Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]
Health care costs in the U.S. have been rising so steadily for so long that containment barely seems possible. Even optimists don’t dream of cutting the price tag. As its official name — the Patient Protection and Affordable Care Act — suggests, Obamacare aims for affordability, not radical reduction.But at a time when we’re all […]
One issue I have with our modern lifestyle – of many — is the emphasis on perfection. Newer, slimmer, bigger, better, faster: the message of perfection screams out to us from glossy magazines, slick television ads and popup ad after popup ad. (Or purrs, cajoles, teases, and smothers.)While I do believe fundamentally in pursuing whatever your […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
In September 2009, when President Obama made a primetime speech pitching his not-yet-passed health care overhaul, he made the following promise: “I will not sign a plan that adds one dime to our deficits — either now or in the future. Period.” To prove his seriousness, he further promised that “there will be a provision […]
What’s the #1 reason a start-up fails?It runs out of money!And why would it run out of money?Because nobody wants the product it’s selling!For early-stage investors, this presents a bit of a conundrum:If a product doesn’t exist yet, how do you figure out if there’s demand for it?And how do you figure it out before […]
Biotech breakthroughs and other transformative innovations are a few of the brightly shining spots in the U.S. economy. In fact, Paul Mampilly believes this is the golden age of biotech investing, and that you can earn massive returns while investing in companies with drugs that benefit all of humanity. Read on for his latest example...
Obama recently claimed this was the “Decade of the Brain”. But it not the first time the government made that promise. The last time they did it, they wasted millions of your tax dollars. Now they’re back for round two. But this time, their failure could mean more than squandered money. It could mean making Alzheimer’s even worse for those who suffer from it.
Why Is U.S. Health Care So Much More Expensive?After years of research and many conversations with health policy experts, I see three key culprits of expensive health care in the U.S.In no particular order, they are the third-party payer system (i.e., employer-provided health care), malpractice suits, and administrative support costs/paperwork.The unintended consequence of institutionalized employer-provided […]
Back in the 1980s, John Nestor became infamous for single-handedly causing massive traffic jams on the Capital Beltway. But in his professional life, he created a completely different kind of traffic jam... one that may have contributed to the deaths of thousands of innocent people. Juan Enriquez has the full story. Read on...
The Food and Drug Administration will tell you they’re there to protect you. To make sure the food and medicine you put in your body won’t hurt you. But good intentions and actual results rarely match up. Instead, the FDA’s drug certification process has made it easy for business to corner drug markets, and jack up prices. In the end, the only thing the FDA protects are these companies’ profits.
Given the insane amount of time, effort and money it costs to bring a drug to market, it's no wonder why drugs are so expensive in America. And even when a drug comes along that IS cost effective, you can count on the FDA to play its part in jacking up the price. Mark Thornton explains...
Generic drugs are supposed to lower healthcare costs and provide you with another medical alternative. That’s what it says on paper. But there’s a real danger that goes along with these drugs. A danger even your doctor might not be aware of.
Too many people think that long-term care planning is just a decision about whether to purchase long-term care insurance. However, long-term care planning is so much more. It is a discussion about how you will fund this expense, where you will receive long-term care, and who will provide the care.
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
The Congressional Budget Office said the government needed to reach 7 million people by the end of March. They claim to have reached the goal and now the debate about Obamacare is over. But what does this milestone really mean in the ongoing healthcare discussion? And more importantly, how will it affect reforms going forward?
In an effort to cut costs and keep track of patients' records, governments could institute a medical guideline cookbook. Bureaucrats might think they have the best of intentions in mind, but these new rules would drag down the medical process and destroy whatever quality is left in our current system.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
As full implementation of the Affordable Care Act (ACA) approaches, every doctor, research professional, and health administrator I talk to tells me the same thing: Obamacare is going to reduce the quality of care and cost you more… in some cases, a lot more.
This technology is not simply for modeling and prototyping, either. TV personality Jay Leno uses a 3-D printer to make custom and hard-to-find parts from scratch for his collection of classic cars. Entrepreneurs have been using these printers in a myriad of ways, and the trend is speeding up.
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
“This only works if young people show up,” said Bill Clinton the other day. He was explaining Obamacare.
On the surface, that’s an odd thing to say. Medicare seems to work just fine without a lot of young people. It needs taxes from young people, of course. But nobody has ever said young people need to buy into Medicare or it won’t work. What’s so special about Obamacare?
To understand that, we need to go back to square one.
One of the strange things about the market for health insurance is that almost none of us ever sees a real price. More than 90% of people with private coverage get it through an employer. Employers, on the average, pay about three-fourths of the cost, and the remaining share tends to be the same for every employee — irrespective of expected health care costs.
In most states, the only people who face real premiums are in the “individual market,” where individuals and families pay for insurance out of their own pockets. Yet the Affordable Care Act (Obamacare) will outlaw the pricing of individual risk (medical underwriting) by the year’s end. Health insurance, therefore, is very different from just about every other form of insurance.
In other insurance markets, a person newly entering an insurance pool will be charged a premium that reflects the expected cost and risk the individual brings to the pool. With respect to life insurance, disability insurance, homeowner’s insurance, and (for the most part) even auto casualty insurance, you pay for what you get.
That practice, by the way, works quite well.
When premiums reflect expected costs, people are essentially paying their own way. When that happens, it really doesn’t matter very much who chooses to buy insurance and who chooses to self-insure and bear the risk themselves. With life insurance, for example, you can have pools with a lot of old people or pools with a lot of young people. You can have pools with a lot of people at high risk of dying or pools with a lot of low-risk enrollees. Or you can have combinations of all of these.
When was the last time you heard anyone say that life insurance won’t work unless we mandate its purchase? Or that the life insurance market will fall apart unless we convince a lot of young, healthy people to buy it? Have you ever heard of a life insurance company spending millions of dollars on rock stars and sports icons and librarians and local civic associations to beg youngsters to buy the product?
Why are things so different in the market for health insurance? Because in this market, premiums are regulated, and that regulation is completely dominated by the idea that it’s unfair to charge real premiums. In fact, the most common belief is that everybody should pay the same premium for health insurance, even if everyone’s expected health cost is different.
It’s not easy to say where this idea came from, or why it is so widely believed. The health policy community often exudes a herd mentality. Once an idea is accepted, it tends to be repeated again and again — until a point is reached at which no one can exactly remember why the idea was ever proposed in the first place.
One reason why this issue has suddenly become a topic of discussion in the blogosphere and in the public policy community is that Obamacare was sold to the public on deceptive terms. When he was campaigning for the presidency in 2008, Barack Obama made it sound as though his health reform was designed only to help people who couldn’t afford health insurance afford it. Everyone else was going to be left alone. (“If you like the health plan you have, you can keep it.”)
Then, on the eve of passage of the legislation, the focus changed to those few people (very few, it turns out) who are denied coverage because of a pre-existing condition. At last count, there are about 107,000 enrolled in newly created risk pools because of this problem.
But it has been only very recently that New York Times columnist Paul Krugman and others have been in print explaining that Obamacare won’t work unless the government controls the premiums paid by everybody in the entire country! No one ever said that during the presidential campaign or during the congressional debate. As far as the general public is concerned, this is a brand-new idea.
There is one other way in which government regulation has caused health insurance to be different. Traditional indemnity insurance basically doesn’t exist anymore. What we call health insurance is really a health plan. It is an entity that controls what care you are entitled to and who can deliver it. When you choose a health plan, you are not just choosing an entity that will pay your medical bills. You are also choosing a network of doctors and hospitals and a set of protocols that determine how medicine will be practiced.
Here’s why that matters. When premiums are regulated so that they cannot reflect expected costs, four things will happen:
1. On the buyer side, people who are undercharged will overinsure, and people who are overcharged will underinsure. This is basic economics. If the price you are asked to pay is artificially low, you will buy more than you otherwise would; if the price is artificially high, you will buy less. If you are sick and require a lot of medical care but can pay the premium ordinarily charged to a healthy enrollee, for example, you will likely choose the richest plan you can find.
2. In order to avoid attracting high-cost enrollees, health plans will respond by scaling back their benefits and their provider networks until the richest plans look pretty much like every other plan. In the individual market today, in most states, you can buy a Blue Cross plan that covers almost all doctors in your area and practically every hospital, including all the best hospitals. I predict those plans will never see the light of day inside the (Obamacare) health insurance exchanges. See this health alert on the race to the bottom with respect to access to care.
3. At the same time, health plans will seek to attract the healthy. Of course, to a certain extent, they are doing that today. But with an electronic exchange in which healthy people tend to buy on price and sick people tend to buy on benefits and software that makes it easy to do those things, the insurers will be even more pressured to reconfigure their offerings to make them more attractive to the healthy and less attractive to people who need medical care.
4. Finally, the perverse incentives do not end at the point of enrollment. They continue. Health plans will have perverse incentives to overprovide to the healthy (to keep the ones they have and attract more of them) and to underprovide to the sick (to avoid attracting more of them and encourage those they have to go elsewhere).
[By the way, risk adjustment in the Obamacare exchanges may actually overpay for certain types of chronic illnesses -- making them more attractive to the health plans than healthy people. But anytime there is nonmarket fixing of premiums and artificial risk adjustment, the total revenue for any particular enrollee is almost certain to be wrong -- in one direction or another.]
There is something else that tends to happen in an insurance market where no one is paying a real premium. If you have problems and need help, you are likely to discover that the insurance company is about as accommodating as the Department of Motor Vehicles.
Dealing with a vendor who doesn’t want your business can be unpleasant. When you call, you are put on hold. Or you never get to talk to a real person in the first place. You are shuttled from one office to another, buried in a complex web of bureaucracy and paperwork that seems intentionally designed not to meet your needs. (See a previous post on paying for medical care at my blog.)
I know what you’re thinking. This is the way insurance companies already treat everybody! Yes, but there is a reason for that. In a world in which market forces have been completely suppressed, anyone who makes frequent calls to a health insurance company is probably someone with lot of health problems, paying a premium well below the cost of her care, who is prima facie a customer the insurer wishes it didn’t have to deal with.
So how should the market for health insurance work? It should incorporate two features:
1. Whenever you enroll in a health plan, you want the premium paid to the plan to reflect the expected cost of your care — especially if you have medical problems. Otherwise, your new plan will have perverse incentives to skimp on what you need.
2. To be able to afford that premium in case you become ill, you should be able to purchase “change of health status insurance” in addition to garden-variety insurance. Such insurance pays the extra premium caused by a change in your health status.
In such a world, health plans would compete for the patronage of the sick just as vigorously as they compete for the healthy. Most likely, health plans would specialize — with plans carving out such markets as cancer care or diabetic care. Instead of running from problems, the insurers would see common, expensive illnesses as entrepreneurial opportunities — just like we observe in other markets.
“Change of health status” insurance doesn’t exist today and isn’t envisioned under Obamacare. But we need it. If the providers of medical care are to have good incentives, we need to allow such insurance and encourage it.
– John C. Goodman
Article originally appeared here.