Government Continues to Lower Expectations for Pre-paid Health Care Exchanges

The federal government pre-paid medical care exchanges are supposed to be working better today.  They are supposed to handle up to 50,000 people on-line at one time now.  Since the federal exchanges are claiming you can sign-up for plans beginning on 1 January 2014 until 23 December, this means that counting today, there are 23 days to sign-up.  So far in two months, it is thought that about 150,000 have chosen plans.  At 50,000 sign-ups per day henceforth a grand upper limit total of another 1,150,000 sign-ups may occur before time has run out.  Some people will not sign-up for anything until they have been on-line over the course of several days examining the offerings and then looking into the provider networks elsewhere.  The enthusiastically socialist state of Maryland, which operates its own exchange, has a much earlier sign-up deadline of 10 December and a very confusing website.

It is not at all clear that even if one signs up by 23 December on the federally operated exchanges, that one will have an actual plan by 1 January 2014.  This is because you do not have a plan until you have paid the company offering the mandated ObamaCare pre-paid medical care plans.  The federal exchanges do not yet have a means to enable such payments.  Given their track record to-date and the methods they are using to manage the exchanges still, it seems unlikely they will have a working mechanism for making payments to the plan providers before Christmas.  So, it seems very certain that fewer than 1,300,000 plans will actually exist on 1 January 2015.

Recall that ObamaCare was passed so that 47 million Americans without health insurance would have pre-paid medical care once it was implemented.  Nothing was said about many millions of people who had insurance losing that insurance.  As it happens, to-date more than 5.55 million insurance plans have been cancelled and the federal government wants to declare success for ObamaCare if 1.3 million new plans are issued under it.  But, this is a net loss of 4.25 million insurance plans, while the supposed 47 million Americans uninsured before will all remain uninsured.  Yes, of course some of them will get ObamaCare insurance and more than 4.25 million of the newly cancelled plans will have no replacement.  The few state-run exchanges which work better than the federal government exchanges will manage to sign-up a few more of the 4.25 million lost plans, but will not sign up most of them either.

Meanwhile, throughout 2015, tens of millions more health insurance plans offered by small businesses and big businesses will be cancelled or replaced by more expensive plans with much increased employee contributions.

On 1 January 2014, many more Americans will have no health insurance and no pre-paid ObamaCare medical care than the original 47 million claimed uninsured who were the very justification for the wrenching changes to our medical care system including the loss of our doctors and hospitals, especially the better ones, the cost of much increased premiums for most of us, the increase in deductibles for most of us, the need to travel much greater distances to the health care providers for many of us, long waits to see doctors or nurse and pharmacist substitutes, a decrease in medical innovation, a decrease in covered medical procedures, more trips to medical facilities to get through a given medical procedure, decreased medical and financial privacy and security, and the many aggravations of having to choose and learn new health networks and how to do their increased paperwork.

Government Suppression of Productivity in the Health Industry

Consider the non-farm business productivity growth history according to the BLS:

In comparison, the 1 - 7 December 2012 issue of the Economist in an article called Fighting fit - Start-ups in health care, claims that the health care industry accounted for 18% of the American GDP in 2010 and for 20 years has had a negative labor productivity of -0.6%!  Why is this one huge sector of the American economy performing so miserably?  The answer is mostly or entirely because this industry is one of the most heavily regulated industries in America and because half of all medical bills are paid by government.

Let us have some fun with numbers.  The average labor productivity of the total non-farm private sector grew at an average rate of

[10(2.1%) + 7(2.5%) + 4(1.8%)]/21 = 2.2%

over the last 21 years.  In the last 20 years, 18% of this part of the economy a rate of -0.6% in labor productivity growth.  Without this single depression of our standard of living by government, the rest of the private sector labor productivity growth rate, r, over the last twenty years can be calculated from the equation:

2.2% = (0.82)r + (0.18)(-0.6%), so r = 2.8%.

The difference between an economy with a labor productivity rate growing at 2.2% compared to one growing at 2.8% is very significant over a generation.  It used to be that a generation was taken to be about 23 years, but that is no longer even close to the case.  A generation is equal to the average age of all mothers giving birth to children.  I have not found a good number for that in the U.S. as a whole.  The state of New Jersey says that the median age was 30.5 in 2004.  Median and average are not the same and NJ may not be entirely typical, but let us take the length of a generation to be 30 years for our purposes here.

During a generation of 30 years, the labor productivity at a growth rate of 2.2% a year has cummulatively become 1.92 times what it was at the start of that period.  But, with a labor productivity growth rate of 2.8% a year, the labor productivity is 2.29 times what it was at the end of the generation or more than 19% greater.  This also is a component causing health care costs to rise at much higher rates than do those of other sectors of our economy.

Yet the suppression of our standard of living of the last 20 years by the health industry due to government interference compared to what it could do if free is a small depression compared to what the game-changing ObamaCare or ObamaUncaringTax will do to the economy!  The story for the next 30 years will be quite miserable in terms of lost labor productivity and hence our standard of living.

A Medical Insurance Cost Increase

I have just received the renewal cost on the health insurance plan my materials analysis laboratory provides its employees.  The cost for individual coverage is going up 19.7%, which is at least twice the increase I usually see in it.  That more than doubled increase is due to ObamaCare mandates.

While the economy is no longer in recession by the official definition due to some growth in the GDP, large and medium sized companies are still hording their income and refusing to spend it.  There have been decreases in R&D and in quality control efforts as a result.  After a record year in 2008, my laboratory has seen a sizable drop in income in 2009 and so far in 2010 compared to 2008.  Meanwhile, our health insurance costs have continued to skyrocket.  Is it any wonder that companies are not hiring? 

Reynolds on Obama Insurance Rate Increase Lie

Alan Reynolds, a senior fellow at the Cato Institute and the author of Income and Wealth has an interesting article that appeared in the Daily Caller on 15 March 2010 that looked into the Obama claim on 20 February that an evil insurance company in California was about to increase its premiums by 39%.  Obama has often repeated this claim since the 15th, including just yesterday in Congress, so he remains undeterred in his big fib, despite the corrective truth provided by Alan Reynolds.

As Reynolds noted, Bob Beckel, the Democrat political strategist, observed that Obama needed an enemy and the insurance companies were chosen.  Obama needed a for-profit insurance company to become the poster bad guy.  He picked Wellpoint's individual Anthem Blue Cross Blue Shield plan which had requested individual plan increases of from 20 to 35% from the insurance regulatory commission of California.  The total of individual plans is only 4% of the market, so few people are affected by rate changes for these plans.  If, and this is a very big if, the commission were to allow these requested increases, the only way anyone would have a 39% increase would have been to both choose a "gold-plated Cadillac plan" and move up into a higher age group.  These requests for rate increases are commonly denied or moderated.  Obama mentioned two that were denied in the same speech he claimed that a 39% rate increase was likely for the WellPoint individual plans in California.

A still more dramatic request for a 56% increase by a nonprofit insurance plan gained little attention.  Why is this?  Because Obama wants to put an onus on companies making profits.  He really dislikes the idea of companies making profits and he assumes that most other Americans do too.  So Obama griped that the $1.2  trillion health insurance industry had the five largest insurers make profits of $12 billion.  What he failed to note was that WellPoint had sold its pharmacy benefits management company NextRX to Express Scripts for $4.7 billion in April and this was included.  The real profit from ordinary sales of health insurance was then only $7.3 billion.

Mark Perry of the University of Michigan calculated that WellPoint's profit without the asset sale as 3.9%, which is hardly a great profit for any industry.  The industry average profit margin is 3% or about $100 per policy.  The Centers for Medicare and Medicaid Services (CMS) say that the cost of premiums minus the benefits paid fell by 2.8% in 2008.  It predicts that private health insurance will go up by 2.5% in 2010, but that medical goods and services will go up more, about 2.8%.  For the average purchaser of health insurance in 2008, premiums fell by 3.5%.  In 2009, they fell by a further 3.2%!

But no, Obama wants us to think that health insurance premiums will soon be out of everyone's reach unless the great socialist leader comes to our pathetic rescue. Reynold's concludes his article with:

The president's health insurance proposals hoped to use stern command-and-control techniques to run the health insurance system. It was all about minimizing free choice and maximizing brute force—forcing people to buy certain kinds of politically-designed insurance, forcing insurers to cover services many consumers do not want to pay for, and forcing insurers to curb or roll back premiums even as medical costs go up. The whole shaky apparatus was built upon even shakier statistics....

One would like to think that one should start with the assumption that a President of the United States is telling the truth, but that one should frequently check to be sure he is.  With our present illegitimate president, as demonstrated over and over with his incredible lies relating to the health insurance and jobs issues, it is only possible for a rational man to assume he is lying and check up on him just in case he has suddenly decided to live up to the responsibilities of his job.  There have been men who became better men once they became President, but there is no sign to date that Obama is now anything but the divide and conquer, lie and lie again rabble-rousing demagogue of the unskilled, uneducated, and unthinking.  It is amazing how many college-educated elitist-minded Americans agree with him and cheer him onward.