Does the healthcare reform increase the cost burden on the young?

Years, many of them, ago, when I was a graduate student, the university required that we international students have health insurance.  There were a couple of insurance companies we could purchase it from and one semester I got by without purchasing any insurance.  I thought I had saved that much money because, well, I was after all too young to waste money on health insurance!

So, the next semester comes around, and this time the university had become wiser--I guess I was not the only one who had skipped buying insurance.  We were informed that if we did not provide proof of insurance, the university would automatically enroll us in an insurance program and bill us for it.  I decided that it was worth testing it and didn't buy any insurance.  Bad move! Turned out that the university was serious after all, and its program was almost twice the cheapo insurance I could have purchased.

My point here is that the young, for the most part, will roll the dice because they fully know that on an average their healthcare expenses will be far, far lower than that of oldies like me.  So, does it mean then that mandating healthcare will essentially make it less expensive for the oder adults and a lot more expensive for the younger ones?

Here is one answer:

Consider 24-year-old Nils Higdon. The self-employed percussionist and part-time teacher in Chicago pays $140 each month for health insurance. But he's healthy and so far hasn't needed it.

The law relies on Higdon and other young adults to shoulder more of the financial load in new health insurance risk pools. So under the new system, Higdon could expect to pay $300 to $500 a year more. Depending on his income, he might also qualify for tax credits.
At issue is the insurance industry's practice of charging more for older customers, who are the costliest to insure. The new law restricts how much insurers can raise premium costs based on age alone. 

Insurers typically charge six or seven times as much to older customers as to younger ones in states with no restrictions. The new law limits the ratio to 3-to-1, meaning a 50-year-old could be charged only three times as much as a 20-year-old.
The rest will be shouldered by young people in the form of higher premiums.

 Meanwhile, Megan McArdle has started doing research on the implementation of the insurance mandate, and writes:

Big Government has written a post suggesting that the individual health care mandate will not actually be enforced by the IRS.  It will be assessed, but if you refuse to pay it, the normal enforcement mechanisms under Subtitle F of the tax code--such as liens and garnishments--may not be employed.

Politically, this is obviously the safest route; you don't want articles about the nice middle aged lady who may lose her house because she didn't pay her mandate.  But practically, this is disastrous, if true.  It would mean that in practice the mandate would only apply to people who get tax refunds; otherwise, just write the IRS a check for everything except the mandate.  And since you don't have to get a tax refund--you can have your employer change your withholding--anyone who doesn't want to pay it, wouldn't have to.

But it's not clear that this is what's actually going to happen.  If the IRS can reorder the priority of the tax dollars they take from you, then they can simply put any funds towards the mandate first.  That way, if you attempt to go without insurance and then pay the IRS everything except the mandate penalty, you'll end up with a tax liability the exact size of the mandate penalty . . . for which they can now garnish your wages, put tax liens on your house, and otherwise do all the nasty stuff that they are authorized to do under Subtitle F.

But if they can't do this, then the mandate is toothless.  I'd expect people will pay it in the beginning, and then over time, as it becomes public knowledge that the mandate is unenforceable, more and more people will refuse.

The Economist has a great graphic :)

Feeling a lot poorer in a rich country :-(

More than once, I have blogged about Robert Samuelson's analyses and opinions. His lengthy piece in Newsweek gives us an idea of the challenges ahead. And, again, I am confident that my intro students know the situation really well--that they are screwed :-(

The bad news is that recovery, though boosting employment, may prove unsatisfying. Our new economic era may lapse into a state of "affluent deprivation." That's an unfamiliar term. It doesn't mean poverty. The United States will remain a wealthy society. Rather, "affluent deprivation" signifies a state of mind. People feel poorer, because their sluggish income gains get siphoned off into higher taxes, energy costs and health spending. Though these all involve benefits, they don't pay everyday bills or cover people's routine pleasures. There's an approaching collision between private and public wants—government spending for everything from retirement benefits to defense to the repair of roads and bridges. ....

A dilemma for the new president is how to reconcile the needs of the present with those of the future. The immediate need is to revive confidence—to rev up demand and spending, thereby absorbing the jobless and increasing the production of underutilized businesses. But the long-term problem is different. It is to mediate between all the competing demands on the nation's income and to expand the economy's capacity to produce the output that satisfies those demands. The closer the economy comes to stagnation, the more Americans will succumb to distributional struggles—not just between the rich and the poor, but also between the young and the old and between immigrants and natives.

Down that path lies "affluent deprivation." To use an old but apt cliché: people will fight over pieces of a fairly fixed economic pie rather than sharing ever-larger pieces of an expanding pie. The winners may be pleased, but the losers will feel short-changed—and so the conflicts may intensify, with yesterday's winners possibly becoming tomorrow's losers. Politics, which is often about rewarding some and punishing others, may become more so.

The youth are screwed

When Thomas Friedman doesn't write as the master manipulator of metaphors, he makes a lot of sense and clearly articulates his argument. Such as this one:

Since the last debate, John McCain and Barack Obama have unveiled broad ideas about how to restore the nation’s financial health. But they continue to suggest that this will be largely pain-free. McCain says giving everyone a tax cut will save the day; Obama tells us only the rich will have to pay to help us out of this hole. Neither is true.

We are all going to have to pay, because this meltdown comes in the context of what has been “perhaps the greatest wealth transfer since the Bolshevik Revolution in Russia in 1917,” says Michael Mandelbaum, author of “Democracy’s Good Name.” “It is not a wealth transfer from rich to poor that the Bush administration will be remembered for. It is a wealth transfer from the future to the present.”

Never has one generation spent so much of its children’s wealth in such a short period of time with so little to show for it as in the Bush years. Under George W. Bush, America has foisted onto future generations a huge financial burden to finance our current tax cuts, wars and now bailouts. Just paying off those debts will require significant sacrifices. But when you add the destruction of wealth that has taken place in the last two months in the markets, and the need for more bailouts, you understand why this is not going to be a painless recovery.

The Bush team leaves us with another debt — one to Mother Nature. We have added tons more CO2 into the atmosphere these last eight years, without any mitigation effort.

Well, my intro class students know really well the argument about burdens being shifted to future generations--even they have started referring to how much their futures are screwed :-( They have pretty much adopted as their slogan "we are screwed". I am to be blamed though, as their blog posts make it clear.