©
2013 Rick Adamson
By
Rick Adamson 9.26.13
(see 11.3.13 update at the end)
Several fallacies with the law:
Failure to address the costs of practicing medicine in an
effort to reduce costs
I think the whole approach was wrong. If the idea was to reduce the cost of healthcare,
as well as provide more people with insurance, it would seem logical that we
study and determine the costs involved in providing health care services. Then work on methods to reduce those costs. But,
no, Congress simply relied on “capitation” or reducing the amount that
healthcare providers receive for services.
One big cost healthcare provider’s face is insurance. The cost of insurance is driven by the threat
of malpractice lawsuits. Tort reform
should have been addressed and limits should have been placed on the amount
that could be recovered from such a lawsuit. In Texas
there is a limit of $250,000.00.
In addition, the threat of lawsuits result in untold
additional (cover my ass) tests and prescriptions which could be eliminated by
such a limitation on lawsuits.
See
this Wall Street Journal article Searching
for the True Cost of Health Care.
The notion that 30-40 million people have no access to
health care and that preexisting conditions and the like were not covered
People in Texas
who have no insurance have access to County hospitals and emergency rooms. The
cost of this care is paid for by the property taxes of property owners in the
County. This benefit resembles that of many Countries who have socialized
medicine. So “insurance” is not always
the answer.
In addition, there are many free or low cost clinics in most
neighborhoods.
Therefore, no one in Texas
is denied healthcare. Some just do not
have insurance.
I wonder if, when the Obama Care becomes effective and all
of the uninsured get insurance, our property taxes will be reduced
accordingly? I submit they will not.
The notion that “insurance” is the answer and imposing
minimum acceptable policy types on insurers
The requirement that insurers offer only minimum acceptable policy types will
fundamentally change the business model of health insurers. All of the mandated coverage requirements
have been available for many years. The
insurance companies simply priced the policies based on the risk associated
with each benefit provided for in each policy.
Just like automobile insurance (all insurance for that matter) higher
risk policy holders have to pay more (e.g., 18 year old males pay more for
automobile insurance than 40 year old males) because they use the policy
benefits more. Similarly, females are charged more for health insurance than
males. Why? Because they use the policy benefits more. Pricing was based on risk! That business model has been abandoned under
The Affordable Care Act (the Act).
Under the Act enrolled individuals will pay the same based on age (rates
will be higher for older people) for a few standardized policies. This, therefore, raises the cost of low risk
participants and lowers the cost for high risk participants. This is just another example of
redistribution of wealth and craters the insurance business model for health insurance
providers. So much for competition and the free market system!
This is not to imply the insurance companies will be hurt
financially because they will not. They
will figure out how to make money especially since they will have many more
customers as a result of the Act’s mandate that everyone purchase a policy
(e.g., millions of young people who currently choose not to purchase health
insurance will be forced to buy a policy). These new policies will be highly
profitable because they are of low risk (minimum use of benefits). Some of these profits can be used to offset
the high risk policy costs.
Under the old business model, if a preexisting condition
caused a person’s policy to be too costly or if the insurer simply decided it
could not provide coverage, the State (at least in Texas) provided an insurance
pool from which coverage could be obtained.
Therefore, no one in Texas
is denied healthcare. Some just do not
have insurance.
Placing the burden of providing health insurance on
employers
Prior to WWII few employers provided health insurance for
their employees. As a result of a shortage
of workers some employers began providing insurance as a benefit to entice workers
to come to work for them. Over the years
it has became the norm for employer to provide health insurance for their
employees.
Until now, there was never a law requiring health insurance
be provided just as there is no law requiring vacation days, holidays, or, for
that matter, that any employer hire anyone.
There are laws requiring minimum wages, non- discrimination,
a safe work environment, among others.
The effect of laws imposed on employers is very simple. Let’s
take the minimum wage as an example. If a product or service cannot be produced
profitably by workers earning the minimum wage that product or service simply
will not be produced in this Country.
The job goes overseas or ceased to exist altogether. The same holds true in places where unions
require a certain wage. If the product
or service cannot be produced profitably by workers earning the union wage that
product or service simply will not be produced in this Country.
This holds true in the private enterprise system but NOT in
the public system. Public unions can
demand wages and benefits that are approved by politicians (without any profit
motive) who soon leave office leaving the public to try to deal with their
mistakes. These mistakes have resulted
in insolvency and even bankruptcy for many municipalities and States.
For this reason, public unions should be illegal, but that’s
another story.
The bottom line is, if the Act results in a product or
service not being produced profitably by workers earning their wages, plus the
cost of the Act, that product or service simply will not be produced in this
Country.
The Act requires that large employers provide health
insurance with certain minimum provisions to their employees. The increased
cost to the employer results if the employer had previously provided no
insurance or if the provided coverage has to be upgraded to meet the mandatory
minimum.
Obviously, employers will take what ever measures they can
to reduce the cost of the Act before they go out of business such as limiting
working hours, eliminating coverage for dependents, eliminating coverage
altogether and hiring no more than 50 employees, among other things.
For example, CNN Money recently reported “Several employers
-- including UPS (UPS, Fortune
500), Delta (DAL, Fortune
500) and University of Virginia -- have recently cited Obamacare as a
source of increased costs. UPS and University
of Virginia will no longer provide
benefits for spouses with coverage options elsewhere. Trader Joe's
and Home Depot (HD, Fortune
500) are shifting part-time workers to the Obamacare exchanges.”
If Congress and the President think that the Act is not
hurting the job situation and the economy then they do not understand the free
enterprise system. Unfortunately, I
think that is the case. Just look at Mr.
Obama’s background and also the resume of the Act’s author Ms. Pelosi. Neither have experience in the free
enterprise system.
The notion that the Act will result in 30-40 million uninsured
becoming insured
It is true that many
of the currently uninsured will have access to the new exchanges. However, it I is not known how many will sign
up. It has been suggested that a large
portion of that population do not want insurance and will not avail themselves
of this service.
Many of those who do
sign up will be eligible for Government subsidies to offset some of the
costs. This is another form of welfare
which will have to be paid for by taxpayers.
Wealth redistribution?
Perhaps more
importantly, employers who are faced with higher costs (do to the mandatory
minimum style policies that must be offered) will make changes in their benefit
programs resulting in fewer people being eligible for insurance at the company
and this will offset any new people obtaining insurance through the exchanges.
Summary
The responsibility for health insurance should be that of
the individual or if a Country so chooses, the Government, NOT the
employer. Imposing regulations and
mandates on employers hurts jobs and the economy which is the life blood of our
free enterprise system. Unfortunately,
there are those (progressives) who seem to think the Government is more
important. The Government produces
nothing and will fail without a vibrant free enterprise system. There are certain things that just cannot (or
should not) be regulated in a free enterprise system.
The result of the Act will be more HMO type plans with very
few healthcare providers. Your doctor
will not join the HMOs due to low reimbursement rates. The providers will be of foreign decent
(American born providers will either retire, became specialists, join cash only
networks or go to work for a hospital)
and will practice in strip centers (compared to professional buildings) to
reduce costs. The few providers will be
overwhelmed with patients so you will have long wait times.
Overall, quality of care will decrease.
Update 11.3.13
More thoughts about Obama care
The health insurance market is divided into two segments:
the group insurance market and the individual market.
The group market relates to the employer sponsored segment.
The individual market relates to individuals who are not covered by an employer
e.g., a one man/woman shop which sells insurance, provides accounting or legal services,
etc.
Historically, the purchaser of health insurance could tailor
their policy to fit their needs and pocketbook.
For example, the purchaser could decide on the amount of life time
coverage, deductibles, whether on not preventive care would be free or have a deductible
or co-pay, whether the policy would cover maternity expenses, whether the
policy would cover drug abuse treatment expenses, whether the policy would
cover contraceptives, whether the policy would cover abortions, among other
options.
Once all or the options were decided upon the insurance
company would quote a price.
Now, under the Act, there is a requirement that all policies
contain mandatory minimum provisions.
Individuals and groups now have no choice. Even a 60 year old individual has to pay for
contraceptive, maternity and abortion coverage which makes no sense. What about a small group of six or seven
who’s owner and all employees are over 50?
Why should that company have to pay for contraceptive, maternity,
abortion and drug coverage if they do not want it?
If your policy provided coverage that does not meet the
mandatory minimum then additional provisions have to be added in order to
comply with the Act. Essentially, Obama is saying that you may need better coverage (in order to comply with the mandatory minimum provisions) and that it will cost less. I don't know about you but I have found the argument that you can get more for less to be disingenuous. It simply is not true, with the possible exception of housing. You can get a bigger house for less in the suburbs and the further out you go the bigger the house but you increase you commute time. So, there is a cost for that also. They just do not understand economics.
These added provisions cost money which results in higher premiums. This is why many employers are complaining
about the increase in insurance expense (some on the increased costs are being
passed on to the employee resulting in employees complaining). This why Unions
are complaining about the increase in insurance expenses.
This is why many individuals are being dropped by their
insurance companies (some insurance companies have decided not to offer the
mandatory minimum plan to individuals because after adding the additional
provisions the policy would be too expensive).
The Act has decimated the individual market (about 25 million people) and
it is estimated that up to 14 million individuals may lose their coverage. The reason is that many of the individual
policies contained bare bones coverage which suited the needs of the
buyers. In order to increase the
benefits provisions to a level which would meet the mandatory minimums was
considered impractical by the providers so they are being dropped. New policies are being developed and offered
to these individuals but after factoring in the added (unwanted) benefits the
prices are double or triple what they were before.
The same is happening in the group market but to a lesser
degree because most group policies already contained more benefits so them
fewer increases in benefit provisions are needed.
President Obama promised that if you liked your current plan
it would be “grandfathered” and you could keep your plan. However, when regulations were written in the
summer of 2010 the “grandfathering” was effectively eliminated. Obama’s “guarantees” have proven to be untrue.
The whole idea was to help the 30 to 40 million uninsured
obtain insurance. It has been estimated
that up to 10 million of the uninsured will qualify for Medicaid as a result of
changes in the eligibility requirements under the Act. I wonder why the government did not simply
provide an exchange or other method for these remaining folks to obtain
insurance at little or no cost while leaving most other Americans alone.
What gives Obama and the Democrats the right to disrupt the
entire system (1/6 of the entire U.S economy) and lives of millions of citizens
lives (an estimated 93 million) when it would have been simpler to address the
problem of the uninsured directly while not involving the vast majority of
people who were happy with their coverage.
It’s called progressive (ism) which means that the political class and
academics know better what the peons need than the peons do. Progressives want to control your life
because you are considered incapable of doing so. Now, it is one thing for a government to
prohibit companies and employers from harming its citizens but quite another to
take over the citizens individual right to make their own decisions.
On top of all of the above the Government has delegated to the IRS the responsibility of enforcing the Act's provisions. What this means, among other things, is that the Act will apply only to law abiding taxpayers. People who do not file tax returns will be beyond the reach of the IRS just as it is now. For example, lower income folks, people who deal only in cash like yard maintenance people, maids and the like, but also drug dealers and prostitutes, among others. It is the typical Federal Government approach, go after the easy target which is taxpayers who file tax returns.
The Supreme Court has said that the Act is constitutional as
it relates to the Government requiring citizens to purchase health insurance by
calling it a tax. (Obama promised not to
raise taxes on anyone making under 250,000, another untruth). It would not be constitutional under any
other provision of the constitution e.g., the Commerce clause. Issues yet to be decided include whether the
government can impose the Act upon the 39 States that have elected not to set
up exchanges and whether the Act is enforceable against those who object to
certain provisions based on religious grounds, among others. Read more…
As a side, I wonder what would prohibit a foreign entity
from selling health insurance to U.S.
citizens. There are such companies
already in existence. It would seem
that the purchase of insurance would be a private transaction beyond the reach
of the Federal government. I predict
that this will happen with the results being more outsourcing to foreign
Countries.
In the end, nothing will be accomplished except increasing
the premiums on the 85 percent (93 million people) of the currently insured
(who are happy with their current coverage), increasing the burden to the
government (more Medicaid obligations and welfare subsidies for the lower
income people who sign up) and totally upsetting the current system. Just look
at the numbers:
30 million currently uninsured read
more…
-9 million put on Medicare read
more…
-7 million enrolling in Obamacare read more…
+16 million who will lose their coverage or not sign up for
coverage
=30 million still uninsured per the CBO read more…
