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Sometimes, things are just so obvious you wonder why few people don't comment on it. I decided to, simply because I think lots of thinking folks will start agreeing.
The "holy grail" of Obamacare is the "no denial for existing conditions" rule. Face it, the federal government is broke, and there's not enough taxing to make it "not broke". Raising rates kills off so much commerce that doing so will result in less revenue, not more.
So, how's an enterprising politician who wants to promise some really big giveaways do it? They find a really big pot of money... and spend it. But the government doesn't have any pots of money. They have all been spent - long ago. And, besides, those nasty TEA Party people keep electing people who block massive new taxes. So, how do you do it? You spend someone else's money.
Who has money? By law, insurers do. They MUST maintain capital and reinsurance adequate to pay claims, so they have a BIG pot of money. And how does a politician spend the insurance company's money? By changing the rules. (we saw how this worked... The mortgage agencies and bubble - textbook case of how it fails) By removing the two things that keep risk to a measurable level, the government is now attempting to spend the insurer's capital for short-term benefit. When the rules about what must be spent and the limits removed, insurers, BY LAW, must raise premiums.
Looky there. Politicians have a ready-made pig in a poke. Spend their money by mandate, and then demonize them for raising rates. Of course, the insurers had to get something out of the deal... so we have the mandate to BUY. Except, of course, it's not politically palatable to simply confiscate people's money and buy the premium for them. The media stories of a giant wave of foreclosures, evictions, bankruptcies, etc would result in a backlash too large to control easily.
And that's the Achilles' Heel. There's simply not enough money to subsidize everyone... People will pay the fine, rather than buy. It's a matter of economic necessity. Few people have several hundred dollars a month they can budget differently. But those with severe needs? They WILL buy. Those who develop severe issues... will buy.
Now, this means that the rates, which are based on the expectation that a relatively uniform cross-section of the nation will be paying... won't be true. The people who won't be paying will be the younger, the moderately affluent who aren't old... the typical "not heavy user". So this will tip the scales to higher levels of loss as a percentage, and rates will go up again. And this will exacerbate the problem.
Like a listing ship with the contents sliding to the low side, the problem simply compounds itself. This is an off-balance ship from the start, and it's only going to get worse. Fewer higher income people will buy, and more subsidized will, straining the public budget - compounded by exponentially growing premiums.
Worse, the system is designed with massive new bureaucracy, which will inhibit any chance of being responsive.
My prediction? If it isn't ended completely, we'll shift to a dual medical system. In short order there will be a cash-only medical system for about 1/4 of the population, that has excellent resources, good prices, no waits, and awesome care, and a steady influx of patients and providers. And the "other" will be total chaos, overburdened with too many people, too few providers, and a frantic pace of constant "changes" made to try to keep it from collapsing completely.
Liberals will claim that the reason this happened is that the people in it, both consumer and provider, are immoral and will seek penalties and controls to prevent free choice and commerce.
If it isn't ended completely, we'll shift to a dual medical system. In short order there will be a cash-only medical system for about 1/4 of the population, that has excellent resources, good prices, no waits, and awesome care, and a steady influx of patients and providers. And the "other" will be total chaos, overburdened with too many people, too few providers, and a frantic pace of constant "changes" made to try to keep it from collapsing completely.
How is the federal government broke? Taxes can be raised to increase revenue and spending can be reduced to decrease expenses. We weren't 'broke' after initiating unfunded wars in years past, but suddenly we are now? People and foreign governments continue to purchase the defecits we run. We are in no different of a financial position as we were 10 or more years ago.
How is the federal government broke? Taxes can be raised to increase revenue and spending can be reduced to decrease expenses. We weren't 'broke' after initiating unfunded wars in years past, but suddenly we are now? People and foreign governments continue to purchase the defecits we run. We are in no different of a financial position as we were 10 or more years ago.
How can you be on a political forum... and be that ignorant of the most basic knowledge?
How can you be on a political forum... and be that ignorant of the most basic knowledge?
What knowledge would that be? Do explain.
-The fact that the interest payments on our debt do not equal our tax revenue?
-The fact that we've had deficits for multiple years?
-The fact that we've been involved in wars for multiple years?
-The fact that foreign governments and the public have been underwriting our debt for multiple years?
Are our continuing deficits a concern, definitely; is the sky falling, no.
Go back and read. You seem to have no comprehension of economics. To say that we're "no different" than a decade (and more) ago, in terms of public sector finances, now, is to be... shall we say... "lacking any relevant knowledge". Compare the percentage of federal budget devoted to "debt service" - that means paying interest on the debt that now exists - and it has multiplied several times. And at the rate we're racking up more debt, it will be all but impossible to continue shortly. It could be said we're now borrowing to pay the interest on what we have already borrowed.
Further, raising tax rates does not increase revenue after a certain point. The various people who analyze these things have somewhat different claims as to the precise point... but all agree that once you get into the high 20's, in terms of consuming the nation's GDP, tax rate increases result in LESS revenue, not more. Taking our state, local, and federal governments into account means we have well exceeded the 20's and are now above that. That's why the federal government is borrowing from 1/3 to 1/2 of it's spending every year, the last few years. And why states are staggering under high unemployment and intractable budget issues (most).
When the rules about what must be spent and the limits removed, insurers, BY LAW, must raise premiums.
I don't think health insurers keep the kind of funds around that will sustain them very long without rate increases to match the imbalance. It will end in a premium death spiral, and given the way it's starting, they could be bleeding cash very quickly in 2014.
I don't think health insurers keep the kind of funds around that will sustain them very long without rate increases to match the imbalance. It will end in a premium death spiral, and given the way it's starting, they could be bleeding cash very quickly in 2014.
And the "death spiral" is the constant round of healthy premium payers dropping their policies.
BTW, those who study insurance have said that "pools" do not function, and never will. The reason being, is that when a pool is formed, it is the most attractive it will ever be. The people in it age, and only those with HIGHER risk join it, thereby worsening the pool itself, which will never attract lower risk people into it.
So, every "pool" eventually exterminates itself through attrition of the healthy - who leave for better rates elsewhere.
The federal effort is to turn insurers into "pools"... and they will self exterminate. It is absolutely inevitable.
-The fact that the interest payments on our debt do not equal our tax revenue?
-The fact that we've had deficits for multiple years?
-The fact that we've been involved in wars for multiple years?
-The fact that foreign governments and the public have been underwriting our debt for multiple years?
Are our continuing deficits a concern, definitely; is the sky falling, no.
I hope you are the only person in America that thinks like that. Guess it doesn't bother you that the debt is growing at a rapid rate. You are like my very young children that used to tell me to write a check or charge it without realizing that the money will have to be paid some day.
Last edited by NCN; 10-25-2013 at 10:59 PM..
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