Now that they have fixed my healthcare plan, I’d like some Democrats to help me with my investment plan

Posted by Marc Hodak on March 22, 2010 under Futurama, Unintended consequences | 7 Comments to Read

So, the Democrats have gotten their legislation.  They are promising:

– Lower insurance premiums

– Near universal health insurance coverage

– Preservation of Medicare’s benefits

– Reduction of the budget deficit

– Lower medical costs

Since I am now petrified to put any of my long-term savings into the stock market, I need to find creative ways to boost my returns.  So, here is what I’m willing to wager against anyone who wishes to bet against me.  By the end of 2014:

– Insurance premiums will be higher

– The percent of America’s uninsured will fall far short of the target

– Medicare’s benefits will be reduced

– The federal budget deficit will be higher than currently projected

– Medical costs will be higher than currently projected

My over/under is that at least four of these five predictions will come true.  If you’re particularly gutsy or liberal, then I will be happy to offer 2:3 odds that at least three of these predictions will come to pass, or take 3:2 odds that all five of them come to pass.

To be more specific;

– The national average for health insurance premiums per year is currently $4,824 per person and $13,375 per family; I am wagering that premiums for 2014 will be higher than those numbers plus the rate of inflation.  Why?  Because insurance companies will be required to accept all comers despite pre-existing conditions (just the kids, at first, then adults in 2014), which will increase their costs, especially in the individual market.  Also, to the extent that mandates work to push more people into the insurance pools, greater demand will enable higher prices, notwithstanding the adverse selection that mandates are supposed to fix.

– The bill is expressly designed to drive coverage from the current level of about 85% to “near-universal” level of 95%; I am wagering that the percentage of Americans with health insurance by the end of 2014 will be no higher than 88%.  Why?  As costs go up (see above), there will be less incentive for healthy individuals to obtain coverage, especially if they can get covered whenever they get sick, which will exacerbate the adverse selection problem insurers now face.  The $695 penalties will be tiny compared to the $10,000 premiums, so you’d have to be a sucker to pay the latter when you can get away with just paying the former, and be guaranteed coverage anyway.

– It’s difficult to quantify Medicare benefits; one indicator is the percent of doctors accepting new Medicare patients.  That number is currently about 75% nationally.  I predict that number will drop, even if Congress adopts the budget-busting repeal of Medicare cutbacks, i.e., the “doc fix,” that was hidden from this legislation to help it’s CBO score.  Why?  Because Medicare will have to suffer some kind of cutbacks in order to keep costs from exploding as much as they otherwise would, and because one of the cost-control measures is likely to be more bureaucratic hurdles for doctors to leap in an attempt to limit fraud.  Both of these trends will continue to turn off doctors, especially the successful, experienced ones who don’t need Medicare patients to maintain their lifestyles (or sanity).

– The fact that Congress will immediately make a mockery of the CBO score by adopting the “doc fix” is just one reason that the deficit will continue to climb.  The Obama budget projects $2.1 trillion in deficits over the next two years.  I am wagering that deficits will exceed that amount.  Why?  Congress has consistently underestimated the costs of its entitlement programs.  This one, too, will be higher than projected.  The higher taxes and fees that Congress is imposing to pay for this law will slow economic growth, resulting in disappointing government revenues.

– According to HHS, the national health expenditures were about $2.4 trillion in 2009, or $8,000 per person, and accounted for about 16% of GDP.  They have projected 6.1 percent per year growth over 2010 and 2011, which means the expense will rise to about $9,100 per person for 2011.  I am betting that the total cost per person will be higher than that.  Why?  More money will be funneling into the health care system, which will drive up prices, just as student loan subsidies have driven up college costs.  In addition, the regulations flowing out of the 2700 page law like topsy will increase the cost of our health care system, which will be reflected in the prices people will pay as both consumers and taxpayers.

There you have it.  Anyone with some liberal convictions and cash can put them both on the line here.  Otherwise, this simply serves as a detailed warning for the time when those liberals will claim that nobody could have predicted how badly this law could have turned out.  Just before they blame the insurance companies for the outcome.

Don Boudreaux, as usual, sums it up best;

Putting any part of the economy into the hands of politicians is like putting the space program into the hands of astrologers.


    of course insurance rates will go up, how else will the feds be able to put the insurance companies out of business

  • Scranton Joe said,

    Right, Stosh (if that’s you real name, tres cool). When the rates blow up, the Dems will conveniently blame the insurance companies, the media will believe them, and voila, the public option will be offered as the solution “to keep the insurance companies honest.”

  • Sadie Mass said,

    You’re an ingrate. The government is assuring that you won’t have to spend all your money on health care, and all you can do it foolishly spend it on political games.

  • Michael P said,

    You want some good investment advice? Make sure whoever bets against you pays up in gold. Whatever dollars you win won’t be worth anything in 2014.

  • Paul Krugman said,

    Of course this will be an economic disaster. That’s because the government’s takeover of health was nowhere near complete enough!

  • Kat said,

    We hurtle forward toward our bright and glorious future! Uh..wait. What country am I in again?

    When you can’t be refused for a pre-existing conditions, whether you are insured or uninsured loses meaning. Those of us who are buying insurance will pick up the tab. Of course, with a fine of 2.5% of income, that means that it’ll be the high earners who are footing the bill once again. Another massive wealth transfer.

    Almost makes you not want to break your back creating wealth. Wait. What country am I in?

  • Jeff D said,

    Marc, I would go one step further on you predictions. Not only will Obamacare not help, but it will make the crisis worse. I would bet that each of your five metrics actually deteriorates by the year 2014. There will be more people without health care than present, Insurance premiums wil continue to grow (at a higher rate than the current rate), etc.
    The reason for this is simple. The cost of health care, health care premiums, and coverage can not be contained by the normal rules of supply and demand. Here are some of the major contributions to the market distortions that Obamacare does nothing to address. Can you think of any others?
    -Medical practices are not bound by normal market pricing rules. No doctor will ever give you an estimate for his services, and patients have no recourse when doctors price gouge. Once you enter the care of a physician you have little opportunity to turn down a service, especialy if you are under anaesthesia. This unethical practice is supported by the insurance companies, who typically negotiate prices down to a level that is still inflated after the negotiations are done.
    -Hospitals are not allowed to deny emergency services to anyone, even if they can not pay. Frequently these emergency services could have been handled at a lower cost if the patient went to the appropriate clinic.
    -There are large barriers to entry into the medical field. These supply-side barriers to competition are supported by current statutes.
    -Medical malpractice lawsuits have no realistic bounds on the magnitude of setlements.
    -Drug companies are over-protected and under-punished, and have too little competition, resulting in overpriced prescription medication and the ongoing costs of bad drugs being passed on to the consumer.
    -Insured individuals pay little attention to the cost of their treatment, and to the cost/risk/benefit decision. Doctors are incentivised to provide the treatment with the highest cost.

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