Wednesday, March 24, 2010

Obama Health Care Bill

Oh no, not another health care bill blog entry! Well, the difference is that nobody reads my blog. But anyway, it is a bad idea for many reasons. The most important reason is that health care costs are guaranteed to go up.

First insurance costs themselves:
1. This bill increases the demand for health insurance as 31 million people are about to be added to the system. It doesn't take an economist to tell you that more demand for a good or service increases its price.
2. Many of these are uninsurables. People with AIDS, incurable cancers, and previous conditions whose costs are astronomical to insure about to be pooled in. Unless these insurance companies are allowed to charge $20,000 a year to cover the cost of insuring these people, the rest of us are going to be picking up the slack.
3. State mandated car insurance. This was sold on the notion that it would spread risk and lower costs for everybody. The diversification and spreading of risk can only go so far. Did rates drop after passing state laws requiring policies? No. And why should they? There are a handful of health insurance companies out there so competition is limited. And once policies are required, they've got you now, so where is the incentive to lower rates?
4. Nothing in the bill says anything about keeping costs down for consumers. Back to (2), if they charge high risk patients astronomical prices which they can't afford, then we are back to square one.

Health-care costs:

1. Since part of the plan is to have subsidies for people earning less than $88k (uh, that's like 90% of America, who's paying for this again?) to offset the cost of insurance, the true cost of the insurance will be masked which will create more demand at doctor's offices (e.g. the extra $x can cover the cost of the co-pay). Those near the bottom rung, who will get all or most of their entire health care expenses covered will surely use the the system a lot more than they had in the past. Every little cough, sniffle or stomach pain will surely send them to the ER. Taxes and subsidies distort economic incentives.
2. More demand on doctors means more waiting and higher costs.

Additional costs:

1. Taxes are increased on anyone who has a job (higher medicare/medicade taxes) or owns a stock/bond portfolio (increase on capital gains and dividends). We know who's being targeted here, eh?
2. It adds a trillion dollars to the federal debt over 10 years. USA is beginning to look like the American consumer around 2006, wouldn't you say?
3. This bill does nothing to lower underlying healthcare costs for Americans. Healthcare is currently expensive and is going to become even more expensive once this bill takes effect. If Obama wanted to make sweeping health care improvements, increasing the cost of it is way off mark.

Since it's the large insurers who strongly lobbied for this bill, it's obvious who stands to benefit from its passager yesterday. Aetna's stock has surged about 10 percent over the last few trading days.

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