The abomination of “Affordable” Healthcare
Last month, you saw members of Congress fall all over each other with competing sound bites about how to cut federal spending. But the real action happened behind the scenes. Away from the TV cameras.
In a shady backroom deal, government bureaucrats (the ones who really “run” the government) reversed a decision to cut Medicare and Medicaid costs by 2.3 percent. Instead, they increased reimbursements to insurance companies by 3.3 percent. This gave the insurance industry a net benefit of 5.6 percent.
In one fell swoop, this ensured that taxpayers would bear a bigger burden than ever. And the insurance industry got an even sweeter deal than it had before.
Let’s be honest, the health insurance industry was not hurting for profits before Obamacare. But with the new Affordable Care Act, the industry has struck gold.
The new law requires the health insurance industry to spend at least 80 percent of its premium income on actually providing health services to those who pay. So if you pay $100 in premiums each month, you are supposed to get $80 in services back. This limits the insurance companies’ potential profit to “just” 20 percent.
But a 20 percent profit is unheard of most industries in today’s economy.
In fact, many industries operate on razor-thin margins with just 1 or 2 percent in profits. Just take the restaurant industry for example.
Plus, think of it this way…
The healthcare industry already makes up about 20 percent of the U.S. economy. And Obamacare guarantees 20 percent profit margins for the entire industry. That’s like putting 4 percent of the entire U.S. economy directly into the pockets of health insurance companies. This money stays in the pockets of corporate fat cats and insurance bureaucrats. And does not go to patients who need care or to the health practitioners who provide it. Meanwhile, the government keeps cutting reimbursements to doctors.
The President and his cohorts had tried to claim that the Affordable Care Act will reverse the exponential growth in health-care costs. Or at least slow it down.
But this will never happen. No matter what the President says, you can expect to pay higher premiums.
The U.S. Society of Actuaries (SOA) released a very interesting study last month. The study predicts that individual insurance claims will increase in cost by an average of one-third over the next four years. (The SOA is a professional organization of number crunchers that specialize in making complex financial predictions.)
The SOA also found that three-quarters of all states will see costs skyrocket by 20 percent or more. This will happen, in part, because the new law gives insurance coverage to previously uninsured high-risk patients. As a result, we will see higher rates of disease, complications, and expensive treatments among these patients who previously did not have insurance.
And we, the healthy, will bear this burden…
A recent New York Times article quoted Robert G. Cosway, an actuary at a large firm called Milliman. In the article, Cosway said, “health insurance will become relatively less expensive for people with chronic conditions and relatively more expensive for healthier people.” That sounds like some pretty perverse incentives for following a healthy lifestyle. (But you can bet that smokers will continue to pay more for all types of insurance.)
In addition, many employers plan to drop group coverage once the new law goes into full effect. So even if you have good insurance from your company now, you may not have it by next year.
Obamacare will also hurt the U.S. job market.
Take the medical device 2.3 percent “excise” tax, for example. This may not sound like much, but it’s already devastated the medical device job sector.
Stryker, a company that makes medical devices and supplies, cut 5 percent of it workers because of the new tax. The job cuts will save the company $100 million annually. And the company will need the extra cash to pay for the excise tax.
Medtronic, largest medical device maker in the world, announced plans to hire up to 1,500 people last year. But the majority of new hires will happen abroad. In places like China.
Unfortunately, job cutting and outsourcing aren’t just limited to the medical device industry. Many large corporations can’t afford to give health insurance to all of their employees. Unlike insurance companies, they don’t get 20 percent in guaranteed profits. Many will have to cut back their workers from full-time to part-time status. This will allow them to escape the new health insurance requirement.
President Obama said he would fund the Affordable Care Act by taxing the highest income individuals. (This didn’t really happen.) He also said the government would pay less in reimbursements to private health insurers. (As we now know, this didn’t happen at all. Instead, the bureaucrats increased reimbursements.)
The wealthy will sidestep Obamacare altogether. They will continue to flock to “concierge”-style medical insurance in the years to come. They will happily pay $20,000 or more each year to get all the medical attention they need or want. And they’ll probably get it from a great doctor who knows the only way he or she can get ahead as a hard-working, knowledgeable professional is to get out of the health insurance business and government control altogether.
In reality, the cost of financing Obamacare will fall squarely on the middle class. Yet President Obama claimed–and still claims–he is trying to protect the middle class!
Sources:
- http://www.fool.com/investing/general/2013/04/09/5-ways-obamacare-will-fail.aspx
- http://www.nytimes.com/2013/03/29/health/health-care-law-will-increase-some-premiums-study-says.html?_r=2&