You should be celebrating the coming Syrian war and Ebola. After all, they’re set to stimulate the economy, no? Chris Campbell explores this insane paradigm and uncovers what would happen if the government got out of the way. Read on…
Savvy investors: Two experts weigh in on why having your own personal gold standard… and betting that Ebola will get worse… could be your best investment decisions of 2014. Read on…
Will you see the end of cancer in your lifetime? One revealing picture says it all. Learn how scientists are creating super immunities… and what it could mean for your portfolio. Read on…
Today, Chris Campbell reveals three pieces of news -- that just surfaced in the past 24 hours -- that could change everything. One, the CDC has failed tremendously already and has put the whole of United States in danger. Second, nurses in the United States are not ready for Ebola. Third, scientific evidence exists that Ebola is airborne through aerosols. Read on…
Chris Campbell is in a room full of more doctors than in all of Liberia. And they’re all there for one purpose: to talk about Ebola. He “snuck” inside the world’s largest Ebola Symposium at Johns Hopkins University. What the panel of speakers are saying boils down to one thing: the government doesn’t know as much as they say… and yes, it’s OK to be worried. Don’t miss this explosive inside report. Read on…
Where do great investors come from?I’m not sure what the hurdle rate for greatness is, but Guy Spier has put up impressive results. His Aquamarine Fund has returned 463% since inception in 1997, versus just 167% for the S&P 500 (a broad proxy for the market). Put another way, $1 million invested at inception is […]
As the Ebola crisis continues, says MSNBC, guns are to blame for the fear of the masses. In today’s Laissez Faire Today, Chris Campbell looks into the mainstream’s hype… Connecticut’s declaration of public emergency… why Americans are buying Ebola plush dolls... how Chris will sneak into the biggest Ebola conference in the world… and much more. Read on…
Cut through all the clutter and see what’s really happening in Liberia. In today’s issue of Laissez Faire Today, Chris Campbell shows you why the CDC is downplaying the situation, and why you still shouldn’t freak out (yet). Read on…
The government is on a mad race to create a vaccine for Ebola. What they aren’t telling you is that, in 2003, they may have found a way to beat it naturally. According to one unclassified government document, this little-known plant beat Ebola 90% of the time. Why isn’t the government developing it? Read on…
Ebola isn’t just spreading. According to one doctor, it could be getting stronger by the day. In today’s Laissez Faire Today, you’ll learn the quick-and-dirty guide to surviving if Ebola comes to your hometown. And eight essential natural medicines to fight Ebola. Read on…
Next year is the 65th anniversary of the Peanuts comic strip. And Charlie Brown, Snoopy, Lucy and the rest of the gang will appear in their first full-length feature film in 35 years.One small company has the license to the Peanuts brand. The cash flow due to this company could be enormous. In late October, […]
The mainstream media has been complacent in reporting the truth about Ebola. They’re not telling the truth about how dangerous the Ebola situation really is. Because of this, millions of lives are at risk. Inside today’s Laissez Faire Today, learn what the mainstream should be telling you about how to protect yourself in the case of an outbreak in the United States. Read on…
Instead of letting you choose, the government has found it fit to force one potentially dangerous medication on you and your family. Where is it? In your drinking water. Even more outrageous: While Uncle Sam forces medication down your throat, he also says you have no right to choose your own milk. Chris Campbell has all the details. Read on…
Think it’s impossible to escape Obamacare? Think again. Laissez Faire Today reader David F. shares how he did it and how you can do it too. Don’t see another doctor, take another pill, or shop around for better medical insurance until you read his story. Read on…
“While I heartily subscribe to your premise of pursuing one’s dream,” one reader, Donald J., wrote, “there are alternate perspectives worth considering.”[We’re listening… go on.]“Some wiseguy once said that life is what happens to you while you’re waiting for something better to come along. Milton put it a little more poetically in one of his […]
Who can forget Robert Louis Stevenson’s Treasure Island? That map, marked with an “x,” is the stuff of high adventure.There is a modern-day equivalent of a treasure map, and it is just as coveted by those who seek reservoirs of oil and gas. It’s called seismic data.What are seismic data? In essence, they’re collected from […]
Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…
Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…
All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…
The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.
I bet you use different kinds of money all the time, sometimes without even realizing it.In various online accounts, I currently have: some dollars, some pounds, and some euros. I have some air miles from two different credit card companies. I have some supermarket rewards points from three different companies. And I also have some […]
Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]
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 […]
I’m sure you’ve seen the news. As if recent, past U.S. policy fiascos in Libya, Egypt and Syria were not enough, the wheels are now coming off the proverbial bus in Iraq, site of so much blood and treasure spent in the last decade.Radical Islamist armies are marching toward Baghdad, slicing through Iraqi government troops […]
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 […]
In 1995, American agriculture underwent a profound, dangerous change.In that year, Monsanto and other companies pushed through approval for a handful of genetically modified (GM) organisms. These included canola oil tweaked to improve its flavor, potatoes modified to resist pesticide dousing, and tomatoes gene-spliced to delay ripening.“About half of all the crops planted on American […]
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...
“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.