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The idea behind an affordability standard is simple: We
should set an expectation in our state that no Minnesotan should be expected to pay more than a reasonable percentage
of his or her income on health care. In many ways it is establishing for health care what has long existed regarding
housing -- a family should not pay more than 30% of its income on housing.
The Minnesota House of Representatives
passed legislation this year establishing a sliding scale affordability standard that sets 6% of income as the cap at
300% of the federal poverty guideline and at 8% of income at 400% of the federal poverty guideline.
There was significant
analysis underlying the establishment of this standard. More information can be found here.
But what does it mean practically. Here are some examples: For a single adult, 300% FPG
is about $31,000. Six percent of $31,000 is $1,860 per year. The JOBS NOW COALITION has calculated that a metro area single adult will
spend $18,228 per year on essentials of food (no meals out), housing, transportation and clothing. The number does not
include life insurance or retirement savings; big ticket items like washers, dryers, other basic household repairs; no entertainment;
no gifts.
In addition, a single adult making $31,000 will pay approximately $6400 in taxes. After accounting
for those expenses and subtracting out 6% for health care, the individual will be left with about $12.50 per day for all other
expenses. And I would reemphasize that the totals include NO SAVINGS for retirement which is simply creating a bigger
disaster for all of us in the coming decades.
(As an aside, the average 27-year old single male adult will pay
$3,622 for health insurance in a year for an individual policy. A 57 year old female will pay $6,112 -- about 20% of
the person's income.)
Using a similar analysis, a single adult at 400% FPG will be left with $26 per day (or
$12.50 a day of you factor in a minimal retirement savings).
A family of three at 300% of FPG (about $53,000)
will pay $3,100 for health care under the 6% affordability standard. Using the same analysis, that family will be left
with $8 a day to cover school expenses and activities, to save for college and to cover all the other "non-essential"
expenses described above. A family of three at 400% will have about $13 left for everything else, assuming the family
does save a minimal amount for retirement.
The point of the analysis should be clear: these affordability
standards are not unreasonable when one considers the real lives of families in Minnesota. See this Familes USA Report for more information.
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