The Young and Healthy don’t buy Health Insurance because they make up only 3% of All Patients

Posted by PITHOCRATES - January 22nd, 2012

Week in Review

A couple of statistics can explain all that is wrong with our health insurance (see Most Health Care Costs Incurred by Few Americans by U.S. Agency for Healthcare Research and Quality Release posted 1/11/2012 on WCTV.tv).

More than 40 percent of patients were age 65 or older, while those age 18 to 29 made up just 3 percent.

Health insurance is different than, say, car insurance.  Car insurance is expensive.  But it has remained a whole lot more affordable than health care insurance.  Why?  What’s the difference between the two?  Anyone can have their car stolen.  Or have an accident.  But when it comes to patients in our health care system more than 40% are age 65 and older.  While those healthy and young (ages 18-29) are patients only 3% of the time.  Big problem.  Because a lot of people age 18-29 think rationally and say that’s a lot of money for what?  I never go to the doctor.

And herein lies the fatal flaw of health care insurance.  Insurance operates by having everyone contribute a little to pay large claims to those few who suffer an unfortunate event.  That’s how insurance works.  Not everyone suffers an unfortunate event.  So if everyone pays a little the few who do suffer an unfortunate event get help when they need it.  That’s risk management.  Spreading the risk over numerous policy holders for a small fee.  But that’s not happening in health care.  Because it’s not insurance.  It’s a cost transfer.  The industry is set up to transfer the cost of the health care consumers to those not consuming health care services.  And when those who are not consuming health care services opt out of the system that creates a serious funding problem.

This is the problem whenever you have other people pay for you.  And why Obamacare has a mandate for the young and healthy to buy insurance.  So Obamacare can transfer the cost of the health care consumers to those not consuming health care services.  The young and healthy.

This is a broken model.  It won’t work.  And it will only lead to higher costs and rationing.  Because the population is aging.  Which means those consuming health care services are growing at a rate greater than those paying for them.

You can thank FDR for this mess.  And his maximum wage limit during the Great Depression.  His attempt to stimulate the economy by keeping wages low so businesses would hire more people.  Businesses couldn’t attract better workers by offering them more wages.  So they offered them benefits instead.  And the health care crisis was born.

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FUNDAMENTAL TRUTH #67: “Free health care is very expensive.” -Old Pithy

Posted by PITHOCRATES - May 24th, 2011

No Such thing as a Free Lunch

Things cost.  In more ways than one.  A free lunch, for example, isn’t free.  If a client takes out a customer for lunch they’re hoping to get something in return.  A new contract.  A new sale.  Continued good will for a future contract or sale.  Even with the quintessential honest business person.  Who can’t be bought.  But can always be persuaded in the event of a tie.  Where all things being equal, the tie will likely go to the relationship that fosters the greater good will.  And there’s nothing wrong with that.  It’s one of the intangibles to consider.  And sometimes the intangibles can outweigh the tangibles.  Especially if there are tricky milestones to meet.  And a fastidious customer to please.

Then there’s the lunch itself.  It isn’t free.  Someone has to pay for it.  Because a restaurant is not just going to give their lunches away for free.  Because it costs them to make a lunch.  They have food to buy.  And people to pay.  From food prep to cooks to wait staff.  And food suppliers don’t give their food supplies away for free.  Because they have their own bills to pay.  And people don’t work for free.  Because they, too, have their own bills to pay.

Even though you’re not picking up your own tab, you are still paying for it.  Buying lunches is an entertainment expense.  Part of the larger marketing and sales budget.  Which is part of the larger overhead account.  Here’s how it works.  You have sales revenue.  And cost of sales (i.e., direct costs to make those sales).  You subtract cost of sales from Revenue and you have gross profit.  You subtract overhead from gross profit to get net profit.  Which is greater than zero in a healthy business.  To do this you need to make sure your sales prices include the costs of all of these free lunches.  In other words, sales prices include a markup to cover the costs of the free lunches.  So you end up paying for your free lunch.  Even though someone else is picking up the tab at the restaurant.

The Remarkable Mechanism of the Free Market

For those of you who enjoy the occasional free lunch, do you notice how often you get one?  It’s usually occasionally, right?  Maybe a free lunch once a month or so.  Maybe a nice spread at the holidays.  You may even get a nice Christmas gift.  Say a nice bottle of scotch.  Or a gift certificate where you can buy something nice.  The free lunches and gifts are nice.  And you probably wish you could get these freebies on a more regular basis.  Because free is nice.  But, of course, they’re not free.  You in fact pay for every last one.  Or your boss.  Because it adds to the cost of whatever your company buys.  And the more free stuff you get, the higher the prices your company pays.  To cover the costs of the free stuff.  But if the markups get too high, your company will have to stop buying that stuff.  And find someone else to buy from at more reasonable prices.

Some of you may not care what your boss pays for this stuff.  You figure he or she is rich.  He or she can afford it.  But he or she is not as rich as you think.  Because running a business is not as easy as it seems.  You see, wherever you work, they sell stuff, too.  And they compete with other people selling similar stuff.  This competition keeps sales prices down.  So to be profitable, you have to keep your own costs down.  And if you buy things at highly inflated prices that include a lot of free lunches and gifts, your costs will be greater than your revenue.  Your company will lose money.  And look for ways to cut costs.  Like laying a person or two off.  And if you’re one of those people, then you’ll start caring about what your boss pays for this stuff.

This is the remarkable mechanism of the free market.  Competition keeps sales prices down.  And costs down.  Because someone’s sales are someone else’s costs.  That’s why people simply can’t charge what they want.  There’s a limit to the amount of markup you can place on any sale.  And a limit to the amount of free lunches and gifts that can be buried in sales prices.

Health Care Insurance became Expensive after it became a Benefit

Now let’s look at health care.  The ultimate free lunch.  Before World War II we used to pay for our own health care.  But when the government implemented price controls on wages, employers couldn’t entice the best and brightest anymore with higher wages.  So they came up with a new idea.  Benefits.  Can’t pay you more money?  Not a problem.  We’ll pay for your health care instead.  Let’s you keep more of your money.  So it’s just like getting a raise.  It started with GM.  And spread to the other automotive companies.  Soon, everyone was providing health care insurance as a benefit. 

Eventually, health care insurance began to pay for everything.  You went to the doctor’s office and paid only a small co-pay out of pocket.  Everything else was free.  Someone else paid.  Just like getting a free lunch.  Only problem was that these free lunches added up.  And there was no free market mechanism to keep prices down.  Someone else paid.  Who wasn’t even at the lunch.  They weren’t there to say, “Hey, I can’t turn in an expense report with a $200 bar tab on it.  It’ll come out of my pocket.  Then my boss will fire me.  Have a Coke instead.  They give free refills.”  Nothing like this happens in health care.  So the costs of health care went up.  And the sales price for health insurance sky rocketed.  It was breaking the back of businesses.  It was becoming the largest single expenditure they had.  And it kept going up.  And never came down.  Soon, employees started paying a portion of these costs through a payroll deduction.  And that deduction kept going up.  As did co-pays.  But these were just a drop in the bucket compared to what the employer was paying.  It got so bad that they had to choose between staying in business.  Going to a cheaper and less comprehensive health care plan.  Or dropping insurance altogether.

Worse, as these employee deductions went up, young, healthy people cancelled their health insurance.  This left only heavy uses of health care with health care insurance.  Older and less healthy people.  And families.  The young and healthy didn’t go to the doctor.  So most of their premiums helped to pay for those who did.  When they started to leave the system the insurance rates on those remaining went up to pick up their lost contribution.  Soon, health insurance wasn’t health insurance anymore.  A fortune was paid in premiums.  And a fortune was spent on health care costs.  It just took money from those not sick today to pay those who were sick today.  It’s now little more than a transfer payment.  And has more in common with Medicare than insurance.

Some of the most Expensive Free Health Care in the World

Medicare has the same problem.  Only worse.  Because it’s a program for the elderly.  Who are big consumers of health care services.  Who are also retired.  And living longer thanks to the good health care they’re getting.  Of course, Medicare isn’t insurance.  The government reimburses health care provides with money collected through payroll taxes.  When they set up Medicare, there was still an expanding birth rate.  So taxpayers then outnumbered retirees on Medicare.  But that changed soon.  The birth rate declined radically.  We went from having big families to having small families.  So retirees on Medicare now outnumber current taxpayers.  So fewer taxpayers must pay more in taxes.  Which is an even bigger problem than the private health insurers are facing.

This means that the free health care we get is some of the most expensive free health care in the world.  And it’s like this because the consumer of the health care isn’t paying the bill.  When a private insurer or the government pays, there is no free market mechanism keeping costs down.  Like in private business.  Who know the full cost of a free lunch.  And they don’t give so many away that they have to raise their prices so much that it makes their goods and/or services unaffordable.

There is no lunch crisis (free or otherwise).  But there is a health care cost crisis.  And the big difference between the two is the free market mechanism.  Health care needs more of it.  For it is the most effective thing in keeping costs down.  It would be so effective that it may even make health care insurance what it once was.  Insurance.  Where a lot of people pay a little bit in to protect their financial assets.  To pay for the few with an unexpected catastrophic expense.

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Rich Liberals Champion the Poor to Maintain their Privileged Lives

Posted by PITHOCRATES - April 2nd, 2011

Per-Vote-Subsidy replaces Corporate and Union Money

Canada has a spoils system when it comes to public financing of political campaigns.  The big pile of public money ‘donated’ by the Canadian taxpayer is divided between the parties by vote.  The more votes a party gets, the more tax subsidies that party gets.  The Canadian prime minister, Stephen Harper, wants to do away with these subsidies (see Harper vows to scrap per-vote subsidies by CTV.ca News Staff posted 4/1/2011 on CTV.ca).

Currently, political parties receive a $2-per-vote subsidy, but Harper has long opposed the system, which was brought in by the Liberals when corporate and union donations were banned.

He said Friday that political parties already enjoy “enormous tax advantages” and taxpayers should not have to support parties they don’t support with their votes. Harper added that the subsidy only helps to ease the way for frequent elections.

Interesting.  Unlike the United States, Canada does not allow corporations or unions donate to political parties.  And when that ban went into place, the liberals brought in the per-vote-subsidy.  It takes money to win political contests.  And when you shut down two big sources (corporations and unions), that money has to come from somewhere else.  So the liberals decided to get that money from the taxpayer.  Fair, right?  I mean, without these subsidies, political power falls to the rich.  And that’s not fair, is it?

The Liberals are the Rich trying to Buy Political Power

When they banned corporate and union donations that left private donations.  From actual people.  So I guess we would have to see how that money flowed to see whether the per-vote-subsidy is fair and serves its purpose.  To keep the rich from wielding political power over the poor (see Analysis: Fears about scrapping per-vote subsidies wildly off target by Patrick Brethour, Vancouver, posted 4/2/2011 on The Globe and Mail).

Data compiled by the website Punditsguide.ca show that funds raised by the parties largely come from small donors, in amounts that would make few Canadian households cringe…

Take the Conservative Party in 2009, which raised… an average [per person] donation of $174.60…

The story is pretty much the same with the other parties: the NDP, with an average donation of $169.11; the Bloc Quebecois, average $102.63; Green Party, $123.21; and the Liberals, with an average of $239.23, the highest of the major federal parties.

Looking at the average per-person donation, it appears the liberal donors are richer than the conservative donors.  Kind of goes against everything the liberals tell us.  That conservatives are nothing but a bunch of rich fat-cats who want to use the poor as footstools.  Either that or conservatives are just cheap bastards.

The same picture emerges when looking at the distribution of donations by size. For the Conservatives, about 10 per cent of the funds raised came from those giving between $1,000 and the maximum of $1,100; conversely, two-thirds came from those giving $400 or less. The NDP were similar, with 7 per cent coming from the highest donated amount, and 70 per cent coming from donations $400 and under. The Liberals – who have fulminated against the perils of the rich controlling the political process – were actually the party most dependent on big donations, with 35 per cent of their cash coming from donors giving between $1,000 and $1,100, while sub-$400 donors accounted for just 38 per cent of the funds the party raised.

In fact, the Liberals outperformed among big donors, raising $3.2-million to the Conservatives’ $1.7-million. The Tories made up that ground, and more, with small donors.

And what do these numbers tell you?  Liberals rely on rich people for their political donations.  Conservatives rely on the little guy, the average working person who can barely afford to donate $200.  And the big corporations and the big unions pour money into liberal political parties.  In ‘soft ways‘ these days.  In Canada.  In the United States.  All around the world.  So much money that it was hard for the little guy to fight against it.  Leaving political power in the hands of the rich.  Much like the liberals say they want to prevent with the per-vote-subsidy.  But, in fact, that’s exactly what they want to do.  Leave political power in their rich hands.

You see, the crony capitalists and the snooty rich don’t like the little guy.  They like the good life that few can enjoy.  And sometimes they need special favors from government to continue that privileged life.  Which is why they donate to liberal parties.  But when they banned ‘hard money’ donations from corporations and unions, liberals had to scramble for other financing.  Because the majority of people don’t support their views.  So they need to ‘force’ donations through these per-vote-subsidies.  For it is the only way they can continue to rule against the will of the people.

The People who Supported Obamacare get Obamacare Waivers

It’s always about the money.  Whenever you’re confused about some political debate, just ask yourself this simple question.  Where’s the money?  Take health care, for example.  The goal of Obamacare was to provide everyone with high-quality yet affordable health care insurance.  Sort of like paying for a Big Mac and getting filet mignon.  Impossible, yes, but that’s what they told us. 

Big Business and the unions were all behind it.  Everyone (employers and unions) wants to dump their health care costs.  That’s why they were anxious for that public option.  Well, they didn’t get the public option.  Not yet.  First Obamacare has to put the private insurers out of business.  Once it does that then the government can step in as the insurer of last resort and, presto, they’ll get their national health care.  But leaves a costly problem for the here and now.

To ‘pass’ CBO, they had to include some onerous requirements.  The new law forced everyone to buy insurance.  The insurers had to cover preexisting conditions.  And they forbade insurance companies to recover their full overhead expenses.  Suddenly affordable insurance was going to become unaffordable.  Or people were simply going to lose their insurance because they couldn’t afford the premiums that were necessary to comply with the requirements of Obamacare.  So many of those who supported this legislation want no part of it.  For themselves, that is.  It’s okay for us.  But not for them.  So they’re asking that the law does not apply to them.  Only us (see List of health reform waivers keeps growing by Jason Millman posted 4/2/2011 on The Hill).

The number of waivers the Obama administration has awarded for a provision of the year-old healthcare reform law grew by 128 in March.

With the new waivers, that means 1,168 businesses, insurers, unions and other organizations have received one-year exemptions from a healthcare reform provision requiring at least $750,000 in annual benefits.

Nancy Pelosi said we needed to pass Obamacare to learn what was in it.  Apparently another 128 insurance plans learned what was in it this past March.  And they want out.  Like the majority of Americans.  Which really begs the question why Obamacare?  It isn’t popular.  They had to pass it quickly before anyone could read the bill.  None of the unions want it.  So why have it?  Because liberals want it.  And why do politicians want anything?  Follow the money.

The Free Market provides High Quality and Low Prices

Hillary Clinton tried to socialize our health care.  Now Obamacare is a short step from doing just that.  Because they said only government could step in and fix our health care system.  That the so-called free market had failed.  Really now?  Because that’s the one thing that has been missing from our health care system.  Market forces.  Doctors providing medical services for a fee that their patients actually pay for.  Not a third party insurance bureaucrat.  But the actual patient.  Until now, that is.  And that free market?  It works.  It’s providing a fully funded quality system that people of average means can afford (see High-end medical option prompts Medicare worries by Ricardo Alonso-Zaldivar, Associated Press, posted 4/2/2011 on the Sun Journal).

Every year, thousands of people make a deal with their doctor: I’ll pay you a fixed annual fee, whether or not I need your services, and in return you’ll see me the day I call, remember who I am and what ails me, and give me your undivided attention.

But this arrangement potentially poses a big threat to Medicare and to the new world of medical care envisioned under President Barack Obama’s health overhaul.

The spread of “concierge medicine,” where doctors limit their practice to patients who pay a fee of about $1,500 a year, could drive a wedge among the insured. Eventually, people unable to afford the retainer might find themselves stuck on a lower tier, facing less time with doctors and longer waits.

People actually paying to see a doctor?  Imagine that?  Just like in the old days.  Before there was a health care crisis.  The patients are happy.  The doctors are happy.  And making a very nice living.  You can’t get much more of a win-win situation, can you?  Who could find fault with this?

The trend caught the eye of MedPAC, a commission created by Congress that advises lawmakers on Medicare and watches for problems with access. It hired consultants to investigate.

I guess the government could.  Big Brother is everywhere.  And he is looking at this free market solution.  And Big Brother is not amused.  People paying for their own medical care?  That’s a problem for those in government.  A big problem.

Several members said it appears to be fulfilling a central goal of Obama’s overhaul, enhancing the role of primary care and restoring the doctor-patient relationship.

Yet the approach envisioned under the law is different from the one-on-one attention in concierge medicine. It calls for a team strategy where the doctor is helped by nurses and physician assistants, who handle much of the contact with patients.

John Goodman, a conservative health policy expert, predicts the health care law will drive more patients to try concierge medicine. “Seniors who can pay for it will go outside the system,” he said.

MedPAC’s Hackbarth declined to be interviewed. But Berenson, a physician and policy expert, said “the fact that excellent doctors are doing this suggests we’ve got a problem.”

You see, one-on-one concierge medicine is bad because it lets doctors work freely with patients.  The government would prefer something along the current lines.  You treat patients.  And then we’ll think about paying you.  And how much we’ll pay you.  Like in the Medicare program now.  That way you’re our bitch.  But if you work outside the system, you and your patients will be free.  And we don’t like that.  Why?  Follow the money.

Follow the Money for the Money Never Lies

Politics is always about the money.  Always has been.  Always will be.  Because it takes money to gain and maintain political power.  Whether you’re running a political campaign.  Or supporting a campaign with your union dues in exchange for political favors (such as legislation that limits competition so unions can maintain their high wage and benefit packages).

Liberals are a minority of the population.  Wherever you are.  The majority of people don’t belong to a union or work for the government.  This majority has jobs.  They take care of their family.  And want Big Brother to leave them alone.  Union dues from a small percentage of the population can greatly influence elections, though.  They can’t donate directly.  But that money finds its way to liberals.  Liberals in the U.S. desperately need this money.  In fact, union dues have become so important to the ruling liberal elite that they created an entire new class of union-paying people.  The public sector union class.  Who has but one purpose.  To launder tax dollars from taxpayers to the Democrat Party.

The 2010 mid-term elections shook up the political establishment.  Conservative governors are fighting back against this new political class.  And the liberal left is attacking these governors.  Even President Obama sent activists to Madison, Wisconsin, to protest against Governor Walker as they voted to make their public sector workers live more like the rest of the people in Wisconsin.  This is why Obamacare is so important to the left.  Health care is 17% of GDP.  That’s a lot of money.  That’s why the public option is so important.  Why nationalized health care is so important.  Because of this money.  Liberals want this money to pass through Washington.  Where they can easily skim a little off the top for their political needs.  And to live well.  Without actually having to work.  Like that majority that pays all those taxes.

Life’s greatest question can be easiest answered by following the money.  For the money never lies.

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