Full quote: “When we win on Nov 8 and elect a Republican Congress, we will immediately repeal and replace Obamacare. ” Made during many, many speeches, a tremendous number of huge speeches, the very best speeches, by U.S. president-elect Donald Trump.
You can’t always believe what candidates running for office say as they slog through their campaigns — gross exaggeration, pandering, and outright lies are to be expected by all involved — but when it comes to Obamacare, surely it is safe to believe that some real changes are in store for us.
Why? Well, it’s because the Republican party has been actively trying to cripple and repeal this legislation since it passed back in 2010. These attempts have been a) without a Senate majority and b) while Obama was still in office.
So it’s logical to assume that there will be some action taken here now that those blocking problems have, from their perspective, been corrected.
And to be perfectly honest, I’m a little concerned about it. Not scared or panicked — not at all. But it’s a situation that warrants interest, attention, and the ability to alter plans and be flexible.
This post will explore what might happen, and how we could best approach potential changes.
Starting Facts
- I’ve retired early, and I’m enrolled in the Affordable Care Act (ACA, also known as Obamacare) along with my wife.
- We pay about $160 each (320/mo together) post-subsidy for a Silver plan offered by Blue Cross Blue Shield of MA. Our income is low because we’re no longer earning, and we are therefore eligible for substantial reimbursement from the government for our insurance plans.
- We would not have been able to stop working without the existence of the ACA. Period. Similar coverage from a private insurer prior to the enactment of the ACA would have run us close to a thousand a month. To cover that gap via passive income we would have had to save an additional 250K or so. We just don’t have it.
- It’s not just about the current cost of private insurance, either. It’s also about the cost control. If insurance premiums go up — and they have — we know we are protected in the sense that subsidies should rise to cover the difference. With private insurance, there is no such guarantee. You are at the mercy of the insurers. If we felt we had to save enough to indefinitely cover indefinitely rising health care costs, we might have been indefinitely working.
- Obvious: The ACA was a savior when it came to creating and finally executing our early retirement plans.
- Side note: We do not carry dental coverage, which is kind of a bum deal for most people. We pay out of pocket for annual cleanings, which are sufficient for most folks who practice daily oral care.
The facts above lead into my concerns, because if you read this blog at all, you know that I don’t particularly like working in offices. (Very long story short, I slogged away in my industry [software] for 15 years or so and grew tired of it. I am not yet remotely tired of not working, though. I would very much like to continue to not work for a very long time. Yep, that’s what I would like to do, all right, just sit back and read and play video games and exercise and travel and lead a life full of dynamism and variety rather than going back to commuting and being given daily fake work by some other individual placed above me in a nonsense hierarchy and so on… Okay, okay, inside voice — that’s enough of that for now. Let’s get back to talking about the ACA.)
In order to continue to not work, my wife and I require affordable health care. The fact that President-Elect Trump has promised to “repeal and replace” Obamacare (and he absolutely will have the authority and power to do it), well — this is (potentially) a kaboom-type wrench in the early-retirement machine.
Let’s get into specifics using a question-and-answer format, shall we?
Question 1: How likely is it that Obamacare might be immediately repealed outright in January 2017 when Trump takes office?
Answer: Extremely unlikely. The ACA is now firmly embedded into the insurance industry and government systems. It will take time. There are also currently political risks to its wholesale destruction, as many people (22 million!) have come to rely on it — such an action will be unpopular to many. Further, the Republican party lacks the 60 seats in the senate necessary to overcome a filibuster, which the Democrats would almost certainly use because of their investment in the legislation.
Question 2: If there are major changes, what are they most likely to be?
Answer: According to Rueters, the most likely form of changes will be around the cost and subsidies, simply because a) those are the easiest type of alterations to enact and b) such changes have already been attempted. Note that certain budgetary changes can be made without having to pass a senate vote, bypassing the threat of filibuster.
This means that it’s possible that the federal subsidy will be reduced or eliminated entirely.
Further into the next administration — 2018 or 2019 — it is more likely that profound structural changes could occur.
The New York Times has reached similar conclusions regarding the most likely short-term changes.
Question 3: When might such changes occur?
Answer: 2017 is almost certainly safe. Even if Trump makes good on his promise to make sweeping changes “on day 1” it will take, minimally, a year to enact them, push them into effect with insurers, and update tax code.
It appears that Trump’s administration will have until March or April to submit changes which could be effective in 2018.
So that’s when the real risk starts — 2018. Perhaps the party will move slowly in enacting changes, making 2018 safe. Perhaps they will move at the speed of The Flash and request changes in February, putting the safety of 2018 in doubt.
I am personally preparing to deal with changes for 2018, as it appears the party is fairly motivated to take rapid action on Obamacare.
Only time will tell for sure, though.
Question 4: Might the changes be good?
Answer: I’m skeptical, as I’ve yet to see any concrete proposals either by Trump or his party, but yes, it’s possible that they will be.
For years the Republican party has been promising to repeal Obamacare once they captured the senate. The followup question is always: What will you replace it with?
And the responses have been elusive — there are, as of this writing, no concrete policy proposals on the table that have been communicated to the public other than vague assurances that they’re working on something and it’s going to be absolutely terrific.
I readily concede (100% willingly, and just slightly optimistically) that it is within the realm of possibility that an effective replacement is proposed and implemented.
I am not a health care policy wonk, telepath, or clairvoyant and will therefore avoid further speculation other than to make two points:
- Trump has not always held his current set of views on health care. In fact, in his 2000 book The America We Deserve, he stated that he was in favor of universal health care, citing Canada as an example of a country that had done it right. (Canada is, for the record, is a single payer system.) He has mentioned in the same book that he wanted to decouple health care from employment. I have to say, that’s speaking my language. (I’ve always thought this coupling to be illogical and distasteful — just another way that the government and insurers enforce, intentionally or not, the work-for-life model on its citizens, making it harder for individuals to break away and claim freedom.)
- Soon-to-be Vice President Mike Pence has already stated that they’re not interested in rolling back the portion of the ACA which made it illegal for insurers to discriminate against citizens with pre-existing conditions. Trump has literally just today 11.11.2016 made similar comments, going on to also state that they are interested in continuing to allow parents to keep their children on family plans through age 26. I take these remarks as a sign of awareness. They understand, apparently, which portions of the law are universally popular and appear to be interested in preserving them.
So, yes, there is some room for cautious hope.
Question 5: I live in Massachusetts. The template for Obamacare (AKA Romneycare) was created here. Is it possible my state will continue to offer Romneycare if the ACA is blown to smithereens?
Answer: Yes, this is completely possible. In the absence of any federal law dictating terms, states will again be able to choose how to handle this issue. Romneycare was affordable and effective for both private citizens as well as the state — and it was reasonably popular to boot. So yes, it could be plausibly resurrected in a post-Obamacare world — and not merely in Massachusetts.
Question 6: If Romneycare is re-enacted in Massachusetts, can I move there from my state and gain coverage?
Answer: Yes, but only if you’ve been good.
Monitoring
Smart early retirees will stay on top of changes to laws that affect their plans.
My wife and I knew going into this thing that we were dependent on the ACA. That knowledge is prompting us to keep abreast of changes the government is going to make in that area.
Other areas we monitor include rules around traditional IRAs, Roth IRAs, and the conversion rules which enable the Roth-Pipeline method of accessing retirement accounts without penalty prior to reaching defined retirement ages. (I described the full strategy we’re using in this old post.)
I’m confident that we can adapt and adjust. This is not the early end of the world, and with any luck it won’t be the end of our early-retirement either.
On a less self-interested note, I hope that our newly elected officials don’t simply gut Obamacare without replacing it with a real, working alternative. I don’t want to see 22 million recently protected Americans again going without insurance. America is a rich country and can afford a plan to cover our citizens. I’m not sure how anyone with a shred of empathy can feel otherwise.
I’ll also add that I don’t mind paying somewhat more for insurance. We can afford a modest increase. What we can’t afford with our current asset sheet is 1K/mo premiums with virtually no restrictions on yearly rate hikes. We can’t afford a return to a pre-Obamacare world without a similar alternative.
So the monitoring will continue.
Preparing for the Worst
Let’s project the worst case scenario for a moment:
Obamacare is gutted without a replacement. The Trump administration does indeed take fast action on submitting changes. They are put into effect in 2018.
And let’s further say the most likely path to this end is taken: All federal subsidies are removed, but people are still required to purchase their own insurance.
This would be a death knell for the ACA. Most people would pay the tax penalty for being uninsured instead of purchasing insurance on the exchanges, because paying full cost for insurance remains unaffordable for practically everybody — it’s a fact that medical costs in the United States are out of control. The exchanges would, in turn, collapse. Opposition to Obamacare, instead of being mixed and uneven, would quickly become unanimous as a result of what would amount to a broad tax increase on the population with zero payoff for the vast majority of citizens (since they remain uninsured.)
The resulting unpopularity would surely trigger a full repeal. Recognizing the harm of the law, senate Democrats would have little choice but to get on board and allow passage.
And let’s say there is no alternative put in place. The various branches of government get caught up in partisan wars, bickering about this and that, resistance from insurance lobbies, and so on. Nothing happens.
Also, for Massachusetts residents: Our state, currently run by Republican governor Baker, is unwilling or unable to reanimate the rotted corpse of Romneycare.
Net result: It’s 2009 again. We are living in a pre-Obamacare health care environment. Decent health care is again tied exclusively to employment. Private insurance costs a million trillion gazillion dollars a month.
If all of this happens, it becomes likely that either my wife or I will head back to work in 2018 in order to gain full coverage. We can’t afford to pay full premium costs, and we’re unwilling to live with the risk of going uninsured.
Other Actions You Can Take
We’re not completely powerless when it comes to the upcoming changes. What else can we do?
- Once these topics begin to be discussed in the mainstream media (i.e. the eyes of politicians are fixed as firmly on Obamacare as Sauron’s Eye was on the One Ring) you should look up your house rep, your senate reps, and then send all three of them both email and snail mail stating your views. Sample text: Obamacare is critical to my family’s health, lifestyle, and well-being. We will continue to need an effective, affordable health care solution. Please work to make sure this legislation is not repealed outright. Fix it or provide a suitable replacement. Don’t sabotage it or junk it entirely unless there’s a good alternative plan which will be simultaneously enacted. Please, please, please, please. If you fail in your work, you will lose my vote plus I will tell everyone I know that you’re a practicing Satanist, or worse, an Atheist. You should do this regardless of their party affiliation or how you believe they will be voting on these issues.
- Send Trump an email for good measure at president@whitehouse.gov. Use phrases guaranteed to provoke a response — I personally believe he responds best to compliments and ego-stroking. Suggestion: Mr. President, I expect the best from you, the very best, because you’ve always delivered the very best in the past in the form of your incredible hotels, casinos, and premium meat products. So I know you have the ability, intelligence and temperament required to create an amazing and affordable health care plan for this country’s tremendous citizens. Please deliver the goods once again. I recognize that you and only you can save the United States. Help me, ObiTrumpIoni. You’re my only hope. And so on.
- Move to another country which offers universal health care.
- Find a small dank corner to huddle in and cry until the end comes. Admit it — this has some dark appeal.
Bottom Line
We knew going into our early retirement that our plans depended on specific bits of tax code and legislation in order to make the numbers work. At this point I’m not particularly alarmed by what are sure to be some upcoming changes.
The key for us is to stay on top of things so that we’re not hit with any surprises. If you can see what’s coming, and you have time to adapt, you can make the necessary adjustments to handle virtually anything. Don’t be caught with your pants down and all of that, blah blah blah.
To close I’ll turn to that old adage: Hope for the best, but plan for the worst.
The worst is going back to work, and if needs be, I’m prepared to do it for a few additional years in order to make sure we remain safe, healthy, and secure.
And the best — the thing I honestly hope for — is that a Trump administration will prevail by offering a similar or improved health care solution to the general public. It could absolutely happen. Obamacare is, after all, far from perfect.
Trumpcare, I’m pulling for you.
Don’t fear change. Monitor, and Adjust as necessary instead. And if things get really bad?
Fight!
***
Please refrain from making highly charged political comments below. This post is intended to be an even-keeled and rational exploration of potential changes to health care laws and their impact on early retirement, not a flame of any party. While you can probably tell I’m deeply disappointed by the 2016 election results, I accept Trump as the president and want him to be successful for the good of the country.
Thanks.
Living a FI 
Move to Norway. Free universal healthcare!
Not if you’re not a citizen.
Right, that’s the rub on moving to another country simply to gain access to free health care. You may need to work through requirements (such as citizenship or other) and this can be a time consuming and occasionally expensive process. And for the vast majority of people, well — we have families and communities here. It’s not a practical solution for most.
Usually you don’t have to become a citizen. E.g. in Finland I think you can be covered permanently by the social security if you work at least two years. You of course have to make sure your visa and stuff are up to date after that (i.e. be legally in the country). And you have to work for two years…
Rather than Norway and other countries where citizenship issues could topple your plans, you can consider a lower cost but good quality healthcare destination like Thailand, Malaysia, India etc. where you can afford to pay straight out-of-pocket even for surgery. In LatAm, I hear Ecuador, Chile and even some parts of Mexico are quite good where most surgical procedures can be paid out-of-pocket fully. Healthcare is the biggest reason why there are many forced exiles from US, who come only to visit family during holidays. One healthcare example here: http://tenfactorialrocks.com/healthcare-affordable-better/
Btw, great post livafi. Serious topic indeed for all FIREd people.
Do they except someone with pre-existing conditions? Let’s face facts. We are all f***ed here in the United States now that this GOP Fraud settlement is in office.
As long as you/your wife don’t have pre-existing conditions . . . here is your solution: libertyhealthshare.org. I used to be on an ACA plan but it got too expensive for the coverage provided. It was basically a catastrophic care plan with a ridiculous deductible of $6,000 per person and $13,500 family. The above cited website will give your family a monthly premium of $299 and a deductible of $1000. Retirement saved.
Also remember that one reason premiums are so high now is because obamacare required insurance companies to cover many more things. Organizations like libertyhealthshare and http://samaritanministries.org/costs/monthly/ don’t have to meet those requirements and the prices are much more reasonable. I used to pay under $100 for catastrophic coverage and the cheapest coverage I could get on an exchange now would be several hundred dollars.
@Benjamin and Prob8, thanks to both of you for sharing alternatives.
For anyone interested in these alternatives, note that you do not have to be religious to join. That is not a question in the enrollment process. If it was, I would have been declined immediately.
I appreciate the advice too. My family and I were on the ACA and it ran us $700 with a $10,000 deductible. And I was fine with it (thank you Universe for our good health). However, with the ACA upheaval, it is comforting to know that there are alternatives.
A fact about premiums the Republican party won’t tell you about:
Opponents keep standing in the way of stabilizing premiums. GOP blocked all legislation that proposed any building to improve the existing law – legislation that would have helped the program function better.
And by the way, does anyone remember what it started out as before the GOP added 106 amendments to it, over a year’s worth of negotiating? It was the Public Option. That is actually what President Obama had proposed, and Romneycare is what the Republicans themselves turned it into. The Democrats were persuaded to believe they’d accept this after they’d done this. And look what they did. They put on a Green Eggs and HAM ACT for over 4 years. Now What they’ve got is their “Thumbs Up the B*t” plan consisting of a hastily drawn up 7 page document that consists of a preamble and then the word “PLACEHOLDER” in big bold letters.
You know what’s also too bad? Too bad we can’t get the “government healthcare” insurance Republicans in office are getting – you know, the insurance WE pay for on OUR DIME that they enjoy for free. It must be an amazing plan, not even one Republican has turned it down for a private insurance plan. Not one. EVER.
But they’ve convinced themselves that we work for them, not the other way around. So shut up, sit down, take your seat. They have some more bullsh** to feed you and you’d better like it. Because that’s all this Republican party is going to offer.
Health care analysts say the extra requirements contribute little to premiums, because they are little used services. The real drivers are less healthy folks locked out of the previous system (due to pre-existing conditions or unaffordable premiums) piling into the new one.
If the worst comes, what about a downshift job? Starbucks and REI offer healthcare to their part-time employees? Politically charged comment- If Trump’s election brings back L-afi (John Stewart who?), maybe it was worth it. 🤔
All possibilities. When I mentioned “going back to work” I didn’t mean to imply I’d return to my old career. There are plenty of other ways to earn.
Well Dr. Doom, you saved me from writing a post on “Obamacare in a Trump World”. 🙂
My analysis of the current situation is pretty much 100% in line with yours. Something will most likely change in 2017 with effective date probably 2018. It’ll probably include higher costs to us early retirees, but not necessarily (one GOP proposal I saw included a flat-ish tax credit of many thousands of dollars that might make health insurance even cheaper or nearly free for your typical 30-something early retiree).
Trump’s a wild card (hope that’s not too political! 😉 ). I wouldn’t even be surprised by some radical reform, possibly even effective radical reform (the best reform, the greatest reform). Cost control? Efficiency? Streamlining? Single payer? I would not put anything past the guy – just hard to pin down what he’s actually thinking since it seems he says whatever is expedient. But now that he’s elected, he seems to be walking back on some of those promises (and that NYT article with some Trump quotes illustrates it well – post-election president elect Trump sounds like a kinder, gentler dude).
Fingers crossed. I’ll be following this situation closely since I’m probably in the same camp as you come 2018 or 2019 (back to work? side hustle to make enough $$ to pay tens of thousands for family coverage?).
>>Well Dr. Doom, you saved me from writing a post on “Obamacare in a Trump World”.
Yep, that’s what I do best. I put out articles that have the potential to bum people out or rub them the wrong way so that folks like you and Jeremy at GCC don’t have to.
>>Fingers crossed.
Same. I really am hoping for the best and, to repeat something I mentioned in the blog post, there are legitimate reasons to hope that whatever reforms come will wind up being ultimately positive developments.
Yes. The Republicans hated Obamacare so much, it was passed with zero Republican votes. Now they get to possibly rebrand it with some much needed improvements and call it Trump Care. They will “win” with the electorate. Peter Schiff had a great article today on why interest rates are skyrocketing. He said that it appears Trump will cut taxes and increase spending at such a rate that his will be the greatest deficit spending presidency of all time. We can hope that this will have two effects. One is that Trump Care will be a better deal than Obamacare. Two is that the stock market will melt up for the next two years as a result of this spend spend spend. When the jig is up in a couple of years, sell most of your stocks, buy bonds which will do very well as the stock market and economy implode.
I read this article the other day:
http://www.npr.org/2016/11/09/501451368/here-is-what-donald-trump-wants-to-do-in-his-first-100-days
It mentions repealing and replacing the Obamacare act with HSA’s.
I’m curious to see what happens and what type of impact it will have on my own FIRE plans.
Interesting content, thanks for sharing the link.
Doom: So glad to see your ideas on the likely changes to the ACA. That’s not easy. Also, so glad to see you blogging again. I got a little worried there. Thanks for the work. Have I been trying to make sense of the ACA for years? Yes. Do I want some decent iteration of the ACA to live on? Hugely. Yuuuugely. But I’m not betting on it. I can pretend that Obamacare Jr. might not be so bad, can’t I? For the life of me, I can’t understand why it’s so reviled by the kookier segment of the “Burn it down!” set.
>> I got a little worried there.
I received more than a few emails expressing concern, apparently prompted by the length of time between posts, and although I’m sort of touched, I’m also baffled. I’m very satisfied with my life nowadays, I have the best life, the very best. It’s absolutely tremendous and I want all of America to have the great life that I have. Appreciate the comment and support —
Thanks for you post. You have once again framed issues in a way that helps me identify and develop my own opinions. Great to hear from you again.
Nice to see you stop by, Karen. Thanks for the comment.
Well written article. I understand Obamacare is important to your FI lifestyle, but in all candor Obamacare is detrimental to the economy, and furthermore like most socialist schemes disincentizes productivity & success While your premiums go down, mine, and those who make more income than can qualify for subsidies are going up. And going up – to borrow a term from DJT – bigly.
I’m a fan of personal responsibility. As nice as it is for taxpayers to subsidize the cost to enable early retirement, it’s not fair to force people to do so. After all, socialists are most generous with other people’s money. If people are reading this and disagree, then I encourage you to donate to this website yourself, so you can continue to subsidize his lifestyle after Obamacare goes away very quickly.
[Doom responds: 1) It is a fact that Donald Trump himself benefited bigly from tax code at every opportunity. I consider his writeoffs to be a socialization of his business endeavors. Do you approve of that particular form of socialization? Further, do you consider that to be more ethical or less ethical than accepting an ACA subsidy? Trump has called his manipulation of tax code “smart.” Could it be that receiving a modest health care subsidy to help with early retirement is similarly shrewd? I am using rules which are legal and available for use. I’ve indicated repeatedly throughout the blog post that if early retirement is no longer an affordable and sustainable option for my family, I will immediately seek full time employment until the numbers work again. That is, of course, the proper adult response. 2) This blog is not monetized and there is no way to provide donations. I’ve never once tried to make any income off these efforts. 3) I’m surprised at your tone here: There is clear disapproval of a lifestyle of leisure. Thanks for your judgment.]
Beyond the ethics of all that, it’s just not a sustainable model. We’re really just getting started and costs are skyrocketing. Insurers are pulling out of the exchanges, fees and penalties for those who opt out are just getting started, and the program itself is caught in it’s entirely predictable death spiral.
Further I actually disagree with the media’s assessment on what will happen. For one, the media got everything wrong this election cycle, including Trump’s presidency and how they’ve framed him up to a now hysterical public. This is a fiction of the media’s making and we see it playing out on the streets of various cities around the country as people protest essentially what is the outcome of a democratic process since they think Trump is the devil.
[Doom adds: I hope you didn’t read the tone of this article as hysterical. Concerned does not mean terrified. And I a) fully accept the results of the election and also stated that b) I am rooting for his (Trump’s) success. ]
Secondly, Trump will repeal and replace Obamacare quickly. It’s one of his first initiatives and will unwind quickly, despite the complexity of doing so. People aren’t used to politicians doing what they say. They make grand promises, and the people get nothing but words, excuses, and half measures in the end. However, the rules are different now – Trump is not a typical politician, and like him or not, he has a record of getting projects done “under budget, and ahead of schedule.” He’s also backed by a Republican congress who have been chomping at the bit to get rid of this abatross around the countries neck.
[Doom adds: I agree that he and his party will want to enact rapid changes. The immediate question is: Will they be able to alter things for 2017? Given what I’ve read, it seems extremely unlikely. It will be interesting to watch things develop.]
All that said, thanks for sharing your perspective here, but when it comes to the predictions of the mainstream media and “experts”, based on their recent performance, I really wouldn’t hold my breath for any of them to play out as they hope.
[Doom adds: It is a human tendency to overweight recent events when attempting to predict the future. I do appreciate the thoughtful comment and sharing your opinions in a rational manner. We’ll both have to let things play out.]
Much agreed with Dividend Ten. The intention of ACA was an attempt to provide health coverage, I.e. medical care, to those who were priced out of the market or otherwise unable to provide coverage for themselves. It was not intended to subsidize someone who chooses not to work and not earn sufficient income to purchase insurance on their own. As with most social welfare programs, many people game the system and take advantage of the producers (income earners) in our society. The irony of ACA is: if only those people whom it was truly intended for participated in it the overall cost would be much lower and it would actually be sustainable.
I fully agree with your statements. The ACA is was not intended for relatively well off early retirees. I still remember doing the research on it three or four years ago and discovering that there was no means test. It initially shocked me.
Still, I currently make use of it because it is a practical and legal way to keep costs down. Somewhere along the way to becoming an adult, I learned that using the rules to your advantage i.e. making use of loopholes is something that practically everybody does. It’s not exactly right, but it’s not exactly wrong, either. In other news, people tend to follow their own self-interest.
I would welcome adjustments to the current system or an entirely new system that fixes the above problem, decouples health care from employment, and is affordable.
>> As with most social welfare programs, many people game the system and take advantage of the producers (income earners) in our society.
I believe there are numerically very few people who do this, though, where this = retire early with a decent stash, enroll in ACA, claim subsidy. Don’t worry, folks that are doing what I’m doing are not going to bankrupt the government any time soon.
Probably didn’t want the administrative asset test hassle for ACA. Also could be why ACA eliminated asset limits for Medicaid (but beware estate recovery after 55). Or maybe ACA views it like income based entitlement?
All the talk about insurance v. ACA no one is addressing costs. I too hope to retire very soon and very early and the ACA would be super helpful. But I am not deluding myself by thinking its anything but a wealth transfer from my remaining co-workers to me. Its a new welfare payment for a group of people we early retirees can sneak into. Those 22m new insured, that is why ACA can’t continue, everyone is just paying for a bunch of previously uninsured folks. Cost is not addressed in any way, just shifted and increased.
But to actually add to the discussion, medical tourism/geographical arbitrage might make a lot of sense for us early retirees.
It’s not just a wealth transfer from your co-workers… US doctors have one of the highest income in the world, so that is a transfer to them. You also transfer money to people like me who own healthcare REITs, a profitable business. Not to mention transfers to me as a software business in the healthcare industry. The only thing we love more than complex rules are changing rules. 😉
I read an article somewhere that one goal of the new administration will be to fix the rising costs. Everybody understands that prices passed on to consumers are frequently not close to costs incurred by providers — margins are high mostly because they can be. And costs are much, much higher here than they are in other developed countries, which begs the question: Why? (Again, the answer is mostly: Because they can be. Because profit is great. Because there are few controls in place to keep them down. Etc.) Here’s hoping more is able to be done in this area.
I totally agree, costs in US are crazy. I think its due to gov though, just like education and homes. Anywhere the gov interferes prices get distorted. With The Donald already pulling back from much of the crazy stuff of the campaign, I think there may be changes but we’ll come out ok.
Also, really love the blog and glad you’re posting again!
Also, as an example of crazy costs, my wife is a RN, gets $50/hr! I was getting 1/3 of that with my fresh finance degree (early 2000s.)
Cost must be the key issue. I am in the UK, so only see the US system through occasional experiences of friends, but my perception is the insurance system there creates incentives for what we would consider to be over-treatment.
Example 1: my Dad and a US friend had the same carpal tunnel problem at the same time. My Dad very quickly had minor surgery which corrected it (on the NHS). My Dad’s friend in the US was funneled through several other procedures/treatments (all paid for by his insurance) before finally getting the minor op and having the problem fixed. Maybe those other treatments had some chance of working – but the way it turned out the healthcare industry made a stack of cash out of him (or, more accurately, all the employers paying in to his insurer) and he had no incentive to say “no” to anything.
Example 2: from a friend who had her first baby in the US. Again, she had great insurance so everything was covered, including monthly scans. When she turned down some of those scans (in the UK on the NHS we just get standard scans at 12, 20 and increasingly 34 weeks) she was put under huge moral pressure by the hospital to take them because they were covered so they “wouldn’t cost anything” – even though nobody could explain to her what benefits they actually gave to her or her baby. Similarly I believe she was seen by a specialist doctor at most appointments – whereas in the UK my first pregnancy I saw no specialist doctors (only general practitioners and midwives) until I was actually in labour. This time I have only seen a consultant because I am over 40 (and even then I’ve just had two consultations, both relatively short, given everything has been straightforward).
It seems to me the most obvious way to get costs down in the US would be to reduce the *quantity* of healthcare being done (by identifying “unnecessary” treatments and consultations and removing them). However, people get very used to what they already have, don’t they? I’m sure if I lived in the US and was used to having a scan every month of my pregnancy I would be horrified and stressed out by the idea of only having 3 scans in a future pregnancy. So it’s a difficult one for anybody to pull off. The whole problem of adopting markets in health care is that the people who are paying for it are rarely the people with the expertise to identify what is actually required, so you are putting huge faith in doctors and insurers not to over-treat or over-charge to their own benefit.
I was similarly upset by the results of the US election, particularly as a woman who has been sexually assaulted and takes this stuff seriously as an indication of character. However, the health care problem is a big one (here in the UK too) and I wish Trump’s government success in tackling it. None of us can afford to stop working to improve things – pressures will continue to mount so we will have to keep working hard to find better solutions.
Greg, the problem with your argument about government interference is that other countries with far more government intrusion (including single payer) have far lower medical costs. Even in USA, Medicare and Medicaid admin expenses are far lower than private insurance that eats up to 20% of each premium dollar in expenses and profits.
I hope for you Americans things indeed turn out to be changing for your benefit. Otherwise, come over to The Netherlands, where healthcare is organized more socially.
DOOM! Thanks for sharing your rational, even-keeled thoughts about healthcare in the US. I’m not worried for myself since I won’t be FI for quite a few more years, but I really feel for those 22 million or so who depend on it.
Doom: You may want to seriously consider Option 3 (at least “part-time”).
Quick background:
I am a Canadian, living in Western Canada; working in the oil & gas industry, making very substantial $$$, and hating it (so much of how you describe your work life resonates with my industry..). Very, very close to FI though (mid forties). I have worked in the US several times over my career, having managed projects in Texas for a couple years, so I am familiar with the issue of health care coverage / costs in your country.
Quick (??) summary of Canadian health care system:
Canada has a single payer health care system, where the provinces are responsible for health care budgets, administration and delivery, yet have inter-provincial agreements that ensure you are covered anywhere in Canada (for those in the US not familiar with Canada, our provinces are much like your states; with a bit more autonomy from our federal government). Federal health budget transfers ensure that all provinces are adequately funded, regardless of their economic (RE: GDP) status. Most provinces charge a progressive basic health care levy, (i.e. at low income is equal to or next to nothing, increases proportionally with increasing family income), and at least one province has NO levy for all residents (i.e. AB).
Provincial basic health care covers pretty much everything from routine doctor visits, exams, surgeries, emergency room visits, etc. etc. What is not covered is ambulance charges, dental, vision, elective surgeries and practitioners / modalities (i.e. cosmetic; anything not referred by a physician, etc.), specialty health service (i.e. physio, psychologist, massage therapy, etc). To cover latter costs, there are several private insurers available that cover anywhere from 50%/80%/100% of these costs. Most private sector employers offer / cover this.
For example, my family is covered for 80% of pretty much everything up to $500/practitioner; $2000/yr out of pocket drug; $100 / year eye exams; global medical assistance / emergency out of country health care coverage; dental = 100% basic, preventative, endodontics and periodontics; 50% major (e.g. crowns); $2,000 per year combined basic and major maximum; 50% orthodontics (dependent child only); $2,000 lifetime dependent child orthodontics, etc.
If you are not working, there are several private insurers that offer this coverage for reasonable cost. (for example in AB, you can get Blue Cross coverage for ~$65/mo/individual; subsidized ~$45. Just one example; lot’s of information available online). To cover the rest, we also have HCSA’s (health care spending accounts) that are non-taxable funds that we use for things like contacts, glasses, 20% or remaining costs for medical/dental/vision/etc.
For example – I live in British Columbia (our version of California, lol), yet work in Alberta (our version of Texas, lol), and have no issues ensuring full coverage for me and my family in either province. In BC, as a high income earner, I pay the highest provincial premium possible, which is $1800 CDN / year ($150 month) for family coverage (wife, two kids under 18). If I still residing in AB, the fee would be $0. My employer covers the rest as described above, at no cost to me; however if I had to pay to get similar via private insurer, would likely be ~$100 – $400 CDN depending how extensive of a plan desired)
Regarding access and costs, I can share a recent example. I had to get a hernia operation a few years back while still an AB resident. It was easier (quicker) to schedule the surgery in BC, where my family was already living. Surgical consult, surgery, recovery exams. etc. all obtained / performed in BC, AB covered all cost. Out of pocket expenses to me = $0. When my family and/or myself travel throughout Canada, into US, Europe, etc., health care coverage is not a concern, although when travelling to the US we ALWAYS make sure we have adequate travel insurance coverage. I have had friends that traveled to the US; had health care emergencies (one racked up a $100,000 bill while on vacation in Hawaii for emergency / extended hospital / travel costs; but smartly he paid the $50 CDN for travel medical coverage thus was out of pocket 0$). Thus we pay the few $$ every time to top up / double / triple ensure we are covered when travelling to US. I will not criticize the US health system, I can only objectively state that one must exercise elevated caution and mitigate risk when it comes to potential financial costs of having to access the US health system.
Mass. is very close to Canada. If you are in the Boston area, it’s an easy half day drive to Montreal, QC. With you & your wife’s educational / career background, net worth, age, etc., I suspect it would be pretty (very) easy to obtain Canadian citizenship, fairly quickly. I’m no immigration expert, but I do have several friends that have (had?) dual citizenship, and in some cases still only have CDN citizenship, and leverage the win/win situation of being covered by the Canadian social safety net, yet still spend a very large portion of their time living in the sunny / warmer climates of the US (especially during our winter months). I work with A LOT of guys/gals that own properties in the US, and spend close to half the year there, while still “residing” in Canada, earning a CDN income, covered by our CDN social safety net.
To summarize, I just wanted to provide a bit of Canadian perspective to your situation. The devil is in the details, however you seem to be a details oriented guy who takes the time to explore all your options. From my perspective, it seems hedging for the future by obtaining CDN citizenship might be prudent in your case.
P.S – I stumbled onto your blog a few weeks ago, and must say it is excellent. Very happy to see you are back with your insightful and helpful posts! Looking forward to your book 😉
Hi Zee:
Thanks for the detailed explanation of the Canadian health care system. Parts of it are similar to Obamacare, believe it or not, like transfering some money from the fed to fund provinces which have lowered GDP.
I was stunned to see you could get full hernia operation and treatment for absolutely nothing.
But here in America, many among us still feel this is bad — that “socialized” medicine is a terrible thing. It’s hard for me to wrap my head around this. I think the profit motive of private insurers and providers is to blame for many of the issues, frankly.
>>I will not criticize the US health system, I can only objectively state that one must exercise elevated caution and mitigate risk when it comes to potential financial costs of having to access the US health system.
Everything you’ve mentioned makes sense. This is why I won’t go without full coverage. If there is a serious accident or health condition, it’s likely to bankrupt us, or at the very least, create massive and horrible changes in our currently very comfortable lives. Textbook catastrophic risk.
Thanks very much for the detailed comment, I am sure it will help educate some readers who would like more information on the Canadian system.
We just retired (or at least quit our jobs) this year. I’m not too worried. As you said, things take time, and who knows what will happen by then. There is nothing actionable for me to do yet or worry about.
The main thing I’m waiting to see is what happens with Medicaid, which not many people talk about. Provisions of ACA removed the asset test for medicaid eligibility. As a family of 3 or 4 spending $30,000 – $40,000, which really means very low capital gains income, it’s currently almost hard to generate enough money not to be eligible for Medicaid if we want to!
Thanks so much for this post!!
As someone ready to pull the plug ( had planned early next year) this did at least help calm my nerves somewhat. I am so sick of affordable health insurance (aka– insurance /protection from bankruptcy) being tied to employment! I know ACA was far from perfect- but it was a start–!and a viable option for those of us who no longer need or want to work for the man. But like you, we cannot absorb $1k plus and rising insurance premiums. We did that for a short period when my husband early retired at age 50 (Cobra-$$$1300/monnth) until I got a job with health insurance.
It is not easy to move to a country with univerasal health coverage. I’ve checked. I would love to move to Denmark or Canada.
I currently live in Ohio–and I will likely move in the next few years. If Canada is not an option I am looking for a state that might have more progressive views – I was leaning toward Vermont or Maine- but MA might be a good choice since they had Romneycare prior to ACA.
I have been in a sort of depression all week- time to snap out of my funk and step away from that dark corner I guess–and I will start with your suggestion of writing to congress etc. It may be for naught- but at least something positive I can do – thanks!
And- big hello- to Justin ROG- I actually went to your blog initially- as you have had such great info on use of ACA and given me advice in the past. Glad to see you agree with Dr Doom here 🙂 I thought of you when the results from NC were rolling in on election night. Worst thing for me also was election day was my birthday! – sort of ruined the day for me :).
Welcome back L-AFI. Good to hear from you again and to read this even-handed post about something we’ve been concerned about ourselves. We (well, one of us anyway) were planning on pulling the plug at the end of this year, but we are re-evaluating our options in light of this unexpected shift. Thanks, as always, for your input and thoughtful analysis. Julie and Will
Such a well laid out post, thank you!
“Find a small dank corner to huddle in and cry until the end comes. Admit it — this has some dark appeal.” Or, if you are in a state like mine, rejoice that legalization of the leaf couldn’t have come at a better time, and plan to spend the next four years only vaguely aware of the chaos.
> 3. Move to another country which offers universal health care.
There is another option, which doesn’t require you to move only to countries with universal healthcare and then establish eligibility (citizenship/permanent residency): Move or travel to countries with healthcare that is more reasonably priced than the US, and then pay out of pocket. You mentioned GCC – they are a great example. The Mad Fientist is doing it, and he just interviewed Adventuring Along who are also doing it. The “Global Nomad” catastrophic insurance is also popular as a backstop to rely on.
However, since you’ve mentioned your family as one of your key parts of your life, I’m guessing this is less relevant than self-exile. But as a ex-pat myself, I can tell you that in today’s digital world, you still can stay in touch decently through video conferencing etc. Add to that the amount of time you are allowed to spend in the US each year and still pass the physical presence test, maybe a visit from family to see you outside of the US, and it can work. Travel hacking obviously can be an enabler for all of this, as well. In any event, the option is there.
Great post, as usual, thanks again for sharing with us.
Hi, Doom. Another MA resident here, partially retired and vulnerable in terms of loss of health care under ACA. What do you think of this piece by the Boston Globe on the impact in good old Massachusetts?
https://www.bostonglobe.com/business/2016/11/09/massachusetts-seen-insulated-from-trump-repeal-obamacare/bFC9mivzgtlC3c7ElXTUyI/story.html
Yes, the contents of the article align with thoughts expressed in my blog post: I think it’s likely that in the case of a full repeal and no replacement, MA will continue to offer its own insurance exchange — and further, I wouldn’t be surprised to see several other progressive states follow suit (Washington? California?). Still I must clearly state that this is all speculation.
My wife and I are on ACA’s bronze option with HSA and no subsidies. Our total increase in premiums over the last three years has been 4%. Not annually… Total! Compare this to our previous plan that covered far less and was rising at 15+% every year. I hear many people on the news complaining about the huge increases in rates, and it seems to me to be tied to those states which refused the Medicaid expansion. States that took ACA seriously (I’m in CA) and wanted to make the best system possible have not had wild premium increases and massive deficits. States that were opposed to it and fought against it every step of the way are the ones who unsurprisingly have a less robust system.
With that said, I do agree that ACA needs to be tweaked. Common sense says that any large legislation will need to be tweaked for improvements as time passes. A corporation doesn’t use their decade old business model regardless of today’s environment. They adjust and course-correct as they go to improve efficiencies and stay relevant. The problem has been that Congress has refused to allow any tweaking. It has been in their best ideological interest to vote 60+ times for repeal and fight any moves towards improvement. When you do your best to bankrupt a company in order to prove that the company is bankrupt, it is disingenuous at best. Yet that is where we are at.
I will find it ironic (and be relieved) if we end up seeing Trump move toward a tweaking model instead of outright repeal.
As a side note, I read a study recently that looked at Presidential campaign promises over the last 100 years and how often they were kept once in office. Turns out the theory that all candidates lie and don’t mean what they say is historically inaccurate. 73% of promises are kept. That is a very high number! I do hold out hope: Trump has publicly taken every side of almost every issue at some point in his life. I wish him the best of luck (because our country depends on it) and pray that he puts more thought into policies as President than he did as candidate.
>>I hear many people on the news complaining about the huge increases in rates, and it seems to me to be tied to those states which refused the Medicaid expansion. States that took ACA seriously (I’m in CA) and wanted to make the best system possible have not had wild premium increases and massive deficits. States that were opposed to it and fought against it every step of the way are the ones who unsurprisingly have a less robust system.
Yes, this mirrors my own analysis. Many states effectively sabotaged themselves and were, as a result, able to claim that Obamacare wasn’t working.
>>Turns out the theory that all candidates lie and don’t mean what they say is historically inaccurate. 73% of promises are kept.
I don’t doubt it — although the actual solution which is implemented frequently looks different than what was promised while campaigning.
Thanks for the thoughtful comment.
Wow only 4% increase !!! I also live in CA and our pre ACA premium was 7100 per year for a 10K deductible and next year it is set to be 14600 for the same 10K deductible .
Mike, that is a crazy high premium! Perhaps an age thing? I’m 37. Do you smoke? We don’t. That is the only other criteria that ACA allows insurance companies to look at. Maybe it is your provider? I am with Sharp, but when we last checked a few weeks ago for this new enrollment period, all of the other providers in our area (San Diego) were priced similarly to Sharp. My wife and I together are 4300/year unsubsidized. It is a bit more expensive (about $100/month more, but again the old plan was rising annually at around 15% year in and year out so the difference would be gone by now anyway given it was 3 years ago) than our non-ACA high deductible plan, but it also not only didn’t cover pre-existing conditions, it also had some pretty frightening fine print (my wife did – she had a separate policy from before we were married… we found it a year after she signed up for it): if she had an accident like a car crash they would cover it, but if it was something like cancer they would write us a $20k check and cancel the policy. We were shocked! A catastrophic policy that caps at $20k! Needless to say, paying $4300/year to have real coverage and not having to deal with hidden insurance company loopholes was a decision we were thrilled to jump at.
Hi Dave, Guess its an age thing, I am 60 my wife 57 non-smokers and both in excellent health.. What is painfully obvious is that certain groups were really screwed with the ACA and hope that something happens to make it affordable. Will look into the healthcare ministries.
My family of 3 is also in CA. We used to have the Platinum Plan Blue Shield PPO in 2015 for $1400 per month. In 2016, the premium increased to $1900 per month, so we switched to the SIlver Plan for $1100. For 2017, the Silver Plan premium is increasing to $1500 per month. So we are seeing astronomical increases every year, nothing like the 4% you are seeing.
I live in Illinois and my 2016 BCBS silver plan ($440 premium/$3500 deductible) was discontinued. For 2017, BCBS is the only provider in my county. The plan that was most like my 2016 plan was going to be a whopping $715/mo with a similar deductible. (I’m 51 & don’t smoke, make a tiny bit too much to be eligible for a subsidy) The cheapest plan was a bronze HMO at $502/mo with a $7100 deductible. If I went without coverage they couldn’t fine me because the premiums are more than 8.13% of my income. I would be eligible for a catastrophic plan, but didn’t even bother checking into it.
While casting about for alternatives, stumbled onto Samaritan Healthcare Ministries and signed up. $220/mo with a maximum deductible of $900/yr, deductible reducible to $0 if you negotiate discounts. As long as these types of ministries are available i will never go back to regular insurance again.
I’d be very careful about health ministries. It is not insurance, but a sort of ersatz co-op run by amateurs. They are unregulated, have no contractural guarantees or reserves, and may have low coverage caps. Might have to front payments before reimbursement. Common exclusions for things like prescriptions, preventative care, morally prohibited and pre-existing conditions. Pretty sure the “premiums” are not tax deductible.
I’m not inclined to use one, way too sketchy for me. But if you are determined, perhaps a hybrid solution would be in conjunction with conventional catastrophic insurance.
What I’ve read about situations like Mike is that they had lucked into an unusually fortunate risk pool that had incredibly low premiums, especially for older members. So after reenrolling into something closer to market rates, naturally experienced large increases. Their current premiums are pretty typical for someone in their age bracket. The previous were exceptionally low. When I transitioned off COBRA onto Covered California, my premiums stayed about the same, similar to Mike’s, and I’m almost the same age. My premiums have always been higher because I never got “lucky”.
Awesome analysis! I’m lucky Mrs CK has a retirement gig that covers our insurance for now. But when she gets tired of that our plan was to go the same route as you.
I am just hoping the pressure stays on the new administration to put something better in place if they do make changes. But in the case that it goes the other direction at least in 2018 you will have access to copious amounts of marijuana to numb the pain as you huddle in a dark corner waiting for the end.
Thanks for the great read, and some much needed entertainment 🙂
>>you will have access to copious amounts of marijuana
Yep, we did approve a ballot measure to legalize it. Maybe I’ll open a dispensary — that way I can directly be part of the anesthetizing supply chain.
Ha! Let me know, CT isn’t too far, and I might be in need of anesthetizing.
I am in exactly the same boat as you; I left my 30 year career only because there was the ACA to obtain health insurance. I’ve been super frugal my entire adult life and my husband and I can live on $17K (a combination of my part-time work and small IRA distributions) a year, which makes us eligible for substantial subsidies and cost sharing subsidies. Plainly put, without the subsidies, we cannot afford the $1100 a month insurance premium, regardless of any plan with pre-existing conditions. I’m 51, my husband is 57; everything on our bodies are now pre-existing!! So of course I felt (and still feel) quite sick at the thought of a DT presidency. We’ll see what happens but like you, we’re probably headed back to full time work in 2018.
I lived in MA when RomneyCare went into effect, and as a young college grad, I was really grateful. I got the maintenance health coverage I needed and then had less anxiety. Now I am a professional in another city, but a contingent worker. I don’t receive a subsidy, but my insurance costs $160/m and I am once again actually utilizing maintenance healthcare. It’s been great for me. I agree with you that 2017 is safe. Everything after that is up in the air, but I hope that only small adjustments are made. ACA is not perfect, but has done a ton of good.
Excellent post. I am weighing the impacts of this election on my early retirement too, from health insurance to social security. I have a retirement Health/Dental benefit that steadily increases each year to now $970 a month for my wife and I. It is a year to year thing where the company I retired from (now involved in a 2nd merger since I retired) reserves the right to cancel the benefit at any time. ACA was always my fall-back plan. My benefit is a use-it or-lose-it deal. I could have saved much by going with ACA but its always being under political pressure had me stay in my plan. I’m still in my 50s and a long ways from Medicare (also a big question under Trump) so all of your and your reader’s comments has provided much to chew on as I do the same thing as you do, which is hope for the best but plan for the worst.
Doom — Sorry for the confusion. When I wrote “I was a little worried there,” I meant: “He has written previously that he would soon quit blogging,” and I thought that you might quit now. Your analyses are way better than I could do. Nice work; the replies show that you’re helping lots of folks.
New to the blog, love it. I’m also working a tech job I hate, and only a few years away from my goal to retire in my 30s. I just checked out your “Doing All The Things” list, did you play Chrono Trigger yet? Add Earthbound to the list too.
ChronoTrigger is done. Great game, very good plot and fun mechanics. I felt the pacing was fairly good too, it moved quickly and there wasn’t too much grinding needed. Looking into Chrono Cross but it’s pricey.
I haven’t played Earthbound but I know that’s where Ness comes from. I’ll be sure to check it out, thanks for the suggestion!
Glad you liked it, it’s one my favorite games of all time! Great replayability too, there are lots of different endings you can get in the New Game + mode. Chrono Cross is very different, certainly not on the same level as CT and only tangentially related to it, but it’s got a 10/10 soundtrack. Honestly I’d save the money and play some more classic ROMs.
Anyway, I’m at work so I best get back to it. Baby steps to FI/RE, baby steps to FI/RE…
Thanks for the tips on Chrono Cross, then, I’ll pass unless I find it super cheap somewhere. I’m kind of waaaaay too into classic gaming — I just re-beat Blaster Master on the NES while babysitting my nephews on Monday. They were baffled that I was playing such an old game but when I passed the controller and asked them to try it, they were hooked. (Speaking of soundtracks, that game also has an excellent one.) The top tier old games are still top tier in my book.
Completely random comment, but… you should look into Valkyrie Profile (the original Playstation one). Made me wish I had a Playstation growing up 🙂
So, didja play Earthbound yet?
I quit my job two weeks ago, couldn’t stand it any more. Comin’ up on half a million in savings, I should probably get another job but man, it’s tough, I think I’ve got more than enough considering I’m single, childless, and my hobbies are damn near free (running, chilling at libraries, retro games on emulators, etc.). We’ll see, maybe I’ll get bored and go back to the grind (but probably not, I’ve got a ton of activities in my Get-A-Life tree ready to rock).
Hope you FI is everything you thought it could be, my man.
I don’t think you have too much to worry about here. The last thing the Republicans want to see on the news are pictures of people suffering or dying because they lost their health care coverage due to the cancellation of Obamacare. The media would have a field day with that and it would be a PR nightmare for the Republican party. My best guess is that the ACA will be tweaked around the edges but is probably here to stay. Heck, it may even get better and more efficient now that it has been in operation for a few years and the things that aren’t working well can be addressed.
Doom, your posts are fantastic, and this one is a very good overview of the issues.
But here’s the thing–when you say “[w]hat we can’t afford with our current asset sheet is 1K/mo premiums with virtually no restrictions on yearly rate hikes,” what you mean is that you can’t afford the actual costs of your retirement.
The problem is that this is what the insurance costs. It’s shockingly high and growing higher because ACA started to bring costs into the system that had previously not been transparent–specifically, costs that were being written off by emergency rooms for the uninsured or in bankruptcy proceedings. Those costs are real costs of insurance, and the system does have to deal with them.
The solution almost certainly has to be some form of actual government healthcare that can then control the costs, rather than find ways to subsidize them. For now, that seems too socialist to many, so we’ve probably got to move closer to unsustainable before a higher percentage of people jump on board.
In the meantime, though, I think it’s important for people to understand that the insurance costs are real costs, and should be factored into early retirement projections as a true cost rather than something artificial that subsidies will effectively reduce, because the overall costs–and therefore the subsidies–are not sustainable in the long run, especially in a country with a $20 trillion national debt.
I was shocked to realize just how much healthcare costs (and how much my job was subsidizing those costs), and am glad to have seen this before making a final jump into early retirement.
Hi John
Agree with everything you wrote, although I would frame it a little differently. I would say that we planned well for retirement. We went into it with a blueprint that would have worked with the current set of rules and services available. Further, there is still a reasonable chance that we’ll come out of this all right — we can’t say with any degree of certainty at this point prior to knowing the specifics of any U.S. Healthcare reform. I don’t think this is a failure of planning or pulling the employment plug prematurely so much as the occurrence of unforeseen (and thought to be unlikely) circumstances.
Even so, as I mentioned in the post, my wife and I understood that our early retirement was built on several assumptions including reliance on Obamacare. We’re flexible and we’ll figure it out.
I will add that several very well known early retirement blogs recommend essentially what we did (Mr. Money Mustache, Go Curry Cracker, and Root of Good, to name a few.) We also saved enough to go with a 3% withdrawal rate (rather than the more-commonly recommended 4%). We took steps to be reasonably comfortable and secure.
But there are just so many things that can potentially wrong when you stop working — you can’t predict all of the risks, i.e. will be “known unknowns” as Rumsfeld used to say. During the analysis phase of early retirement, I eventually came to the conclusion that at some point, it’s best to just pull the trigger and do it, with the understanding it’s possible or even likely you’ll need to alter plans somewhere along the way.
The most secure alternative is to work virtually indefinitely to cover what you hope are all of the unknowns. Don’t go into the market — that’s too risky, what if you lose it all? Plan on 1.2K a month for a good family plan and 10% yearly rate hikes — plug it into your formula. What about inflation? It was around 10% for much of the eighties! Have to save a few million more for that.
And so on. Eventually individuals will have a choice to make: Continually saving in order to accumulate what is perceived to be a safer asset level, or quit and accept the risk. Security (and work…) or life. It’s an easier choice if you generally enjoy your career, of course — these people can potentially have it both ways. I could not.
>>The problem is that this is what the insurance costs.
Sure, I recognize and agree that this is the fundamental problem. But insurance should frankly not cost as much as it does on the private market. Even after years of Obamacare, we still don’t have great visibility into the real costs of both insurance itself and health care. What we can say is that costs in the States are much higher than other developed countries, and we’re all left wondering why exactly that is. Someone else left a comment and said the high costs are due to “government involvement.” I disagree. Costs are high because there is so little transparency, which in turn allows hospitals to charge (virtually) whatever they like. Costs were high before Obamacare and they remain high. The government has yet to exert much control over continually rising costs and premiums. (This is surely one of the biggest failures of Obamacare — its inability to rein in costs more effectively thus far.)
>> because the overall costs–and therefore the subsidies–are not sustainable in the long run, especially in a country with a $20 trillion national debt.
Maybe and maybe not. Most other developed countries manage to offer health care for their citizens using models which are affordable, effective, and sustainable. So then why can’t the United States come up with a similar or better solution? Answer: Perhaps it can.
At any rate, part of the reason I wanted to write this post was to talk about what happens when you recognize that a pillar of your retirement plan might fall. And it’s very rarely discussed. People don’t like to admit shortcomings or possible failures in their own planning — it makes them look less authoritative and therefore tarnishes reputation, you know. Particularly if reputation is tied to income, it limits an individual’s ability to admit the shortcoming.
So I’ll close with this: We clearly underestimated the risk of repeal or major changes to Obamacare.
But on a more optimistic note, these developments do not signal the end of the world — not even close. Prior to retiring I used to think that something like this would throw us into paralysis. Confronted with the reality of needing to alter plans to fit a changing world, I have to say, it’s just. not. a. big. deal. Perhaps one or both of us will go back to work, perhaps we will instead choose a completely no-frills catastrophic coverage plan, perhaps Trumpcare controls costs to the point that your basic private plan becomes affordable — one of these acceptable if not perfect futures will become our new reality and it’ll all work out.
Re: “But I have to say, confronted with the reality of needing to alter plans to fit a changing world, it’s just. not. a. big. deal. Perhaps one or both of us will go back to work, perhaps we will instead choose a completely no-frills catastrophic coverage plan, perhaps Trumpcare controls costs to the point that your basic private plan becomes affordable — one of these acceptable if not perfect futures will become our new reality and it’ll all work out.” “We’re flexible and we’ll figure it out”. Being able and willing to to these things is, I think, the greatest asset we have in our early retirement. True luxury.
Spot on response. I am not critical at all of your decision to retire early, and I greatly prefer to see people take reasonable chances rather than working indefinitely trying to eliminate all possible risk.
My surprise after reading MMM and fully buying into the analysis was how much of a wild card health insurance really is. I dismissed all the concerns about uncertain lifestyle inflation costs that permeate the criticism of MMM because I’m reasonably content with what I have. And the high deductible, catastrophe health insurance plans fit perfectly with my ideal that insurance should really only be necessary to protect against unaffordable expenses, and should itself be an affordable expense.
But when I began looking at moving to my wife’s employers’ plan from mine (she wants to work longer than me), I figured the costs would increase by maybe $1,000 or $2,000. Instead, it was a jump for a family plan from $3,500 under my plan to $10,500 under her plan. And because of the way her health care plan is set up (free for her, only lightly subsidized for family), we couldn’t qualify for a subsidy under ACA because of the family glitch that defines affordable care based only on the covered employee’s cost. That led to investigating bronze plans with $11k annual premiums and $14k deductibles, pushing possible health care coverage from the $3,500 I pay now (and had plugged into my annual spending figure) to up to $25k per year if we both retire and subsidies are unavailable.
That’s a significant wild card in estimating future expenses under the 4% rule, and one I realized I needed to understand better.
Again, your blog is great. Seeing you work through the pros and cons in real time rather than just resigning yourself to working forever is inspirational. And I keep your “Leaving the Cushy Job” open in my phone browser all the time as a reminder to jump when the time is right!
Thank you for your review LivingaFI. I was planning on using ACA when I retire. The other option was going abroad.
I really hope that the broken healthcare system in the US is overhauled soon, despite they way incentives are set up, and the strong interests against fixing healthcare.
Thanks for a reasonable analysis Doom.
I retired without ACA and had what is known as an Indemnity Plan (I couldn’t get covered at all pre-ACA due to pre-existing). It was reasonably priced and offered a pretty good catastrophic backstop. I’ll go back to that in worst case scenario.
I wish I could say it was with great foresight that we moved to a Northern European social democracy 10 years ago, but I’m grateful for it nearly every day. Of course it’s not free – I pay plenty of taxes – but the burden of paying for medical services is shared so a catastrophic illness or injury doesn’t also become a financial catastrophe. Best wishes and thanks for your post.
Thank you for your posts, they are the best on the web by far in the FI community.
I never EVER want to go back into tech once I retire. I rather work on more year in tech and then never have to go back in. I almost feel fortunate I am still working as I can adjust a little easier as this is a good reminder to have a buffer. Changing the rules on ROTH and ACA at once changes my FI numbers by a couple years.
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I would be very surprised if MA did not reanimate RomneyCare, assuming ACA repeal without replacement. Though, I guess if you are worried about that, all the more reason to help GOTV against Baker in 2018.
As for replacement plans, Sarah Kliff at Vox has done some amazing work going through some of the Republican plans on the table: http://www.vox.com/2016/11/17/13626438/obamacare-replacement-plans-comparison
One thing people aren’t really talking about, but will be important soon is that ACA, both through an additional tax on high income earners and providing care for near-retirees, has really helped solvency of Medicare. Since Republicans plan to eliminate this additional tax through reconciliation and potentially uproot ACA, long term Medicare viability is also going to be on the table in the coming years.
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On the same boat here. Left my corporate job in 2015 and took an ACA plan in 2016 but didn’t renew for 2017 because the premium went up 48%. What I am looking at right now is some type of “medi share”, which is close to what I need. If you manage your income to be really low maybe you can get Medicaid or if it is too high for medicaid then take a look at some of gocurrycracker.com posts on tuning your income to qualify for subsidies. Good luck
Come back and write more! 🙂 I’m in tech, follow the FIRE crowd, but when they finally FIRE – they don’t write, it’s like, I’m wondering: is it good? is it fun? is this a goal still worth pushing for? Love your writing, I check your site regularly and just can’t wait for more… I know it kinda might feel like a job to feed our hungry minds, but you’ve accomplished the goal and I like reading more about it.
not sure I will make retirement ‘ealy’ – I got the message too late, but it’s possible to hit it anywhere between 53-57 depending on returns and savings rate. (I’ll be 49 in July, so it’s not far off).
Anyway – would love to read more of your stuff when you get some time and feel the desire to write some more.
Chat later,
Steve
FIRE! Yes, it is wonderful…:)
That Republicans slam an Obamacare that was modeled on Romneycare is political posturing lacking substance. Which painted Republicans into a corner, hugely limiting their options. So I am deeply skeptical they can implement a better plan. The Freedom Caucus wants government out of all health care, including medicaid and medicare. They don’t seem to care who gets hurt. So Republicans can’t agree on anything coherent. Which is why some political operatives say just rename Obamacare to Trumpcare and be done with it.
Miss your words of wisdom, Dr. Doom! Hope all is well 🙂
Thinking of you! I hope all is OK. Thanks so much for all you have shared, it is very helpful.
Are you ever coming back???
Time for the annual update! Clare
I miss you and your writing, too!
I came back one year later – I miss your posts. I am glad you are having too much fun in life. 🙂
Would love to read new posts from you. You were one of the first bloggers I started reading on personal finance (really it’s all connected to philosophy to some extent) and to this day my favorite.
Come back! Give us an update and farewell.
He is back! Just doing podcasts and twitter, not the blog.
Not true.
Please come back. Totally enjoyed your blog. Your description of work was so similar to some of my experiences. I too worked for Chthulu!
I am soon to quick work for ever and would love to see how you get on not working.
I am not good at doing nothing.
He is back! He does podcasts and twitter. Just not this blog any more.
Not true.
I just wanted to stop in and say that wherever you are, I hope you are doing well and that the FI/RE life is treating you well! 🙂 Some of my favorite writers are no longer updating their blogs regularly, but I still like coming by and re-reading previous posts for continued inspiration and hope. Take care! ❤
Your sincerity and perspective is extremely refreshing. Thank you! I wish all is well with you.
I no longer expect new posts when I come back but please never take this touchstone of sanity down (the blog, not necessarily this post).