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Commentary

What are the consequences of insuring customers with pre-existing conditions?

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Walter Williams

Investors Business Daily

What would happen if Obama succeeds in passing a law to force insurance companies to accept customers with pre-existing conditions at the same price as everyone else who doesn’t have pre-existing conditions?

Read this IBD editorial by George Mason University economist Walter Williams. (my second favorite economist)

Excerpt:

Sen. John Rockefeller, D-W.Va., chairman of the Senate Finance Subcommittee on Health Care, and Rep. Joe Courtney, D-Conn., a member of the House Education and Labor Committee, have introduced the Pre-existing Condition Patient Protection Act, which would eliminate pre-existing condition exclusions in all insurance markets. That’s an Obama administration priority.

I wonder whether President Obama and his congressional supporters would go a step further and protect not just patients, but everyone against pre-existing condition exclusions by insurance companies. Let’s look at the benefits of such a law.

A person might save quite a bit of money on fire insurance. He could wait until his home is ablaze and then walk into Nationwide and say, “Sell me a fire insurance policy so I can have my house repaired.” The Nationwide salesman says, “That’s lunacy!” But the person replies, “Congress says you cannot deny me insurance because of a pre-existing condition.”

This mandate against insurance company discrimination would not only apply to home insurance, but auto insurance and life insurance as well. Instead of a wife wasting money on costly life insurance premiums, she could spend that money on jewelry, cosmetics and massages and then wait until her husband kicked the bucket to buy life insurance on him.

Insurance companies don’t stay in business and prosper by being stupid. If Congress were to enact a law eliminating pre-existing condition exclusions, what might be expected?

Yeah, that’s why Walter Williams is awesome. And you must read the rest to see how it would apply to medical insurance. Everything sounds good to those who do not ask the most important question in economics: “and then what happens?” And that question cannot be answered with “then I feel good about myself and people like me because I care about the poor”. That question needs to be asked for the forgotten man. The nameless man who is hog-tied into supplying the wealth that gets redistributed by demagogues desperately seeking adulation from the covetous masses.

The problem is that people don’t understand how insurance works. If you have to pay guaranteed claims from people with pre-existing conditions, then the premiums of all those people who don’t have pre-existing conditions will be increased to pay for those claims. Think. Beyond. Stage. One.

The Cato Institute

Consider this podcast from the libertarian Cato Institute, which explains a little more from the point of view of the medical insurance company.

The MP3 file is here.

Here a summary of what happens after stage one, to the forgotten man. Medical care costs money to produce. Forcing medical insurance companies to sell care for a pre-existing condition far below the actual cost of providing it will force insurers to drop coverage for those pre-existing conditions. (Or they may drop the doctors who treat those conditions from their network). That is worse for the people with pre-existing conditions. And this is how economic ignorance hurts the very people that the secular leftist do-gooders are trying to help.

Believe me when I tell you that this happens all the time with leftist economic policies. It’s the law of unintended consequences. They think they are helping their preferred victims, they feel better about themselves, but they actually hurt the very people they are trying to help. And by “help” I mean they steal someone else’s money/product/liberty and transfer it to their preferred victims in order to buy votes.

National Review

Now, take a look at this article that ECM sent me from National Review, which talks about Obama’s promise that you will be able to keep the medical coverage you have. Is Obama telling the truth? Can pigs really fly just by sheer belief and pixie dust?

Excerpt:

Obamacare would forbid insurers from basing rates on the individual health of their customers in any community. It also would force issuers to cover people who refuse to buy insurance until they get sick. These and Obamacare’s other complexities and contradictions would make insurance pricier, as would a $149.1 billion, 40 percent excise tax on high-value “Cadillac plans.” Thus, some employers would save money by paying fines after de-insuring employees. Workers who cherish their health plans then would find themselves dumped into the government-run Health Insurance Exchange.

“Some smaller employers would be inclined to terminate their existing coverage,” explained a December 10 memorandum by Medicare’s chief actuary, Richard S. Foster. He added: “The per-worker penalties assessed on non-participating employers are very low compared to prevailing health insurance costs. As a result, the penalties would not be a significant deterrent to dropping or foregoing coverage. We estimate such actions would collectively reduce the number of people with employer-sponsored health coverage by about 17 million.”

Even more ominously, Obamacare would require employers to provide federally approved coverage. Obama considers “meaningful” plans those at least as generous as the Federal Employees Health Benefits Program.

“Obama’s definition of ‘meaningful’ coverage could eliminate the health plans that now cover as many as half of the 159 million Americans with employer-sponsored insurance, plus more than half of the roughly 18 million Americans in the individual market,” says Cato Institute policy analyst Michael Cannon. “This could compel close to 90 million Americans to switch to more comprehensive health plans with higher premiums, whether they value the added coverage or not.”

It’s not just elective abortions that we’re going to be paying for whether we want them or not. In some countries with socialized health care you can pay for breast enlargements (UK), sex changes (Canada), in vitro fertilization (Canada), etc. And these elective surgeries take up money from the other vital services. Obama can make it such that every plan has to offer those coverages.

So, those who don’t use such elective services end up encouraging them, even if they have moral objections to those services. When the government subsidizes something, more people choose it. Won’t Planned Parenthood be pleased with all that new revenue? I’m sure they’ll think of something to do with all that money. Maybe a nice political donation?

News

Chavez marches Venezuela down the road to serfdom at gunpoint

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CNN reports that Chavez has devalued the Venezuelan bolivar.

In the wake of his decision to devalue Venezuela’s currency, President Hugo Chavez on Sunday said he would put the military on the streets to ensure that business owners don’t raise prices.

Speaking on his weekly television program, “Alo Presidente,” Chavez railed against merchants who re-price their items in reaction to Friday’s announcement that the Venezuelan bolivar currency, which had been fixed at 2.15 to the U.S. dollar since 2005, was devalued to 4.3 to the dollar. For food and medicine, Chavez announced a second fixed exchange rate for these “necessity” goods at 2.6 bolivares to the dollar.

“I want the national guard in the streets, with the people, to fight speculation,” Chavez said, calling re-pricing a form of robbery.

[…]He encouraged people to publicly denounce businesses where prices increase and threatened to expropriate businesses that do.

The government would transfer ownership of such businesses to the workers, Chavez said.

Yes, attacking and nationalizing businesses with the Venezuelan army will do a lot to create jobs and increase competition among product and service providers. Surely lower prices and increased quality will result from this consumer-friendly policy. And foreign investors will be rushing to Venezuela to invest so they can take 700 million Euro losses in a split second.

Investors Business Daily explains the result of devaluing a currency.

For starters, it’s a tax. “The government has decided to recognize the massive accumulated inflation in the country and is trying to increase the purchasing power of the (dwindling) dollars it has . .. (by selling) dollars to the private sector at a higher price,” explained Hausmann. “In the short run, this is like a tax on the sale of dollars.”

[…]”The poor have no way to protect themselves from devaluation,” said Johns Hopkins University’s Steve Hanke, who has advised previous Venezuelan leaders about currency. “Their only means are awkward and inefficient.”

Meanwhile, the “tax” on dollars “means a transfer of resources out of the private economy to the government’s coffers,” said Hausmann. “As a consequence, the rest of society will have less income.”

Teachers and doctors, already in short supply among the poor, will likely be hard hit, along with small businesses.

Worse, inflation’s likely to surge, another burden for the poor.

Inflation was already on its way to 30% before Friday’s devaluation. Food, which makes up 80% of what the poor buy, has been hit with a 20% immediate increase in price. This effectively lifts inflation for the poor to a devastating 50%.

Costs for other goods, such as car tires, will rise by 100%. A banker in Caracas tells IBD this will push average inflation to 60% — adding to accumulated inflation of 600% over the past decade, a brutal tax on poor Venezuelans.

The very complexity of the new currency scheme will be a nightmare for the poor, says Hanke.

“More regulations will lead to repression,” he said, citing the weakening freedom to spend money. More controls mean shortages.

I think that people who elect communists like Chavez need to be more careful about listening to honeyed words about the benefits of wealth redistribution. When you attack the rich, they stop hiring workers. And if you attack them enough, they leave your country. Communism causes poverty and famine. It always has, and always will. If you want to know where it ends, look at Cuba and North Korea. That’s where Venezuela is headed.

More on this story from Fausta here and here. ECM sent an article about scheduled blackouts here.

Is Obama any different from Chavez on economic policy?

Here they are shaking hands:

Is there such a thing as a secret handshake for communist dictators? Just asking. Not saying that Chavez or Obama are communist dictators. Just wondering if communist dictators have a secret handshake. A communist dictator handshake conducted by communist dictators to congratulate themselves on how well their ignorance of economics “helps” the poor to starve to death.

Here is the currency graph of the US dollar versus the Canadian dollar. A decline of about 20% in 12 months. (The current exchange rate is 1.03301)

How many Canadian dollars is 1 US dollar worth?
January     1.22664 CAD   (21 days average)
February    1.24684 CAD   (20 days average)
March       1.26275 CAD   (22 days average)
April       1.22697 CAD   (21 days average)
May         1.15311 CAD   (21 days average)
June        1.12458 CAD   (22 days average)
July        1.12350 CAD   (23 days average)
August      1.08796 CAD   (21 days average)
September   1.08182 CAD   (22 days average)
October     1.05427 CAD   (22 days average)
November    1.05978 CAD   (21 days average)
December    1.05366 CAD   (22 days average)

I wonder which one knows the least about economics. Chavez? Obama? Or my keyboard? Hmmmmn.

Here is my previous story about energy rationing in Venezuela.

News

Obamacare and the simulus bill will increase your taxes

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First, Americans for Tax Reform. (H/T Health Care BS)

Excerpt:

Individual Mandate Tax: Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax of up to $1,485.

Hike in Medicare Payroll Tax: For self-employed idividuals, the Medicare tax jumps from 2.9% to 3.8%. For businesses with employees, a firm’s “matching” Medicare tax jumps from 1.45% to 2.35% of employee salaries.

Employer Mandate Tax: If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $750 for all full-time employees.

Excise Tax on Comprehensive Health Insurance Plans: Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family).

Medicine Cabinet Tax: No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

HSA Withdrawal Tax Hike: Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent.

Excise Tax on Charitable Hospitals: $50,000 per hospital if they fail to meet new “community health assessment needs,” “financial assistance,” and “billing and collection” rules set by HHS.

Tax on Innovator Drug Companies: $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

Tax on Medical Device Manufacturers: $2 billion annual tax on the industry imposed relative to shares of sales made that year.

Tax on Health Insurers: $10 billion annual tax on the industry imposed relative to health insurance premiums collected that year.

But that’s not all – there’s a marriage penalty in there, too. (H/T Jennifer Roback Morse at RuthBlog)

Excerpt:

“The Senate bill stipulates that two unmarried people, 52 years of age, with private insurance and a combined income of $60,000, $30,000 each, will pay a combined cost of $2,483 for medical insurance,” Quist wrote.  “Should they marry, however, they will pay a combined cost of $11,666 for insurance — a penalty of $9,183 for getting married.”

The numbers are based on the government’s definition of “poverty level.”  Those above poverty level will pay higher premiums, and the excess would be redistributed to those in lower income levels.

[…]John Helmberger, CEO of the Minnesota Family Council and Institute, said the middle class will once again take the hit financially.

“This hidden marriage penalty,” he said, “hits hardest the very people that are most suffering from the pathologies resulting from the decline of marriage in our culture.”

I recommend that all my readers click through to Dr. J’s post and read her comments about Christian liberals who vote for government-run health care, thinking that it doesn’t destroy marriage and family. The left is dominated by anti-family types who think men and women are interchangeable, and that means the traditional family is in their crosshairs.

The stimulus bill will cause tax increases

Second, Hans Bader writes about the stimulus bill taxes for the Competitive Enterprise Institute. (H/T ECM)

Excerpt:

The federal government’s $800 billion stimulus package, which failed to cut unemployment, is now forcing states and local governments to raise taxes. The Wall Street Journal describes how “stimulus dollars came with strings attached that are now causing enormous budget headaches . . . At the behest of the public employee unions, Congress imposed ‘maintenance of effort’ spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs,” such as ”welfare, if the state took even a dollar of stimulus cash,” even if a state’s tax revenue has since fallen due to the recession.  “So when states should be reducing” their spending ”to match. . . lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes.”

[…]The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

Don’t elect a radical leftist during a recession.