Financial topics

[Reality Check]

Generational divide on the Obamacare issue is striking.

Generation X Democrats, like those in the White House, have gone into attack and outright lies mode on this one.

Generation Xers are attacking those who have their insurance canceled, and complain about it to the press, as a moronic minority of a minority ( some part of 15 Million people - which is less than 5% of the total population ) so the press should ignore them.

Generation Xers have also labeled all the policies being canceled as "junk policies" that "sometimes" ( the sometimes is usually omitted from the attacks when repeated by the press ) do not even cover hospitalization. The owners of these policies being canceled are also too stupid to appreciate that Obamacare has saved them from these junk policies and too lazy to shop around and locate "quality insurance" policies to replace them.

The big lie in all this is that the policies being canceled are mostly junk policies. Insurance companies manage risk and some individuals do not abuse insurance, even if they have a chronic illness, and they are good risks, and their premiums are lower than the premiums of say a habitual drug addict might be. Replacement policies must accept drug addicts with many serious health issues and long time good customers at the same premium levels.

Older Democrats, like the talking head consultants on news programs, are admitting that the Obamacare is causing "disruptions" in the insurance market, and that it is "unfortunate" that the President of the United States misled this minority into thinking they could keep insurance policies that they liked and that worked for them. The President meant well, but he should have used more "precise" language. The Older Democrats are also admitting that when change happens sometimes good people get hurt. It is just "a price we have to pay" to get beyond these disruptions to the promised land of Obamacare.

Different ways to put lipstick on a pig.

[John]

These attacks are total desperation. This thing is coming off the rails. I
really don't see how it can survive another month. The problem will
be what to replace it with, and that will be the subject of even more
vitriolically bitter disputes, given that it's already done so much damage.

[Reality Check]

These attacks are total desperation. This thing is coming off the rails. I
really don't see how it can survive another month. The problem will
be what to replace it with, and that will be the subject of even more
vitriolically bitter disputes, given that it's already done so much damage.

These attacks are intended to give the Media a new set of talking points. Just a minority, only "junk" policies being canceled. Nothing to see here, move along folks. What about that world series. The NSA is spying on foreign countries, I am shocked, shocked. Obamacare is old news. The Supreme Court approved it. It is the law of the land. Leaks about the IRS scandal. Congressional hearings on Benghazi. Gun control is the only way to save the children, an in depth investigative report.

Propaganda works, for a while.

The current Republican controlled House of Representatives have surrendered on Obamacare. They let the Democrats dictate the terms of their surrender at the time the government was opened back up.

Unless, and until, at least one house of Congress is taken over by politicians who are willing to fight over Obamacare, it is truly the law of the land.

News reports that some Democrats are wavering on Obamacare and want a delay, are just hype, the delay they are talking about is NOT about delaying the mandate. The delay is about changing how many months during 2014 you can be with out insurance ( 3 months or 5 months ) before the 1% of gross income penalty kicks in ( if you are poor and one percent is less than $95, then you must still pay at least $95 ).

Only if the political class in the United States is drastically altered by the 2014 elections will anything change. Both the Democratic and Republican elites are exempt from this law, and they really do not care, unless they get kicked out of office over it.

[Reality Check]

Younger voters and younger media types, really like the personal attacks. Both generation Xers and the Millennials fall into these camps.

It is an open question when the media as a whole is going to jump on the band wagon of attacking the complainers, and ignore the substance of the complaints.

Many different things could happen in the next 30 days.

Propaganda does matter.

[Reality Check]

The insurance companies are facing financial disaster because the only
new people signing up are sick and have pre-existing conditions.

The state budgets are facing financial disaster because there are hundreds
of thousands of people signing up for free Medicaid.

The web site has no chance of working well by Dec 1. Nixon's wage-price controls were
a disaster for the economy, but this is much worse.

The stupidity of anyone who thought this would ever work is cavernous, and the people
who continue to push this program are nothing but criminals, and
deserve to be jailed or shot.

The insurance companies - and large employers with large historic employee health care costs - appear to be the winners in all this.

They had three years to prepare. They are still fee enterprise entities and they are free to take advantage - or make mistakes - when change is imposed. But both the large Employers and the Insurance Companies that were smart about managing this change are set to make huge profits off this.

Growth of small companies - the low cost competitors of large companies has been stunted by Obamacare.

Smart, productive, employee have stayed with the big companies due to fear of the unknown, and because small competitors were not hiring full time employees.

Obamacare has given large employers the excuse to massively increase annual deductibles and co-pays, thus shifting health care costs from the employer, to the employee, and driving most employees away from going to the doctor and hospital except when they are extremely sick, and in addition it has become acceptable for large employers to drop health care for part time employees, and cut the hours of part timers back to less than 29 hours a week. Taken together all these changes will cut large employer benefit costs drastically and boost the profits of large employers.

Insurance companies have been able to use this as an excuse to drop expensive hospitals and expensive doctors from their networks, not only for those on Obamacare, but also for those on Medicare, and also for those on Employer sponsored health care plans, and for those insurance companies who play in the Medicaid Market, they can do the same for Medicaid in some states.

At the same time insurance companies have been free to stop issuing policies on a selective county by county, and a state by state basis. Some will guess right and some will guess wrong on these actions. There will be winners and losers. Insurers were free to cancel policies and use Obamacare as an excuse. Their replacement policies being new policies, fall under a different set state rules, in those states where insurance premium rates are regulated, such as California, there will be no premium increase requests to be approved, limited, or disapproved ( the new Obamacare policies were different beasts with no history - and thus - no increase ).

State insurance regulators were out of their league on these changes. When the annual deductible goes up by a factor of five ( 5 ) times and the premium goes down by a couple of dollars a month - is that a rate decrease? Maybe under state rules, but it is a massive profit increase for the insurance company - and that is exactly what is happening in the individual insurance market.

The largest part of the insurance market, by far, is the employer plans ( 80% of the market ? ), many of these plans will keep the same premiums from last year while doubling or tippling the out of pocket costs for health care. Even after sharing some of those savings with some of the more savy employers, the profits of the insurance companies serving that huge section of the health insurance market will surge. As will the profits of the self insured employers.

Even though the insurance companies stand to lose some policies from people who they canceled , andjust go without insurance, the profit increases for the insurance companies should be massive.

[Reality Check]

One thing many people are missing in this, is there is no enforcement mechanism for many of the health insurance related rules.

The IRS will enforce, after the fact, the employer mandates and the individual mandates, on employers and individuals who do not buy Obamacare approved insurance.

But the rules limiting the profits of insurance companies, have no federal enforcement agencies.

The rules, such as the maximum limits on deductibles and co-pays in Obamacare approved insurance plans were written by insurance company employees and representatives, working with congressional staff members, in the middle of the night. Thus a $12,000 a year annual family deductible is not only legal under Obamacare, it is defined by federal law as "quality, affordable health care".

The same is true as to the maximum profits insurance companies can make under the new law, how they are measured, and how they are enforced, those provision were written by the same people, and lack any kind of federal enforcement agencies.

The insurance companies remained free to set their own annual deductibles, co-pays, premiums, drop hospitals and doctors off their managed networks, approve or deny claims, manage their own profits, all under very vague guidelines insurance company empoyees and their agents wrote, without any federal enforcement enforcement agency.

The suggestion that insurance companies are going to be destroyed by this implementation is highly questionable. There may be individual companies that bet wrong. However, when the fingers of blame start being pointed, I am sure there will be many sob stories from the insurance industry about the total number of people with insurance policies dropping - and calling for more draconian penalties to force people to sign up.

[Reality Check]

The state budgets are facing financial disaster because there are hundreds
of thousands of people signing up for free Medicaid.

For the next three years, 2014, 2015 and 2016 the portion of new medicaid recipients signing for Medicaid under Expanded Medicaid rules, will be funded 90% by the Federal Government, so for three years that impact on State Budgets will be limited, or at least partially limited.

New sign ups for Medicaid under the old Basic ( pre-expansion ) rules remain an open question on what impact they will have on state budgets for 2014, 2015 and 2016.

There is an open question about who ( federal government or state government ) pays for large increases on the Medicaid roles of people who would have qualified under the OLD Medicaid rules. Some have suggested that for states like Oregon, who did expand Medicaid, and that virtually all the new Medicaid enrollments to date would have qualified under the old rules, the state alone will be responsible for the vast majority of the expansion of Medicaid roles in Oregon. But that is questionable, even for those under the Federal Poverty level, they had to meet other, state by state, requirements under the Old Medicaid Rules, such as being disabled or having small children, to be eligible for Medicaid. Middle age married couples, who were not disabled, and who had no minor children were not eligible in many states under the OLD ( pre-expansion ) rules. Such rules were left to each state under the pre-expansion Medicaid rules.

Expanding Medicaid became a state by state option under the Obamacare law once the U.S. Supreme court struck down the portion of the Obamacare law that was coercive. More than half the states have now elected to expand Medicaid in their states, but less than half agreed to do so in time to begin accepting new patients under the expanded Medicaid rules by January 1st, 2014.

But it is not clear, for those states that elected to expand medicare, such as Oregon, what the President, by executive order can fund with federal funds at 90% federal money.

The bigger impact may be on the Health Care Delivery System, in each state. This will vary on a state by state basis. For example. The payment rate for Medicaid patients in Washington State is so low, that doctors limit how many Medicaid patients they will treat, and write the services delivered to Medicaid patients off as charity work.

Should the total number of Medicaid patients increase drastically, General Practitioner Physicians may refuse to see new Medicaid patients entirely. This has already happened in Washington State with another pool of patients. The workers compensation system has been forced to recognize Registered Nurses and Physicians Assistants as primary health care providers, because doctors have simply refused to work as general practitioners under the payment restrictions and payment rates allowed by state law. When a patient of the Workers Comp system goes to the state website for a list of doctors who accept Workers Comp patients, the website just gives a list of all doctors with a medical list in your country , and suggests you call them and ask. The answer from doctors is always no new patients, it is the worse kept secret in the state. The emergency room at each hospital has a list of all the Nurse practitioners who accept Workers comp system patients - no doctors on that list.

One of the unintended consequences of this law may be a bifurcated health care system where those on Medicaid ( maybe half of those covered with any kind of medial coverage after Obamacare ) can NOT see a doctor for routine medical needs and instead will have to rely on nurse practitioners for their health care, except for major surgeries.

In any case, the worst of the state budget crisis resulting from this may be delayed for at least three years. Longer if Democrats regain absolute power in Washington DC and extend the 90% subsidy beyond three years. The federal government continues to just go deeper in debt to fund these kind's of state subsidies - and there appears to be no limit on the amount of money the Democrats are willing to borrow to fund current expenses.

[Reality Check]

...
I really don't see how it can survive another month.

The problem will be what to replace it with, and that will be the subject of even more
vitriolically bitter disputes, given that it's already done so much damage

Three years, rather than 30 days, maybe a better estimate of when it will be considered something that needs major changes or replacement.

But clearly it will have to be changed or repealed over time.

The one thing that the Democrats who created this have going for them, is that private employers and private insurance companies, are actually implementing the re-structuring of the insurance market and the health care delivery system, and they will be more competent at achieving their own goals ( the goals of the employers and the goals of the insurance companies), than the government was at building a website.

People with employer based insurance plans will still be able to go to doctors and buy medicine, and the majority of people on employer based health insurance will not get sick enough to be devastated by the higher deductibles during the next few months. It even be after the next election before they notice.

If the government was actually implementing the insurance or the medical care, as they are the website, this would not be the case. The website is really only a window shopping site and a connector that also allows those with incomes in the $30,000 to $120,000 range to receive a modest subsidy on their monthly insurance premiums. The actual insurance sales are done by the private Insurance Company after the Obamacare Exchanges collects information about the applicant and passes that information along to the private insurer. The web site serves as a connector by linking all the federal government data bases to the purchaser, and associating that purchaser, and his/her tax return, with the insurance company subsidy that the private insurer receives directly from the government.

What happens in terms of what changes, or repeal, will occur, will, to a large degree, be determined by what happens in the elections of 2014 and 2016.

The damage that Obamacare is going to do, is already locked in. Employer health insurance plan changes were set in stone a year ago. Next years (2015 ) employer health care changes are being written over the next couple of months. The majority of individual insurance market policies ( some 8 to 10 million peoples insurance policies ) will be canceled in the next 12 months. The destruction of major parts of the health care delivery system is locked in at this point. Even repealing it, Obamacare, in it's entirety after the November, 2014 elections will not stop this destruction.

If the Democrats are in charge in all branches of government when the changes are made, Obamacare, in some form, will be with us forever. If the Republicans are in charge in all three branches, the Obamacare name will be gone, and Obamacare will officially be repealed, but the defacto federal government take over of health care may stand, even under Republicans.

[John]

I'm still comparing what's going on now to what happened in 1974, when
Nixon's wage-price controls were spiraling out of control. Remember
that Nixon's controls were supposed to LOWER the inflation rate from
4% to 2%, but instead RAISED the inflation rate to 12%. There was no
intrinsic reason why the controls couldn't have continued a year or
two longer, but they were ended by massive POLITICAL pressure because
everyone, even their supporters, could see what was going on.



So there may be no intrinsic reason why Obamacare can't go on for
another year or two, but when I say it's coming off the rails, I'm
talking about a massive political collapse, because everyone can see
the disaster unfolding. When I said that I don't think Obamacare can
last more than another month, I said that because of the political
backlash, which is growing very rapidly. If the web site isn't
"perfect" on November 30, and I don't see how that's anywhere close to
being possible, then I expect the political collapse to be very rapid
after that.

We might speculate which parts of Obamacare are going to survive. The
following are my guesses:

• The exchanges seem like a good idea to me, including the
  standardized policies. But some additional policy types would have to
  be added, for 60 year olds who don't want maternity coverage.
• Allowing kids to be on their parents' policy to age 26 seems like
  a good idea.
• I would think that the preexisting condition rule would have to be
  revamped. One possibility might be that insurance companies are
  forced to take customers with preexisting conditions, but the policy
  won't take effect for six months.
• There's been one form of universal health coverage that's always
  been available: Everyone is treated by hospital emergency rooms,
  regardless of ability to pay. That will continue.

However, these are details. You can see the real problem by looking
at the graph above. It shows that the inflation continued to spiral
upwards, even after the controls were lifted. Policy prices that have
already surged enormously are going to continue to do so, for the
reason that you say: That the damage from Obamacare is already locked
in, and it will take a year or more for them to recover.

[Reality Check]

Obamacare Impacts on Doctors and Hospitals

The major impacts on Doctors and Hospitals will be different than many projected.

Changes to Employer based Health Insurance, coincidental with the Implementation of Obamacare, will have the biggest impact. Why? Simply because the vast majority of reliable, highly profitable, insurance payments comes from this huge pool of patients. There are a huge number of changes in the Employer Insurance Market that will impact Doctors and Hospitals.

1. Obamacare allows insurance companies to use doctors and hospitals farther away from their patients. This allows insurance companies to negotiate lower rates with older, less modern hospitals farther from the centers of a metropolitan area. Employers have moved, over many years, to managed care plans with In-Network providers. The most expensive hospitals were simply not being considered for the list of In-Network hospitals associated with the new insurance plans Employers are migrating to on January 1st, 2014.

2. Annual Deductibles, Co-Pays for routine hospital visits, and Co-Pays for Specialists in employer based plans are doubling or tripping in the plans offered by many major employers. People will react in the predictable way and go to the doctor less often and to the hospital less often for minor illnesses and avoid elective medical care entirely. This is the most profitable high volume business for Hospitals and Doctors and losing it will have a disproportionate effect on the viability of their staying in business.

3. Many part-time employees of Major Employers had, prior to implementation of Obamacare, insurance policies through their employers that provided little in the way of major medical insurance, but allowed young healthy employees to effectively pre-pay their medical expenses. These policies prior to Obamacare encouraged young healthy, working people, and their families, to go to the doctor for preventive and minor medical treatment. This was highly profitable business for doctors. Now it is gone. Because these policies are illegal under Obamacare, employers have simply dropped all insurance policies for Part Time Employees. Most of these part time, low income, young, healthy, employees will simply go without insurance, or go on the Expanded Medicaid programs. Either way this highly profitable business for doctors is gone forever.

4. A substantial number of doctors, as many as half in some metropolitan areas, have aligned themselves with hospitals as sub-contractors, or statutory employees, to take advantage of some loop holes put in the Obamacare law for hospitals. These loop holes allowed hospitals to refuse to negotiate with insurance companies over prices for some services and also prevented the insurance companies from dropping them from an insurance policy's list of In-Network providers, simply because they refused to negotiate.

5. Insurance companies have found a loop hole of their own to counter the above. They simply created new insurance policies that have never used those hospitals, and instead negotiated favorable prices with other less modern, less expensive hospitals within the larger geographic area allowed by Obamacare. Self insured employers used a similar tactic by creating new self insured benefit plans. The end results, is that many employers have avoided dropping hospitals from an insurance plan by simply dropping that insurance plan and offering a different insurance plan that never included that hospital. These changes are being implemented coincidental with the implementation of Obamacare.

6. Many Doctors who tightly locked themselves into a single hospital suddenly find many of their patients are asking them, the Doctors, why the doctor was dropped from the insurance the employee "just selected" through their employer. This is happening not only in new Employer based Insurance Plans being implemented on January 1st, 2014, but also new Medicare ( Senior Citizen ) Advantage insurance plans being implemented on that same date, and new Individual Market Insurance plans also being implemented on January 1st, 2014, at the same time key changes in the Obamacare law go into effect.

7. Media reports, indicate that doctors are grouping together and filing suits when their patients inform them they can no longer see them ( their current doctor ) without paying Out-Of-Network penalties. If indeed, it was the patient who selected a new insurance policy that did not include the patients current doctor, and not the insurance policy administrator that changed the list of in network doctors, these lawsuits may not go very far under the new Obamacare law.

8. Because of the the massive increases in deductibles and co-pays in the Employer based insurance and Individual Market based Insurance, the total visits to Doctors and Hospitals, by profitable patients, should decrease substantially, not increase as many were suggesting.

9. Also, it is likely that many more patients will have their private insurance canceled, either because they are part time employees and their private insurance policy is canceled by their employer, or because they are one of the eight ( 8 ) million to ten ( 10 ) million the Obamacare administration estimated would have there individual market private insurance canceled. Millions of these people will elect not to replace the private insurance canceled, with another private insurance policy. Regardless if they just go without insurance, or sign up for state Welfare based Medicaid, the number of visits to doctors by profitable patients will decrease an additional substantial amount, not increase as many were suggesting.

10. By contrast, visits to Doctors and Hospitals, by Welfare Medicaid Patients, which is usually considered charity work provided at a loss, by most doctors in most states, because the amount of money received by the doctors from Welfare Medicaid in most states is well below their cost of doing business. Welfare Medicaid is run by the states, not the Federal Government, so Welfare Medicaid in each of the 50 states is different, and the impact of expanding the number Welfare Medicaid beneficiaries in each state will also be different.

11. Mass retirements by independent doctors, who refused to join a hospital consortium have been predicted. Just the opposite may occur. These doctors may find they have more highly profitable business from employer insured patients, exactly because they refused to join a hospital consortium. Other doctors may just get lucky because they are part of a consortium that did negotiate and were not excluded from the new insurance policies.

Doctor shortages have been predicted due to the surge in new patient visits. Ironically there may actually be a surplus of doctors overall, but a shortage of In-Network doctors, due to a large number of doctors tightly tied with the most expensive hospitals, being excluded from many new insurance policies. Wait times to see a doctor may increase for many private insurance patients, while other doctors offices are nearly empty.

Expect emergency, Presidential executive orders to eliminate the "disruptions" caused by the free market operating within the Obamacare implementation. Such as a keep your doctor executive order, and, written notifications to young U.S. citizens notifying them that they are now required by Federal Law to buy an Obamacare approved private insurance policy or signup for Welfare Based Medicaid.