Tuesday, March 30, 2010

Health Insurance Costs

Well, it looks like I called it. The CEO of Aetna is interviewed in the April 5, issue of BusinessWeek. The answer to the question, "Will insurance premiums go up?" Is a direct yes. He cites that some of the reasons leading to higher premiums will be an increase in taxes, but I have a hunch that is just a small part. It may be politically difficult to blame the very sick people who previously couldn't get coverage and will now be subsidized by the rest of payers.

Think about it: according to aids.org, nearly 900,000 people live in the US with HIV. Since it costs nearly $25,000 a year in health case costs for a person with this disease a simple calculation shows that these insurers will now be paying an additional $22,500,000,000 per year. And that is just one disease.

And what about those who live irresponsibly with unhealthy lifestyles: smoking, obese, excessive fast-food eaters, excessive drinking, drugs, the list goes on. Don't make the responsible people pay for other people's poor life choices.

Sunday, March 28, 2010

Term Limits for Congressmen (and women!)

Should term limits be imposed on people in office? This is an interesting issue that I haven't fully decided upon, but I slightly lean towards the affirmative. I think that too many politicians continue to be voted in as a result of name recognition to the voting public. Unless these politicians really mess up and the media picks it up, the status quo remains. Perhaps voters think that because the representative (or senator) is currently in office, it's less risk to take a chance on a new guy. It's easier (and lazier) than having to research a competing politician's viewpoints.
But maybe that is what we need? We want voters to know what politicians are up to and what issues are important to them. Perhaps this would force voters to pay attention.

And if the politician is well liked, he or she can still run for another area of office. For instance, a Representative of the House can run as a Senator or Governor, etc.
Voters always pay lip-service to wanting change, but they continually vote in the same candidates. So why not upset the status quo and put some new representatives in place after the old ones have had their chance?

Flat Tax Article

An interesting read on Forbes.com by a distinguished professor at Chicago about a flat tax system. He discusses a lot of the same issues that I have mentioned in my blog.

Saturday, March 27, 2010

Book recommendation

Since I am an economist, I review a lot of books related to the subject. I recently reviewed one that is written so clearly and intuitively and it really breaks down a huge portion of the field into an, admittedly large, book. The book, Basic Economics by Sowell is a must read to understand basic principles in the economy. There are no political slants or underlying messages being conveyed - just economic science. Every politician should be required to read this book before being admitted to office.

The major parts are broken down into these divisions, with a few chapters in each part:
Part I. Prices and Markets
Part II. Industry and Commerce
Part III. Work and Pay
Part IV. Time and Risk
Part V. The National Economy
Part VI. The International Economy
Part VII. Special Economic Issues

U.S. = Socialism?

So, every year, the IRS reports income and outlays with the categories for the previous year at the bottom of tax booklets. So, for 2008 (2009 tax document), the government paid out more than 50% of its income to social entitlement programs! Is this not the definition of a socialist government? Get ready for more!


Seven good questions about health care reform.

Wednesday, March 24, 2010

Obama Health Care Bill 2

Another problem that I have will this bill and all congressional bills in general is that they contain 500 different earmarks for special interests or have misleading titles. Make a bill that focuses on the title of it and the title alone!!

Before being called the "Patient Protection and Affordable Care Act," it's title was "To amend the Internal Revenue Code of 1986 to modify the first-time homebuyers credit in the case of members of the Armed Forces and certain other Federal employees, and for other purposes." And other purposes, huh? Gee, that's not misleading. You'd think the title would reflect the central theme of the bill!

In addition to amending the Internal Revenue Code of 1986 to modify the first-time homebuyers credit in the case of members of the Armed Forces and certain other Federal employees, and supposedly protecting patients and somehow providing affordable care, the Wall Street Journal also reports that it also 'overhauls the federal student-loan program... [by] shifting lending responsibilities to the federal government' (more socialism and big government), gives $655k for the Institute for Irritable Bowel Syndrome (I'm not making this up!) and has 5,223 additional earmarks. Remember, this bill is over 2000 pages long (as if a congressman is actually going to read something of that size!).

Earmark-laden legislation should be an end to the old way of doing business, and the beginning of a new era of responsibility and accountability. But don't quote me, quote Obama, since that is what he said about a year ago.

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.