it on Republicans who had no control over any part of it. I’m a conservative who was opposed to the ACA, but, ironically, I will now be one of the millionaires w/ low taxable income who qualifies for free Medicaid that is described in this article. In fact, I won’t even be eligible for any other insurance unless I pay myself a salary that I don’t need and wouldn’t spend. Go figure.

      Reply
  3. Jason

    The majority of Medicare is also welfare. The average recipient will only pay for 40% of there lifetime benefit while 60% of the benefit is welfare.

    Reply
  4. MPS

    We truly have a nanny state out of control. My wife and I both retired before 60 but we were very concerned about finding health insurance because of ‘pre-existing’ cancer issues. We were paying $1200 per month thru COBRA, but this was due to expire so we applied for coverage on the ACA website. They sent us Medicaid cards!! My wife was devastated! Certainly this must be mistake. Could our government be this screwed up? You bet!!
    Well, we have gotten over it and here’s my justification. We worked hard for 40 years and paid taxes every year. We saved our money and never took a dime of unemployment or any other form of state or federal assistance. If they want to give us free health care, I won’t turn it down.

    Reply
    • Desiree Woods

      Wow, what a selfish response. There are millions of Americans struggling who have contributed to the well being of this country. Maybe not as much monetarily, but all contributions count. We are now paying nearly 10 percent of our income just for a premium (for one person) and then paying out a large amount for medical care.

      Reply
  5. Craig Baydor

    This is typical for rich. Their money is in the investments or business. Not their personal. So it is not surprising they would qualify.
    The disappointing part is that these well to do would even apply for free or cheap health care.
    If you can afford health care, why would you steal from the benefits meant for those who cannot.
    Since they exploit a loophole, it would be too hard to stop them. So I suggest shaming them.
    Someone with time and the ability should create a public list to shame the wealthy for stealing benefits meant for the less fortunate.
    My two cents.

    Reply
  6. Lauren

    When they ran the actual numbers there were so few ‘medicaid millionaires’ that it didn’t make sense to require asset verification which is a lengthy and expensive process. Cost/benefit. Most millionaires who are paupers on paper wouldn’t be caught dead with medicaid: most doctors don’t take it, if something catatrophic does happen your care is limited and asset evaluation will come into play, and you have no coverage if you travel out of state. If you really are wealthy, it’s not worth it.

    Reply
  7. Em

    This is a foreshortened explanation leaving out many details : but .. Medicaid is bolstered by enrolling those with large “non-income” assets and estates, as Medicaid is the beneficiary of those assets when the Medicaid recipient dies. A Medicaid recipient cannot choose to bequeath thier assets or estate, as there is an automatic governmental lien on the estates of Medicaid recipients, which lien is collected by Medicaid when a Medicaid recipient dies. This provision of Medicaid is called “Estate Recovery” Probably those with wealthy estates who enroll themselves in Medicaid do not realize that, per their enrollment, they are relinquishing their estate to Medicaid upon thier death.

    Reply
    • David

      It will be fun to see those on this comment list receiving Medicaid now face that lien. I guess the ACA authors were smarter than all these right wing commenters thought

      Reply
    • Rick

      Discussion of Medicaid misses the point that even if you don’t qualify for Medicaid, you can qualify for a large ACA subsidy so long as your MAGI is less than 4x fed. poverty level. There may not be a lot of Medicaid millionaires, but there may be many millionaires who receive subsidies.

      BTW, the article was a little misleading saying, “various deductions such as mortgage interest, and expenses really could make a person look poor on paper.” Those deductions are not taken into account when figuring your MAGI which determines whether you qualify for an ACA subsidy.

      Reply
  8. L. Valentine

    A FEW IS TOO MANY; this excuse has been abused in a multitude of programs. The requirements should and must be adjusted. It is time these “Loop-Holes” and the “Omissions” that exist in a multitude of areas, including tax codes, are at their root, morally wrong. These corrections would be a HEALTHY START in giving citizens some faith that our government is working “For All The People.”
    Incomes are not the problem if a fair and balanced approach is absorbed by all.

    Reply

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