Monday, March 22, 2010

Yes, that IS a wolf in wolf's clothing: Part I

Well, they did it.

With the passing of the Health Care bill, America may have finally, officially passed into the twilight of our prosperity. If allowed to stand, this new piece of social welfare will be the coup de grace of a century-long effort to pacify and emasculate the American spirit of liberty and the value of the individual.

The economic reality of this bill, combined with the other entitlement bombs ticking away has provided the moment for us to face the prospects of our national mortality. The picture is grim, but you must fully and deeply understand it if America is to have a chance at surviving this altruistic onslaught. And yes, I have read the official 69-page summary of the bill which is probably 68 more pages than the average Congressman ;)

To be clear, this analysis is conducted on an economic premise, not a moral one. And why should it be otherwise? After all, the Democrats pushed this through precisely on the argument that this bill is an economic positive for America and will help cut the deficit. Well, the truth is not so kind.

Health insurance economics: Today
Insurance premiums have been rising steadily for decades for many reasons: general inflation, advanced care options which did not exist in years prior, fraud and waste, etc. But perhaps the largest single driver of rising costs is Medicare and Medicaid. These government programs do not reimburse physicians for the full cost of care provided. The formulas are too complex to go into here but roughly speaking, Medicaid reimburses providers 20-25 percent less than does the private sector. Naturally, doctors and hospitals must pass this loss onto patients with private insurance, thereby raising the cost of care. This is pretty simple economics. The metrics for Medicare are even worse.

The truth of the matter is that your health insurance rates have been climbing so astronomically NOT because of insurance companies themselves. Profit-wise, this industry is among the least profitable of any industry: about 3-4% profit margins. It's because the government has seen fit to underpay doctors and hospitals for the care of about 80 million people. The difference is made up through higher costs for those with private insurance. That my friends, is the simple and inescapable truth of the matter. Yet, the insurance industry makes the perfect bogeyman for the politicians. They certainly could not stand up and shame the doctors of America for having the nerve to pass these costs up the financial food chain. This would create the atmosphere for exposing the true thieves in the process: the government and its recipient class enablers. No, the insurance industry served its purpose just fine. By not fighting today's battle, they bought themselves perhaps another decade until their Saigon. And you can bet that all of today's insurance executives and big shareholders will be long gone by then.

Health insurance economics: Tomorrow
Here is the unavoidable truth. Are you ready? If you have private insurance today, your premiums will continue to rise and faster than before - the promises of D.C. Democrats notwithstanding. The policies unleashed by the newly passed health care bill virtually demand it. Consider the larger points (my comments in red):

1. Six months after enactment, insurance companies could no longer denying children coverage based on a preexisting condition. This is a nearly instant increase in the number of "expensive customers" in your insurance pool. This adds costs.

2. Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions. Clever of them to wait until after Obama faces re-election as this will pose a significant increase in "expensive patients" to be added to the health insurance rolls. What do you think your favorite Chinese buffet would cost if a team of Sumo wrestlers began eating there every night?

3. Insurance companies must allow children to stay on their parent's insurance plans until their 26th birthday. Again, adding further costs. While people this age are typically very profitable customers for the insurance company, a 25-year old still on his parent's family plan is not nearly so. Additional members are always less profitable than individual policies.

4. Expands Medicaid to include 133 percent of federal poverty level which is $29,327 for a family of four. This will mean higher costs coming from the care providers as the previously mentioned problem with short-paying for services will be amplified. This too will be reflected in your health insurance premium.

5. Requires states to expand Medicaid to include childless adults starting in 2014. Ditto.

6. Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016. Remember, the government's version of "paying all of the costs" means about 80%. Again, that 20% balance is to be passed onto you and I who have our own health insurance.

What the future will hold
There are many more provisions that will add to the cumulative effect of those above. There is only one result possible: provider costs and in turn, insurance costs will go up, up and away. For Democrats, this is the perfect, planned result of this bill. As for any liberals who right now are shouting: " yeah, but what about the CBO numbers and the fact that this bill will lower the deficit!?" Well, you've been fed and have swallowed a lie of epic proportions. If you can not acknowledge the simple truths of economic behavior combined with basics of supply and demand explained above, you are not being intellectually honest. If that was not enough, I present you with this. At what point do you cast political loyalty aside in favor of basic, human decency and truth? Yes, I realize you consider health care a right and that by achieving this, you are doing a "good". But if the means to achieve this include outright deception, what then of your moral high ground? Morality of course is another topic for another day which I will address. But strictly economically speaking, the depth and scope of this deception is not only staggering... it is fatal.

For it will create such economic havoc that enough people will clamor for the government's help once again. Yes, it sounds counterintuitive given that it will be the government responsible for the mess in the first place. But such has been the history of much of our collectivist policies. But you must remember two things.

One, they have already shown a complete disregard for public opinion this time around. Now that they've succeeded, the next time will only be easier.

Two, the narrative will be the same: the evil insurance industry is to blame! But this time, healthcare providers themselves will be added to the crosshairs. Why? Because between now and then, let's call it 5-10 years, the average quality of care in America will decline. It must, based on the most basic laws of supply and demand. There are not enough doctors (supply) to go around in many parts of the country today yet we are adding millions of new patients (demand). Add to this the declining incentive to enter the field of medicine because of cost controls that result in lower wages and you will either get fewer doctors OR less qualified doctors to make up the difference. Those fortunate enough to maintain their own private insurance plans will likely continue to have the very best doctors (an increasing number of which are no longer accepting new Medicare or Medicaid patients). These doctors will be vilified as the rich and the greedy. And we know what happens to those labeled as such in modern-day America.

However, there will be many more patients on government-subsidized programs of one name or another who will have to stand in line to be waited on by second-tier doctors and in second-tier facilities. Either way, this new scapegoat will soon enter the barn along with the insurance devils in tow.

Systemically, the writing is on the wall: as costs go up for private insurance plans (which is unavoidable) and individuals and employers get priced out, the government picks these people up into their "Exchange". This dumps more burden onto the private-insurance system in the process (due to the government short-paying for services and the reduction in the size of the private insurance pool) until such time that private insurance ceases to become a business worth pursuing or the government simply nationalizes it.

This bill is not the first step toward a single-payer, Western European model of health care... it is the final step!


  1. I agree...this is a sad day in American history.
    Forrest Phelps-Cook

  2. Excellent! Thank you for voicing this so clearly and concisely! Thank you!!

  3. Very insightful, well presented. If only more people would look at the true economics.

  4. and today in my email I receive an email from John McCain, he in one sentence tells us about how bad this legislation is...and in the next breath asks for MORE contributions! Why the hell would I want to keep giving money to those who clearly can not seem to do the jobs they were placed there to do? I'm so totally sick of politicians! Better save our money kids, I bet this is just round one...they got a taste of our blood and I'm sure they'll be back for more!

  5. I'm sorry, but whenever I read these blogs against any kind of healthcare reform, I never actually see any of you address the very real problem of how people like me, who are not in the poverty level, who work for a small company that does not provide health insurance and can not afford hundreds of dollars, if not thousands, a month for health insurance for a family. I pay taxes too. I have a serious illness at the moment, with NO way to pay for treatment, so I will most likely die.
    Where is the help for me? I work, so I get nothing? I have to become homeless and put my child in foster care so I can live? IN THE UNITED STATES?
    I have always considered myself a Republican, until I became ill. The Republicans have had a very long time to get this under control, and did nothing until Obama was in office, and then all they did was fight to the bitter end to defeat him, with no real plan to fix things.
    The United States will soon become a third world county, for more reasons than this bill.
    God help us all.

  6. Perhaps it's time we separated from the all powerful Obama administration!

  7. I too was near poverty level. But I managed to raise two children making between 5.11 and 8.87 an hour during a 17 year period. They never took free lunches, we did not live in Gov housing, they did not get food stamps, and we did not go without healthcare. It was a matter of doing without some of the things most will not. No cigarettes, no drinking, eating out only where children ate free and that was few and far between. I babysit on the weekends and after my regular job. My children's entertainment was playing outside and on weekends we would spend time together at the park. That was a great life. It took hard work and ambition. But I did it and I have something to be proud of. PEOPLE , TAKE PRIDE IN WHAT YOU CAN DO FOR YOURSELF, NOT WHAT UNWILLING FELLOW COUNTRYMAN CAN DO FOR YOU!!!! I AM PO'ED THAT I HAVE WORKED SO HARD FINALLY ROSE ABOVE, NOW HAVE TO HELP THOSE WHO AREN'T WILLING TO WORK HARD LIKE I DID.

  8. I agree with you (Anonymous posting from 3:37 PM), but I think that is why conservatives/Republicans have a reputation of not being compassionate. A lot of liberals feel they are on morally higher ground than we are. One of the ways we can attract a larger following is by showing how conservative principals can and will help everyone achieve his or her goals, without allowing for those truly in need to die while waiting for help.

    How do we do this? First, explain Federalism. The Federal government has specific jobs, and health care is not one of them. This does not mean that health care cannot be provided at the local or state levels to those who truly need. But, it must only be a temporary fix.

    Second, encourage philanthropy. Incentives for charity are important, as is a strengthening of religious/moral values in our youth. Teach them to give back to the community. Teach those in need to turn to community religious organizations for help instead of the government. And then, once back on their feet, hopefully they will give back to those who helped them.
    The American Red Cross provides a great example of how Americans can easily give to those in great need around the world.
    Why can't we start an organization (tax-exempt charity) that provides health insurance to those in great need who do not qualify for Medicaid? Is anyone telling Oprah she can't pay out of her own pocket for the poor in her neighborhood to receive health care?

  9. WTH??? A complete disregard for public opinion! I am neither Democrat nor Republican. Just sick of the corruption in Washington these days. I agree with WTL here.

  10. Well Said Wayne

  11. I'd like to know what they plan to do with all the illegals. Apparently health care will not be provided them. So do they continue the same program of using the ER as their primary care physician. Further stressing our already strapped hospital resources. The dumbocrates have just told the rest of the world come to the US. Here u get free health care if your a citizen or not.

  12. Your assumptions of how this will affect the current insurance companies seems to be pretty well thought out.

    Those costs are about to go up even more though since the next agenda item is "immigration reform". We will see another massive amnesty program being pushed. It won't be a change in legal procedure in any significant way but will simply "deem" currently illegal immigrants to be "permanent residents" thus adding huge numbers to the social entitlement programs.

  13. Our hearts go out to individuals who have worked hard, WERE RESPONSIBLE with their earnings and (through no fault of their own) come down with an illness and don't have insurance to pay for the costs of treatment.

    But what we need to realize is that this is the exception...not the rule. You can not build a plan to handle the exception.

    Of course, the majority of the cost of this plan will be for people who were born on welfare, raised on welfare and reproduced more welfare kids.

    However, not all on welfare....some are just irresponsible individuals who made good money and made the CHOICE not to spend it on health insurance.

    People act like there is not health insurance out there that they can buy today. They can.

    Over 10+ million individuals that currently do not have insurance, made more than $75,000 a year. Sorry, you can afford insurance if you make that kind of money.

    My tax dollars should not be spent to support the lazy on welfare or the irresponsible who choose to spend their money on "other things".