Tuesday, March 23, 2010

Some Random Obamacare Comments

1. By 2019 there are reports that there will still be 21M uninsured. The new coverage to 32 million does not cover everybody since, depending on the estimate, there are more than 32M uninsured people.

2. CBO did a static analysis that yielded the "cost savings" and "no budget deficit" with this bill. There are a number of assumptions unique specifically to that bill. Put your thinking cap on though. Do you really believe you can lay a $500B tax on rich people and have no effect on investment, and thus, job prospects? CBO doesn't measure the alternative use of the $500B tax transfer from private to public sector.

3. One of my favorites is the description I saw of how children can stay on their parents plan until age 26. So 26 is now deemed a child? If my kids are still loafing on my insurance plan that long, there's a chance I've done something wrong. In any event, except for cases where young adults have handicaps, this is ridiculous.

4. The only possibly good points were the coverage for pre-existing conditions. But it could have been handled in a more efficient manner through establishing high-risk pools for these people to subsidize them or work out some sort of tax scheme. Otherwise, it's very likely insurance premiums will go up for small businesses.

5. The evil insurance companies will have to pass on the costs of these mandates. It will become less affordable and more costly as a direct result of this legislation than it would have been compared to the status quo. No doubt Obama will come out angry and blame insurance around January, after the elections, when they jack their premiums to their business customers because of the mandates.

6. Congress will not allow a tax in 2018 they couldn't stomach in 2010. This will undercut the savings that yielded a magically budget neutral effect on the overall budget deficit.

7. Holding hospitals accountable for "results" incentivizes doctors to take patients most likely to have a good outcome so they get "results". Too bad if you're old, fat, perceived as lazy by the doc...

8. Primary care docs will make references to specialists so long as the threat of a lawsuit is there. With this bill, it will likely incentivize even more pointless CYA references.

9. The idea that a central point of data administered by the center for medicare and medicaid (CMMS) will lead to great effectiveness will only be useful if the doctors use them. Medical technology has long been available. If the docs, who the hospitals revolve around, don't use it (as they haven't) it seems wishful thinking to believe they will do so now to such a degree will get major benefits. Although this is potentially ripe for benefits. But me of lil' faith!

10. Expecting CMMS to run efficiently is wishful thinking. Expecting an Agency like this to play a key role in cost containment is a joke. Who knows maybe all the GS-12s and 13s and the contractors they bring in will manage a miracle. Maybe they'll be uber-motivated to squeeze costs out. I'm sure they'll work round the clock rather than clocking out at 3:30. I'm sure.

11. This puts a ridiculous, unsustainable cost burden on the states. States share Medicare costs with the Feds. Guess how the Feds are paying for this? By cutting funding reimbursement to docs and to states who won't be able to say no. If I were the Governor of a state I would be horrified about what this is going to do to my budget over the next decade. They're already facing massive budget cuts. You ain't seen nothing yet.

12. This will also crush private health insurance in the long run. As we march towards single payer, that was the real intent anyway wasn't it?

Obama promised to take a scalpel to budget cuts in his campaign. He could have done that by dealing with the specific problems such as the problem with people with pre-existing conditions. Instead, he took out his sledgehammer and gave us all an uppercut.

Monday, March 22, 2010

No Market Crash Yet

I came in this morning and the stock market is actually up after they passed Obamacare last night. I was expecting a massive selloff. Healthcare stocks are up!

The past 18 months have thrown a monkey wrench in my former belief that I've held all my life about the stock market being basically rational. I always knew there was an emotional twist. But the path the stock market has followed is almost purely emotional and irrational. I believe success in investing requires the ability to forecast the likely moods of the herd. Thinking that the stock market will not grow by 50% in the same year that millions more people are unemployed, would be rational. Despite the layoffs and general malaise the Dow keeps going up. Why? There is really little connection between main street and wall street. You may be able to make money from that if you can reasonably understand the likely mentality of herds. Maybe tracking sentiment somehow. I haven't figured it out yet.

The Dow Jones is at about 10,800 today. It keeps going up. I had thought the Obamacare debacle would trigger a selloff. Maybe it will happen later in the week but not yet. The Dow is greatly over-valued. I still expect the Dow to plummet to about 8500 by the end of this year. We'll see what happens.

Sunday, March 21, 2010

Obamacare Details

What is particularly interesting is how the numbers work. At a cost of $940B over 10 years, the Congress is assuming it will cost $29,375 for each one of the $32M uninsured people. This is about $2,937 per year as a median assuming the $940B takes account of normal inflation. Given what my current insurance policy costs, this seems low to me. Between your portion and your employer portion, who really pays $3K annually for healthcare? It is probably more like $10K but even if it is only $5K instead, it ups the cost by several hundred billion dollars.

The other features are the "savings" of raiding Medicare, which is like robbing Peter to pay Paul because Medicare is still paid for by the federal government, even if it is not an "on-budget" item. Medicare is intended to take the 2.9% payroll tax and pay it out to beneficiaries, as a sort of pay-as-you go fund depending on the type of enrollment. But Medicare is projected to go insolvent by around 2017 http://www.commonwealthfund.org/Content/Newsletters/Washington-Health-Policy-in-Review/2009/May/May-18-2009/Trustees-Report-Projects-2017-Insolvency-Of-Medicare-Hospital-Fund.aspx . Since the 2.9% is not really adequate, I wonder what they're really going to with it? Cutting $500B probably makes it go insolvent quicker and/or gives doctors an even greater incentive to refuse these patients since they will be paid even less for serving them. Since it was an Alice in Wonderland entitlement to begin with, maybe that's ok.

There are so many other bizarre things that this bill does that it will take several more posts in another day. The thing that's kind of funny to me is if this is so urgent and such a great moral crusade, why wait until 2014? It seems a lot of folks looking for free guvmint healthcare tomorrow are going to be disappointed.

From a CBS news article:

I. Cost:
$940 billion over ten years.

II. Deficit:
Would reduce the deficit by $143 billion over the first ten years. That is an updated CBO estimate. Their first preliminary estimate said it would reduce the deficit by $130 billion over ten years. Would reduce the deficit by $1.2 billion dollars in the second ten years.

III. Coverage:
Would expand coverage to 32 million Americans who are currently uninsured.

IV. Health Insurance Exchanges:

  • The uninsured and self-employed would be able to purchase insurance through state-based exchanges with subsidies available to individuals and families with income between the 133 percent and 400 percent of poverty level.
  • Separate exchanges would be created for small businesses to purchase coverage -- effective 2014.
  • Funding available to states to establish exchanges within one year of enactment and until January 1, 2015.

V. Subsidies:

  • Individuals and families who make between 100 percent - 400 percent of the Federal Poverty Level (FPL) and want to purchase their own health insurance on an exchange are eligible for subsidies. They cannot be eligible for Medicare, Medicaid and cannot be covered by an employer. Eligible buyers receive premium credits and there is a cap for how much they have to contribute to their premiums on a sliding scale.
    Federal Poverty Level for family of four is $22,050

VI. Paying for the Plan:

  • Medicare Payroll tax on investment income -- Starting in 2012, the Medicare Payroll Tax will be expanded to include unearned income. That will be a 3.8 percent tax on investment income for families making more than $250,000 per year ($200,000 for individuals).
  • Excise Tax -- Beginning in 2018, insurance companies will pay a 40 percent excise tax on so-called "Cadillac" high-end insurance plans worth over $27,500 for families ($10,200 for individuals). Dental and vision plans are exempt and will not be counted in the total cost of a family's plan.
  • Tanning Tax -- 10 percent excise tax on indoor tanning services.

VII. Medicare:

  • Closes the Medicare prescription drug "donut hole" by 2020. Seniors who hit the donut hole by 2010 will receive a $250 rebate.
  • Beginning in 2011, seniors in the gap will receive a 50 percent discount on brand name drugs. The bill also includes $500 billion in Medicare cuts over the next decade.

VIII. Medicaid:

  • Expands Medicaid to include 133 percent of federal poverty level which is $29,327 for a family of four.
  • Requires states to expand Medicaid to include childless adults starting in 2014.
    Federal Government pays 100 percent of costs for covering newly eligible individuals through 2016.
  • Illegal immigrants are not eligible for Medicaid.

IX. Insurance Reforms:

  • Six months after enactment, insurance companies could no longer denying children coverage based on a preexisting condition.
  • Starting in 2014, insurance companies cannot deny coverage to anyone with preexisting conditions.
  • Insurance companies must allow children to stay on their parent's insurance plans through age 26.

X. Abortion:

  • The bill segregates private insurance premium funds from taxpayer funds. Individuals would have to pay for abortion coverage by making two separate payments, private funds would have to be kept in a separate account from federal and taxpayer funds.
  • No health care plan would be required to offer abortion coverage. States could pass legislation choosing to opt out of offering abortion coverage through the exchange.
    **Separately, anti-abortion Democrats worked out language with the White House on an executive order that would state that no federal funds can be used to pay for abortions except in the case of rape, incest or health of the mother.

XI. Individual Mandate:

  • In 2014, everyone must purchase health insurance or face a $695 annual fine. There are some exceptions for low-income people.

XII. Employer Mandate:

  • Technically, there is no employer mandate. Employers with more than 50 employees must provide health insurance or pay a fine of $2000 per worker each year if any worker receives federal subsidies to purchase health insurance. Fines applied to entire number of employees minus some allowances.

XIII. Immigration:

  • Illegal immigrants will not be allowed to buy health insurance in the exchanges -- even if they pay completely with their own money.

Saturday, March 20, 2010

The Implications of Obamacare

It looks like Obamacare is going to pass in the U.S. House tomorrow.

The long term implications, to me, range from complete disaster to little effect. In the complete disaster scenario America is on a course to look like Western Europe for the next generation. This is great if you enjoy structural unemployment of 12%, lack of opportunities for entrepreneurship, and having to deal with bureaucrats to get a sign off on basic medical procedures.

On the other hand, maybe this will mean nothing because business people in America won't care in the long term about how heavily they're taxed. In the short term they'll of course be angry and declare Obama the embodiment of evil. Ultimately, the rich are the people who will pay the bills under our new bizzaro world politics universe. You will have a whole lot of people who will essentially get free healthcare now. That's great for them. Who wants to pay for something when you don't have to? This assumes the rich will mindlessly continue to make a whole lot of money for the Feds to take. I know enough rich people to know that a lot of them care little for anything other than making money. Practically, you probably can tax people up to 60% to 75%. What else is an entrepreneurial guy going to do? Write poetry? If the rich sheep keep working and investing, all will be good.

So maybe Obamacare will be a great thing. Maybe all the people who are adamently opposed to it will be among the first to get in line to collect the benefits. Last I checked, nobody is refusing to cash Social Security checks or receive their Medicare benefits. It all hinges on the rich. Keep on working you rich people. Keep my gifts coming.

Monday, March 8, 2010

So, Where We At?

It's been over 2 months since my last entry. And nothing has really changed. 3 days ago, we learned that another 36K jobs were lost in February. We're still said to be in "recovery". The healthcare bill is still not passed. And our president is still putting up rinky dink "job creation" proposals every day saying we need to get the economy started again. Yep. I heard that one before. It's March 2010. Is it still Bush's fault? Next month will be the month we start gaining jobs. Yep. And if we lost more jobs in March, we'll get some the month after that.

Meanwhile the country's deficit is ballooning. It's slated to expand by almost $10 Trillion through 2020 thanks to Obama's latest budget proposal. That assumes we grow signficantly during that timeframe. For a labor force of about 150M people, I'm sure that's nothing to be too concerned about. It'll probably work itself out. That $10T divided by 150M equals almost $67K per worker. I'm sure future workers can afford to pay the extra $67K after 2020 to make it up since we'll be so prosperous thanks to Obama's new hope and change utopia.