Week in Review
Let’s imagine you buy your groceries a different way. Instead of going to the store and picking things off of the shelves and paying for them at checkout imagine this. You don’t pay the store. A third party does. Like it does for everyone else that shops at this store. Sounds great, doesn’t it? Let’s say people pool their money together for purchasing power. And have this third party take that pooled money and use it to get better pricing. Because of the large amounts they will be paying for.
So everyone pays in a monthly amount to their third-party purchaser. Then goes to the store and takes what they want. And at checkout they just sign an invoice to acknowledge they took this stuff. And the store will submit the bill to the third-party purchaser. Of course, there would have to be some rules. Because if everyone pays a flat amount each month you can’t have someone picking up steaks every day when you’re buying hamburger for your kids. So there are limits to what you can buy. Requiring the third party to review every submitted invoice. Requiring a very large staff to review every grocery store purchase to approve and disapprove line items on each and every invoice for payment. To resolve billing and payment errors. And to bill shoppers for any unapproved purchases they made. Even if they didn’t understand that these items weren’t covered.
So, included with that monthly payment there must be an overhead fee. To pay for all those people reviewing those invoices. Those who bill shoppers for unapproved items. Those who pay for the approved purchases. And those who process payments from shoppers. Still, things slip through the cracks. People are getting unapproved purchases through the system. Grocery prices rise. The overhead costs at the third party grow due to new costly regulations. Etc. Such that on occasion the total amount of cash out at the third party exceeds the total of cash in. Requiring them to raise the monthly amount everyone pays.
Sounds a bit more complicated than just going to the store and paying for what you want out of pocket. And more costly in the long run. But if someone else pays the third party for those monthly fees it’s a whole different story. Say as a benefit at work. Because without you having to pay anything it’s just free groceries. At least, to you. And you will demand that your employer pays for more stuff so it’s free to you. Even though it’s not. Because the rising cost of third party grocery purchases will cost your employer. Which will limit your pay. And other benefits. Because in the real world nothing is free. Even if people think that a lot of stuff is free. Or should be free. Like health care (see Nearly 7 in 10 Americans say health plans should cover birth control by Karen Kaplan posted 4/22/2014 on the Los Angeles Times).
Among the various provisions of the Affordable Care Act, few are as controversial as the one requiring health insurance providers to include coverage for contraception. A new survey finds that support for this rule is widespread, with 69% of Americans in favor of the mandate…
Women, African Americans, Latinos and parents living with children under the age of 18 had higher levels of support for mandatory contraception coverage than people in other demographic groups, the survey found…
— 85% of those surveyed supported mandatory coverage for mammograms and colonoscopies.
— 84% supported mandatory coverage for recommended vaccines.
— 82% were in favor of mandatory coverage for diabetes and cholesterol screening tests.
— 77% backed the provision on mandatory coverage for mental health care.
— 75% supported mandatory coverage of dental care, including routine cleanings.
There’s a reason why the United States is a republic and not a democracy. For the Founding Fathers feared a democracy. And wanted responsible people between the people and the treasury. For once people understood they could vote themselves the treasury they would. And things like this would happen. Mob rule. Where the mob demands more and more free stuff while fewer and fewer people pay for that ‘free’ stuff. And people in government anxious to win elections will keep giving the people more ‘free’ stuff that others have to pay for. Until one day you end up with the health care system we have in the United States. All because other people were paying for routine costs people could expect and budget for. Things that if they paid out of pocket for would cost less in the long run. Which would keep insurance what it was supposed to be. Insurance. And not turn it into a massive cost transfer scheme that only allowed the price of health care to soar.
Tags: Affordable Care Act, benefit, bill, contraception, democracy, Founding Fathers, free stuff, health insurance, insurance, invoice, Mob rule, overhead, payment, prices, routine costs, third party
Week in Review
Obamacare is not going well. The say it is. But it isn’t. The White House can all of a sudden give us a number like 8 million enrollees when they said earlier they couldn’t tell until the insurance companies tell them. And the other big question is this. Are these enrollees? Including all people who enrolled whether they paid or not? Or are these only the people who paid? Or are most of these people enrolling in Medicaid? Those who won’t ever pay? If that 8 million aren’t paying customers Obamacare is doomed.
So the financial foundation of Obamacare is likely very perilous. Where the sick and poor are probably signing up more than the healthy with money. And the delay of the employer mandate to sometime after the midterm election takes a bad financial foundation and makes it worse. For they can’t keep delaying the funding parts until after elections. Because someone has to pay for all of the subsidies. As well as the high cost of the old and sick. Which alone may bankrupt Obamacare (see Labour considers raising national insurance to fix £30bn NHS ‘black hole’ by Toby Helm posted 4/19/2014 on the guardian).
Radical plans to increase national insurance contributions to plug a looming £30bn a year “black hole” in NHS funding and pay the spiralling costs of care for the elderly are being examined by Labour’s policy review.
The Observer has learnt that the idea is among options being considered to ensure NHS and care costs can be met under a future Labour government, without it having to impose crippling cuts on other services in successive budgets.
Senior party figures have confirmed that a scheme advanced by the former Labour minister Frank Field – under which funds from increased NI would be paid into a sealed-off fund for health and care costs – is being examined, though no decisions have been taken.
Recent figures based on data from NHS England and the Nuffield Trust and produced by the Commons library suggest that NHS costs alone will go from £95bn a year now to more than £130bn a year by 2020.
Some have suggested that they designed Obamacare to fail. So they can get what they really want. Single-payer. Or national health care. Like they have in Britain with their National Health Service (NHS). Which is running an enormous deficit. Based on the above numbers it currently is 31.6% (£30bn/£95bn). Which is just unsustainable. But this is what an aging population will do. When you have more people leaving the workforce consuming health care benefits paid for by fewer people entering the workforce. Which should be a huge warning for the United States. Because they have an aging population, too.
At the current exchange rate that £30 billion comes to $50.37 billion. Is this what the US can expect? No. Because they have five-times the population Britain has. So their deficit will be approximately five-times as big. Or $251.85 billion. That’s a quarter of a trillion dollar shortfall PER YEAR. At least. And $2.52 trillion over a decade. So unless the Americans can somehow make their people less sick so they won’t consume health care resources the deficit alone for Obamacare will be more than twice the original CBO projection for the total cost over 10 years. Which means the Americans will have to do what the British must do. Increase taxes. Charge for some health care services in addition to these higher taxes. Or impose crippling cuts to services. Hello rationing. And longer wait times.
This is the absolute worst time to impose a single-payer/national health care system. Just as the baby boom generation fills our health care system in their retirement. It might have worked if we had kept having babies the way we did before birth control and abortion slashed the birthrate. But we didn’t. And now we have a baby bust generation stuck footing the bill for a baby boom generation. Fewer paying for more. And the only way to make that work is with confiscatory tax rates. Or death panels. Because you have to raise revenue. Or cut costs. There is just no other option. Or people can work longer, pay out of pocket for routine, expected expenses and buy real insurance to protect themselves from catastrophic, unexpected medical expenses. Which is actually another option. And probably the only one that will work.
Tags: aging population, baby boom, Britain, death panels, deficit, insurance, longer wait times, National health care, NHS, Obamacare, old and sick, rationing, Single payer
Week in Review
Currently there are no market forces in health care. Which is why health care costs are so high. When buyers and sellers meet they always agree on a price that makes them both feel like winners. Just watch an episode of one of those pawn shop shows. The seller wants a higher price. The buyer wants to pay a lower price. As they move towards each other they arrive at a price that makes them both happy. The seller gets an amount of money he values more than the thing he’s selling. And the buyer is getting something he values more than the money he’s paying for it. Making them both feel like winners.
It’s not like this in health care. Because there is a third party between the buyer and seller. Either an insurance company. Or the government. Just like there is a third party between networks’ programming content and the consumer. The cable/satellite/phone company (see Why Your Cable Bill Keeps Going Up by Evan Weiner posted 4/12/2014 on The Daily Beast).
The television networks and the television carriers, whether it’s through cable, satellite or phone lines, carriers seeming are always fighting these days over the cost of programming and what rights’ fees should be. The rights’ fee is what a television carrier pays for a networks programming. The carrier then passes that cost along to consumers and tacks on an additional fee because they too feel the need to be compensated for bringing the program into a home.
The injured party is the subscribers who have little course to affect the talks unless they decide to drop their provider for another, and there is no guarantee switching to another provider will end TV blackouts…
Thanks to the 1984 Cable TV Act, cable subscribers have really no say in what they want for their needs. The cable carrier was allowed to establish tiers of services. The consumer could take a local, basic tier alone or basic and basic extended but would have no choice in what they wanted to buy and were forced to take whatever the multiple system operative wants to give them or they opt out of having cable TV. The same apparently holds true for satellite TV and the phone companies.
Cable/satellite/telephone television is like Obamacare. As consumers can’t keep the programming they liked and wanted to keep. As it is for Obamacare. Where people who had health insurance they liked and wanted to keep could not keep it. Instead, a third party, the government, forced them to buy a tier of health insurance they did not want. Only they do not have the option to opt out of Obamacare. Because buying health insurance is mandatory. Unlike cable/satellite/telephone television. For as much as we may hate our cable/satellite/telephone companies at least we don’t have to buy from them under penalty of law.
Tags: buyer, cable, carriers, consumer, Health Care, health insurance, insurance, networks, Obamacare, programming, rights’ fees, satellite, seller, subscriber, television, third party
Week in Review
The big question in the Obamacare signups recently released by the Obama administration is this. How many people have actually sent a payment into their insurance company? For signing up for health insurance doesn’t mean you have health insurance. You have to pay for it first. With ‘first’ being key. As anyone who has paid a health insurance premium knows. You pay for next month’s health insurance this month. That is, it’s cash before delivery. As the insurance companies need the cash before they can pay any benefits. This is the way all insurance has worked since the dawn of insurance. First money goes into an insurance pool. Then said insurance pool pays insurance claims. The money must come first. There’s just no other way for it to work.
So, is the money coming first with Obamacare? As it turns out, the majority of it is. At least, according to a leading federation of Blue Cross and Blue Shield health plans (see Blue Cross group sees Obamacare premium payments at 80-85 percent by David Morgan posted 4/2/2014 on Reuters).
A leading federation of Blue Cross and Blue Shield health plans said on Wednesday that it is receiving premium payments from 80 to 85 percent of its new Obamacare health insurance customers.
The estimate, released by the Chicago-based Blue Cross Blue Shield Association, reflects enrollment activity among 35 Blue Cross Blue Shield plans in 47 of the 50 states, including plans sold by WellPoint Inc, from October 1 through February 1…
If the Blue Cross Blue Shield payment rates held true for enrollment across the board, between 5.7 million and 6 million of the 7.1 million would actually be enrolled in coverage.
So that means the Obama administration is overstating the enrollment numbers from 18.3% to 24.6%. And between 1.1 million and 1.4 million haven’t paid for the Obamacare they signed up for. Of course, that’s assuming that the 7.1 million were all new Obamacare enrollees into private health insurance plans. And not those who signed up for Medicaid who will never write a check for their coverage. Which will not help the insurance companies pay for the expanded benefits mandated by Obamacare.
So the Obama administration’s numbers are suspect to say the least. As is the continued existence of the private insurers. For if they don’t get 7+ million signing up for Obamacare (with a heavy concentration of the young and healthy who will file few claims) the cost of caring for the old and sick will bankrupt them. Of course if this was the plan all along the Obama administration could at least claim something in Obamacare was working according to plan.
Tags: Blue Cross, Blue Cross and Blue Shield, claims, health insurance, insurance, insurance pool, Obama administration, Obamacare, premium
New Complex and Confusing Regulatory Policies require Additional Accounting and Legal Fees to Comply
There have been demonstrations to raise the minimum wage. President Obama even called for Congress to raise the federal minimum wage to $10.10 an hour. He also wants employers to pay salaried people overtime. There have been demands for paid family leave (paying people for not working). Unions want to organize businesses. To get employers to pay union wages. Provide union health care packages. And union pensions. Obamacare has made costly health insurance mandatory for all employees working 30 hours or more a week.
Environmental regulations have increased energy costs for businesses. Sexual harassment training, safety training, on-the-job training (even people leaving college have to be trained before they are useful to many employers), etc., raise costs for businesses. New financial reporting requirements require additional accounting fees to sort through. New complex and confusing regulatory policies require additional legal fees to sort through them and comply.
With each payroll an employer has to pay state unemployment tax. Federal unemployment tax. Social Security tax (half of it withheld from each employee’s paycheck and half out of their pocket). Medicare tax. And workers’ compensation insurance. Then there’s health insurance. Vehicle insurance. Sales tax. Use tax. Real property tax. Personal property tax. Licenses. Fees. Dues. Office supplies. Utilities. Postage. High speed Internet. Tech support to thwart Internet attacks. Coffee. Snow removal. Landscaping. Etc. And, of course, the labor, material, equipment and direct expenses used to produce sales.
The Problem with Guaranteed Work Hours is that there is no such thing as Guaranteed Sales
The worst economic recovery since that following the Great Depression has created a dearth of full-time jobs. In large part due to Obamacare. As some employers struggling in the worst economic recovery since that following the Great Depression can’t afford to offer their full-time employees health insurance. So they’re not hiring full-time employees. And are pushing full-time employees to part-time. Because they can’t afford to add anymore overhead costs. Which is hurting a lot of people who are having their own problems trying to make ends meet in the worst economic recovery since that following the Great Depression. Especially part-time workers.
Now there is a new push by those on the left to make employers give a 21-day notice for work schedules for part time and ‘on call’ workers. And to guarantee them at least 20 hours a week. Things that are just impossible to do in many small retail businesses. As anyone who has ever worked in a small retail business can attest to. You can schedule people to week 3 weeks in advance but what do you do when they don’t show up for work? Which happens. A lot. Especially when the weather is nice. Or on a Saturday or Sunday morning. As some people party so much on Friday and Saturday night that they are just too hung over to go to work. Normally you call someone else to take their shift. Then reschedule the rest of the week. So you don’t give too many hours to the person who filled in. In part to keep them under 30 hours to avoid the Obamacare penalty. But also because the other workers will get mad if that person gets more hours than they did.
The problem with guaranteed work hours is that there is no such thing as guaranteed sales. If you schedule 5 workers 3 weeks in advance and a blizzard paralyzes the city you may not have 5 workers worth of sales. Because people are staying home. And if no one is coming through your doors you’re not going to want to pay 5 people to stand around and do nothing. For with no sales where is the money going to come from to pay these workers? Either out of the business owner’s personal bank account. Or they will have to borrow money. It is easy to say we should guarantee workers a minimum number of work hours. But should a business owner have to lose money so they can? For contrary to popular belief, business owners are not all billionaires with money to burn. Instead, they are people losing sleep over something called cash flow.
Cash Flow is everything to a Small Business Owner because it takes Cash to pay all of their Bills
To understand cash flow imagine a large bucket full of holes. You pour water in it and it leaks right out. That water leaking out is expenses. The cost of doing business (see all of those costs above). A business owner has to keep that bucket from running out of water. And there is only one way to do it. By pouring new water into the bucket to replace the water leaking out. That new water is sales revenue. What customers pay them for their products and/or services. For a business to remain in business they must keep water in that bucket. For if it runs out of water they can’t pay all of their expenses. They’ll become insolvent. And may have no choice but to file bankruptcy. At which point they’ll have to get a job working for someone else.
Cash flow is everything to a small business owner. Because it takes cash to pay all of their bills. Payroll, insurance, taxes, etc. None of which they can NOT pay. For if they do NOT pay these bills their employees will quit. Their insurers will cancel their policies. And the taxman will pay them a visit. Which will be very, very unpleasant. So small business owners have to make sure that at least the same amount of water is going into the bucket that is draining out of the bucket to pay their bills. And they have to make sure more water is entering the bucket than is draining out of the bucket to pay themselves. And to grow their business.
This is why business owners don’t want to hire full-time people now. Because full-time people require a lot of cash (wages/salary, payroll taxes, insurances, training, etc.). They’re nervous. For they don’t know what next will come out of the Obama administration that will require additional cash. For every time they want to make life better for the workers (a higher minimum wage, overtime for salaried employees, guaranteed hours, etc.) it takes more cash. Which comes from sales. And if sales are down future cash flow into the business will also be down. Leaving less available for all of those holes in the bucket. So they guard their cash closely. And are very wary of incurring any new cash obligations. Lest they run out of cash. And have to file bankruptcy. Which is why they lose sleep over cash flow. Especially now during the worst economic recovery since that following the Great Depression.
Tags: Bankruptcy, Business, business owner, cash, cash flow, costs, economic recovery, employees, employers, expenses, full-time, Great Depression, insurance, jobs, minimum wage, Obamacare, overtime, part-time, payroll, regulations, retail, sales, small business, small business owner, tax, work hours, worst economic recovery
Week in Review
As ships began to ply the world’s oceans some of them did not make it to their destination. Instead, they ended up on the ocean floor. The financial loss for a ship lost at sea was enough to bankrupt a shipper. Which greatly inhibited early transoceanic trade. But then the good men at Lloyd’s of London began selling marine insurance out of a London coffee house. Spreading the risk of a large financial loss across all shippers. Where each shipper paid a small fee (i.e., an insurance premium) to cover the financial loss for the few ships that sank. It was an excellent system. Mitigating the risk of the very risky transoceanic trade. It worked so well we still use it today (see Ship loses more than 500 containers in heavy seas by Tim Lister posted 2/22/2014 on CNN)
On any day, between 5 million and 6 million containers are on the high seas, carrying everything from potato chips to refrigerators. But not all of them make it to their destination, as the crew of the Svendborg Maersk have just found out.
Their Danish-flagged ship was in the Bay of Biscay last week as hurricane-force winds battered the Atlantic coast of Europe. Amid waves of 30 feet and winds of 60 knots, the Svendborg began losing containers off northern France. After the ship arrived in the Spanish port of Malaga this week, Maersk discovered that about 520 containers were unaccounted for. Stacks of others had collapsed.
It’s the biggest recorded loss of containers overboard in a single incident…
The Through Transport Club, which insures 15 of the top 20 container lines, has put the loss at fewer than 2,000 containers a year. But other industry sources say the number may be as high as 10,000. That would still represent far less than 1% of the containers traversing the world’s oceans. Maersk, one of the world’s largest lines, says that its highest annual loss in the last decade was 59 containers.
If we crunch some numbers we can see how insurance works. Let’s make some assumptions. Conservative ones. Let’s assume the low end of 5 million containers. And the high end of lost containers (10,000). This puts the total loss of containers at 0.20% of the total shipped. Which means that 99.8% of all containers shipped reach their destination. So the insurance pays for a very small number of lost containers. Now let’s assume an average value of $250,000 per container. That makes the value of all containers shipped $1.25 trillion. And the value of containers lost $2.5 billion. Or 0.20% of the value shipped. Which is a small fraction of the total. If we spread this amount over each container shipped that comes to an insurance premium of $500 per container. A small price to pay to avoid a $250,000 loss.
This is why marine insurance works. Because it’s insurance. Where shippers pay a small premium to insure against a very large possible financial loss. Which is why Obamacare won’t work. Because Obamacare isn’t insurance. Neither was health insurance before Obamacare. Because people expect a free ride. If they have ‘insurance’ they don’t want to pay for anything. Which isn’t how insurance works. That would be like shippers having someone else pay for their marine insurance. And then expect to ship things across the ocean for free because they had insurance. Marine insurance doesn’t work like that. And neither should health insurance.
Tags: containers, financial loss, health insurance, insurance, insurance premium, Maersk, marine insurance, Obamacare, premium, risk, shipper, transoceanic trade
Because Obamacare Insurance pays for everything Under the Sun it is anything but Insurance
Do you know what the problem is with health care? Insurance plans that give away free flu shots. Not that flu shots are bad. They’re not. And it’s a good thing for everyone to get one every year at the onset of the flu season. For it does seem to limit the spread of the flu virus. It’s because we get a flu shot every year is why insurance shouldn’t pay for it. Because we know about this expense. And we can budget for it. Just like we can budget for our monthly cellular bill. Which is in most cases more than ten times the cost of one annual flu shot.
When Lloyds of London started selling marine insurance at that coffee shop they were selling insurance. Not welfare. Losing a ship at sea caused a huge financial loss. And shippers wanted to mitigate that risk. So every shipper paid a SMALL premium to protect against a LARGE loss. A POTENTIAL sinking and loss of cargo. Not every ship sank, though. In fact, most ships did not. Which is why that little bit from everyone was able to pay the financial loss of the few shippers that lost their ship and cargo. But that’s all that Lloyd’s of London paid for. They didn’t pay a dime to shippers whose ships didn’t sink. No, those shippers paid every cent they incurred (crew, food, rum, etc.) to ship things across those perilous oceans. Because they could expect those costs. And they could budget for them.
This is how insurance works. Which isn’t how our current health insurance system works. No. Today people don’t want to pay for anything out-of-pocket. Not the unexpected catastrophic costs. Or the EXPECTED small costs that everyone can budget for in their personal lives. Like an annual flu shot. Childhood vaccinations. Annual checkups. Childbirth. Etc. Even the unexpected things that aren’t that expensive. Like the stitches required when a child falls off of a bike. Things that would cost less than someone’s monthly cellular bill. Or things that people can plan and save for. Like a house. A car. Or a child. Which is why Obamacare insurance is not insurance. It pays for way too many expected costs that we can budget for. And because it does it only increases the cost of our health insurance policies. Which are now anything but insurance.
Free Market Forces and Insurance for Catastrophic Costs will Fix any Problems in our Health Care System
When we pay these things out-of-pocket there are market forces in play. For a doctor is not going to charge someone they’ve been seeing for years as much as he will charge a faceless insurance company. Even today some doctors will waive some fees to help some of their long-time patients during a time of financial hardship. Because there is a relationship between doctor and patient. And they want to help. Which is why they sometimes overcharge insurance companies to recover costs they can’t recover in full from other patients. (Which is why insurance companies are vigilant in denying overbillings). Especially those things government pays for. Medicaid. And Medicare. Which the government discounts. Leaving health care providers little choice but to overbill others to pay for what the government does not.
When we pay out-of-pocket doctors can’t charge as much. Because they need patients. If they charge too much their patients may find another good doctor that charges a little less. Perhaps a younger one trying to establish a practice. These are market forces. Just like there are everywhere else in the economy. Even a cancer patient requiring an expensive miracle drug benefits from market forces. If there was true insurance in our health care system, that is. Cancer is an unexpected and catastrophic cost. But not everyone gets cancer. Just as every ship does not sink. Everyone would pay a small fee to insure against a financial loss that can result from cancer. Where that little bit from everyone buying a catastrophic health insurance policy was able to pay the financial loss of the unfortunate few that require cancer treatment. Even one including a costly miracle drug. Because only a few from a large pool would incur these financial losses insurers would compete against other insurers for this business. Just like they do to insure houses. And ships crossing perilous oceans.
Health care would work better in the free market. It doesn’t today because government changed that. Starting with FDR putting a ceiling on wages. Which forced employers to offer generous benefits to get the best workers to work for them when they couldn’t offer them more pay. This was the beginning. Now the health insurance industry is so bastardized that it doesn’t even resemble insurance anymore. It’s just a massive cost transfer from one group of people to another. Instead of a pooling of money to insure against financial risk. For the few unexpected and catastrophic costs we cannot afford or budget for to pay out-of-pocket.
Because our Health Care System is the Most Expensive in the World it is the Best in the World
The American health care system is the finest in the world. When you have a serious health care issue and you have the wherewithal there’s only one place you’re going for your medical care. The United States. And the best costs. And it’s because it is so costly that people enter into the health care industry to do wonderful things. Such as pharmaceutical companies. Who many rail against for charging so much for the miracle drugs only they produce. It’s a free country. Anyone could have created that miracle drug. All they had to do was to spend a boatload of money for years on other drugs that were losers. Until they finally found one that wasn’t a loser. That’s all you had to do. Yet few do it. Why?
Because creating miracle drugs is an extremely expensive and often futile endeavor. Which is why we award patents to the few who do. Which is the only reason they pour hundreds of millions of dollars into research and development and pay massive liability insurance premiums for taking a huge risk to put a drug onto the market that may harm or kill people. They do this on the CHANCE that they may develop at least one successful drug that will pay for all of the costs incurred to develop this one drug, the costs for the countless drugs that failed AND provide a profit for their investors. Who took a huge risk in paying their employees over the many years it took to come up with at least one drug that wasn’t a loser. Their investors do this only because of the CHANCE that this pharmaceutical will develop that miracle drug that everyone wants. But most don’t. And investors just lose their investment. But it’s the only way miracle drugs become available to us. Because of rich investors who were willing to risk losing huge amounts of money.
This is what the profit incentive gives us. The best health care system in the world. Why the countries based on free market capitalism have the finest health care systems in the world. And why North Korea, Cuba, the former East Germany, the former Soviet Union, Venezuela, etc., have never given us miracle drugs. There never was an economic incentive throughout the economy to do so. Like there is in countries with free market capitalism. Where everyone at every level pursues profits that result overall in a pharmaceutical industry that produces these miracle drugs.
There is an expression that says you get what you pay for. Our health care system is the most expensive in the world. And because it is it is the best in the world. Trying to inhibit the profit incentive for research and development and forcing medical providers to work for less (steeper Medicaid, Medicare and now Obamacare discounts) will change that. Because you do get what you pay for. And those who live/have lived in North Korea, Cuba, the former East Germany, the former Soviet Union, Venezuela, etc., can attest to.
Tags: budget, capitalism, catastrophic, costs, doctor, financial loss, flu, flu season, flu shot, free market, free-market capitalism, health care system, health insurance, incentive, insurance, insurance companies, Lloyd's of London, market forces, Medicaid, Medicare, miracle drug, Obamacare, out of pocket, patient, pharmaceutical, premium, profit, profit incentive, risk, unexpected
Week in Review
The problem in America these days is the mass ignorance of the people. Thanks to a public school system that does not educate but programs our children to be good Democrat voters. Higher education taken over by the leftist radicals of the Sixties that forever changed the curriculum to teach our children to distrust capitalism and love government. When controlled by Democrats, of course. And people who are for some reason respected for their economic prowess who are absolutely clueless on things economic (see The Daily Show Nails Why Healthcare Will Never Work As A Free Market by Christina Sterbenz posted 1/18/2014 on Business Insider).
Steven Brill, author of Time’s in-depth healthcare analysis “Bitter Pill,” appeared on The Daily Show this week to discuss his opinion of Obamacare.
Brill’s work exploded his career into a love-hate relationship with Obamacare, now leading to a book. Speaking with Jon Stewart, Brill certainly made his criticisms known but we also feel like he pinpointed exactly why healthcare just can’t work as a free market.
Brill told the story of a cancer patient forced to pay $13,700 out-of-pocket, up-front for transfusion of a drug. And that cost only constituted part of a greater $83,000 payment. Brill claims, however, the drug only cost the pharmaceutical company $300.
Stewart came back at Brill with the typical, conservative argument — creating a free market for healthcare where patients pick-and-choose their coverage to create competition and therefore, better options.
“Everyone says, well it’s a marketplace. That guy [the cancer patient] has no choice in buying that drug. His doctor told him, ‘This will save your life. You don’t take it, you’re gonna die,'” Brill responded.
He further argued free markets must host two aspects — a balance between buyers and sellers and secondly, knowledge — neither of which the current U.S. system offers.
“That cancer drug has a patent. That is a monopoly that the government has given the drug company. There is no other drug. That’s the drug,” Brill said.
Jon Stewart is a comedian. So one can almost forgive his ignorance. But you’d think a person writing for a publication with the word ‘business’ in its name would actually understand business. But the author hasn’t a clue. It’s not her fault. It’s because of the politicizing of our educational system. As her dual degrees in journalism and public affairs would have taught her squat about the classical, Austrian or the Chicago school of economics. Instead filling her head with Keynesian nonsense. The one economic school embraced by power-hungry governments everywhere that has a proven track record of failure. For it was Keynesian policies that gave us the Great Depression, the stagflation of the 1970s, the dot-com bubble and recession of the late 1990s/early 2000s and the Great Recession. Where massive government spending did not pull the economy out of recession but only made things worse.
Why does this pharmaceutical company have a patent? Or perhaps a better question would be why do we have this one cancer drug? Why is it that this one pharmaceutical company developed a cancer drug that works that no other pharmaceutical company or government developed? Because of that patent. The only reason they poured hundreds of millions of dollars into research and development and paid massive liability insurance premiums for taking a huge risk to put a drug onto the market that may harm or kill people. They do this on the CHANCE that they may develop at least one successful drug that will pay all of their past costs for this one drug, the costs for the countless drugs that failed AND a profit for their investors. Who took a huge risk investing, giving this pharmaceutical company the money to pay all of their employees over the years it took to come up with at least one drug that wasn’t a loser.
Does the author of this article work for free? No. Of course not. She has bills. As we all do. Even the people working at pharmaceutical companies. Who don’t work there for free. Even if the vast majority of their work produces nothing that their employer can sell their employer still pays them. Thanks to their investors who give them the money to do so until they can actually sell something. But their investors do this only because of the CHANCE that this pharmaceutical will develop that miracle drug that everyone wants. A miracle drug that would never come into being if it weren’t for investors who were willing to risk losing huge amounts of money. Something only rich investors can afford to do.
Health care worked as a free market before General Motors made it an employee benefit thanks to FDR’s ceiling on wages. Once people stopped paying for what they received all free market forces left the health care system. And costs began to rise. This whole “healthcare just can’t work as a free market” is a product of the dumbing down of our educational system. One that produces people who don’t know the difference between insurance and health care. Insurance protects our assets against a catastrophic and UNEXPECTED loss. Like when Lloyds of London started selling marine insurance at that coffee shop. Every shipper paid a small premium to protect against a POTENTIAL sinking and loss of cargo. A POTENTIAL financial loss. Not every ship sank, though. In fact, most ships did not. Which is why that little bit from everyone was able to pay the financial loss of the few that did. For the ships that didn’t sink the shippers paid every other cost they incurred to ship things across those perilous oceans.
This is how insurance works. Which isn’t how our current health insurance works. Where people don’t expect to pay for anything out-of-pocket. Not the unexpected catastrophic costs. Or the EXPECTED small costs that everyone can budget for in their personal lives. Childhood vaccinations, annual checkups, flu shots, childbirth, etc. Even the unexpected things that have a low cost. Like the stitches required when a child falls off of a bike. Things that would cost less than someone’s annual cellular costs. Or things that people can plan and save for (like a house, a car or a child). When we pay these things out-of-pocket there are market forces in play. For a doctor is not going to charge someone they’ve been seeing for years as much as a faceless insurance company. Even today some doctors will waive some fees to help some of their long-time patients during a time of financial hardship. Because there is a relationship between doctor and patient.
When we pay out-of-pocket doctors can’t charge as much. Because they need patients. If they charge too much their patients may find another good doctor that charges a little less. Perhaps a younger one trying to establish a practice. These are market forces. Just like there are everywhere else in the economy. Even a cancer patient requiring an expensive wonder drug would contribute to market forces if there was true insurance in our health care system. Cancer is an unexpected and catastrophic cost. But not everyone gets cancer. Everyone would pay a small fee to insure against a financial loss that can result from cancer. Where that little bit from everyone was able to pay the financial loss of the unfortunate few that receive a cancer diagnosis. Because only a few from a large pool would incur this financial loss insurers would compete against other insurers for this business. Just like they do to insure houses. And ships crossing perilous oceans.
Health care would work better in the free market. It doesn’t today because government changed that. Starting with FDR putting a ceiling on wages. Which forced employers to offer generous benefits to get the best workers to work for them when they couldn’t offer them more pay. This was the beginning. Now the health insurance industry is so bastardized that it doesn’t even resemble insurance anymore. It’s just a massive cost transfer from one group of people to another. Instead of a pooling of money to insure against financial risk. For the few unexpected and catastrophic costs we could not afford and budget for to pay out-of-pocket.
Tags: cancer drug, catastrophic, competition, Democrat, doctor, drug, educational system, FDR, financial loss, free market, Health Care, ignorance, insurance, investors, Jon Stewart, Keynesian, market forces, miracle drug, monopoly, Obamacare, out of pocket, patent, patient, pharmaceutical, pharmaceutical company, premiums, risk, unexpected
Week in Review
Health care is expensive. It’s why we have Obamacare. To lower the cost of health care. And give quality health care to everyone. But why exactly is health care so costly? And who’s to blame? Well, let’s take a look at the cost of an appendectomy to get an idea (see Reddit User Posts $55,000 Hospital Bill for Appendectomy by SYDNEY LUPKIN, ABC News, posted 1/1/2014 on Yahoo! News).
When a 20-year-old man got over the pain of having his burst appendix removed in October, he got hit with a hospital bill he wasn’t expecting.
The bill from Sutter General Hospital in Sacramento, Calif., said the total charges were $55,029.31 but that the patient owed only $11,119.23 because his insurance had covered the rest.
Shocked, the patient took to Reddit to post the bill and vent his frustrations.
“I never truly understood how much health care in the U.S. costs until I got appendicitis in October,” he wrote on the social media site. “I’m a 20-year-old guy. Thought other people should see this to get a real idea of how much an unpreventable illness costs in the U.S…”
But the bill was not so unusual, given recent studies that showed how the cost of medical procedures could vary from hospital to hospital, said Timothy McBride, a professor and health policy analyst at Washington University in St. Louis….
Sutter General Hospital spokeswoman Nancy Turner said hospital billing is complicated, and that the hospital has people available to help patients navigate it. She said hospitals often serve many patients who don’t pay at all or don’t pay the actual cost of treatment because they are on Medicare or Medi-Cal, California’s version of Medicaid.
“Sutter Health agrees that an improved billing structure is needed, where published charges are more closely aligned with actual costs,” Turner said. “And a more straightforward pricing system is only possible when reimbursement from government-sponsored patients covers actual costs.”
How much did your television cost? How much is your cable bill? How much was your laptop? Your tablet? How much was your mobile device? How much is your cable bill? How much is your cellular bill? People know these costs very well. For they are very discerning shoppers. And because they are manufacturers and providers bend over backwards to give their customers what they want at the lowest possible price. This is free market capitalism at work. Competition for our dollars makes businesses try to give us the highest quality at the lowest price. But none of this happens in health care. Because there are no free market forces in health care.
No one knows what their health care costs are. Because they don’t pay the bill. So they don’t know. And they don’t care. It’s so bad today that most couldn’t shop and pay for the own health care if they tried. On the rare occasion they pay attention to their bill what do they do? Blame the hospital for gouging on their bill. But there is a reason they do this. And it’s not because they’re greedy. They do it because it’s the only way they can keep their doors open. Thanks to the people who don’t pay their bills. And the government who doesn’t pay all of their bills. Leaving no choice for health care providers but to over-bill the insurance companies. Who are the only people paying their bills in full and then some.
Obamacare will only make this worse. By giving ‘free’ health care to more people. Health care that the government won’t pay in full. Which will force the health insurers to raise their premium prices further. Until it is so expensive that no one will buy it anymore. The so-called death spiral. Opening the door for single-payer health care. And Medicaid-quality health care for everyone. Well, perhaps not quite Medicaid-quality health care. With more people in the program wait times and rationing will be greater than they are currently in Medicaid. So it will be worse than Medicaid. The worse-quality health care currently available in the United States.
Tags: appendectomy, bill, free market, Health Care, health insurers, hospital, hospital bill, insurance, Medicaid, Obamacare, patients
Week in Review
If you buy a car you buy auto insurance. And only after buying a car would you ever buy auto insurance. Ditto for house insurance. If you bought a boat or an airplane you would buy insurance for those things. But you wouldn’t buy insurance for a boat or a plane if you didn’t own a boat or a plane. For you only insure things that leave you exposed to a financial loss should something happen to those things. Straight forward, yes? And it’s the way insurance has worked since its inception. Except for health insurance.
Today, thanks to the Affordable Care Act (i.e., Obamacare) people have to buy insurance for things they have no exposure to. For example, a gay man has to include coverage for prenatal care in his health insurance policy even though a gay man will never be pregnant. Nor is it likely he will ever be married to someone who can get pregnant. Which somehow doesn’t seem to be fair. Just like it doesn’t seem to be fair to make people pay for the morning-after ‘abortion’ pill who have no intention of getting an abortion. Or who can’t even get pregnant.
Those on the left say too bad. Everyone must pay for these because we can’t discriminate against those who need this coverage by charging them more. So we must charge everyone more. Making health insurance more expensive than it has ever been before. Causing people who had insurance they liked and wanted to keep to lose that insurance. And some people are even losing the doctors they wanted to keep, too. When those on the left are forced to buy something against their will, though, it’s a whole different story (see Michigan Lawmakers To Consider Separate Insurance For Abortion by Courtney Subramanian posted 12/2/2013 on Time).
Michigan lawmakers are set to consider a controversial proposal that would require women to buy additional health insurance specifically to cover abortions…
The proposal prohibits all public and private health insurers from offering abortion coverage in policies. A separate rider would needed to be purchased, which means people would have to preemptively purchase the rider without knowing if they’ll ever need it. The rider could not be purchased after getting pregnant, including in cases of rape or incest.
Being forced to buy something that they don’t know if they will need? Could be worse. They could be forced to buy something that they will never need. Like many are being forced to do. As men everywhere have to pay for policies that cover women’s health issues. Even though they are men and don’t have women’s health issues. Raising their insurance costs so much that some can no longer afford to even have insurance.
If men have to pay for prenatal insurance coverage then why shouldn’t women pay for an abortion rider? For unlike a man a woman can get pregnant. And have an abortion.
Tags: abortion, abortion coverage, Affordable Care Act, health insurance, insurance, Michigan, Obamacare, pregnant, prenatal care
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