Saturday, June 1, 2013

ACA: a price rocket -or- Wernher Von Braun warned of such launch pad explosions.

An item of ACA that escapes discussion is "fully reserved". That is, private insurance must reserve for future losses. However, social insurance, in the main, the "reserve" thereof, is implicitly and explicitly assumed to be the political authorities ability to coercively tax. Historical experience tells one, in no uncertain terms, that social security type plans with a quasi-reserve such as a trust fund do not reserve for future loses rather they raise taxes in that the tax functions/substitutes as the reserve.
Another item to consider is, in the aggregate, experience tells one that social insurance schemes are generally way too rich in benefit design based upon an extremely under estimated price.
Regarding ACA, the schemers have created a design that has the attributes of a social insurance plan yet the insurance mechanism is privately insured. Unlike U.S. Social Security and Medicare which have paper tiger trust funds [or worse in that the dupery of being one's own debtor and creditor is at work] and escalating historical tax rates, ACA is underpinned with a real tiger reserve [private insurers] and hence escalating premium rates. Stated alternatively, the premium rates will mirror the escalating tax rates of general social insurance schemes yet escalate even more as the future losses must be reserved and those reserves based upon ever escalating price. No hiding behind unfunded future liabilities.

Consider for a moment that Medicare had been originally designed based on the ACA design. For example, circa 1965 to today there would be no such item as unfunded liabilities. All future losses would have to be reserved [private insurance mechanism]. Exactly what kind of insurance premium would one currently face and would have faced between 1965 and today?

Would it be the current zero price per month for part A and $100 per month for part B? The only way part A could remain at a zero price would be to have an extreme escalation in the payroll tax and part B's price would need to increase substantially as well.

Moreover, if such program had been fully reserved all along, then there would be no need to massively escalate price today as that mass escalation would have occurred over time [1965 - 2013]. The price, if fully reserved, would have been a bone of contention, politically speaking, during the vast majority of Medicare's life span.

In essence, there is no bending the cost curve in ACA. The curve is now fully priced for escalating price based upon too rich of a benefit design AND fully reserved for the price today and escalating price of tomorrow. No hiding behind paper tiger trust funds and unfunded future liabilities. Moreover, ObamaCare taxes will need to rise as well to subsidize the escalating price of certain groups selected for subsidization.

As with all social insurance schemes price containment will end in cutting benefits and/or price control schemes that will merely exastrobate the situation.
**note** how many times and in how many ways does one see/hear the basis regarding  the future viability of collective action as "the political authorities ability to coercively tax."

How many programs, when challenged on viability, are defended by "the political authorities ability to coercively tax." The nitwitery of the argument is that if all programs had to call in their marker regarding  "the political authorities ability to coercively tax" then the tax rate would be 101% which means there would be no economy as no tax at 101% can exist.

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