Boomers And Health Care Reform Costs

Those unintended consequences of all major Federal social legislation will always emerge from the woodwork.  The recent health care reform is no different.  Regrettably those unforeseen consequences always cost more money, never less money.  If someone has an example where it cost less I am all ears.  Inform me.  There will be many that will arise from the health care that will carry an enormous financial burden.  It is hard to say what all of them will be but there is one that is there already that will add billions and billions to the costs for the health care and the health insurance companies and the government obligations undertaken with the new bill.  Just like with Fannie and Freddie the government has given an implicit guarantee of the costs even if not directly.  As insurance companies fold the company will take them over or bail them out to keep the program in place rather than letting it fail.  It is a program “too big to fail”.  Consider the consequences for the elderly and those Boomers quickly reaching the age to go on Medicare.

By now you are familiar with the mandate provisions of the health reform act.  If you don’t have health insurance you are subject to a fine of $695 or 2.5% of your income whichever is greater.    For now we will assume that provision passes Constitutional muster which it should not under the Tenth Amendment, the commerce clause and the Fifth Amendment.  There has already been substantial discussion that  the young and healthy will opt to pay the penalty rather than the cost of insurance which is indeed a very good assumption because it will be cheaper.   Soon the act will eliminate all pre-conditions for acceptance by the insurance companies.  The young will simply wait until they get sick or have an accident and then make a quick call and sign up for coverage.  After their treatment they will drop the coverage again and go back to paying only the penalty.   This behavior will have a very negative effect on the revenues and profits of the insurance carriers.  If it depletes the revenues so badly they no longer can make a profit then what is the point of being in the insurance business?   They will bow out and in walks Government, Inc.  
The young doing this by themselves might not be enough to bring down the insurance companies but they are small fry compared to what will be happening with the elderly and the Boomers.

At age 65 you sign up for Medicare.  You are dumb not to because they have taken your money for years for the program and you are “entitled” to it.  As I have said before I would be happy not to be involved with Medicare at all if the government would simply give me back my money at only 2% interest for the 40 plus years I have been paying into the damn thing and I will take care of my own health insurance needs.   When you sign up they also will automatically take the premiums out of your Social Security check.  You have no choice in the matter it is automatic.   The result is that all these old folks have medical insurance and are not subject to the penalty of the new act.  They are not required to do anything else.  The overwhelming majority of these people also have a supplemental policy to cover those expenses not covered under Medicare.  That market is huge, very huge.   In case you haven’t noticed the elderly have many more medical problems than the young and their medical expenses are astronomical compared to the 30-somethings.   We are expensive to maintain in the health system.  The most expensive demographic group by far.

When the program is fully implemented in a couple of years you will see millions of the elderly do just what I am going to be doing.  They will immediately drop their supplemental coverage.  They will have their Medicare and suffer no penalty.  When me or the little lady gets sick and needs one of those $50,000.00 pacemaker surgeries, we will immediately call the insurance company and sign up on the way to the hospital.  We’ll pay about 2 or 3 months of premiums.  When the surgery is complete we will drop the coverage again.  We pay a few hundred dollars in premiums and get that expensive surgery with the Medicare and the supplemental policy.  Even when they cut back on the Medicare benefits we’ll have the coverage under the supplemental policy.  It should come as no surprise that not just a few but millions of people will be doing this.  Of course will all the Boomers coming along the numbers will be staggering.  The insurance companies won’t be able to sustain those losses for long.  The losses will be big.  The insurance companies will stop offering supplemental coverage.  Then who will take up that slack?   Good ole Government, Inc. again.   I mean what politician is going to allow old grandma to expire for lack of a pacemaker?   If you doubt what I have posited I suggest you check out the bill and use your own common sense about the way human nature works.  Who is going to pay for years maybe for supplemental coverage when they are guaranteed to get it on the way to the hospital or after the doctor has given the bad diagnosis.   I don’t know how this issue will be handled but it won’t be pretty and it sure won’t be cheap.  Someone should get the CBO to score that one.  To think it won’t happen is delusional.  I for one will cancel my supplemental the month after I am guaranteed coverage regardless of whether or not I am in the hospital; they have to take me.  Like to see the business plan that projects profits on that kind of model.

It should give everyone pause to realize that in the last couple of weeks that the credit worthiness of the US has plummeted so low that some large corporations are paying less interest for their borrowed funds than the US.  The two-year US treasury bill now pays more interest than Abbot Labs, Berkshire Hathaway, Johnson and Johnson and a few others.  Think about that one for a while.  The implications are not good.   http://www.olcranky.wordpress.com

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Filed under business, Economics, government, Politics, Socialized Medicine

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