On Takers and Payers

Bruce Krasting's picture

Remember the big flap about the Supreme Court ruling on the Affordable Healthcare Act (AKA – Obamacare – ACA)? The issue that made the headlines was that the Supremes ruled that ACA was legal, provided that the penalty for not having health insurance was collected as a tax.


This is a big deal as the penalty ($700 a year per person) was supposed to be the discipline that forced people to go out and buy their own insurance. One either acquires health insurance, or they pay a price.


The CBO took a look at this last week (link). The results surprised me. The reality is that few people will end up paying the penalties. So the basic premises of ACA is actually a fraud.


CBO estimated that there will be 30Mn uninsured in 2016 when ACA goes into effect. Of that 30Mn, the following groups will be excluded from paying the penalty:


1) Undocumented workers.

Really? But that is 10Mn people; a third of the problem!


2) Religious Beliefs

Huh! What religion is that? If it gets you out of paying taxes, I want to join!


3) Native Americans

Okay, after all, it is their land.


4) Individuals and families with low incomes.

I can live with this. But isn’t this where we are today? Poor people don’t have health insurance today, and they don’t have to pay any fines. In 2016 they will still have no insurance, and they won’t have to pay any fines. What has been accomplished?


5) Anyone who does not file federal income taxes.

This is directed to those with income of less than $10k per year (same as #4), but there are an awful lot of people who don’t file taxes who are making much more than the minimum amounts. Most waiters and bartenders would fall into this group.


6) Individuals who can’t afford the cost of health insurance.

The annual cost of health insurance must be less than 8% of an individual’s income for the penalties to apply. What is this new insurance policy going to cost? If the answer is $250 per month (too low in my opinion) it means that anyone with an income less than $37,500 is excluded. If the cost of that Ins. policy is $500 a month (a more reasonable estimate), then anyone who has annual income of less than $75,000 would be excluded.


With these carve outs the number of individuals who would be subject to the penalty falls to 6Mn (80% drop). But it gets worse:


Among the uninsured individuals subject to the penalty tax, many are expected to voluntarily report on their tax returns that they are uninsured and pay the amount owed. However, other individuals will try to avoid payments.


Oh boy! How many of the remaining 6Mn will “voluntarily” pay the penalty, and how many will seek to “avoid” it? At least half will avoid it. There is not much risk of getting hit by the IRS if one’s income is < $75,000. The IRS does not have the manpower to chase after those who “avoided” the penalty. The CBO recognizes that the actual amount of fees collected is subject to:


the ability of the Internal Revenue Service (IRS) to administer and collect the penalty.


The only people who are going to end up paying are those who have something to fear from an audit.


Households with income that exceeds $60k are estimated to constitute about one-third of people paying penalties and to account for about two-thirds of the receipts from those penalties.


The CBO reckons that Uncle Sam will collect about $8Bn a year in fees. This money will be used to offset some of the costs of the uninsured. The Penalty is also the “stick” of ACA that forces people to get insurance by one means or another. I see it differently:


- Post the introduction of ACA there will still be 30Mn people without insurance. These people will still get sick or injured; they will continue to be a drag on everyone else.


- The fees/taxes that are supposed to provide discipline and revenue for ACA will accomplish very little. I will be amazed if the penalties total more than $2Bn a year (peanuts). There will still be 30Mn people without insurance, and they will get sick (not peanuts).


- The Administration and Congress have cooked up a deal that got amended by the Supremes that will result in a great new opportunity for people to cheat on their taxes. Millions will take advantage.


- ACA is a wealth redistribution program. ACA will create more TAKERS; the PAYERS will foot the bill.



Mitt probably lost any chance he had with the election with is words about the “other” 47%. But the fact is the country is divided between Takers and Payers. The CBO head, Doug Elmendorf had this to say about the dilemma the country faces:



Formidable? I would say impossible.

Four years from today the Taker - Payer ratio will exceed 50%. The argument then will be the same as it is today. In order to pay for the cost of government, taxes will have to be much higher than the historical norm. But the necessary higher taxes will drag on the economy, and growth will be far less than potential. Sub-par growth means high unemployment and low tax receipts. The vicious debt spiral will continue.

Where does this lead us? Elmendorf's thoughts:



The conclusion is that we are headed into a crisis, and when it happens we will not have the resources available to fight that crisis off. What kind of plan is that?



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LawsofPhysics's picture

What useless drivel.  You want to know the simple truth on "takers" and "payers"?  Here it is;  There are some people who create real goods and services of real fucking value.  The are typically engineers, doctors, carpenters etc.  Then there are people who do nothing but push around worthless pieces of paper.  These people create nothing of real value, yet they TAKE what the others have produced.

Everything else, including healthcare, is simply cognative dissonance after that. Since none of this is sustainable and humanity itself is a ponzi, get your tribe in line before it is too late.

You are a moron if you think that any man-made institution (especially in this environment where FRAUD is the status quo) is going to somehow insure your safety or health.  Insure it for yourself.

hardcleareye's picture

This is all smoke and mirrors, the fact is that the US spends more than twice per capita than other nation that provides quality health care.  For example a MRI costs $1,080 in America and $280 in France.

And we are sitting here discussing who and how we are going to PAY these bullshit cost, instead of discussing how to stop this "highway" robbery. 


kaiserhoff's picture

A friend's nephew was recently in an accident.  He was airlifted to the hospital.  The chopper bill was $151,000.  They expect a total tab well over half a million.  His mother said, "I guess they'll be delivering that helicopter any day now, since we damn sure paid for it."

They have insurance, and are otherwise poor.  If it had been the reverse, years of savings would have been instantly wiped out.  This is not a system anyone can defend.


Cole Younger's picture

Mdicare and other social programs are going to bankrupt the nation...Then what? Uncle Ben starts printing trillion dollar bills and everyone, including the rich lose...I do think we need to break the U.S. up...those who want a socialist country can go to the states like california and new york..those who want a real republic again can go to the texas, arizona, wyoming, montana, etc...

etresoi's picture

... and the basic health care insurance pays 70% of the $280 MRI

ebworthen's picture

You mean 70% of the $1,080 MRI after the $50 co-pay at the provider specified by the insurance contractor who colludes with the provider network?

etresoi's picture

No, I mean an MRI costs $280 in France, of which 70% is paid bTranberg navigation lighting the universal health care insurance.  Private supplemental insurance usually covers the remaining 30%

ebworthen's picture

Ah, thank you, did not know that.

Bear's picture

The Nada Plan ... Let's create a ZH business that offers a low cost 'insurance plan' that guarantees minimum benefits (i.e. nothing) priced at $350 a year.

kaiserhoff's picture

Let's declare ZH a religion and opt out;)

Yen Cross's picture

Update your blog Bear! WTF? You are an expert "swing trader"! I have some long term stuf making $ off your calls!

 Bear you taught me how to download "EA's"on MT4.    The trading community is small Bear!

Oldwood's picture

The Disparity.

The rich republicans want a politcal economic system that enriches them with money and power. To do this they are willing to share in the wealth but not to the point that they might feel encroached upon. The Left wants a politcal economic system that consumes itself to the point that only the government can provide. It is not enough that they have wealth and power, they must have dominion, the absolute ability to define our every action.  Obamacare is not sustainable and will therefore collapse, crashing down on the insurance companies heads as they will surely take the blame. Insurance will be nationalized, finally providing the single payer plan that so many are yearning for. If our government had ever been able to demonstrate even a single program where it had been able to have positive results, we might be willing to give it a chance. I wish we had a pragmatist political party. One that was progressive when a new and improved system is proven out and put in to operation and one that was conservative in that it wasn't willing to throw out a working, even though flawed, system for the sake of some new miracle plan, that while untested was assured to work if we only believed hard enough. Liberals will claim that Obama failed only because we small minded persons refused to believe in his enlighted vision. The same people who despise religion for the same reasons. 

Yen Cross's picture

 When a guy like Bruce says "SHIT", you know there is a big fan "spooled-up" ready to fling it!

  Quote; "So we're going to have a  crisis, and we will be up " SHIT'S" creek , when we do."

    Nice piece Bruce.

Essential Nexus's picture

Awesome commentary Bruce.

Everybodys All American's picture

This plan is becoming so typical of bureaucratic plans with all the special exemptions for select companies and preferential treatment of certain classes and groups. It will never work as planned. Guaranteed for failure from the start. No one by the way is voluntarily signing up for this plan right now. You can't even get 50% to vote and you expect them to buy insurance. It's laughable.

disabledvet's picture

Sounds like a war plan to me. Or should I say "yet another war plan." if Obama wins his focus will be on foreign policy...aka "the war thingy." this one is easily the biggest since WW II so that strikes me as a big deal. Mitt actually thinks he can fix the economy...are we better not even trying at this point? Easily as big a vote as the last go around. I expect turnout to be around 40 percent...the lowest in US history.

Moe Howard's picture

Hey Bruce, what is an UNDOCUMENTED WORKER who does not work?

Is that a subset called UNDOCUMENTED LAYABOUT?

You squeek from political correctness.

To your little story, I guess you don't "get it"; you are trying to make sense out of nonsense.

The program wasn't designed to work, it was designed to fail, to make things worse, so they can come out with MORE solutions. They won't stop until we have the model they are working toward - the health care system that was in place in Eastern Europe prior to 1989.

Bruce Krasting's picture

Undocumented is the term the CBO used.

I call this an "illegal" worker, and no, that is not politically correct at all.

Moe Howard's picture

Again, then, if you are just quoting, what is an ILLEGAL WORKER that doesn't work?




How about just a criminal.

BigDuke6's picture

You never have forgiven Bruce for the Danny story have you?

nmewn's picture

I call them illegal aliens who also use forged documents to obtain work or benefits...but thats kinda long...so I'll just stick with just plain ole "ïllegals".

kaiserhoff's picture

What do you have against chilli belly?

Actually, I prefer chalupas.  It leaves more room for discussion, as in, why isn't there a bounty on these fuckers??????

Everybodys All American's picture

Single payer. Government run and controlled. Insurance companies either nationalized or out of business. That's the pan. My plan involves peaceful  disobedience. They can plan all they want but they can't plan for people saying shove it.

brettd's picture

Develop a real, personal relationship with your MD, and be sure he/she is willing to take cash or other payment for services.  In most "single payer" situations, Govt will prosecute MD's who work outside the system.  Canada is an example.


Don Levit's picture

Bruce wrote:

"The annual cost of health insurance must be less than 8% of an individual's income for the penalties to apply."

I thought that was the purpose of the subsidies of the exchange, so this threshold could be met.

It seems to me that the penalties WOULD  apply in the vast majority of cases you wrote about.

Don Levit

ebworthen's picture

Bruce, $500 a month is $6,000 a year; for the shrinking middle class that is much too high to be considered "affordable" especially when you consider co-pays, deductibles of $1,500 or higher, and having to pay 20% of every bill out-of-pocket (insurance only covers 80% so not really insurance).

There is a HUGE incentive to de-lever, downsize, keep the old car, and work part time in order to qualify for what you would otherwise have to bust your ass 60 hours a week for to end up at the same place.

Why would I bust my ass to work two jobs or overtime so that I can't have time with my loved ones and all my effort goes to pay taxes that go to banks, insurance premiums that go to corporate sick-care and attorneys, and fundamentally spending 30 hours of my life per week to fund the Kleptoligarchy?

Optimusprime's picture

Agree.  I came to basically the same conclusion five or six years ago.   A contractor, I first realized having employees was a loser.  More effort than it was worth. 

If I can't do it myself, I partner with other licensed contractors and split the take fair and square. 

And I realized it was nutty to beat the bushes looking for not very lucrative or interesting/challenging jobs.  So I just "semi-retired".  I still work when something looks appealing and the drive is no too far, but otherwise just work around the place at home (land in the country). 

 Garden.  Log. Mow.  Make lumber and furniture.

Of course I have had to scramble from time to time to pay the bills, but I ALWAYS had that problem in the past before, too, and now is much less stressful.  If anything, by cutting out debt and excess maintenance-demanding possessions, I scramble a lot less. 

steve from virginia's picture


Doug Elmendorf does not understand how modern, industrial economies function. Like many others he believes them to be self-sustaining when they are not. They require a contant debt/resource subsidy to even exist.


The US government budget deficit is what services private sector debt. The government is able to run a continuous deficit without going out of business, something that no private sector entity can do.


Consequently, any talk of 'balancing the budget' is just that. Should the US government operate without a deficit it is because the entire country is finished as an industrial state.


This 'finish as an industrial state' is inevitable, it cannot be stopped, reasoned- or negotiated with. Nobody has mentioned ... "Peak Oil' ... It's in effect right now and ready to 'flick' Spain into the food-waste grinder, maybe next week. See 'Greece' for an idea for what is taking place.



dolly madison's picture

As for waiters/waitresses, I was one during the many years I went to college, and I always had to file taxes and usually owed some.  They estimate the tips based on your sales.  You might be able to get away with not claiming some of your tip income, but you certainly can't get away with claiming none of it, so unless you work only very few hours, you will have to file taxes.

Lokking4AnEdge's picture

If the Federal government can borrow unlimited $ at close to zero interest rate than they should abolish all income taxes until the situation changes....

If I was able to borrow at zero interest rates I would not work ....


Umh's picture

And they don't work either.

CheapBastard's picture

<< Oh boy! How many of the remaining 6Mn will “voluntarily” pay the penalty, and how many will seek to “avoid” it? >>


Oh Boy ! is right, Bruce. If history is any guide:


June 24, 2010 Fraud in the homebuyer tax credit?


A Treasury Department inspector general reports that 4,608 people have claimed the homebuyer tax credit even though their home is a government prison. Some of them could have been filing jointly with spouses eligible for the credit, but more than 700 not only didn't file jointly but were serving life sentences!


Florida prisoners seem to have been especially diligent about defrauding the government. More than half the inmates who got the credit and are serving life sentences were in Florida.




You can read the full report here:




bill1102inf's picture

Takers pay and contribute to the general economy as much if not more so, and most definetly a higher % of income than ANY OTHER group in the country.


People on welfare making 400/week spend 100% of their money plus their gov money in the economy, not so much for Mr Daddy Warbucks making 10K/month.



Umh's picture

So first we subtract the "gov" money from their money. What were you saying?

FeralSerf's picture

Bill Gates and Warren Buffet and maybe the Waltons and Kochs will have to pay the penalty.  Why would they buy health insurance?

bill1102inf's picture

Of course they will buy health insurance. The commentary on here is borderline pathetic. So will you, you WILL BUY health insurance, OR you WILL PAY the penalty. I promise you.


Obama 4 more years.

FeralSerf's picture

I won't be buying the insurance since I'm exempt.  I won't be paying any penalty and your promises don't mean shit.

Bill Gates doesn't need insurance.  He can pay the medical bills out of pocket if Microsoft doesn't do it for him.  Insurance is gambling and the house has the odds tremendously in its favor.

Obama, the puppet of the insurance and financial industry criminals, belongs in the dustpan of history for a lot longer than another 4 years.

shovelhead's picture

If I can get me a happy ending massage with single payer HC then sign me up and give me my RFID chip implant.

As it is now, I'M the one providing the happy ending and my bum hurts.

shovelhead's picture

If I can get me a happy ending massage with single payer HC then sign me up and give me my RFID chip implant.

As it is now, I'M the one providing the happy ending and my bum hurts.

dolph9's picture

The point of all policy now is to destroy savers and the responsible, and to reward banks and the bottom feeders in the ghettos, barrios, and trailer parks across America.


Well, count this saver out.  Fuck 'em.  I will pay for insurance if it's a good deal, but I'm NEVER paying a penalty for not buying insurance.

bill1102inf's picture

Those people mow your grass, paint your house, clean your rooms, THOSE are the people you DONT F WITH, and your pansy ass most certainly WILL either buy insurance OR PAY the penalty.

Umh's picture

Most of the people he is talking about don't mow grass, paint houses, clean rooms or anything else that will earn them a living. They talk about either getting over or just working enough to goof off. I've listened to more than 1 conversation about the childs father can't live with them, because the subsidized rent will be increased.

dolph9's picture

Nice try.  Believe me when I say I'm a fast learner when it comes to both gaming and avoiding systems.  Extortion gets nowhere with me.

BigDuke6's picture

Dolph check my reply to your post on the healthcare thread by testosterone pit from a few days back.

To get healthcare in perspective I'm going to give you a few facts that show how the system in the USA is eating itself.

In Australia 1 in 10 people die in an intensive care unit .... Aka an expensive care unit.

In the USA it's 1 in 4
In Florida it's 1 in 2

That's where a lot of the money is going and it's not a good allocation of resources
People need a better death and it's up to them to say 'enough' to their families

bobbydelgreco's picture

the takers are so much higher then 47% any one in healthcare defense a government job ie cops & teacher are takers bruce don't even look at dc i know awoman who is amultimillionaire from being in the industry that services pentagon computers once the country elected to deindustrialise it became hopeless

max2205's picture

40% of those reading this now will be dead by 2016 so who cares

OldPhart's picture

Judging from the amount of bullets purchased by Homeland Insecurity, by 2015 95% of Amurikans will be dead.

Each dying from six self inflicted head shots..

q99x2's picture

There is no reason for any American to pay taxes. There is no need to work here either and therefore you shouldn't work unless you are into that kind of thing. Right now God is one of his unpredictable moods thus the reason for the religious not having to pay. It is time to dance, sing praises, play music and study Greek mythology (not whether or not they will default but Athena Apollo the Odyssey and all that) and Opera. College is a good choice as well because it soothes God out of taking the route of a hissy fit.


kaiserhoff's picture

I thought you were heading toward "Benny is god, and his printing will provide for our needs."

As several have pointed out, if printing money works, there should be no need for anyone, anywhere to pay taxes.

Put that in your equations, Ben, and stick it where the sun doesn't shine!

onlooker's picture

Appreciate the nuts and bolts schematic of what will be one of the biggies of our broken system. Mitt says he will stop this cancer before it gets implanted into the system.


I don’t dislike the man any more than I dislike Obama, but Obamacare and small business are two things that are a must to take of, for the sake of saving what business we have left and give incentive for new small business.


The Obama concept of

  1. you did not do it your self
  2. redistribution
  3. Union domination


Have merit but are misspent with Obama.

  1. In the old days a bank might loan $500 to seed a person with drive, ambition, and a dream
  2. The Banks and puppet masters must not own everything 75% is enough
  3. Unions have history in the US that validates the need for them, but they do not create wealth they only exist off of those that do create. First we need business and then we need the Union. Business first if we are to survive--- before dictatorial government and before destructive tax codes.