Tag

ObamaCare

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)


Jul 11
0

Fun With Math – Marginal Cost Of Hiring Minimum Wage Employee

By | Commentary

I’ve been seeing a lot of Obamacare Articles, and even some on the minimum wage, so I thought I would crunch the numbers and see what the fuss is all about.

In Texas, the minimum wage is 7.25 an hour, which pencils out to $15k per year, or $1250 per month. Let’s ignore FICA, unemployment insurance, workers comp, and burdensome administrative costs and go straight to the elephant in the room….healthcare.

Say I have two equally qualified candidates…one a healthy 25 year old non smoking male. The other, 45 year old smoker, with 4 children and a pregnant wife…high risk of course.

The cost of insurance for the 25 year old may be $5000, but there is a good chance actual costs will be zero. Personally, I made it through my 20’s with a single Dr. visit…for stitches, and I paid the full $600 because my deductible was like $2k. On the other hand, a family plan is probably going to run 25k, and actual costs…given the high risk pregnancy and smoking could easily run 100k…or much higher.

What should our business owner do? All he wants is a minimum wage employee to sweep the shop and mow the grass. He’s ready and willing to pay $15k…maybe even 20k. But $40k…no way!! Unfortunately, due to the laws and regulations…our business owner is not allowed to ask, or use the employees health as a factor in his hiring decision, despite the fact that different employees can have a huge difference in cost. This is a huge problem nobody is talking about. Companies, especially smaller ones, need to be able to forecast with precision how much it is going to cost to add headcount, and with the current setup, medical costs to the employer are completely unpredictable. In my opinion, this is one (of many) reasons unemployment/underemployment is as high as it is.

Let’s look at it from another perspective. So, imagine you are at the car dealership…trying to decide between the red minivan and the blue minivan. The cost is the same…$30k. You ultimately decide on the blue one, and walk up the checkout line…where the salesperson rings it up. That will be $60k. Say what?? Well….it turns out that this minivan was built on an assembly line by high risk/unhealthy workers. So while the sticker is $30k just like the red one (built by only young and healthy employees) but there is a $30k surcharge.

Wait just a minute you say….I changed my mind. I want the red one for $30k…or maybe I no longer need a minivan. “See…the thing is” the salesman replies….”if you try to change your mind now….the unhealthy employees and the federal government are going to sue your ass to the moon.”

As a buyer of consumer goods….you can realize the absurdity of this scenario, but this is in fact businesses…as consumers of labor must deal with on a regular basis. Is it any wonder employer’s are hesitant to hire? They have no idea what an employee is going to cost them until after they make an offer, and especially with low wage employees, the cost of insurance could easily be more than the wages they are offering. No thanks!! So…they stick with contractors and part time workers. Everybody ends up losing, most of all the employee who now can’t find a job period. Thanks Uncle Sam….those darn unintended consequences….when will he learn?

Now…back to our example, assume that the businessman instead ends up hiring both guys. They have the same skills, and perform the exact same task, but the healthy, unmarried employee has a total compensation package of $20k…$15k wages and $5k of healthcare. Our second employee makes twice that….$15k of wages, and an additional $25k for healthcare. Blatant discrimination right? Nope…just the status quo….an involuntary transfer of wealth from the young and healthy to the old and sick.

The solution is simple….employment and healthcare must be severed completely, and individuals must take personal responsibility for their own healthcare needs. Were this done…the businessman in our example above could offer a wage of $25k to both of his new employees with no health benefits. Each employee could then go purchase whatever health care plan…or no plan that best met their needs. Furthermore…they would need to accept responsibility for their own decisions. If they decide to smoke…and then need $250k for a lung transplant…well…better crack open the piggy bank….you made your life choices…you can no longer force your co-workers and/or society pay the tab for your decisions. Same goes for the myriad of other health woes caused by personal choices.

The bottom line is…the current healthcare delivery model in this country is all kinds of screwed up. An employer should be able to offer an employee a specific wage for a specific job just as I can walk into a grocery store with $3 and walk out with a gallon of milk.  Until we have that, it is going to be very difficult for all young and unskilled workers to find employment

 

 

 

 

Apr 03
0

Insurance Stupidity 4/3/2013

By | Commentary
I just read this over at Money.com discussing the fact that over half of current individual plans do not meet the new minimum coverage provisions set forth in ObamaCare…so of course, cost will be going up. The problem is, if you don’t need all that stuff, you are now going to be forced to buy it anyway. Imagine you are in the market for a car…all you need is basic transportation, which you can probably get for about $20k (new). But when you get to the dealer…it turns out there is a new ObamaCar mandate…sorry, no more cheap cars….the base model is now a Cadillac Escalade…all options….$80k starting price. There is no doubt that the Escalade is probably a better vehicle than the Focus you wanted…but it’s not what you need, and now you can’t even afford a car period. How awesome is that?
The truth about Obamacare, and the entire medical insurance industry in general, it that it is just one more way for the old and wealthy to screw over the young, poor, and healthy. The game is to pull in as many young and healthy people into the pool who pay way more in premiums than they use. For example, from the time I officially entered the workforce at 21, until my early 30’s, I had exactly one medical expense…stitches in my chin…all under my deductible, I think it ended up costing about $1000 (most expensive 3 minute jet ski ride ever). Over that time, my employer paid $10k per year, and I put in a few thousand more, so lets just say over 10 years, I contributed $120k, and had exactly zero insurable events. This is exactly what they want…and this is the entire purpose of Obamacare….to pull in the young, healthy, and “underinsured” population into the pool and overcharge the crap out of them to keep costs low for the old, fat, and sick.
The solution to all of this isn’t to band together providing a gigantic insurance pool from which we can all demand an infinite amount of medical service. The solution is to return to personal responsibility, and return to the basics, making health insurance more like car insurance. That is…you pay for routine maintenance, fuel, ect….the insurance company pays if your vehicle is stolen, totaled by an uninsured motorist ect… Under this model, you would pay for your Dr. visits, your medicine, and the arm you broke skateboarding (or jetskiing). Insurance would kick in if you were diagnosed with cancer, were seriously injured in a car accident ect… Furthermore…we have to become responsible for the choices we make that affect our health. For example, if you decide to smoke…fine….but in addition to the $5/pack…you  also better start saving some money for the $1 million cancer treatment/lung transplant you are going to need in 15 years because that’s on you…insurance isn’t going to cover it, and neither is society. We must be prepared to accept the consequences of our own decisions. The other biggie is food. If you want to eat yourself to death….that’s your personal choice…and I get it…because I love food too. But if you are 35, and weigh 400 lbs, can’t work, need a heart transplant and a ton of medicine just to stay alive because you eat  6000 calories of McDonalds a day….I hope you saved up for it because society simply can not, and should not pony up the million bucks for your treatment. Personal responsibility folks… just own it. That’s what made this country great…and the lack of it is what is actively tearing it down.