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Category Archives: Health Care Insurance

In his article Why Governments Can’t Run a Business Gordon raises many good issues, but Mr. Gordon here is a reminder and rebuttal to each of your points:

1. Governments are run by politicians, not businessmen.
Quite obviously I do not know how you would define businessmen. Remember, Worldcom, Enron, Arthur Andersen, Merrill Lynch, Morgan Stanley, AIG…

2. Politicians need headlines.
Using the examples above I can understand why businessmen don’t like headlines.

3. Governments use other people’s money.
How do banks get their funds?

4. Government does not tolerate competition.
Have you forgotten Standard Oil?

5. Government enterprises are almost always monopolies and thus do not face competition at all.
Oh wow, if cutting cost is alien to the culture of all bureaucracies, then private medical insurance must be free by now, right?

6. Successful corperations are run by benevelont despots.
Sorry, I forgot GM had over-looked 50 years of losing market share.

7. Government is regulated by government.
Have you forgotten what happened to Wall St in 2008 with minimal regulation?

 

My point is, blaming the other side either overtly or covertly, is not going to help America.

Benjamin T Solomon
Managing Principal
QuantumRisk LLC

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Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.
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I attended the West Chamber of Commerce Health Care Community Forum as part of the Obama-Biden Transition Project. It got me thinking about the cost of health care.

Here are some of my findings:

1. Based on my experience, between 2001 and 2008 employer’s healthcare payments have gone up by 2.2x in just these last 6 years. (This figure correlates with other people’s findings).

2. In real dollar terms this is around $1,350 per employee (with a family of three) or $16,200 per annum.

3. The 2006 Average Median Household Income was $49,568 (more).

4. COBRA is ineffective. See Washington Post article, COBRA Too Costly for Many Unemployed, Report Finds.

5. Small businesses accounted for 99.7% (2006) of US employer companies, and 50.9% of the US non-farm private labor force of 58.6 million people (more).

6. In 2006, the estimated average annual salary of a small business employee was $31,049.

7. The average US household size is 2.6 and average family size is 3.19 (more). For rough calculations we can continue to use a family size of 3.

8. Between 1997 and 2006, the proportion of the uninsured US population has hovered between 14.2% (1999) and 15.4% (1997). more 

9. Between 1997 and 2006, however, the proportion of under 65 insured by private insurance has steady gone down from 73.1% (1999) to 66.5% (2006). That is approximately a whopping 10%.

10. The usual trends presented tend to be related to age (CDC Data), that younger people tend to be uninsured.

Here are my thoughts:

1. The 2008 health insurance costs to the small business employer is on the order of 30% of an employees’ salary.

2. Cobra is ineffective, because almost no small business employee who has been laid off can afford it. This is because as soon as the employee is laid off his expense burden increases by 30% if he or she want to continue with the medical benefits.

3. We have to ask oursleves some very hard questions:
3.1 Was there a 2.2x increase in accidents or diseases in the US to account for this 2.2x increase in health costs? No.
3.2 Was there a 2.2x increase in the non-employable senor citizen population in the US? No.
3.3 Did the number of uninsured in the US increase by 2.2x over these last 6 years? No.

The politically incorrect & uncomfortable answer is that health insurance costs increases were not due to the underlying population demographics or the economic condition of the US in general.

4. More and more Americans are opting out of private health insurance plans, at the rate of 1.5% per annum, not taking into account the effect of the 2007-2009 recession, which should substantially increase the uninsured in 2009.

5. Though age trends are very interesting they miss a very important underlying correlation, that income is highly correlated to age. Quite possibly the age correlation is symptomatic of earnings, and not an independent factor in itself.

6. If age is not the right factor can income be correlated to proportion of insured? I could not find this data, but looking at incomes as a ratio of poverty levels, there is an important relationship. The average private insurance level between 1997 and 2006, by poverty category shows that there is a strong relationship between income and proportion insured. The CDC data shows the proportion insured, of Poor (23.5%), Near Poor (47.2%) and Not Poor (86.5%).

7. That is private health insurance only works in a society when this insurance is not a significant chunk of disposable income. That means we have to get back to affordable health insurace costs. Say $100 per month?

8. The opt out rate is an exponential function, and therefore it would be reasonable to expect, that this 1.5% per annum rate, will substantially accelerate with the passage of time if nothing is done to address runaway health insurance premiums.

9. Don’t be surprised if the proportion of Americans below 65 yrs. with private medical insurance drops below 50% by 2020.

10. I suspect that the private medical insurance industry is therefore in a bubble of it own making.

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Disclosure: I’m a capitalist too, and my musings & opinions on this blog are for informational/educational purposes and part of my efforts to learn from the mistakes of other people. Hope you do, too. These musings are not to be taken as financial advise, and are based on data that is assumed to be correct. Therefore, my opinions are subject to change without notice. This blog is not intended to either negate or advocate any persons, entity, product, services or political position.
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