Tag

Bitter Pill

Oct 21
0

Obamacare Economics

By | Commentary

Andrea Mitchell was on Meet The Press this weekend and managed to speak a bit of truth with this quote:

“They need the healthy people to be enrolled in order for the economics of it to work”

So…take a pool of 100 healthy single 23 year old men.  If you are an actuary….what is the expected medical costs for this pool over the next 12 months? We know there won’t be any pregnancies, and there probably won’t be any cancer, arthritis, or osteoporosis. Maybe one guy will have a serious ATV accident, a few colds, and a handful of STD’s. With a moderate deductible, lets just say the expected insurable costs add up to $75k, plus $15k profit/admin cost for $90k total…or $75 per month per guy….to insure against being bankrupted should something terrible happen….like a car crash, cancer ect…

The entire premise of Obamacare is to attempt to slip…into this pool of young and healthy….the really sick. So now we take 10 guys out of our population and replace them with 10 chronically ill people, each requiring $50k per year of medical services. So now, instead of being able to insure himself against unlikely, but catastrophic events for $75 per month….our 90 young men have to pay $500 per month instead. Now…for the 10 chronically ill people…this is a really good deal. They can go it alone and pay $4200 per month….or sign up for Obamacare and pay $500…or less. But as you can see…this is a screw-job for our young males…..who are being forced by law to subsidize the sick population.

And that’s how the game works….just like social security and medicare…..the old and powerful using the legislative process to benefit themselves and screw over the young. The fear is….that only sick people will sign up for Obamacare…which is why there is a penalty…to attempt to force the young and healthy…who would otherwise look at the $500 per month payment and decide…correctly….that the insurance risk/reward simply didn’t pencil out for them and decline. However….at least in the first year, the penalties are minimal…as low as $95, and grow to$695 by 2016. So what is likely to happen…especially in year one is rather than getting a pool of 90 23 year old healthy males and 10 sick folks…you get almost all sick folks. In that case….somebody, either the insurance company, or probably the federal government ends up losing a ton of money, and in year two….rates go up accordingly.

I have a better idea….personal responsibility. First…we take down all of the medical monopolies that allow Dr. McDreamy to jack up his prices 500%. This should collapse prices down to a point where you can afford to pay cash for essentially all of your routine care. Sure….it will mean no more Lamborghinis for McDreamy, and he’ll have to get rid of 90% of the hot secretaries he keeps on the payroll, but I’m ok with that.  You will still have a catastrophic insurance policy that will cover car crashes and other random events you have little personal control over. But…50 and need a $2M heart transplant because you weigh 450 lbs….tough crap. You can sell your BMW and offer McDreamy $50k cash…take it or leave it….I suspect he’ll take it. Dying of cancer because you smoked 3 packs of cigarettes per day for the last 3 decades??….That sucks, but sorry….you can’t force society…or your insurance pool to pay for the consequences of your personal decisions.

The entire medical establishment has gotten fat and rich by offering services at outrageous prices nobody would voluntarily pay. They have managed to pull it off by working with government, big business, and the insurance industry to create and promote the screwed up system we currently have…. Obamacare just builds onto and solidifies an already screwed up system….it solves nothing and attempts to screw over the young in the process. The only thing that will work is to destroy the current system, and make people responsible for their own decisions. I’m willing to bet….as a result…they start making better decisions. I think it will work….that’s how much faith I have in mankind….

 

 

Oct 02
0

Thoughts On Obamacare

By | Commentary

I saw a clip of Obama yesterday telling an audience that the reason the Republicans are so hell bent on killing Obamacare is that they are afraid that if they let it through…people will actually like it…..making it impossible to do away with. He’s right you know….just look at Social Security, Medicare, Medicaid, Food Stamps….and dozens of other large federal programs…..How will we ever kill a program that gives free stuff to large voting blocks? We won’t….this, it seems is the Achilles heel of democracy….and will likely be the key to our downfall.

So let’s just admit it… Obamacare is just another government mechanism to give free stuff to a large voting block….probably Obamas voting block. I oppose Obamacare because it’s just another Welfare Program. Republicans, I suspect, oppose it primarily because it is Obama’s welfare program. So Republicans are on the right side of this, but they don’t exactly have the moral high ground.

I don’t know the actual cost…I’ve seen anywhere from $0 to $150B per year. It’s not huge, in a $3.8T budget, but it’s big enough. For about 4 years now, federal outlays have more or less stabilized at around 3.8T. For how long?….probably not much longer, but it’s still a tiny bit encouraging. On the Revenue side, since bottoming out at 2.3T in 2009, annual revenues have risen 30% to $3.0T, including a 12% increase in FY 2013 that just ended.

Four years ago, we were sitting on a 1.8T deficit….it pretty much looked like the end. If you were an optimist….and sat down and penciled out a best case scenario….reality has pretty much followed that script for 4 years now with flat cost and growing revenue. Don’t get me wrong, we aren’t saved….we still have an $800B annual deficit, which is enormous, but an optimist might say hey…if I can keep this streak for another 5 years, who knows, maybe I will actually balance the budget after all(now what to do with this $20T+ debt??).

And then comes Obamacare. After so much progress restraining cost(well…relative progress)…. why come in and create a new entitlement program? Instead of creating feel good programs like this, why not just skip the show, and just write checks to people. Why not give every citizen $50k per year? Or better yet, why not just give everyone a check for $10M and be done with it. Problem solved right? Well…no. You see, if I got a check for $10M tomorrow, I’d quit my job the next day…and so would everyone else, leaving me with the little problem of having $10M in my bank account….but nothing to buy, not even food. That would end quite poorly wouldn’t it?

The bottom line is….despite all of their noble (I assume) intentions, there are problems that government simply can not fix, and their attempts to do so will only make things worse overall. And that’s the problem with Obamacare….sure there are some people who will be better off, but the losses overall will far outweigh the benefits. All government programs are like this…from social security to the Park Service. Taking money from one group and giving it to another will always incur net losses, especially when there is an army of incompetent bureaucrats in the middle.

Honestly, even without Obamacare, the odds of this four year streak continuing were pretty slim. My current forecast is that we are pretty close to a bottom at $700-800B per year deficits for 2014 and 2015 before heading back up as entitlement programs drive outlays to outpace revenue gains. Throw in a recession anywhere in the next 5 years and the numbers get a lot uglier fast…and that’s without any Obamacare costs. I’ll add them to the model once I find a reliable source….(probably actuals sometime next year)


Mar 05
0

Must Read: Bitter Pill: Why Medical Bills Are Killing Us

By | Commentary
A new cover article from Time “Bitter Pill: Why Medical Bills Are Killing Us” is getting a lot of press. The author takes a step back and asks the obvious question everyone else has forgotten to ask for the last 30 years or so. Why the H#** is medical care so expensive? Why does 3 minutes with my kids Dr. cost $300? Why does an MRI on an 8 year old machine cost a few thousand bucks? The answer is…the medical industry as a whole has conspired to screw us all over…getting rich in exchange for the false promise of immortality. They use our ignorance, and their “expertise” to their advantage at every step of the way, and have fully used and abused our broken government to push through a myriad of laws that assist them in screwing us over.
I think this piece very important because it changes the direction of the conversation. For decades, insurance companies have been the bad guys…and the noble Doctors played the hero. But that’s BS. Do you think Dr Mc Dreamy wants to make $1000 for that hip replacement, or $200,000? He’s got a BMW to pay for, a couple mistresses, and a vacation home in Aspen to pay for so you know damn well what side of the fence he’s on.
And now it’s time for a personal story. A few years ago, I went to see a specialist about my hand…I had a tingling sensation in my pinky that wouldn’t go away, and Web MD convinced me that I was probably about to have a massive heart attack. It took this specialist about 1.5 minutes to correctly diagnose me with some kind of nerve irritation. Not to worry he said…He could do a surgery to fix me up…all he needed was $30k, and something about a shark with a laser on its head. Uhh…. really? For the record…for $30k, I would literally sell you my pinky, but that’s another conversation for another day.
The next step was an appointment with an electro shock therapist. For $2k, I sat in a chair while a university of phoenix grad stabbed me in my arm and hand and then shocked me. Like 20 times. The whole thing was recorded on a prehistoric looking machine that looked like it was pulled out of the hatch on Lost. Then…the real Dr. /specialist guy came in, turned up the juice on the shockinator 1.0, and gets me a few more times. Three minutes later, I’m paying my $30 copay and thinking that maybe waterboarding is torture after all.
Next up, a follow up with the specialist who sent me to get tortured tested in the first place. After a nice long wait, I get ushered into a lavish exam room. He takes a look at my hand, asks me how it feels, and promptly recommends that I get some electro shock therapy to confirm that his surgery will cure my pinky. I quickly reminded him that I just had that done and am only here to get my test results. (I am thinking I nailed it) After looking confused for a minute, he opens an envelope, flips to the back of the report, and gives me the good news…my  nerves are fine(except for that new facial twitch)…and I should just make an appointment….he’ll be happy to see me every  month indefinitely until electro shock therapy damages my nerves enough that the insurance company will pay for his surgery fees.
Three minutes later, I’m in my car thinking about what a friggin racket this guy is running. All in, I’m only out like $90 for three copay’s, but my insurance company gets billed like $500 for each visit and his buddy at the torture clinic got a few thousand for my “treatment” If he can talk me and another guy with a tingly pinky to swing by every month for a 3 minute checkup, he’s got enough to cover his BMW payment and a couple dates at Chili’s with his mistress.  Short story long…I never went back, and while still for sale, my pinky feels fine…I just needed to stop exposing it to electro shock therapy.
Back to the Time story..I recommend reading the whole thing…and it is long..if you want to understand some of the true problems with our medical system.  This topic has huge deficit implications with medicare/Medicaid outlays expected to grow exponentially over the coming decades as the Boomers all retire and get in line for their free hips, knees, and electroshock therapy….for which Dr. McDreamy would be more than happy to provide…for the right price.