Sometimes I Wonder

In a recent Wall Street Journal Article by Leavitt, Hubbard and Hennessey the authors state:

"Thus a healthy 25-year-old and a 55-year-old with cancer would pay nearly the same premium for a health policy. Mr. Obama and his allies emphasize the benefits for the 55-year old. But the 25-year-old, who may also have a lower income, would pay significantly more than needed to cover his expected costs."

First this is just outright wrong. The Baucus Bill makes the older person pay up to 7.5 times as much as a younger person, under the worst scenario. Specifically the Mark states:

"Beginning January 1, 2013, health insurance plans in the individual market would be required to offer coverage on a guaranteed issue basis and would be prohibited from excluding coverage for pre-existing health conditions. Limited benefit plans and lifetime limits would be prohibited, and health insurance companies would be prohibited from rescinding health coverage.

Health insurance premiums would be allowed to vary based only on tobacco use, age, and family composition according to the following ratios:

1. Tobacco use – 1.5:1
2. Age – 5:1
3. Family composition:

• Single – 1:1
• Adult with child – 1.8:1
• Two adults – 2:1
• Family – 3:1

Premiums could also vary to reflect geographic differences. Taking all these factors together, premiums could not vary by more than 7.5:1."

These former Bush Administration "economist" types just seem to have failed to read any of the facts. Read it guys, it says 7.5:1, in black and white. When I read this stuff I wonder how the Government can run with characters like this, Republican and Democrats. The Baucus Bill is a reasonable start, it is greatly better than the House HR 3200 disaster. Yet it needs fine tuning.

Second, one must understand the simple concept of insurance and premiums. Let us remember that the 55 year old most likely has been paying premiums along with their employer for thirty years or more.

Let us perform a thought experiment. Let us assume that universal health care was mandated 100 years ago. Thus everyone in the system would be paying the fee for their entire working lifetime. It would be like having a whole life insurance policy from the time you began working or say 25 years of age whichever occurred first. Then you would be paying the same fee for each year, a modest fee, but one which would not change, other than say with inflation.

In this environment, the 55 year old and the 25 year old would be paying the same fee. It would be like whole life not a term life plan. No one with such a plan objects, they know that if I start at 25 then I pay my $2,400 per year all my life, that is $200 per month.

Yet if I waited till I was say 55, I would have to pay a larger fee, which is reasonable, but that would not be permitted. Those who are employed and are 55 are paying the same as the 25 year old in their company plan. They have been doing so all their life. That is the way is has worked, at least for those employed with company plans.

My argument is that the fee should be akin to a whole life plan. Those 55 most likely have been paying via their employer. The new entrants are pari passu with the 55 year olds. Frankly charging a 55 year old more is not just. The 55 year old is now being penalized for having paid all their life and the new kid on the block wants a break, where under the old game the 55 year old did not get the break.

Now back to the Bushie team of, well I will be kind, after all, look at where they worked, they were the team that got us where we are today, some one must have some sympathy, NOT.

Our whiz kids then go on to state:

"If Congress goes down this road, health insurance premiums will increase dramatically for the overwhelming majority of people. Even if Congress mandates that everyone have health insurance, many will choose to go without and pay the tax penalty. If you think people are dissatisfied with health care now, wait until they understand that Congress voted to mandate hidden premium increases and lower wages."

Here is where I again go ballistic. In the Plan I proposed a few weeks ago, one can get a revenue neutral solution by addressing the demand and supply issues. I did so by working in a detailed analytical and financial fashion through all the numbers. I provided this in a recent White Paper. I have been reading the Hennessey Blog, see below, and it appears to me that he is like so many economists, lacking in any business expertise and failing to address the issue with numbers. This analysis is just a plain and simple financial analysis. The problem is solvable. Read the analysis! Read something guys, because your crying about a non-problem is shameful!