ACA: The Least Wealthy Group, The Young, Subsidize the More Wealthy Group, The Old.

“Experts say the administration has until mid-November to iron out the problems or risk jeopardizing its goal of signing up 7 million people in the first year of the Obamacare marketplaces. The number includes 2.7 million healthy young adults whose participation will help offset the higher cost of insuring sicker and older beneficiaries.” - Obamacare site improves, but new problems emerge, msnnews, 10/16/2013 (1)


“The number includes 2.7 million healthy young adults whose participation will help offset the higher cost of insuring sicker and older beneficiaries.”

Certain political elements make a concerted effort to court young people. This same element, in the main, wants to charge the young to cross subsidize the old in regards to health insurance. Cross subsidization is by no means a new tactic e.g. Social Security and Medicare at this juncture are basically pay-as-you-go with the young paying for the old. But the new tactic is: The blatant advertising of the cross subsidy stratagem.

Hence certain political elements that court younger people with promises of political solutions to economic problems i.e. social justice are advocating the younger subsidize the older. Why wouldn’t each age group merely pay for the risk they themselves represent? Why would the least wealthy group, the young, pay for, in the main, the more wealthy older group? Reverse social justice?

Beyond social justice being a mirage [F.A. Hayek], younger people might want to examine Director’s Law:

Director's law states that the bulk of public programs are designed primarily to benefit the middle classes but are financed by taxes paid primarily by the upper and lower classes. The empirically derived law was first proposed by economist Aaron Director.

The philosophy of Director's law is that, based on the size of its population and its aggregate wealth, the middle class will always be the dominant interest group in a modern democracy. As such, it will use its influence to maximize the state benefits it receives and minimize the portion of costs it bears. (2) (3)

Moreover, a media barrage has begun aimed at the young with the by-line of: you must purchase as it’s the “law”. Is it "law" or is merely manmade legislation created by the stroke of a pen and can be voided by a stroke of a pen? Legislation is top-down edict of the few whereas law is emergent order of the many which emerges over long periods of time. Adding the label of "law" to manmade/mandated legislation of the few, is merely a political attempt to give the weight of law to legislation. (4)

　
Maybe the young, those that feel they are being railroaded, should consider reading Thomas Lambert's, law professor at the University of Missouri, essay entitled How the Supreme Court Doomed the ACA to Failure. Why would the young want to read such essay? The essay includes the quintessential ACA work around of when to pay the tax [penalty] and when to buy the insurance. Lambert offers charts, examples and includes a to-the-point discussion.

The link to Lambert’s essay appears below:

http://www.cato.org/sites/cato.org/files/serials/files/regulation/2013/1/v35n4-5.pdf


　


Notes:

(1) http://news.msn.com/us/obamacare-site-improves-but-new-problems-emerge

(2) Director’s Law

http://en.wikipedia.org/wiki/Director's_law


(3) (4) Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice, F.A. Hayek

http://www.amazon.com/Law-Legislation-Liberty-Mirage-Justice/dp/0226320839/ref=sr_1_7?s=books&ie=UTF8&qid=1381998835&sr=1-7&keywords=f.a+hayek

　   

Obamacare: To Buy or Not To Buy…..use to be the question.

The chart above is Thomas Lambert’s buy/don’t buy matrix regarding Obamacare. The formula finds its basis in: family income, maximum percent of income to be spent on insurance, dollars to be spent on insurance, insurance cost as the percent of penalty, resulting in a “buy”/”don’t buy” likely decision matrix. **

 **The complete essay, How the Supreme Court Doomed the ACA to Failure, The Roberts “tax” ruling undermines the new health care law by Thomas Lambert, law professor, University of Missouri. that yields the buy/don’t buy matrix, appears in the link below:

 www.cato.org/…s/files/regulation/2013/1/v35n4-5.pdf

　

Putting the formula into its action phase, assume a family income of $75,000. You supposedly spend $7,125 on health insurance. You pay the fine and have plenty of money remaining to manage everyday medical expenses. If the year goes by and you remain healthy, which the vast majority of people do, then you are ahead of the game.


However, if disaster strikes, you merely “buy” coverage as no pre-existing condition clause can stop coverage from going into force. Once the disaster passes, you return to the “don’t buy” position.


The matrix surely has nuances and doesn’t work in every last case e.g. chronic condition. However, in the past a rough estimate put forward by pundits and talking heads was that “some people” will not buy Obamacare coverage and merely pay the fine and buy coverage when needed. That proposition may well become “most people” will not buy Obamacare coverage and merely pay the fine and buy coverage when needed. That is to say, the mere fact someone has worked out a “buy” - “don’t buy” Obamacare purchase matrix means it becomes not a “some people” rational decision not to buy, given particular parameters, it becomes a “most people” rational decision not to buy, given particular parameters.

　

　

　

Obamacare “Tax”: How Roberts “Tax” Dooms Obamacare

One of the talking points in the political promotion of the Affordable Care Act (ACA) also known as Obamacare was the attempt to provide health insurance to the vast majority of the estimated 45 million uninsured Americans. Arguments about the ability of an overburdened health-care system to absorb upwards of 45 million more potential patients is a particularly interesting argument. The specter of rationing when price is eliminated as the rationing agent [price fixing scheme of Obamacare and the subsequent outcomes of price fixing schemes] and other arguments regarding the scheme’s viability and implementation are very valid arguments regarding the absorption of upward of 45 million new participants.
 

However, will in fact upward of 45 million people become insured or will the number be much, much smaller?


Putting aside arguments that the current number of insured(s) may actually fall and concentrating on the potential 45 million additional insured(s), will in fact the 45 million become a much, much smaller number than anticipated due to the “penalty” of the individual mandate being depicted as a “tax” by SCOTUS?



Thomas Lambert, law professor from the University of Missouri in an assay entitled How the Supreme Court Doomed the ACA to Failure explains at length why the Obamacare fine/penalty/tax is much more rational to pay than acquiring coverage. That is, Lambert puts forth the formula of rationally paying the tax and acquiring coverage only when a sickness, illness or accident manifests itself and/or occurs.


More importantly Lambert explains the reasoning behind Justice Roberts conclusion that the penalty was a tax and how the tax has to be relatively small in size (not punitive) and how the tax must remain the same amount adjusted for inflation. That is, the “tax” can not be increased per the Roberts decision except via an inflation adjustment which means the tax remains relative in size to the inflation adjusted Obamacare insurance premium. Therefore, the tax remains relative and hence it will always be rational to follow the Lambert formula of paying the tax and acquiring coverage only as needed. The only exception to the formula is if health-care prices fall, but Obamacare does precious little to address the underlying health-care price.


Lambert also points out that the framers/promoters of ACA likely figured they, in the future, could increase the penalty/tax via congress. Problem is the same framers/promoters never figured on the individual mandate and associated penalty being framed constitutional via a “tax” argument and hence made no process arrangements for raising the penalty aka “tax”. Hence no mechanism exists in ACA to raise the tax as that was something the framers/promoters would have gotten around to later but now can not make any changes at all due to Roberts decision and the requirement that the tax can not change except adjustments for inflation. Ops!


With the formula in hand and with the rational response being to pay the fine and acquire coverage when necessary, anti-selection sets in, in a big way, with only older and infirmed individuals buying coverage which means health insurance premiums skyrocket. Given the Lambert formula via the tax depiction by Roberts, the mantra of upwards of 45 million new insured(s) fizzles.


Thomas Lambert’s entire essay can be found in the link below:



www.cato.org/…s/files/regulation/2013/1/v35n4-5.pdf