President: "Sign up; it will save you money"

During a speech in the Rose Garden today, President Obama expressed his frustration regarding the problems with the healthcare.gov website developed to allow people to sign up for health insurance under the Affordable Care Act.

While President Obama acknowledged that the website was experiencing problems at the moment, he encouraged us to be patient and consider other means to enroll; e.g. by phone or in person.  The main thing, he said, was to sign up, IT WILL SAVE YOU MONEY.

The President obviously doesn't understand how insurance works.  EVERYONE can't save money. Everyone pays premiums and claims get paid to those who are sick.  For the sick, it saves money IF and only IF their illness results in expenses that are greater than the premiums they paid.  The un-sick never save money.

Obamacare

One of the big advantages of the Affordable Care Act is that previously uninsured people will now be able to afford coverage.  One big benefit is that conditions can be treated in the early stages instead of after they get out of hand.  Let's think about this a little.

I don't have any health insurance and I'm not feeling very well.  Something's just not right.  A doctor visit costs $100  and I just can't afford to go.  I put it off for a month.... maybe 2.... maybe a year.  The next thing I know, I've had a heart attack when I could have started taking a statin a year ago and avoided the whole thing.

Along comes the Affordable Care Act to save the day.  Because I don't have much income, I qualify for a subsidy, which means I can get coverage for $60/month.  It won't be easy, but I"ll find a way to pay for it.  Now, here we go again... I'm not feeling well, I really should go to the doctor.  But guess what.  My $60/month Bronze plan has a $3000 deductible.  It still costs me $100 to go to the doctor and not only couldn't I afford it before, now certainly can't afford it with a $60/month insurance payment.  I still don't go to the doctor and I still have a heart attack.  The difference now is that I have insurance to cover part (maybe only 50%) of the hospital bill.  Seems like I'm just as sick and just as bankrupt either way.

I don't see how the "early stage detection" outcome is going to be achieved.  Perhaps some will be discovered during a covered yearly physical exam, but from my experience: a) other than the routine blood work, there really isn't much depth to an annual physical exam, and b) if something is discovered, any likely required follow up is NOT covered until the deductible is reached. I couldn't afford $100 for a doctor visit, how am I going to afford $200 to see a specialist?

Health Care: Pre-existing Conditions

Now that the convention is over and Mitt is the anointed Republican candidate, his story is starting to shift in an attempt to appeal to the masses.  While the rhetoric before the convention was REPEAL OBAMACARE,  now he is saying that parts of the law are good and should be kept.  One of the parts that he likes is not allowing insurance companies to deny coverage based on pre-existing conditions.

First, by admitting that insurance companies should be compelled by law to insure a certain class of people is an admission that the free market economy will NOT  deliver the best result for the people in all cases.  It is not in any insurance company's interest to insure someone known to be sick.

Second, given that insurance is to be provided, how is it to be paid for.  There are basically three scenarios.  1. You just add them to the pool of those already insured, in which case the cost of insurance goes up for everyone in order to cover the added expense of insuring people with known health issues. 2. You create "high risk pools" into which these people fall and for which insurance companies will provide coverage.  Unfortunately, insurance companies are "for-profit" entities and they must set the premiums at a level that, on average, will cover the expenses of the group of sick people plus administrative overhead  and profit.  To take a simple example, let's say the "high risk pool" consists of people with cancer, the treatment of which costs $50,000/year.  In order for the insurance company to survive, it must charge $50,000/year plus 15% for administration and profit.  Who can afford that.  3. You can spread the risk, and cost across all people  by insuring the healthy as well as the infirm.  This is how insurance works, the people who are fortunate enough to never need it are the ones who pay for the less fortunate.  This is exactly what the "individual mandate" in the affordable healthcare law is supposed to enable.

If you already have insurance and you really don't care if someone else does or not, I guess you're going to ignore this line of reasoning.  Just remember though: as we learned in 2008, most of us are one "economic downturn" away from being jobless or switching jobs.  When that happens, perhaps your current beloved insurance will no longer be available.  If you've got diabetes, you're screwed.

Of the 3 options above, the only one that seems reasonable is exactly what the Affordable Care Act is trying to do.  The biggest issue I have with it is that it keeps the "for-profit" insurance companies in the middle of the whole thing.  Get them out of the way and go for a Single Payer system and we'll be on our way to a modern, affordable health care system.