Wednesday, March 28, 2012

The Argument In Favor Of Health Insurance Mandate


As the Supreme Court listens to arguments for and against the Affordable Health Care's mandate for personal insurance, it is interesting that the key point being made for a mandate is that everyone eventually requires health care so everyone should share the cost of coverage.  That's what all insurance is for: spreading the risk.  Some people will require more care than others and no one knows whether they will need extraordinary levels of care or not.  So, since everyone requires health care, it follows that everyone be required to buy health care insurance coverage so that other people are not forced to cover the costs of caring for the uninsured... even if you feel you are healthy and can afford to pay for your medical services as needed.  At some point, you will be unhealthy and you will not be able to pay for your medical services.

Of course, that's a generalization because nothing is inevitable except death and possibly taxes.  Still, the odds say that you will need health insurance to cover the cost of your medical care... unless you don't.  Then you are lucky because you didn't need your insurance which you didn't want and for which you were required to buy... but you might have needed it.

The point here is that nearly everyone will agree that having health insurance does give peace of mind and can be invaluable when you have a serious illness requiring expensive care.  Yet there are a lot of people who don't buy the insurance because they can't afford it.  They get by with state-run Medicaid programs and visits to hospital emergency rooms or inexpensive clinics.  The cost of these "freebies" is borne, of course, by everyone else in the cost of their health insurance and taxes.  So, why not force those who can afford insurance but choose to not have to have it?  Then there will be more money to give to those who can't afford it.

But they are already receiving the care under the present system.  It's just "under the table" forced payments from others.  So, formalizing the hidden costs into visible costs really doesn't change anything, does it?  Except, of course, the government makes you participate and the government dictates the level of coverage and care you can receive and the government can penalize you if you resist.  You answer to elected and un-elected officials rather than the other way around.

So, the individual mandate doesn't really fix anything except the lack of 100% participation.  It doesn't improve the number of choices or the level of care or the freedom to choose.  It really doesn't do much except to let those who want to scam the system by paying a small fine relative to the cost of buying insurance then get insurance when they need it for a condition that existed before they got the insurance.  Then the government can proudly say that you are covered even if you have a pre-existing condition that might be the reason for an insurance company rejecting you under the present system.  Which means that the government can't really boast about 100% participation [unless you call paying a penalty "participation"] and insurance companies would really be screwed if everyone opted to pay the small penalty and get the expensive insurance... guaranteed... when they needed it for that heart transplant.

This then becomes another argument against the individual mandate: people who are responsible and comply with the individual mandate and those who presently are receiving some form of assistance by the states will not see an improvement in their coverage or treatment, but those who want really cheap insurance without paying the true cost of the insurance can choose to pay a penalty for much less and then get the insurance when they really need it.

The real argument against the health insurance mandate is that it is unconstitutional for the government to require you to enter into a contract to buy a product and penalize you for not buying such product.  But we will have to wait for the U.S. Supreme Court to formalize that.  And if they do, what are we left with?  An imperfect, but workable system that has a built-in incentive to buy insurance before you get a pre-existing condition, but the freedom to decide if and how much insurance you will buy.  Responsible people will continue to be responsible without threats from the U.S. government.

Oh, that penalty for ignoring the mandateImpose an annual penalty of $95, or up to 1% of income, whichever is greater, on individuals who do not secure insurance; this will rise to $695, or 2.5% of income, by 2016. This is an individual limit; families have a limit of $2,085.

The average annual cost of health insuranceAverage Annual Premiums for Family Health Benefits Top $15,000 in 2011

$2,085 vs. $15,000... and I can obtain the insurance when I need it?
Hard choice.  Let's take the mandate and scam the system.  We'll screw the responsible people and the insurance companies.
That's the real argument for the individual mandate.

That, of course, is the ultimate goal of Obamacare.  Force private insurance companies out of business and make the government the sole provider.  Then replace the penalty for non-participation with a significant general tax increase to cover the cost of government provided and administered health care.

2012 IS HERE


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)