Commentary
By Tom Loker
The Affordable Care Act is often called ObamaCare but I think from now on it should be called “DemoCare” because it’s going to demolish care in America and along with that demolish America’s Middle Class.
There are quite a lot of things about the way this law works that make it undesirable. Mostly, the causes are not in the debate that we hear so much about nor are they in the parade of facts that we are about to be inundated with over the next 90 days from those selling the benefits or arguing against them. Like most debates the truth in the rhetoric is somewhere between the extremes. There are many flaws, there are some benefits but there are massive amounts of unintended consequences. This is why, I do not call for its repeal. I call for amendment and alteration.
I agree with the provisions that prohibit refusal or cancellation of insurance because of disease state. I also agree with the concept of a base level insurance policy that is offered as a minimum by all insurers. I agree with some of the provisions that help provide, monitor and manage our national safety net for the helpless. If you want to see more of what I think refer to my latest book, The History and Evolution of Healthcare in America.
What is disappointing, is the use of facts in a manner that obscures the real effects of the law, in once respect, and the ignorance of the problems in the underlying mechanisms, unintended consequences, and damage to needed mechanisms and industries in other respects.
Since the law was created to lure Americans into a system, to hook them to increased dependence and then force the failure of the for-profit system leaving only the option of a federal single payer system, that the legislators pushing the law failed to achieve, the construction of the law itself will demolish our care systems, hence the new name DemoCare, on many levels.
Let’s look at one or two of these many levels. You can go to my Blog to see many more: http://tloker.wordpress.com.
Personal Healthcare costs will drastically increase
Much is being made about the low cost of care and how the premium costs are actually declining now and will continue to do so in the future—this is simply not true! At the time of the law’s passage the average cost of a policy for a family of four was about $8,000.00 per year.
Today it is over $13,300. You will notice that the stats on lower cost plans are calculated from the policy costs of this year, mid-2013, compared to the lowest levels of the estimated policy costs in the new exchanges, fall of 2013. Well, if you have suffered significant cost raises since 2009 and you only look at the last few months the initial policy premium may appear lower, but if you’ve been paying the bills for your family of four they are anything but lower.
Secondly, many of the premium costs shown in articles include eligible subsidies for those who are eligible. They are simply false comparisons. Health care costs, and premium costs have gone up a lot since 2009.
Now let’s look at the overall costs, beyond just the premiums, and what it means to Americans.
You can purchase the lowest cost plans and they come with a deductible limit of about $6,500.00 per year meaning you will spend that money before any insurance coverage kicks in. You will pay a premium of between $150 and $300.00 for a Bronze level plan depending on your state. You can’t get a subsidy if you buy the cheapest plan, Bronze, you have to buy the more expensive silver or gold. We’ll take about the subsidies in the next section. So when you really look at the numbers there is one more number that is important… How much do people actually spend on care in a year? Answer is about $8,500.00 per year. (I’m using rounded numbers to make the math easy) So to be clear, to be painfully obvious, you will pay on average about $8,500 per year on care. If you buy the cheapest policy (the one that’s such a great deal everyone should have at least one) you will pay out of your own pocket about $6500.00 before the insurance covers anything, and you will pay somewhere between $1750 and $3600 per year for premium payment—and remember you can’t get a subsidy for the cheapest plan! What a deal! I think you should all sign up right away. Sure, for some who have chronic illnesses this still could still be a good deal but this is not the majority of America.
So why is the law also Demolishing the Middle Class?Let’s start with some simple definitions just to make it easy to divide people. We need to be able to discuss clearly who are Poor, who are Rich and who the middle-class are.
• Poor are people who do not earn enough to live, not simply survive, without some subsidy.
• Rich are people who have more earnings, and assets than they need to live and can invest some of the excess earning or assets to hedge against loss of buying power.
• Middle Class are people who have either not enough to invest to hedge against the loss of buying power or make too much to get a subsidy.
Under DemoCare, and many other federal and state programs, you can get some subsidy is you earn less than 400% of poverty level. So why it that the federal poverty level has not been is revised to a higher number and now we just multiple it—two three or four times? For a family of four this comes to about $89,000 per year in income. As a side note, this represents about 60- 70% of the US population by the way and even without DemoCare over half of the nation gets about one half of their annual income directly or indirectly from a federal subsidy already. So for the purposes of this discussion. Poor are anyone who earns less than $89,000. And, on Monday if you earn less than $89,000 there is a federal subsidy for you. Welcome to the Poor club of America where all of your dreams can come true!
If you are Rich, this means you have excess assets or income—income that you don’t need to keep living in your home, put your kids through school and keep food on the table. Today, on average, this number is about $175,000 per year. I think this is a high number but for this discussion let’s go with it. If you’re Rich, you can invest some of this excess money into savings accounts or the stock & bond markets (the prime vehicles of choice today) and you can earn interest or receive gains. In effect, while you believe these are really gains, what they have been mostly is keeping you somewhere between earning slightly less than the rate of buying power reductions or significantly more, depending on how much “extra” you really invested.
So, if you are in the Middle class you don’t get a subsidy and you can’t keep ahead of the loss of buying power! Oh yea, I forgot to ask, “Where is the loss of buying power coming from?” Well, in a large part it’s coming from the federal programs providing subsidies to an increasing number of American citizens.
Since 1972, when we only had about $500 billion of currency in circulation, we have been printing money with no real basis in tangible value. We had to do this because we were spending a lot more money, between federal subsidy programs, wars, and trade deficits, than our economy could generate. So we changed over, and over, how we calculated the amount of currency that was OK to have. As of today we have somewhere around $17 Trillion of currency in circulation. During the same time we have continued to have a trade deficit (cumulative since 1972 about $12 Trillion) and we have continued to increase what we spend for war and subsidies. So at the same time we also have a U.S. Debt of about $16 Trillion. Don’t try to balance the numbers as they just don’t balance. Maybe this is why the government hasn’t passed a budget since Lincoln!
So why is DemoCare killing the Middle Class?If you are Poor, as your ability to purchase what you need has been eclipsed by the loss of buying power due to printing money with no basis to an increase in real value, the government has simply printed more money to cover the subsidies. So the Poor get protected against, inflation, deflation, cross-flation, stagnation, whatever term you want to apply. In reality, as they had to buy less to pay, the government has printed more money to give to help them pay for what they can’t afford. Since we purchase from other nations more than we actually produce, a lot of the new money spent has flowed out of the U.S. and we have lost even more buying power, requiring new money – a vicious, viscous, cycle! The Poor disproportionately capture the new printed money to make them “whole.”
Now, if your one of the Rich, because, you can invest some of your “extra,” you have been able to disproportionately capture a bit of the new money as it has entered the market. You can borrow it, and pay interest on it allowing the printing of more new money, you can invest it in stocks and bonds, where the high yields have been because this is how a lot of the large dollar amounts of new money have entered to economy, or you could invest some of it in creating new businesses and get tax breaks, which require the government to make up the loss of revenue by – say it with me – printing more new money. So the Rich can hedge against the loss of buying power. Now, who in the economy can do neither? Who are getting crushed? Who is it that is losing this game really badly and will lose even worse on October 1st? Yes! You are correct! You paid attention and got the correct answer! The Middle Class. They are getting disproportionately screwed.
One last thing to ask yourself. Who is it that the government constantly tells to borrow more and buy more? The exact part of the population that has no ability to do either! The Middle Class! And as the government has tried to help the Middle Class they have simply converted a huge section of the population from Middle Class to Poor government subsidy dependent citizens.
As DemoCare continues to implement and we swell the current 50% of subsidy dependents to 60-70% government dependents, the Middle Class will be further demolished. Ultimately we will end up just where the rhetoric claims the problem is today. There will be little to no Middle Class. There will be Rich and there will be Poor. And there will be such a break in numbers between the two groups that likely we will have a societal catastrophe. This will not be the fault of some conspiracy of Rich people trying to hurt the Poor for their own gain! This makes for great debate, great argument, and is a good tool to get people to join a side. It will be because, we have allowed the evolution of a financial, and economic system that is just one big unintended consequence!
So welcome to DemoCare, jump right in the waters going to be just fine!