FT198: “Obamacare will fail because you can’t incentivize people to make their lives worse.” —Old Pithy

Posted by PITHOCRATES - November 29th, 2013

Fundamental Truth

Stores used the Incentives of Black Friday to get People to do what they Wanted

A belated happy Thanksgiving.  And a belated happy Black Friday.  We say belated because Black Friday was already here by the time Friday woke from its sleepy slumber.  No more waiting in line Friday morning for those stores to open.  No.  Today if you snooze (i.e., spend Thanksgiving with the family at home) you lose.  Because it’s first come first served.  Which means if you wanted to get some of those deep discounts before they run out you didn’t let anything silly like celebrating Thanksgiving with the family get in your way.

Now everyone loves a bargain.  It’s why we scan the Sunday sales papers.  And search online for the best price.  But in the Obama ‘recovery’ there isn’t a whole lot of spending going on.  As there isn’t a whole lot of employment going on.  Since President Obama assumed office his policies have destroyed some 10 million jobs.  And one thing about unemployed people.  They definitely want a bargain.  Especially if they want a good Christmas for their family during the dark times of the Obama presidency.

But there is a greater lesson Black Friday can tell us other than President Obama is a bad president.  Especially in things economic.  Why are stores opening on Thanksgiving?  Because they’re cruel and evil forcing their workers to slave away during a holiday?  No.  It’s not that.  In fact, some employees love working on a holiday.  For they get paid more working on a holiday than they normally would.  Allowing them to earn extra money to give their families a good Christmas during the dark times of the Obama presidency.  As it turns out shoppers and workers alike like Black Friday.  For it allows each to have more for less.  And that is the great lesson of Black Friday.  Getting people to do what you want by offering them something they want.  Or, in other words, offering them an incentive.

The Kansas–Nebraska Act of 1854 pitted Northern Republicans against Slave-Owning Southern Democrats

Slaves working in the planter South had no desire to be slaves.  Yet they were slaves.  Why?  There weren’t slaves in the North.  Only in the South.  The blacks in the north chose not to be slaves.  While those in the South had no choice.  The planter elite in the South, the ‘Old World’ planter aristocracy, used force.  And having a larger force in Washington than they normally would have (thanks to the Three-Fifths Compromise that counted slaves as three-fifths of a person for representation in Congress) they were able to use the force of government to continue to force blacks into slavery.  The Southern Democrats (i.e., the ‘Old World’ planter aristocracy) were able to keep the black man enslaved until the mid 19th century.  Even using the power of the federal government to override states’ rights in the North.  Using the Fugitive Slave Act to force northern states to return fugitive slaves to their Southern Democrat owners.  The ‘Old World’ planter aristocracy.

This is coercion.  This is how you get people to do what they don’t want to do.  Using the power of the federal government the Southern Democrats kept their slaves in bondage.  Also, using the power of the federal government they forced those in the North who wanted to help ‘fugitive’ slaves to stay free return their slaves or else.  That ‘or else’ being the full weight of the federal government coming down on them with extreme prejudice.  But when the North became more populated control of the House of Representatives favored the larger populated North.  Despite the Three-Fifths Compromise.  Which left the Senate.  And as each state got two senators how the new states entered the union mattered.  For the planter elite to hold their power over the United States.

The Missouri Compromise of 1820 was an early attempt to put slavery onto the path of oblivion.  Those in the North did not want it.  The planter elite in the South did.  So they compromised.  Slavery could remain in the South to appease the planter elite but the compromise prohibited slavery in the new Louisiana Territory that Thomas Jefferson purchased above the 36°30′ parallel (about the southern border of Missouri).  Except in the state of Missouri.  Then came the Kansas–Nebraska Act of 1854 and the idea of popular sovereignty.  Throwing the Missouri Compromise of 1820 out the window.  These two states were both above the 36°30′ parallel.  The Kansas–Nebraska Act of 1854 said the first people into the fledging states could choose for themselves if they would be a slave-state or a free-state.  Which led to a mad rush to Kansas.  And a bloody civil war there.  That eventually led to the American Civil War.  To settle once and for all the issue of slavery in America.  Would the Southern Democrats prevail and keep the black man in bondage?  Or would the Republicans free the slaves?

Obamacare is less like Black Friday and more like Slavery

Even if you flunked your history class you should know the answer to this.  Abraham Lincoln and his Republicans defeated the Southern Democrats and won the American Civil War.  Freeing the slaves.  Of course, the Southern Democrats were not good losers.  They gave us the KKK.  Then the Jim Crowe Laws.  The separate but equal nonsense that didn’t exist in the Republican North.  The old southern aristocracy were not huge fans of the Declaration of Independence or the Constitution.  All they wanted was privilege.  They wanted the Old World in the New World.  And the planter elite fought bitterly to keep that.  Well, not them as much as their fellow southerners they lied to about states’ rights.  Getting them (most of who were too poor to own a single slave) to fight and sacrifice their lives to maintain the institution of slavery.  To maintain the privilege of the southern aristocracy.

So there you have examples of incentive and coercion.  Black Friday incentivized people to hire in for seasonal jobs during the holiday season.  And brought people into stores with deep discounting.  Everyone got something they wanted.  And so they did what the store owners wanted.  People worked for them on Thanksgiving.  And people came into the stores on Thanksgiving.  Both of their own free will.  Now contrast that to slavery.  Where there was no free will.  Only the coercion of the federal government.  Where fear and intimidation compelled slaves to remain slaves.  And their only incentive was to obey their masters to avoid physical harm.

With the Supreme Court ruling the penalty of Obamacare became a tax.  Allowing the federal government to compel people to buy health insurance or suffer the consequences.  A ‘tax’ that will grow in time.  Buy insurance or else.  With that ‘or else’ being the full force and fury of the IRS.  Something most people would find more unpleasant than a colonoscopy.  Without any anesthetic.  No, a letter from the IRS is something no one wants to see in their mail.  For few things will fill you with fear and dread more.  This is the enforcement mechanism of Obamacare.  Which they need because people otherwise wouldn’t spend more for less.  Higher insurance premiums to cover things they will never need (a gay man will never need prenatal care).  And sky-high deductibles that will be like having no insurance.  As everything will be out of pocket until you reach that sky-high deductible.  Which few people will reach unless they have a catastrophic illness or accident.  This is why people are NOT signing up for Obamacare.  Because Obamacare ain’t no Black Friday.  Obamacare is offering nothing the people want.  At prices higher than they ever had to pay for health insurance before.  Leaving them with less to spend on their family.  Forcing them to cut out things they once enjoyed.  Which is why Obamacare will fail.  Because you can’t incentivize people to make their lives worse.  No, to do that you need the fearful power of the state.  Just like the Southern Democrats used to maintain the institution of slavery.

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FT197: “Global warming insurance would probably sell as well as Obamacare.” —Old Pithy

Posted by PITHOCRATES - November 22nd, 2013

Fundamental Truth

The Scam of the Ponzi Scheme is that there is no Investment

A Ponzi scheme is a pyramid scheme.  An investment scam.  Here’s how it works.  Say three scammers build an investment fund that they promise will return an 18% return on investment.  A pretty good return these days.  If they have 100 investors who invest $25,000 each that brings in $2.5 million into the investment fund.  Now here’s where the scam comes in.

They pay each investor an 18% return each year.  So their $25,000 returns $4,500.  A return they can’t get anywhere else.  An investment just too good to be true.  Some take that $4,500 check and spend it on something special for themselves.  Others leave it in the fund.  While others beg to get into the fund.  Of course they wouldn’t do these things if they understood what happened to the $2.125 million that the fund didn’t pay out to investors.  That went into the pockets of the three scammers.

That’s the scam of the Ponzi scheme.  There is no investment.  The scammers collect the money people invest.  Put aside some money to pay out as a generous return on investment.  While keeping the rest.  These scammers sit on top of the pyramid.  And the more people that join the investment fund the wider the base of the pyramid gets.  Pouring more money into the scam.  Providing more money to pay out even higher returns on investments.  Getter ever more people begging to get into the fund.  While burying the scammers under an avalanche of cash.

Our Aging Population is sending the Health Insurance Industry into a Death Spiral

All Ponzi schemes share these characteristics.  And one other one.  They all fail.  And the scammers go to jail.  Why?  Simple.  The scam works as long as the base of the pyramid continues to grow greater than the top of the pyramid.  As the base grows larger the scammers spend more money, though.  Because there is more money to spend.  And spend they do.  Putting down deposits and paying on large mortgages and loans.  Buying very costly things that have a voracious appetite for cash.  So over time more money flows out at the top of the pyramid.  Which isn’t a problem until money stops flowing into the bottom of the pyramid.  Or begins to flow out.  Because people want to use their money for something else.  Like for a down payment on a house.  And once the money flowing out of the bottom of the pyramid exceeds the ‘return’ on investment the fund pays those high returns on investments shrink and disappear.  Exposing the scam.

This is what has happened to Social Security and Medicare.  Thanks to an aging population.  Women are having fewer babies than they did during the baby boom generation.  So today we have fewer taxpayers entering the workforce who pay the taxes that pay for Social Security and Medicare.  While the baby boomers are retiring and leaving the workforce.  And living longer into retirement.  Consuming far more money than they ever paid into these entitlement programs.  So there is far more money flowing out of the top of the pyramid than is flowing into the bottom.  Inverting the pyramid.  And putting these programs onto the path to bankruptcy.

Health insurance is little different.  It just covers so much these days that insurance premiums have soared to pay for this ever expanding coverage.  And the aging population just makes a horrible situation worse.  The elderly are living longer and consuming the lion’s share of health care services.  Further raising the cost of health insurance.  Making it unaffordable to many.  So people simply choose not to buy it in their youth when they are young and healthy.  And wait to buy it later in life when they need it.  Such as when they start raising a family.  At which time they’ll try to find employment somewhere that has good health insurance.  When they start consuming health care services.  Creating adverse selection.  Where only those who consume health care services buy health insurance.  While those who don’t consume health care services (i.e., the young and healthy) don’t.  Creating a death spiral.  As there are no non-consumers of health care services subsidizing the high cost of the large consumers of health care services.  So premiums rise.  To allow fewer people pay for more.  More people drop their insurance because they can no longer afford it.  Shrinking the insurance pool.  So premiums rise.  To allow fewer people pay for more.  More people drop their insurance because they can no longer afford it.  And so on until the cost of health insurance equals the cost of the health care services.  And the insurance market goes the way of every Ponzi scheme before it.

When Reality hits People in the Pocketbook they tend to Lose their Idealism

Enter the Affordable Care Act and the mandates.  Forcing the young and healthy to buy insurance they won’t use.  So they can use their premiums to pay for the old and sick.  The greatest generational theft in history.  Something the young and healthy see.  And don’t like.  For they are not running out and buying health insurance on the health exchanges.  In fact the majority of the people to enroll thus far are the high consumers of health care services.  Which is basically the opposite of the goal of Obamacare.  The young and healthy may have supported President Obama and the Affordable Care Act but that was only in generalities.  Yes, we should help those who don’t have insurance.  And, yes, we should do something to save the environment.  We should stop discriminating against the LGBT community and let them get married.  In the abstract these are all noble goals.  But when the reality hits their pocketbook then it’s no longer an abstract thing to feel good about.  Especially when they can’t get a job with their college education because they had the misfortune to enter the workforce during the worst economic recovery since that following the Great Depression.  The Obama recovery.

This is when youthful idealism turns into skepticism.  As reality settles in hard.  This isn’t raising taxes on the rich.  Something they won’t have to deal with until much later in their career.  This is in the here and now.  When they stop hearing inspiring words from the president about what we can do if only we implement his policies.  But only hear B.S. and lies.  For if they had that youthful idealism they would be rushing to the health exchanges to buy health insurance to make the world a better place.  But they’re not.  And this has the left worried.  Not just about trying to fix the broken Obamacare website.  But will this skepticism spread to other items on their liberal agenda?  Such as the fight against manmade global warming?  They still want their carbon tax.  And they’ve worked hard to get kids graduating from high school convinced that we’re destroying the planet and need to make polluters pay.  If the young lose their faith on Obamacare they may just stop fearing global warming to the point that they may start driving big SUVs again.

In the abstract the youth will support many things.  Until it starts hitting them in the pocketbook.  And if we make the fight against global warming hit them in the pocketbook they would quickly become indifferent about manmade global warming.  Even becoming manmade global warming skeptics.  Perhaps even noting that the glaciers once stretched down from the poles to near the equator.  And moved back towards the poles.  Before there was any manmade global warming.  Something that probably bothers them today but they’re not yet ready to question the left about manmade global warming.  But if we made them buy insurance to protect themselves from the ravishes of global warming they probably would.  The prognosticators can run off a list of calamities that will befall us from unchecked global warming.  So actuaries should be able to put a cost on that.  And set insurance premiums to cover the cost when the calamities of manmade global warming hit us.  Putting these premiums into a Save the Planet from Manmade Global Warming Trust Fund.  Just like the Social Security Trust Fund that has nothing in it but government IOUs.  Let the youth start paying a monthly premium to save us from manmade global warming and see how soon they become global warming deniers.  If we did this global warming insurance would probably sell as well as Obamacare.  Because when reality hits people in the pocketbook they tend to lose their idealism.  And this is the biggest fear the left has.  Because they count on that youthful idealism to win elections.  For once people lose their idealism they tend to vote Republican.

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Concierge Medicine and Catastrophic Insurance are a better alternative to Obamacare

Posted by PITHOCRATES - November 16th, 2013

Week in Review

The Affordable Care Act (i.e., Obamacare) is supposed to make health insurance affordable.  But what it does is force people to buy insurance policies to cover everything under the sun.  Including things they don’t want.  And things they will never use (elderly people will have to buy pediatric care for children they don’t have and never will have at this point in their life).  Which raises the cost of health insurance.  By making health insurance not insurance.

Insurance is not supposed to provide free stuff.  It is to protect your financial assets from a catastrophic loss.  Shippers buy insurance for cargo on ocean-crossing ships.  Not to get something for free.  But in case the ship sinks.  For if it does the insurance will pay for the cargo that goes down with the ship.  This is insurance.  And this is NOT what health insurance is today.  Which is why health insurance is so expensive (see Is Obamacare Driving Doctors to Refuse Insurance? by Jen Wieczner, Market Watch, posted 11/12/2013 on Yahoo! Finance).

Of the estimated 5,500 concierge practices nationwide, about two-thirds charge less than $135 a month on average, up from 49% three years ago, according to Concierge Medicine Today, a trade publication that also runs a research collective for the industry. Inexpensive practices are driving growth in concierge medicine, which is adding offices at a rate of about 25% a year, says the American Academy of Private Physicians.

Unlike high-end concierge practices, which typically bill insurers for medical services on top of collecting retainer fees, the lower-end outfits usually don’t accept insurance. Instead, they charge patients directly for treatment along with membership, often posting menu-style prices for services and requiring payment up front, which is why it is called “direct primary care.” Eliminating insurance billing cuts 40% of the practices’ overhead expenses, enabling them to keep fees low, doctors say.

If you want to know why health insurance is so expensive this is why.  It covers too much stuff.  And requires layers of bureaucracies that raise costs further.

Concierge medicine could also be called classical medicine.  The way it used to be.  When people paid for regular expected expenses out of pocket.  Just like they paid for their housing.  Their food.  Their clothing.  And anything else they could reasonably expect they would need in life.  Concierge medicine is the direction the American health care system should be moving in.  Not Obamacare.  For Obamacare takes the problem that made health insurance unaffordable in the first place.  And makes it even more unaffordable.

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The Soft Tyranny of National Health Care

Posted by PITHOCRATES - November 14th, 2013

Politics 101

Nazis and Communists acquired Power by Promising their People a Generous Welfare State

Adolf Hitler did not tell the German people that he wanted to wage world war.  Install an oppressive police state.  Or commit genocide.  Joseph Stalin did not tell the Russian people that he wanted to install an oppressive police state.  Starve millions of his people to death.  Or export communist revolution around the world.  Fidel Castro did not tell the Cuban people that he would make life so unbearable for them that they would rather risk dying in the ocean to reach America than staying in Cuba.

These dictators did not say these things.  And if anyone ever asked them of their true intentions they lied.  Especially to their people.  They lied about wanting to brutally oppress their people so they could expand their power.  Instead they told them they were going to take care of the people.  Unlike the evil capitalists.  Hitler’s National Socialism was going to give the people everything they could possibly want.  A job.  Mandatory vacations.  And national health care.  A person would be a fool not to want to give Hitler more power as he was going to make their lives so much better.  Freer.  And more pleasant.  Like a welfare state is supposed to be.

The communist promised that there would be no bourgeoisies exploiting the working man.  Instead everyone would be equal.  A utopia where everyone was each other’s brother.  Or comrade.  There would be no private property.  The people would own everything.  And there would be national health care.  This is the communist utopia Stalin promised his people.  And what Castro promised his people.  Neither meant it.  As no communist dictator meant it.  But by promising the people these things they were able to acquire power.  And the more power they acquired the more the people suffered.  This is why dictators and dictator wannabes lie.  To get the people to give them things the people would never give them if they told the truth.

The Affordable Care Act is a Pathway to the Soft Tyranny of National Health Care

The American left has always wanted the Holy Grail of the socialist state.  National health care.  For it gives them massive power.  As a person’s health is the most important thing in their life.  And once dependent on the state for their health care there is no new tax they won’t approve.  If it’s for their health.  This is why the left wants national health care.  This is why all dictators give their people national health care.  It makes people dependent on government.  And it makes people fear their government.  For if the government doesn’t get what it wants they could withhold health care.  Which could result in their death.

Now the Hitlers, Stalins and the Castros of the world don’t need to withhold health care to kill their people.  Their people feared them because they know their leaders could kill them outright.  The kind of thing that just doesn’t happen in Western democracies.  Which is what makes national health care so attractive.  For it offers a soft tyranny.  For you heard the left’s dire predictions of what would happen if the Republicans shut down the government.  But national health care?  Imagine the fear they could put into the people the next time the Republicans talked about tax cuts. 

The Affordable Care Act (i.e., Obamacare) is a pathway to this soft tyranny.  National health care.  While Canada and the United Kingdom struggle under the weight of their state health care systems the American left thought long and carefully of how to bring that same failed system to the American people.  With the health care industry totaling one-sixth of the U.S. economy that was just too great a tax hike to impose on the American people.  Even Democrats would be reluctant to impose such high taxes on people they needed to vote for them.  So they couldn’t go that route.  At least, not yet.

President Obama breaks the Law Again as he Tells Insurers they can still Sell Policies the People Liked

There is one thing standing in their way.  The private health insurance industry.  For with this there is an alternative to massive new taxes.  Which makes massive new taxes politically unattractive.  So they have to destroy the private health insurance industry first.  By lying to them.  Teasing them with government mandates that will give the health insurers a lucrative windfall of business.  While actually sealing their demise.

If you like your health insurance plan you can keep it.  Period.  That was the big lie.  Because you can’t.  Secretary Sebelius quickly wrote out the grandfather clause in the Affordable Care Act.  Especially for the individual market.  Where a lot of young and healthy people had only catastrophic policies.  Because they are young and healthy.  If the government was going to mandate the insurers pay for everything under the sun from free birth control to senior care they needed these young and healthy to lose their current policies and replace them with more costly policies with higher deductibles.  Basically forcing them to pay for costly health insurance but never using it because of those high deductibles.  Which transferred the cost of senior care to the young and healthy.  Something the young and healthy would never have been onboard with if the Democrats had told the truth.  Which is why the Democrats lied to them.

With the implementation of Obamacare the lies have become real.  They’re touching people’s lives.  And not in a good way.  Millions of individual policy holders are losing their insurance.  And those with employer-provided insurance will start losing theirs next year.  They’d be feeling the pain today but President Obama broke the law and ordered his administration not to enforce the employer mandate of the Affordable Care Act.  Giving the employers a year reprieve until they, too, have to drop their non-compliant health insurance policies.  But being caught in the lie the year before the 2014 midterm elections has caused the president and the Democrats a lot of heartburn.  So much that the president is once again breaking the law.  And telling health insurers that they can still offer the health insurance policies the people liked.  When it is virtually impossible for them to do.  For they spent 3 years preparing for Obamacare and calculating insurance premiums based on the mandates bringing in enough money in premiums to pay for everything under the sun they now must cover. 

If they reinstate the old ‘substandard’ policies the young and healthy will buy these instead of buying the more costly Obamacare policies.  While the old and sick will buy the far more generous Obamacare policies.  Which will be a bargain for them as they will consume far more health care dollars than they pay in premiums.  But without the young and healthy subsidizing these policies the insurers will go bankrupt quickly as their benefits paid will far exceed their premiums collected.  Forcing them to increase their premiums to pay for the higher than expected benefits paid.  Until health insurance is so costly no one is buying it.  Putting them out of business.  So they can’t do this and hope to remain in business.  And, therefore, they will not reinstate the old ‘substandard’ policies.  Which is what the president wants.  For he gets to blame the insurers.  While accelerating the demise of the private health insurance industry.  By bankrupting them as planned.  AND getting the people to hate them even more.  A win-win for the Obama administration.  As they lie that they care about the people they are harming to expand their power.  Just like every other tyrant and tin-pot dictator has done throughout history.

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Obamacare forces Seniors to give up their Doctors and Medicare Advantage

Posted by PITHOCRATES - October 27th, 2013

Week in Review

During the 2012 campaign the Obama campaign attacked Mitt Romney as a guy that didn’t care if people with cancer lost their health insurance.  In fact, the company he co-founded, Bain Capital, was accused of being so heartless that it wanted people to die from cancer. 

An employee of a steel plant lost his job and his health insurance after Bain took over the failing company and later closed the plant.  And because of this his wife died from cancer.  Even though she had lost her health insurance before the plant had closed.  Yet this one cancer death was very effective in demonizing Mitt Romney during the 2012 campaign.  Ironically, President Obama will willingly let many people die from cancer to achieve a political end; national health care (see Elderly patients sick over losing doctors under ObamaCare by Carl Campanile posted 10/25/2013 on the New York Post).

Elderly New Yorkers are in a panic after getting notices that insurance companies are booting their doctors from the Medicare Advantage program as a result of the shifting medical landscape under ObamaCare.

That leaves patients with unenviable choices: keep the same insurance plan and find another doctor, pay out of pocket or look for another plan where their physician is a member…

The [sic] are 2.6 million elderly New Yorkers who receive Medicare, the public heath [sic]-insurance program for the elderly.

But one in three patients — nearly 900,000 — are enrolled in Advantage, Medicare HMOs run by private insurers…

Federal funding to Medicare Advantage is being pared back by billions of dollars in coming years under the national Affordable Care Act. Obama said spending on the program was higher than regular Medicare and unsustainable.

President Obama said if you like your insurance you can keep your insurance.  And if you like your doctor you can keep your doctor.  Unless, of course, he wants to gut Medicare Advantage to pay for Obamacare.

He screws his young supporters by forcing them under penalty of law to buy health insurance to pay for the old and sick.  And now he’s screwing the old and sick by taking away their doctors and health insurance.  If he’s willing to screw two large voting blocks that support him imagine what he’ll do to people he doesn’t like.  Like Republicans, conservatives and Tea Party members.  The same conservative group that got special IRS scrutiny during the 2012 campaign.  An election where the Republican base did not turn out like they did during the 2010 elections.  Now imagine how eager they’ll want to be politically active when in addition to special IRS scrutiny the government can take away their doctor.  And deny them treatment for their health problems.  If you want a glimpse into that world you can look here.

Or you can look here.

It can get a little scary when the state becomes all powerful.  Some people at the Founding wanted a more powerful government.  For they were all students of the Enlightenment.  And believed that only like-minded people would ascend to government.  But the Founding Fathers knew their history.  And knew better.  No person should be trusted with power.  For what Lord Acton wrote in 1887 is as true today as it was throughout history.  “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

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Young Obama Supporters take a Knee to the Crotch under Obamacare

Posted by PITHOCRATES - October 26th, 2013

Week in Review

First it was the government shutdown.  Then it was the disastrous rollout of the Obamacare website.  Both diversions to a bigger tragedy lurking beneath the surface of their rosy predictions of how great Obamacare was going to be.  The truth of how bad Obamacare already is (see Some health insurance gets pricier as Obamacare rolls out by Chad Terhune posted 10/26/2013 on the Los Angeles Times).

Thousands of Californians are discovering what Obamacare will cost them — and many don’t like what they see.

These middle-class consumers are staring at hefty increases on their insurance bills as the overhaul remakes the healthcare market. Their rates are rising in large part to help offset the higher costs of covering sicker, poorer people who have been shut out of the system for years.

Although recent criticism of the healthcare law has focused on website glitches and early enrollment snags, experts say sharp price increases for individual policies have the greatest potential to erode public support for President Obama’s signature legislation.

“This is when the actual sticker shock comes into play for people,” said Gerald Kominski, director of the UCLA Center for Health Policy Research. “There are winners and losers under the Affordable Care Act…”

Pam Kehaly, president of Anthem Blue Cross in California, said she received a recent letter from a young woman complaining about a 50% rate hike related to the healthcare law.

“She said, ‘I was all for Obamacare until I found out I was paying for it,'” Kehaly said.

Nearly 2 million Californians have individual insurance, and several hundred thousand of them are losing their health plans in a matter of weeks…

A number of factors are driving up rates. In a report this year, consultants hired by the state said the influx of sicker patients as a result of guaranteed coverage was the biggest single reason for higher premiums. Bob Cosway, a principal and consulting actuary at Milliman Inc. in San Diego, estimated that the average individual premium in 2014 will rise 27% because of that difference alone.

Individual policies must also cover a higher percentage of overall medical costs and include 10 “essential health benefits,” such as prescription drugs and mental health services. The aim is to fill gaps in coverage and provide consumers more peace of mind. But those expanded benefits have to be paid for with higher premiums…

“It has the effect of benefiting people in their 50s and 60s and shifting costs to people in their 20s and 30s,” said Patrick Johnston, president of the California Assn. of Health Plans. “Benefits are being increased for all, but it’s not government subsidies for all. Some will pay more.”

Do you have a strange feeling of déjà vu?  I do.  That feeling of already experiencing this before.  But where?  Hmmm.  Oh yes.  Now I remember.  This is exactly what the Republican opposition had warned us about since the Democrats first brought forth the Affordable Care Act.  Guess the Republicans were telling the truth all along.  While the Democrats were lying through their teeth. 

Guess we CAN’T keep the insurance we like after all. 

It is ironic that the people who are some of the biggest Obama supporters, the young people, will get hurt the most under the Affordable Care Act.  Just so the people they’re rebelling against, those stuffy uptight old folks from their parents’ generation, benefit the most.  Imagine that.  The thanks they get for being so supportive of the president is to pay the health care bill of their parents’ generation.  All in the name of fairness. 

What the young must feel reminds me of an episode of SNL with Michael Myers’ Sprockets featuring Germany’s most Disturbing Home Videos.  In particular the home video titled Kicked in the Testicles.  Where the pain is so intense the man must vomit.  That must be how the young supporters of President Obama feel now.

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Health Insurance Premiums and Deductibles

Posted by PITHOCRATES - October 21st, 2013

Economics 101

The Requirements of Obamacare force Insurers to Cancel their Less Costly Policies

We buy health insurance to protect our financial assets in case of a catastrophic health problem.  Such as a bad accident requiring costly hospitalization and rehabilitation.  Or a costly disease.  Like cancer or a heart attack.  As bad as those things are the good news is that most people don’t suffer from these health problems.  Which allows us to use insurance to protect our financial assets.

People in an insurance pool pay a small premium to pay for a potential loss.  Such as a catastrophic health problem.  Because not everyone in the pool will suffer from a catastrophic health problem the insurance premium can be much smaller than the cost of medical care for the few that do.  A premium small enough that individuals and families can budget this amount and rest comfortably knowing that a catastrophic health problem won’t cost them their home, their kids’ college fund, their retirement savings, etc.  A system that has worked well.  Until we started using insurance to pay for everything under the sun.  Which has caused insurance premiums to soar.  And Obamacare just doubles down on this trend and turns insurance into welfare.

Premiums before and after Obamacare R1

Obamacare raises the coverage requirements for all insurance policies.  To a ridiculous extent.  For example, couples whose children are grown adults still need pediatric coverage.  Obamacare requires a lot of standard coverage like this that is virtually impossible for some people to use.  Thus greatly raising insurance premiums.  In our example our fictitious insurance pool contains 10,000 individuals and 10,000 families.  To include everything the Obama administration wants to include raises individual premiums 240%.  And family premiums 257%.  Which causes a problem with President Obama’s promise to the American people.  That thing about keeping your current insurance if you like your current insurance.  As insurers have no choice but to cancel their less costly policies.

The Affordable Care Act makes Premiums Unaffordable by Requiring Insurers to Cover More

That promise was, of course, a lie.  Because you can’t buy more for less money.  You just can’t get more for less.  So if the policies cover more they cost more.  If they cover a lot more they cost a lot more.  Well, that creates a bit of a problem for the optics of the Affordable Care Act.  When you make the existing health care system ‘affordable’ you really can’t raise the cost of insurance by over 200%.  Even if you are giving more insurance coverage.  Because if it’s just too expensive people won’t have the money available to pay for it.  So they brought the premiums down from what they would need to be to do what they want them to do.  To something a little more affordable.  Like this.

Premiums before and after Obamacare Adjusted R1

Which brings the increases to 80% for an individual policy.  And 129% for a family policy.  These are still steep price hikes.  But with the more these policies cover and subsidies for those who need them they are an easier sell.  Of course, there is another problem.  Selling these policies at these lower prices won’t bring as much money into the insurance pool.  Which will limit what this pool can pay for.  Leading to rationing.  And longer waiting times.  As health care providers will have to tell patients ‘no’ because the insurer denied the treatment or procedure.  Which sort of defeats the purpose of Obamacare.  Affordable health care for everyone.

So what to do?  To cover everything under the sun requires hefty premiums.  But hefty premiums are not affordable.  There appears to be a paradox here.  And that’s because there is.  Because you can’t get more for less.  But Obamacare has a workaround for this paradox.  At least for the optics of Obamacare.

The Ultimate Goal of Obamacare may be to Fail to Clear the Way for Single-Payer National Health Care

There’s another part of health insurance.  The deductible.  The out-of-pocket portion of our health care expenses.  When insurance was truly insurance we paid for our routine health care expenses out-of-pocket.  We took our kids to the doctor for their vaccinations and the doctor billed us.  Then we paid the bill.  Using our insurance only for those catastrophic health problems that we couldn’t plan for.  Or budget for.  And it’s the deductible that makes Obamacare look more affordable than it is.  By making their deductible far exceed their premium.  So a lot of people pay into the pool but never collect from it.

Claims Individual and Family R1

In this example we look at some claims.  The money the insurance pool pays out.  The above numbers are net of the deductible.  So the annual claim per individual and family is money from the pool paying their bills.  Most people get little.  While the breakout with the fewest members have a catastrophic health care problem.  The total claims for this pool for both individuals and families come to $159,750,000.  While premiums total only $123 million at our adjusted premiums.  That’s a $36,750,000 shortfall.  Well, insurers can’t pay out more than they collect so they need to find another $36 million or so without making this affordable health insurance appear unaffordable.  So where can we find another $36 million?

By raising the deductible, of course.  If we raise the deductible for both individuals and families to $7,500 those claims at $7,500 or less are out-of-pocket.  They don’t come from the insurance pool.  If we add up the claims that become out-of-pocket they total $57,250,000.  More than enough to cover the shortfall.  As well as provide subsidies for the poor.  And all those new government jobs to run Obamacare.  With these higher deductibles AND higher premiums people will be paying far more for their health care than they did before.  Perhaps more than they can afford.  Thus making the Affordable Care Act unaffordable.  Which may be the ultimate goal of Obamacare.  To fail.  So the government can blame greedy insurers who the people will hate even more.  And setting the stage to get the people to acquiesce to a single-payer system.  Or national health care.  Which the left wanted all along.

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Insurance Pools, Premiums and Obamacare

Posted by PITHOCRATES - October 7th, 2013

Economics 101

For Health Insurance to work More People need to Pay Into the Pool than Collect from the Pool

It’s here.  Obamacare.  Which promises to give more people health insurance.  With health insurance policies paying for more than policies do now.  More tests.  More procedures.  Even birth control.  Obamacare will also provide coverage for people with preexisting conditions.  Remove caps on benefits and forbid insurance companies from cancelling insurance coverage.  Forcing insurance companies to give policy holders a lot more benefits.  All while reducing insurance premiums.  Which seems to defy common sense.  Getting more while paying less.  To better understand this let’s look at a sample insurance pool.

Obamacare Impact on Insurance Premiums - Before

Insurance pools are larger than 10 policy holders but this will suffice for this example.  In this example there are 5 individual policy holders with a monthly insurance premium averaging $118.  There are 4 family policies with a monthly insurance premium averaging $400.  And one policy holder with a chronic health condition who pays a premium that people with preexisting conditions pay.  In this example paying $1,200 a month.  It’s that high because this person requires medical care in excess of $30,000 each year.  The average of all premiums is $339.

Now, this is how insurance works.  There is a pool.  People in the pool each pay a small premium compared to the medical costs they MIGHT incur.  The word ‘MIGHT’ is key here.  For insurance to work more people need to pay into the pool than collect from the pool.  This allows the pool to pay the few who have a large unexpected medical expense.  If the insurance company’s actuaries get their premiums right the total of premiums paid into the pool approximately equals the total of expenses paid by the pool.  So premiums in basically equal payments out.  Premiums in can exceed payments out.  But payments out cannot exceed premiums in or else the insurance company will go bankrupt.

Obamacare will Increase the Price of Health Insurance for Men because Insurers can’t Charge more for Women

Obamacare’s individual mandate is an attempt to make sure premiums in exceed payments out.  By forcing more young and healthy people who will not use health insurance pay into the pool.  Young and healthy, see, is the key.  Because that’s money they can spend on other people.  So the young and healthy are the answer to the high cost of the old and sick.  So Obamacare, then, is basically a cost transfer from the old and sick to the young and healthy.  And it will work to lower the cost of health insurance.  If the young and healthy buy health insurance and never use it.

Obamacare Impact on Insurance Premiums - Adding Young and Healthy

If we add 12 young and healthy people to the pool who will not use the insurance the premiums become more affordable.  When there were only 10 people in the pool the total premiums added up to $3,390.  By adding these 12 young and healthy to the pool the total premiums paid in increases to $4,000.  An increase of 26.3%.  So if we discount all premiums by 26.9% we still get a total of $3,390 paid in.  Which is how Obamacare is supposed to lower the cost of health insurance.  By forcing people who won’t use it to buy it.  So they can pay for the people who do use it.  Thus lowering the average premium to $154.09.  And bringing down the premiums for single, family and preexisting conditions to $78.03, $294.78 and $884.35, respectively.  Lowering price across the board.  Making everyone happy.  Except, of course, those forced to buy something they won’t use.  So this part can lower insurance costs.  But it won’t.  Because Obamacare complicates things.

Obamacare Impact on Insurance Premiums - Adding Coverage Requirements

Obamacare will raise premiums because it requires insurers to cover more.  In addition to the things already noted there are some other costly requirements.  Such as the ban on price discrimination based on sex.  Meaning insurers can no longer charge women more for health insurance.  Even though women are more costly to insure.  Primarily due to their reproductive systems.  And other biological differences.  If they can’t charge more for women then they must charge women what they charge men.  And to cover the higher costs of insuring women they must charge men a higher premium.  So when they charge women that premium it will cover birth control, breast exams, pap smears, etc.   In our example we assume singles and families will pay twice as much.  While those paying preexisting conditions premiums will pay 50% more.  Bringing the average premium to $288.08.  While bringing the premiums for single, family and preexisting conditions to $156.06, $589.57 and $1,326.52, respectively.

The Key to Obamacare is to get more Young and Healthy People to buy Insurance that they will Not Use

But premiums will cost even more.  Because insurers cannot deny coverage for people with preexisting conditions.  And they can’t cancel coverage for people if they come down with a very costly chronic health problem.  Basically meaning there is no cap to what an insurer may pay on an individual.  Which makes the insurance equation more difficult to balance.  Making sure that payments out do not exceed premiums in.  Which is more difficult to do when there is no limit to what those payments out can be.  So insurers will have little choice but to charge people for the worst case scenario.  That a large percentage in the pool will have long-term chronic illnesses.  And that some people will be buying insurance for the first time after being diagnosed with a long-term chronic illness.

Obamacare Impact on Insurance Premiums - Pre-Existing Conditions

Insurers will have to make assumptions.  With no limit to their high-end exposure they will have to charge everyone more across the board.  So they will have to take their greatest risk—the exposure to preexisting conditions and long-term chronic illnesses—and factor that into all premiums.  In our example we charged singles 25% of the greatest risk.  And we charged families 50% of the greatest risk (the more people on the policy the greater the risk of long-term chronic illnesses on that policy).  Raising the average premium to $437.  And raising the premiums for single, family and preexisting conditions to $331.63, $663.26 and $1,326.52, respectively.  Or an increase of 181%, 66% and 11%, respectively from before the implementation of Obamacare.

Obamacare seems like a windfall to the insurance companies.  Which is why some of them supported Obamacare.  But the key to Obamacare was to get more young and healthy people to pay into the insurance pool while not using that insurance.  The young and the healthy.  Individuals.  Who don’t have families.  Those who will see a substantial rise in their insurance premiums.  As much as 181%?  Perhaps.  But if the increase is too great for these young and healthy individuals to afford they will not buy health insurance.  And they can’t get a subsidy.  Because it’s the young and healthy—those who are supposed to pay into the insurance pool without using their insurance—who are to provide the money for the subsidies.  So they won’t increase the amount of premiums going into the pool.  While the additional requirements of Obamacare will increase the payments going out of the pool.  Causing the insurance equation to go out of balance.  Putting the private health insurance business out of business.  The ultimate goal of Obamacare.  So the left can get what they wanted all along.  National health care.

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Canada has Record Number of Doctors but Canadians still have Trouble Finding a Doctor

Posted by PITHOCRATES - September 28th, 2013

Week in Review

Obamacare is coming.  The path to single-payer/national health care.  Which we’ll have once Obamacare kills the private health insurance business.  By forcing insurers to cover so much that they have to raise their premiums beyond what people can afford.  As people stop buying insurance they will have to raise their premiums further still due to fewer people in the insurance pool.  Which, of course, will force more people out of the pool as they simply won’t be able to afford insurance anymore.  Eventually the insurance companies will not be able to insure enough people to remain in business.  Leaving only the government.  And then the left has their single-payer/national health care.

So what will that be like?  Well, we probably won’t be able to keep our doctors.  Like President Obama promised us we could.  No.  Socialized medicine does not encourage people to go through the hell of medical school to become a doctor.  So there will be fewer doctors.  Requiring higher caseloads per doctor.  Prompting many to retire.  And then it will be more like it is in Canada (see Canadian doctor total at record high posted 9/26/2013 on CBC News).

Canada had a record 75,142 doctors last year and they earned $328,000 gross on average, according to two new reports…

But the numbers alone don’t present the full picture. It’s important to ask not just how many doctors are needed, but where are they most needed and in what specialties, said Geoff Ballinger, CIHI’s manager of physician information.

Kristin Speth, 35, of Toronto, has been looking for a regular doctor since she moved from Alberta four years ago. She’s had headaches since childhood and has been going to walk-in clinics but is frustrated with the experience.

She’s tried the provincial service to find a doctor but keeps getting notices saying there are no leads.

“It is extremely frustrating,” said Speth.

“It’s just so hard to find someone who will just stay longer than the one year that I need for my physical. They just don’t stick around or you know, you can’t find anyone who is taking new patients.”

Canada’s population is around 35 million.  So there’s about one doctor per every 468 Canadians.  The US population is around 314 million with about 691,000 doctors (in 2010).  That’s about one doctor per every 454 Americans.  So the Canadians have more doctors per capita than they do in the US.  But currently finding a doctor in the United States is not as difficult as it is in Canada.  Well, until Obamacare, that is.  After which Americans will be as exasperated as their Canadian neighbors.  Because they already have what Obamacare will give us.  Single-payer.  And doctor shortages.  Even though they have more doctors per capita than we do.  But apparently their ‘single-payer’ workloads are so heavy they just can’t—or won’t— take on new patients.   Something to look forward to under Obamacare.

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FT188: “When it comes to Obamacare the left is either ignorant or devious.” —Old Pithy

Posted by PITHOCRATES - September 20th, 2013

Fundamental Truth

People buy Insurance to pay a Small Fee to Insure against a Large and Unexpected Financial Loss

What is insurance for?  To help mitigate a large financial loss.  Crossing the ocean can be dangerous.  There are storms.  Wars.  Even pirates.  Shippers can lose very costly cargoes.  Most ships make it to their destination without incident.  Wise people noted this a long time ago.  And they came up with an idea.  Insurance.

Let’s illustrate this with an example.  Let’s say there are 100 ocean crossings in one year.  Each one of these crossings has cargo valued at $10 million each.  Let’s say of those 100 crossings only three sink.  A loss of $30 million.  A loss few can afford.  But there are only three ships that sink.  And at the beginning of the year no one knows whose ships will sink.  It could be anyone.  And everyone of the anyone has a very strong desire not to be the one losing a ship with a $10 million cargo.  So they are willing to pay a small fee to insure against a greater loss.

Here’s a general idea of how it works.  With 100 crossings valued at $10 million each that’s $1 trillion in total cargo.  Of that $1 trillion there’s a very good chance based on past history that $30 million of it will sink to the bottom of the ocean.  So if we divide that catastrophic loss by those 100 crossings that’s an additional $300,000 insurance cost to add to each of the 100 crossings.  So instead of a possible loss of $10 million a shipper will only have a definite ‘loss’ of $300,000.  Which is far less than $10 million.  And something they can plan for.  As they can add it to the price to their customers.

People don’t buy Health Insurance because a Larger Percentage of the Population doesn’t get Cancer or have Bad Car Accidents

Because of insurance none of these shippers will have to suffer a $10 million loss should it be their ship that sinks to the bottom of the ocean.  This is insurance.  Everyone pays a small fee to protect themselves from a great financial loss.  And that fee is far, far smaller than that potential financial loss.  This is the only way great things get done.  Great things require huge outlays of money.  And no one would risk those outlays if they didn’t have a way to mitigate their losses should their ship sink.  Literally.  Or figuratively.

This is insurance.  Paying a small fee to insure against an unexpected and catastrophic financial loss.  Health insurance today doesn’t do this.  It pays for everything.  Including the routine things we know about and can budget for.  Things that are unlikely to bankrupt us.  Office visits.  Flu shots.  Physicals.  Breast exams.  Colonoscopies.  These are all part of living.  We know we will have these expenses.  Just as we know we have to buy groceries and gasoline.  But there is no grocery and gasoline insurance.  And thank God for that.  They’re expensive enough.  Can you imagine their costs if they went up like health insurance?

The reason why health insurance is so expensive is because it is not insurance.  It doesn’t just pay for the unexpected and catastrophic financial losses.  Like incurred from a cancer diagnosis.  Or a car accident.  It pays for everything.  In our shipping example that would be like those shippers paying a $10 million insurance premium to insure a $10 million cargo.  Which would never happen.  Because it would be less costly to lose the occasional cargo.  Because every ship doesn’t sink.  At most three may in one year.  Even if all three ships were yours it would be cheaper to replace $30 million in cargo than paying $1 billion in insurance premiums.  This is why a lot of people choose NOT to buy health insurance.  Because a larger percentage of the population doesn’t get cancer or have bad car accidents.

The Left learned after the 1994 Mid-Term Elections that they had to Lie to get National Health Care

Obamacare just makes everything worse.  Because it forces insurance companies to pay for even more routine and expected medical expenses.  Increasing the cost of health insurance even more.  Which in turn increases the cost of business.  Which provides most health insurance these days as an employee benefit.  With Obamacare mandates to provide more of everything the cost has grown so much that businesses have been dropping their health insurance benefits.  Or cutting back hours to escape the Obamacare mandates.  Making Obamacare a big part of the anemic economy.  For it is a great disincentive to creating jobs.  And hiring people.

Now, anyone with a rudimentary understanding of economics knows this.  If you keep raising the cost of business you will see less economic activity.  The left understands this when it comes to interest rates.  It’s why they want to keep printing money to keep interest rates low.  To lower the cost of borrowing so businesses borrow more to expand their businesses.  So they do understand at least one cost of doing business.  But they seem to be completely ignorant when it comes to taxes and regulatory compliance.  For while they worry about rising interest rates hurting business they don’t have any concern about rising taxes or regulatory compliance costs.  Why?

Because they are truly ignorant?  If so they shouldn’t be anywhere near the economy.  Or they are devious?  And lying through their teeth to deceive the American public to get something they want?  Well, they may be ignorant.  But the smart money is on devious.  For the left has always wanted national health care.  But the people don’t.  When President Clinton tried it he lost the House in the 1994 midterm election.  And the left learned a lesson.  To get national health care they had to lie to the people.  Which is what Obamacare is.  A big lie.  It will do nothing President Obama said it would do.  All it will do is destroy the private health insurance industry by placing regulatory compliance costs on businesses and the private health insurance industry that will simply put the private health insurance business out of business.  As we are seeing.  Leaving uninsured people that the government must step in to insure.  And once they do they’ve got their national health care.  While giving the American people the middle finger.  “Say no to our national health care?” they’ll say.  “Well, [deleted expletive] you.”  They will say this figuratively, of course, with their actions.  For they will never let go of the lie that Obamacare is about lowering costs and insuring the uninsured.  And not the truth that it is nothing but a means to advance their agenda.

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