Upon Further Review: The ObamaCare Argument of Private Health Insurance Monopolies Rebuked

Please recall for a moment an argument used during the ObamaCare debate: There is a serious lack of competition among health insurers within the differing and several states. That is, the debate point implicitly and explicitly alluded to many [if not all] states having one insurer dominating the market. Examples such as Hawaii, Maine, Vermont, Alabama and Arkansas were mention where one insurer controls 70% or more of the market place . That more competition was needed and government provided health insurance would create a competitor.


Upon further review, the argument/debate point mentioned above made for a good story albeit fantasy. As the story goes, a monopoly exists [the villain] and the white knight on the stallion [politico through the mechanism of government] will charge in and vanquish the evil doer. Problem is, the statistics used to frame the monopoly position of particular private insurers, and the supposed lack of competition thereof, is incorrectly portrayed and merely so much political theater. How so? (1)


The Obama Administration and other advocates of government provided insurance used a single study made in 2008 by the American Medical Association (AMA) entitled Competition in Health Insurance to frame their argument of the existence of wide spread private insurance monopoly in the differing states. Problem is, the study based its statistical outcomes on less than one half of the health insurance market.  Ops! That is, the study did not include employer provided coverage that are self insured plans. 

Not included in the study were plans where the firm acts as the insurer through self-insurance and pays the bills from the firm’s resources. The self-insured plans hire an administrator (many times an insurer) to handle the every day administration of the plan such as claim payments, enrollment processing, etc. however the firm itself acts as the third party payer i.e. the insurer. Employer provided self insured plans make up over half, approximately 55%, of the health insurance provided in the United States. (2) (3)


Economist John R. Lott, Jr. crunched the numbers and found that the 70% (or even higher claim) of the market controlled by a single company in the differing states is really 36 percent when the entire insurance market is taken into consideration:


“We can look at the 43 states for which the AMA compiled data ranking them with market share held by the two larges insurance companies. That pattern is fairly similar. On average, over 53 percent of people with insurance in those states get their insurance from companies that self-insure. For Alabama, instead of the “[Obama] almost 90 percent is controlled by just one company,” as the president claims, the correct number is just 36 percent. And the second-largest company has 2.1 percent of the market.


Even with the “almost 90 percent” number, it is worth noting that the president rounded that up from the actual share in the full insurance market of 83 percent. The president just wasn’t happy to claim that the largest insurance company in Alabama had an 83 percent share when the right number was 36 percent, but he had to go further and raise it to “almost 90 percent”. On top of that, in his attacks on for-profit insurance companies, he couldn’t even acknowledge that Alabama’s largest insurer was a non-profit company [Blue Cross Blue Shield].” (4)

Notes:


(1) President Obama, weekly address, 08/22/2009,

http://www.whitehouse.gov/the-press-office/weekly-address-president-obama-debunks-phony-claims-about-health-reforem-emphasizes-

　

(2) American Medical Association, 2007, “Competition in Health Insurance”,


http://www. Ama-assn.org/ama1/pub/upload/mm/368/comp study_52006.PDF


(3) John L. Lott, Jr., Debacle, pages 141-145


(4) John R. Lott, Jr., Debacle, page 143.

　

　

Norquist and Lott from the book Debacle: are you better off after $53,000+ of additional debt?

In the book Debacle by Grover Norquist and John R. Lott, Jr. the authors on many occasions examine statements by New York Times columnist Paul Krugman and disprove his statements with empirical evidence. On pages 109 - 111 of Debacle, Norquist and Lott disprove Krugman yet again regarding Krugman’s 02/25/2011 assertion that “…the size of the deficit in the next year or two hardy matters or the U.S. fiscal position.…and in fact the size over the next decade is barely significant.”  (1) (2)

Moreover, they make an observation of the share of the national debt based on an average family basis. That the share of national debt on the average family went from $87,000 to $140,000 so far (that was at the $11 trillion national debt level) under Obama and the $140,000 will balloon to $186,000 by 2016. That puts the numbers in a more digestible form [trillions can be difficult to comprehend].

They then take the above observation and go back to the last budget proposed by Bill Clinton. They take Clinton’s budget; project it forward to the 2012 budget year by adjusting for inflation and the growth in population. The result? A $70 billion surplus in 2012.  That makes for an eye opening comparison of what has happened over the last 12 years with the major ramp up in national debt occurring during Obama Administration.

But they don’t stop there. They pose this question [paraphrasing]: Ask yourself if all this new debt [your family’s share increasing from $87,000 to $140,000], which basically comes in the form of government spending, has greatly improved your life? Good question. That is, if your family’s share of debt went up $53,000, can you say you have experienced $53,000 worth of value? Stated alternatively, are you $53,000 better off?

Notes:

(1) Paul Krugman, New York Times, Feb. 25, 2011

(2) Paul Krugman, “The Arithmetic of Near-term Deficits and Debt”, New York Times, August 6, 2011

04/06/2012 Jobs Report: The Unemployed vs. The Employed and the Further Rise of the Discouraged Worker

The Friday 04/16/2012 jobs report is not a report that one would associate with a strengthening economy. However, it does follow the trend regarding the official end of recession 06/2009 when total number employed was 140 million, remaining roughly the same number employed today.....three years later. Yes, 140 million employed 06/2009 and 140 million employed today. Job creation? Nada! (1) (2) (3)

The jobs report showed 164,000 more leaving the work force. Yes, 164,000 more discouraged workers added to the army of 4.5 – 5 million already discouraged workers [left the work force]. Further, as has been pointed out many times, if a robust economy was perceived, the denominator of the formula regarding unemployment would be flooded by discouraged workers returning to the work force if they sensed a growing economy producing job opportunities. Hence an increasing unemployment rate would occur before a declining unemployment rate. Add in the "churn rate", those workers trading up to a better job at an all-time low, you end with a rather disturbing picture.

At the current trend of discourage workers leaving the work force, the unemployment rate is going to drop to 0.00% with 600 standing divisions of discouraged workers.

A disturbing picture? Oh it gets much better. Forward earnings, a forward looking predictor of economic activity, has been turning downward for months. If one removes Apple from the forward earnings picture the scene becomes onerous. (4)

Notes:

(1)    Jobs Indigestion, Earnings in Coming Week, The Street, 04/07/2012. http://www.thestreet.com/story/11486447/1/jobs-indigestion-earnings-in-coming-week.html?puc=_btb_html_pla5&cm_ven=EMAIL_btb_html

(2)    March jobs report: Hiring slows, Unemployment falls, CNN Money, 04/06/2012.

http://money.cnn.com/2012/04/06/news/economy/jobs-report-unemployment/index.htm

(3)    Debacle, Norquist and Lott, page 24.

(4)    S&P500 Q4 Profit Margins Decline By 27 bps, 52 bps Excluding Apple, Zero Hedge, 02/18/2012. http://www.zerohedge.com/news/sp500-q4-profit-margins-decline-27-bps-52-bps-excluding-apple

Five Stimulus and Jobs Bills: Measuring the Abysmal Keynesian Results

'Even before the 2010 midterm elections, with Democrats controlling massive supermajorities in both the House and Senate, President Obama had passed five stimulus and jobs bills. If you add up the promises, he boldly promised well over 5.5 million jobs “created or saved.” But reality turned out very differently: There were 2 million fewer people working in September 2011 than when Obama took office. On top of that, population growth by itself should have generated more than 3 million new jobs.'

'By the end of the summer, in August 2011, the unemployment rate was still at 9.1 percent. It was no longer possible to claim the Stimulus had worked well. Obama claimed that the sluggish economic growth wasn’t the fault of his own economic policies; it was the fault of other circumstances that he had no control over. It was either events outside the United States or the irresponsible political behavior of others in Washington. Obama claimed:

"In the last few months, the economy has already had to absorb an earthquake in Japan, the economic headwinds coming from Europe, the Arab Spring and the [rise] in oil prices—all of which have been very challenging for the recovery. But these are things we couldn’t control. Our economy didn’t need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It’s pretty likely that the uncertainty surrounding the raising of the debt ceiling—for both businesses and consumers—has been unsettling, and just one more impediment to the full recovery that we need."

There are a couple of problems with his argument. Economic growth had already ground to a halt during the first three months of 2011—with GDP growing by just 0.1 percent. This was well before the Arab Spring, the renewed debt crisis in Greece and other countries, and the July and August 2011 debate over the debt ceiling. And whatever the impact of the March 2011 earthquake, its initial impact during the first quarter in the United States would have been very limited. The president also blamed Republicans for not passing his new legislation when they took over the House of Representatives in January 2011. But with Democratic supermajorities in both the House and Senate for the two previous years, it is pretty hard to blame for the slow growth in the first half of 2011.

In addition, it seems a little hard to blame the Japanese earthquake for our poor unemployment rate when the Japanese unemployment rate fell and ours rose in the five months following the earthquake. Nor is it clear how we can blame “economic headwinds” from Europe when our unemployment rate from January to August 2011 rose while it fell for European countries such as Germany, Italy, and Sweden and stayed the same in France.'

'No matter how you cut it, 3 million jobs have not been added since the recession ended. The recession officially ended in June 2009, and at that time 130.49 million people held jobs according to the Bureau of Labor Statistics’ Establishment Survey. The numbers for September 2011 show 131.33 million, an addition of just 840,000 jobs. But with the working-age population having grown by 4.6 million people in the same period, this should be viewed as a miserable failure. Furthermore, out of the 840,000 additional jobs, the vast majority—540,000—were merely “temporary help” service jobs.' - Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future, Grover G. Norquist and John R. Lott, Jr.

The entire excerpt from the book Debacle: Obama's War on Jobs and Growth and What We Can Do Now to Regain Our Future can be read at the following link:

http://www.foxnews.com/opinion/2012/03/15/read-excerpt-from-john-r-lott-jr-and-grover-g-norquists-new-book-debacle/

More Guns, Less Crime: Understanding Crime and Gun Control Laws, John R. Lott, Jr.

Dr. John R. Lott, Jr. professor of economics, wrote the book More Guns Less Crime, Understanding Crime and Gun Control Laws. The book is now in its third edition. (1)

The book is extremely enlightening regarding gun control measures and increases in crime and conversely the removal of gun control measures and the reduction in crime. A very interesting topic is the major drop in violent crimes as well as other crimes regarding conceal-and-carry.

One needs to examine conceal-and-carry and how it relates to the economic proposition of the “free rider effect”.

When conceal-and-carry laws are enacted, those that want to commit crime are now faced with who in fact does have a concealed weapon. For example, if A, B, and C are walking along, who has the concealed weapon? A? B? C? All? None? Just one? Hence would-be-crime-committer Z is faced with a dilemma-deterrent in that Z may be completely out gunned, may be facing gun to gun, or may be the only gun. Which is it?

Consider A, B, and C now dispersed to different locals. Would-be-crime-committer Z remains faced with a question: is a concealed weapon involved?

In both cases, assume C does not have a concealed weapon nor does C ever intend to carry a concealed weapon. Hence C becomes the “free rider” of those with the concealed weapon as would-be-crime-committer Z has no idea who is, and who is not, carrying a concealed weapon. Hence C becomes less of a crime target as C may -or- may not be the concealed weapon carrier….and in this case C is not with weapon but free rides on A and B that cause the free rider effect for C.

The book is extremely comprehensive as Lott collected enormous amounts of data. More guns....less crime. Rather counterintuitive but none the less true.

A link below is to a 06/17/2010 discussion panel at the CATO Institute with Dr. Lott representing the position of more guns, less crime and the Brady Campaign to Prevent Gun Violence representing those in favor of gun control. The discussion is enlightening:

http://www.cato.org/event.php?eventid=7235



Notes:

(1) More Guns Less Crime, Understanding Crime and Gun Control Laws, John R. Lott, Jr., University of Chicago Press, 3^rd Edition, 05/15/2010.

http://www.barnesandnoble.com/w/more-guns-less-crime-john-r-lott/1102826787?ean=9780226493664&itm=1&usri=more+guns+less+crime+john+lott