In the State of the Union Address, the President stated, "But if anyone from either party has a better approach that will bring down premiums, bring down the deficit, cover the uninsured, strengthen Medicare for seniors, and stop insurance company abuses, let me know. Let me know. Let me know. I'm eager to see it." Well, here is a start.
Let's begin with the premise that all insurance in operated in the same fashion. Actuaries (ultra numbers crunchers) determine premium rates by the propensity for the company to incur a loss on the account. It doesn't matter if they are insuring a car, boat, life or health of an individual or group.
1) How do you bring down health insurance premiums?
Do you have difficulty finding affordable auto insurance? No? Neither do I. Neither to any of the untold number people with the pr-existing condition of being a truly horrible driver. Companies are in fact clamoring in competition for the privilege of insuring them and offering "accident forgiveness".
Do you have difficulty finding affordable life insurance? No? Neither do I. There are many A+ rated insurance companies offering the lowest term life insurance rates in decades.
Is it necessary to purchase either one of these forms of insurance through your employer? No. A larger group plan may offer lower premiums because the insurance companies risk is dispersed over more account holders, but it is not necessary because those who provide this insurance must compete for the business. Why do we continue to hinder the competition that will bring down premiums by remaining committed to employer sponsored health care? It is a good question to ask both parties.
2) How can we bring down the deficit, cover the uninsured, strengthen Medicare for seniors?
It merely takes a rudimentary knowledge of how insurance works. Using auto insurance as a metaphor, drivers with the pre-existing condition of being a really, really bad driver can't get affordable insurance on their own. In some states the Insurance Commissioner establishes a Joint Underwriters Association that insures these poor driving challenged individuals. It is a "pay to play" system where if the insurance companies want to do business in that state, then they will pool together to insure those that are otherwise un-insurable. For doing this, they are permitted to conduct business in the state. However, in health care, the un-insurable are relegated to the Medicare and Medicaid roles. Simply stated, the insurance companies will cover these costs for the right to make money on the millions of other policies they can write. Let's see:
This will reduce government spending on health care and hence lower the deficit. (Check)
This will help the uninsured become able to be insured. (Check)
With less money spent, this will free funds for seniors on the Medicare roles. (check)
Does the implementation of this get a little more complicated? Yes, but not nearly as complicated as our current system of coverage. See these links for further explanation of JUA's and their applicability.
Friday, January 29, 2010
Tuesday, January 26, 2010
Ebb and Flow
The special election, and subsequent misreading of the vote, reinforces my theory that the greatest failure of the educational system in this country is the lack of emphasis on the subject of economics. Even a rudimentary knowledge of markets and the ability to identify how these concepts apply in areas not often seen as having market characteristics would serve our electorate, and apparently our elected officials, greatly. Whether recognized or not, markets are in a constant state of correction. like a pendulum swinging back and forth, the political climate will correct itself when the body politic strays too far to the left or right. Any drastic movement is sure to be followed by an equally drastic correction.
What happened in Massachusetts was that the silent majority of independents had finally been awakened to the relatively recent and hard shift to the left in American politics. Prior to the election, my concern was that the Republicans would misread a victory in Massachusetts as an affirmation of their body of work rather than a correction, or rebuke, of the aggressive progressive movement. To my surprise, it appears that the Democrats are, at least publicly, misreading and excusing the results as an anomaly. The day after the election, someone on NPR stated that the electorate was simply having anxiety about the current economic situation rather than ideologically opposed to progressive ideology and socialization. When the independents feel that the left is moving too close to socialization, or the right is moving too close to legislating individual morality, the electorate will issue an electoral spanking much like the one we saw in Massachusetts.
Remember, Massachusetts is at most 15% registered Republican and at the federal level the majority of both legislative houses of Congress and the Presidency are firmly held by the Democrats. It is patently obvious where the backlash is coming from and it is related to an opposing ideology.
What happened in Massachusetts was that the silent majority of independents had finally been awakened to the relatively recent and hard shift to the left in American politics. Prior to the election, my concern was that the Republicans would misread a victory in Massachusetts as an affirmation of their body of work rather than a correction, or rebuke, of the aggressive progressive movement. To my surprise, it appears that the Democrats are, at least publicly, misreading and excusing the results as an anomaly. The day after the election, someone on NPR stated that the electorate was simply having anxiety about the current economic situation rather than ideologically opposed to progressive ideology and socialization. When the independents feel that the left is moving too close to socialization, or the right is moving too close to legislating individual morality, the electorate will issue an electoral spanking much like the one we saw in Massachusetts.
Remember, Massachusetts is at most 15% registered Republican and at the federal level the majority of both legislative houses of Congress and the Presidency are firmly held by the Democrats. It is patently obvious where the backlash is coming from and it is related to an opposing ideology.
Tuesday, January 19, 2010
Health Care Reform: Making Madoff Look Like An Amateur
This thought occurred to me some weeks back when the left in this country was making the case that the failure to socialize the health care industry is bankrupting this country. My immediate thought was that the current state of Social Security, and its unfunded liabilities, is doing much more to damage this country's financial position. It was then it occurred to me that they view these two issues as one and the same, inextricably joined at the hip (or wallet as the case may be).
By now nearly everyone is familiar with the name Bernie Madoff. He was the architect behind a Ponzi scheme that defrauded investors out of an estimated $65 billion dollars. By definition, a Ponzi scheme refers to an investment that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering, or guaranteeing, returns that are either abnormally high or the security of unusually consistent payments. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. Although the intention of the Social Security System is for the most part altruistic, it is unfortunately structured and has been operated no different than any other Ponzi scheme. The only difference being the size of the scheme, as Social Security had unfunded obligations in excess of $41 Trillion in 2008 according to the Government Accountability Office.
There are those who claim that Social Security is not a Ponzi scheme simply because it:
1) Social Security does not propose high returns
As stated, Social Security does offer the security of unusually consistent payments because it is backed by the full taxing power of the United States Government.
2) Social Security is not destined to end.
Ponzi schemes end when there is a population bubble where the influx of new investors’ money exceeds the population of those drawing benefits or returns. With the Baby Boomer Generation drawing benefits, we are experiencing that right now.
3) Social Security is altruistic in its intent.
Touche’. However, if it is structured and operated like any other fraudulent scheme, does it really matter whether or not a fraud is intended to be so?
This is where the current Health Care Reform comes into play. Without admitting yet another government program failure, Social Security is cash negative and can only be salvaged by:
1) reducing promised payments and/or increasing the tax withholding of those paying into the system
Reducing payments, or increasing the tax withholding, would be a de facto admission that the program is fatally flawed.
or,
2) increasing the number of people paying into the system.
With unemployment currently over 9%, encouraging further immigration of working age people is not an option.
The only realistic option to perpetuate this program without admitting it is no different than any other Ponzi scheme, is to legislate additional dollars from another source. With health care making up between 15% and 20% of the US economy, this is the magic elixir for those who seek to expand the role of government. What Health Care Reform amounts to is an ass-backwards attempt to float the Social Security System through the life expectancy of the Baby Boomers in the hopes that it will once again reach a point where those paying into the system outnumber those drawing benefits.
Of course this comes at the price of liberty. Unfortunately this is a price that about 50% of the US population appears willing to pay. With that ratio, as with the Ponzi scheme, it is doomed to failure. The salvation will be the natural ebb and flow of ideology between government and individual responsibility, and government dependence and liberty.
By now nearly everyone is familiar with the name Bernie Madoff. He was the architect behind a Ponzi scheme that defrauded investors out of an estimated $65 billion dollars. By definition, a Ponzi scheme refers to an investment that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually entices new investors by offering, or guaranteeing, returns that are either abnormally high or the security of unusually consistent payments. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors to keep the scheme going. Although the intention of the Social Security System is for the most part altruistic, it is unfortunately structured and has been operated no different than any other Ponzi scheme. The only difference being the size of the scheme, as Social Security had unfunded obligations in excess of $41 Trillion in 2008 according to the Government Accountability Office.
There are those who claim that Social Security is not a Ponzi scheme simply because it:
1) Social Security does not propose high returns
As stated, Social Security does offer the security of unusually consistent payments because it is backed by the full taxing power of the United States Government.
2) Social Security is not destined to end.
Ponzi schemes end when there is a population bubble where the influx of new investors’ money exceeds the population of those drawing benefits or returns. With the Baby Boomer Generation drawing benefits, we are experiencing that right now.
3) Social Security is altruistic in its intent.
Touche’. However, if it is structured and operated like any other fraudulent scheme, does it really matter whether or not a fraud is intended to be so?
This is where the current Health Care Reform comes into play. Without admitting yet another government program failure, Social Security is cash negative and can only be salvaged by:
1) reducing promised payments and/or increasing the tax withholding of those paying into the system
Reducing payments, or increasing the tax withholding, would be a de facto admission that the program is fatally flawed.
or,
2) increasing the number of people paying into the system.
With unemployment currently over 9%, encouraging further immigration of working age people is not an option.
The only realistic option to perpetuate this program without admitting it is no different than any other Ponzi scheme, is to legislate additional dollars from another source. With health care making up between 15% and 20% of the US economy, this is the magic elixir for those who seek to expand the role of government. What Health Care Reform amounts to is an ass-backwards attempt to float the Social Security System through the life expectancy of the Baby Boomers in the hopes that it will once again reach a point where those paying into the system outnumber those drawing benefits.
Of course this comes at the price of liberty. Unfortunately this is a price that about 50% of the US population appears willing to pay. With that ratio, as with the Ponzi scheme, it is doomed to failure. The salvation will be the natural ebb and flow of ideology between government and individual responsibility, and government dependence and liberty.
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