Obamacare Bailout of Health Insurers

“House Republicans floated the idea Friday of demanding that the White House agree to end programs designed to assist insurance companies selling policies as part of the new health-care law in exchange for raising the debt ceiling for one year, according to a GOP lawmaker and senior leadership aides.”

“Under one scenario discussed Friday morning at the House GOP's annual policy retreat held on Maryland's Eastern shore, Republicans would agree to extend the debt limit for one year, but demand that there be "no bailouts for insurance companies under Obamacare," the lawmaker and aides said. House Majority Leader Eric I. Cantor (R-Va.) and House Budget Committee Chairman Paul Ryan (R-Wis.) described to colleagues how this scenario could play out and conservative lawmakers in the room seemed supportive of the idea, including Rep. Michele Bachmann (R-Minn.), who spoke up in support and offered to help whip up support for the plan among Republicans.”

“Concerns about a so-called "Obamacare bailout" have emerged in recent days, especially on conservative op-ed pages. The term is generally used to describe three programs in the health-care law — two temporary and one permanent — that make it less financially risky for health insurance plans to sell on the new exchanges. The term also is sometimes used to refer to one specific program in the health-care law known as "risk corridors" that limit both the amount of money that a health insurance plan can make and lose during the first three years it is sold on the new health-care exchanges established by the law.” - House Republicans might propose canceling ‘Obamacare bailouts’ to raise debt limit, Washington Post, 01/31/2014

Link to the entire article appears below:

http://www.washingtonpost.com/blogs/post-politics/wp/2014/01/31/house-republicans-might-propose-canceling-obamacare-bailouts-to-raise-debt-limit/

ObamaCare 1.0 vs. ObamaCare 2.0

Regardless of one’s politics regarding ObamaCare, one might want to examine the 2001 essay by Milton Friedman entitled How to Cure Healthcare. A link to the entire essay appears below.

One thread you will notice in Friedman’s essay is the role of government in health-care and the escalation in the price of health-care associated with the increased government intervention in health-care from World War Two to present. That is to say, politicos through the mechanism of government have played a very large role in what is now presented to you as the current health-care system. The health-care system and price you see today is in fact, to a very large degree, a summation of politico policy over the last 70 years.



“We have become so accustomed to employer-provided medical care that we regard it as part of the natural order. Yet it is thoroughly illogical. Why single out medical care? Food is more essential to life than medical care. Why not exempt the cost of food from taxes if provided by the employer? Why not return to the much-reviled company store when workers were in effect paid in kind rather than in cash?

The revival of the company store for medicine has less to do with logic than pure chance. It is a wonderful example of how one bad government policy leads to another. During World War II, the government financed much wartime spending by printing money while, at the same time, imposing wage and price controls. The resulting repressed inflation produced shortages of many goods and services, including labor. Firms competing to acquire labor at government-controlled wages started to offer medical care as a fringe benefit. That benefit proved particularly attractive to workers and spread rapidly.

Initially, employers did not report the value of the fringe benefit to the Internal Revenue Service as part of their workers’ wages. It took some time before the IRS realized what was going on. When it did, it issued regulations requiring employers to include the value of medical care as part of reported employees’ wages. By this time, workers had become accustomed to the tax exemption of that particular fringe benefit and made a big fuss. Congress responded by legislating that medical care provided by employers should be tax-exempt.” (1)

Upon reading the entire essay a clear question begs asking: the summation of politico policy over the last 70 years has brought you a government intervention health-care system that is broken..... and like so many politico arguments before, the broken politico-government intervention system can be only be corrected by additional politico-government intervention? Is not the argument one of political dupery [again]?

Stated alternatively, the 70 years of politico policy, the summation thereof, regarding health-care might be entitled ObamaCare 1.0 and the current legislation is merely ObamaCare 2.0. That the summation of failed politico-government interventionist policy - will somehow, someway - be solved by more/additional failed politico-government interventionist policy. It’s merely the same song with a different beat regarding the old and worn out argument of: it will be different this time.

Government is the only enterprise on earth, that when it fails, it just does the same thing over again, just bigger. - Don Luskin


Link to the entire essay appears below:

http://www.hoover.org/publications/hoover-digest/article/7298


Notes:

(1) Milton Friedman, How to Cure Healthcare, 2001, Hoover Institution, Stanford University.

　

The Socialized Medicine Scheme: the Compulsory Auto Insurance Argument

If you look at the 09/21/2009 post on The Last Embassy you will see a discussion entitled The Socialized Medicine Scheme: now its like Auto Insurance?

http://thelastembassy.blogspot.com/2009/09/socialized-medicine-scheme-now-its-like.html

The post discusses the fallacy in the argument that compulsory health insurance and state mandated compulsory auto insurance are one in the same. The argument was put forth in some circles, then consequently used as a “talking point” by Mr. Obama in regards to the “obligation” to purchase health insurance being the same as the “obligation” to buy auto insurance. The fallacy of the argument is the failure to understand the obligation aspect of the insurance.

However, the argument has taken on a new dimension.

When health-care reform (aka health insurance reform) is debated you'll notice a new argument that the public will be forced/obligated to buy health insurance which is unconstitutional and the proposed penalty for non-purchase is unfair. Under the proposed health-care legislation, failure to buy health insurance results in a significant fine and potential jail time. Forced purchase of any item, including health insurance, is unconstitutional. That the significant fine and potential jail time is a sever penalty on the middle class, and an even worse penalty on the poor.

The rebuttal to the argument is: then you think compulsory auto insurance should not be the law and the public should have no protection?!?

The rebuttal is extremely flawed. Its a complete disconnect. Why is the rebuttal flawed? The flaw is the misconception of the term “obligation”.

Many people think insurance is insurance. That is, that the many types of insurance are basically generic. Hence the compulsory auto insurance state law requirement is exactly like, akin to, and the same as compulsory health insurance.

Compulsory auto insurance laws are required due to the bodily injury and property damage liability arising from the operation of vehicles. That is, the required auto insurance coverage mandated by state law is for the benefit of an exogenous party. Your "obligation" is that of liability to another party.

Health insurance is the exact opposite of compulsory auto insurance in regards to who benefits and what obligation exists. That is, health insurance is purchased for the direct benefit of the policy owner. Health insurance is not purchased for the benefit of an exogenous party. The "obligation" is to yourself. Your failure to purchase health insurance does not create a bodily injury or property damage liability to an exogenous party.

Hence compulsory health insurance being used as a direct comparison to compulsory auto insurance ignores the obligation aspect and the party that benefits from the insurance.

Going back to the rebuttal mentioned above, the failure to buy health insurance has nothing to do with the public protection aspect of the rebuttal argument. There is a clear and major difference between the obligation to the “public” being protected against negligence and the obligation of the “public” being required to buy health insurance for their own benefit.

Health insurance has absolutely nothing to do with public protection against negligence. That is, within compulsory auto insurance the public protection element is negligence and the public’s recourse is the insurance. In health-care/health insurance reform and consequently the argument for compulsory health insurance, where is the public protection element? The public suffers no negligence and hence does not need insurance as a recourse for negligent acts.

Hence the rebuttal mentioned above, then you think compulsory auto insurance should not be the law and the public should have no protection, holds no water as the "public protection" aspect is confused in regards to the separate and distinct points of obligation to the public and the obligation of the public.

Therefore, compulsory auto insurance and compulsory health insurance are two separate and distinct concepts that are most comparable in their many differences and very few similarities.