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That is true but Gnomon stated that Ma and Pa businesses and his lawn guy could now hire employees based on the presumption that health insurance was going to become more affordable. Insinuating the law was going to spur new hirings. I am just trying to work through that.

Don't even try to work through that logic. Gnomon is confused. Health insurance will become more available, but that does not mean it will be any less expensive. Administrative costs will go up for employers and insurers, and enforcement costs will go up for the government (that means more, higher taxes). The lawn guy will still be the lawn guy, and he will still have difficulty finding new employees who actually want to work.

Cpa, MediCare was passed in 1965 and implemented in 1966. The maximum MediCare withholding tracked with the SS max until around 1993, at which point the MC max was uncapped and the MC rate went to 1.45% of gross wages (plus the matching amount from the employer). For someone earning the SS max of $135K in 1993, the MC deduction was almost $2K, plus the employer's $2K. Over the years the net MC tax has increased at more than three times the rate of inflation, because of changes in the posted rate and in the amounts on which it is assessed, plus the overall growth in wages. You might want to run an NPV calc on the total withholding paid by a hypothetical employee and his employer's matching contributions for someone who entered the workforce around 1970 and is turning 65 about now. You will need to make some assumptions about contribution levels and discount rates, but the NPV will be astoundingly high (the corpus will be all tax-free money, of course). I think it's reasonable to use a long term pension rate discount assumption of 7.75% for a 45-year career, and a life expectancy of about 18 years after achieving MC eligibility. Then use the NPV and the discount and life expectancy assumptions to set up a sinking fund for that employee and see what kind of premium can be supported for the actuarial lifespan. Include the new Part B premium which will be around $214/month (this from memory) in 2014, with annual increases after that. Most of us have paid and will pay plenty for the privilege of being in MediCare. I know that for me, it's not an entitlement program, because I have paid in a ton of money over the years, and will continue to pay when I become eligible for benefits. It is an entitlement for low-wage workers, because they can never pay in what it will cost to care for them, and the higher wage earners will continue to subsidize them.

The main reason that withholdings and Part B premiums can't support the aggregated program is that the government pisses away so much of the money and is fairly inefficient in its overall administration. This is compounded by the same increasing life expectancies that are dogging Social Security. Re Obamacare, I am coming to the conclusion that we need a mandatory national plan (similar to Medicare) with involvement of for-profit insurers, but with strict regulation as a public utility.

Whew, seems like taking the long way home. In a nutshell, the program is not solvent and it'll be up to our grandkids to decide what we're entitled to.

It's insolvent because of governmental malfeasance on a grand scale over many years. You have to separate the MediCare issues from the Obamacare issues, even though Obama is financing Obamacare partially on the wallets of the MediCare recipients who have already paid into the system for their entire working lives. Much of the financing approach fits nicely with his apparent desire to redistribute wealth in this country. There are no nutshells for this problem. It is massive and complicated (and expensive).

In part, Replacement wrote:
" Re Obamacare, I am coming to the conclusion that we need a mandatory national plan (similar to Medicare) with involvement of for-profit insurers, but with strict regulation as a public utility."

Well said!! This is close to the Swiss model and it works well.

re someone else's comment on my lawn guy - yes, health care insurance will be available but it will also be mandatory and that takes it off the table as a hiring chip. Yes, he will still be the lawn guy but that's the nature of his business. It is the nature of any one-man business that depends upon the guy's manual labor - if he breaks a leg in late June he's screwed; if he needs a liver transplant he's screwed. The guy he bought the lawn business from runs an excavating company with a partner. If one of them gets laid up the biz will survive. Lawn man badly needs to become at least a 2-man operation.

By the way, Replacement, thank you for your analysis of Medicare pay-ins.

Yep, the employer mandate won't kick in but the hirees will have their own insurance.

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Yep, the employer mandate won't kick in but the hirees will have their own insurance.

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Or they will pay the tax < 300.00 per year.

He, the lawn guy, is not competitive (he doesn't offer enough compensation) in the labor market now and Obamacare won't change that.

He could still run his business with broken bones but someone needing a liver transplant probably doesn't need the stress of self employment. Partnerships rarely work.

Or they will pay the tax < 300.00 per year.
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Yep, a loophole in Obamacare as currently constituted is that it is cheaper to pay the penalty (i.e., tax) than to buy the mandated coverage. For anyone willing to go without coverage for the nickel and dime ills of everyday life, it will make economic sense to just pay the penalty/tax, and defer the insurance purchase until something serious happens. If you are young and healthy, you could go for a lot of years before you need to pony up for a full premium. Economically, the concept is similar to the idea of a catastrophic coverage policy in which you self-insure for minor ills and then can fall back on the catastrophic coverage if something bad happens. With the elimination of the pre-existing condition exclusion, this will become a reasonable strategy for some people. It also works against the long term success of the plan design (such as it is) and creates an adverse selection bubble down the road.

Some of the best minds in the country are working on this problem. Unfortunately, those minds are not in the government.