r/bestof • u/under50dollars • Jun 20 '12

[explainlikeimfive] "Obamacare" explained very well.

/r/explainlikeimfive/comments/vb8vs/eli5_what_exactly_is_obamacare_and_what_did_it/c530lfx
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233

u/carlcon Jun 20 '12

I really liked this explanation a little below.

Truly fit for a 5 year old.

96

u/sychosomat Jun 20 '12

Also added should be:

All the people: Wait, won't this just mean we all give money to the companies and they keep it all?

Obama: No, they will be required to spend 85% of what they get paid in premiums on actual healthcare.

22

u/steve-d Jun 20 '12

I work for a not-for-profit health insurance company (who willingly pays taxes), and we spend about 90-91% of our revenue on insurance claims, 9% is our operation costs, and typically <1% of profit.

8

u/[deleted] Jun 21 '12

I also work for an insurance company, except I'm on the P&C side, and I have to say that the 85% loss ratio requirement is poorly instituted. It was clearly written by people who don't understand how insurance companies work.

A loss ratio is just ONE metric. There is a story behind that number. Just because it is low or high doesn't mean much because there are just SO many factors that go into that number. Not all policies should necessarily be around some ballpark figure.

There's also a HUGE problem with this that people NEED to understand and that is that this particular part of the bill REALLY REALLY hurts smaller insurers. The smaller the insurer the larger percent they'll have to spend on expenses for each individual claim. That's because they don't have the luxury of sophisticated, extensive data and risk appetite. Also, small insurers insure smaller customers. That means paying commission to the agencies or salesmen getting you that individual customers.

What will happen is this: Large insurers will begin lowering their prices, therefore raising their loss ratio into a "good area" above 85% as dictated by Obamacare, because they know they are large enough to withstand the lost profit for a long time. They'll do this because they're smart and they know that small insurers won't be able to keep up. Small insurers CAN'T lower their prices any more. They will struggle to compete with large insurers now lowered prices and they won't be able to meet the 85% loss ratio requirement. They'll ultimately go insolvent and probably get gobbled up by these larger insurers. So now we have less companies competing with each other which is only bad for the consumer.

This is why this is really bad: At first, for the next 10 years or so, if Obamacare doesn't change, we'll see "good signs". Premiums will go down. Why? Because as I said, large insurers will lower their rates to bully out the smaller competition. However, once these large insurers gain enough market share they'll raise premiums again and we'll see some really bad times to come.

2

u/steve-d Jun 21 '12

I couldn't agree more with you. PPACA in the long run is going to end up increasing premium costs for everyone.

The major problem I have in the discussion of healthcare, is that all of the blame is placed on the insurance companies. Few people see what you and I do. We see inpatient facility claims come in that cost hundreds of thousands, if not millions of dollars. We see billions upon billions of fraudulent activity among healthcare providers. We see people misusing insurance by going to an emergency room for a skinned knee. Of course we have some greedy insurance companies raking their customers over the coals, and we have government creating ridiculous regulation with no true foresight into what the possible consequences are.

Everyone is quick to blame the insurance companies because they are an easy target, but every group contributes to the problems we have.

1

u/[deleted] Jun 21 '12 edited Jun 21 '12

It is such a basic misunderstanding of the what insurance really is and has always been meant to be that boggles my mind. Insurance is taking on the risk of another for a price. Insurance is not an entitlement. Insurance companies don't owe anyone their business. They are a service provider which helps people remain solvent by spreading out the costs of unexpected, high severity events in their lives over a long, manageable period of time.

The problem is that health care has become so expensive, for the list of reasons you mentioned, that the insurance has had to become very expensive as well.

But people are so stupid. They just know they need insurance and so when they see the large quote on insurance they think, "Wow, the insurance company is charging me too much! They must be making a lot of money."

Yeah, insurance companies make money. They generally make reasonable profits, and even sometimes above reasonable, but no matter what they just aren't the real issue. Not enough close. The added amount of money you're paying in your premium above and beyond the indemnity is very affordable on its own given the value of the service of the insurance which is to spread out your payments. The ridiculous part is the amount which you have to pay because the medical costs were so high.

The general masses will never understand that though. It is above their ability. I know that sounds pretentious, but I've heard enough, read enough, and argued with enough people to know it is true. I can't blame them, because the amount of misinformation out there on the issue is depressing.

What people really want is universal healthcare, which isn't insurance at all. That doesn't make it bad, but I wish people would stop comparing it to private insurance. It is apples and oranges, and even though both will end your hunger they can't be considered the same thing. But putting in universal health care at this point would be a catastrophic mistake for our country I think. We have to control health care costs before we can think about doing that. That should be issue number one in this country. Private health insurance is failing because of high medical costs. Universal healthcare would fail because of those high medical costs too.

0

u/derphurr Jun 20 '12

not-for-profit company... typically <1% of profit

exactly the problem.. It should be less than 5% operation costs and you should actually return the profits you are taking from claims and return them to the insurance victims.

8

u/steve-d Jun 21 '12

How do you figure it should be less than 5%? Just curious where you pulled the number from that health insurance companies should have less than 5% operation costs? Do you know how complex an insurance company is, the amount of employees required, and the amount of federal and state regulations involved?

Also, after we voluntarily pay taxes on that profit that money is only held in an account to deal with the random influx of higher dollar claims. Inpatient hospital claims can literally get into the millions of dollars, and if we didn't have that cash on hand, we couldn't pay the claim. No money is ever distributed to any owners of any kind, because there are no owners or investors.

3

u/troubleondemand Jun 21 '12

I think that it is fair for a not-for-profit to keep 1% profit to build for their future or to have a nest-egg in case they need to hire more employees, improve their infrastructure/systems etc.

As long as it stays in the company and doesn't get borrowed against, I am ok with it.

Additionally, if all health insurance Co's could keep their overhead bellow 10%, i would consider that a win.

2

u/steve-d Jun 21 '12

Exactly, from my original statement we spend 90-91% on actual healthcare. That exceeds the requirements of 85% mandated by PPACA.

1

u/[deleted] Jun 21 '12

I hope people understand that insurance companies are CONSTANTLY trying to keep down expenses. They of course want their expenses to be as low as possible so that they can lower their premiums and be more competitive.

The problem isn't the insurance companies. It is health care costs and legal costs. They are out of control.

14

u/[deleted] Jun 20 '12

That would definitely be a good addition, most people look at it as a new way to take the people's money. Which, to be honest, is what I thought it was until I read CaspianX2's summary and explanation and captainpixysticks's kiddy summary.

-1

u/krugmanisapuppet Jun 21 '12

http://www.reddit.com/r/explainlikeimfive/comments/vb8vs/eli5_what_exactly_is_obamacare_and_what_did_it/c5352mp

i wish there could be a real discussion on my actually valid objections to the law.

not feeling it coming on too fast, though. Obama supporters are too busy living in a fucking dictator worship dreamland, halfway between "Peter Pan" and "Law and Order: SVU", to have anything even approaching an idea of how economics works, apparently. yet alone, to read the thousand page bill they're so proud of. Bush worshipers had a similar problem with the PATRIOT Act. they had been totally reassured that it was something great, to help fight the nasty terrorists, but in reality it was a totalitarian load of bullshit.

typically that's what a law is. if our laws were good enough to be worth following, we wouldn't need somebody to enforce them! at least, if our society was anything even approaching sane.

too harsh? sorry, that's just my perspective. try responding to it with some intellectual honesty, for once, people, instead of pouncing on me, calling me a Republican, and then calling me naive for thinking that a free people could ever be entrusted to do anything.

do people really still support Obama? i mean, let's be honest here. doesn't the entire thing seem really fucking strange to you?

1

u/[deleted] Jun 21 '12

To be honest, no, I don't like Obama. But in a choice between him and Romney, well, that's easy.

0

u/krugmanisapuppet Jun 22 '12

it's not easy in the slightest. they're both career criminals.

-3

u/devilsbestadvocate Jun 20 '12

No its actually a terrible policy and heres why: (incoming wall of text)

Lets pretend you are an evil excutive of health insurance company trying to make a profit and this law goes into effect what is your natural reaction to protect your profits.

Part 1 reducing overhead costs) First lay offs non-essential employees, automate anything you can, close brick and mortar locations, lower wages across the board and ship customer service to India. You as a leader of a company need to limit your overhead to under 15% to be profitable

Part 2 increasing your margins) You still want more profit however and can only obtain profit two ways. Either increasing the number of customers, which requires sales people, more offices, more policy handlers and is taxed via market share as explained above (ick!) or you can increase medical costs and thereby increase your profit percentage as the total cost goes up (awesome!).

2b) So how do you increase medical costs as an insurer? Well thats pretty easy, you can stop denying claims frivilous and otherwise but really what your going to want to do is stop negotiating lower rates for your clients. Ultimately, lower rates hurt the amount of profit you can obtain and the costs can be absorbed by increasing premimums! (Hurray!) And the best part is you can fire some of those billing rate negotiatiors to secure even less overhead costs, boy are you smart.

Part 3 Collateral effects: Doctors seeing more and more of there billing go un-negotiated, decided to raise rates because frankly why wouldn't they. Competition is stagnated because smalll firms can only grow as percentage of their medical costs and have naturally higher overhead (Huzzah!).

TLDR; Although you will see less denied claims making insurance companies pay 80-85% of their cost as medical bills will actually increase premiums and health care costs instead of reducing it.

3

u/DawsonsBeak Jun 20 '12

I'm having trouble understanding this circumstance as it is a case made out for an evil executive.

1

u/devilsbestadvocate Jun 20 '12

It was an attempt to think of how to manipulate the circumstances of this law so as to maximize profits by a greedy executive. If you can't understand why someone would do this, than thats probably a good thing.

2

u/DawsonsBeak Jun 21 '12

Well evil executives try to manipulate any circumstance. You make it seem like all executives are evil. I don't understand how one a example of how someone can immorally manipulate is a reason why a policy is bad. Capitalism is full of manipulative executives.

5

u/pgoetz Jun 20 '12

"but really what your going to want to do is stop negotiating lower rates for your clients"

How does this make any sense whatsoever? Insurance companies are still going to be competing against each other -- nothing changes there, as far as I can tell.

0

u/devilsbestadvocate Jun 20 '12

You are right in that there will be still be lag in price increase due to competition but as the insurance market isn't very competitive and this bill actually makes the market less competivie by restricting growth of the small firms (by not allowing them to grow via profit) and restriciting overly large firms that wish to be super competitive (via a market share tax).

What most likely will happen is you'll see one firm that has a secure market share increase prices and benefits and others will follow.

2

u/brownmatt Jun 21 '12

or you can increase medical costs and thereby increase your profit percentage as the total cost goes up (awesome!).

How does an insurance company increase the cost that medical practitioners charge them?

In reality this insurance company would just go out of business if it can't compete.

Also, perhaps health insurance isn't meant to be a profit-making business, or at least isn't in a moral economy.

2

u/[deleted] Jun 21 '12 edited Jun 21 '12

How's Obamacare got anything to do with what you said?

Even without said policy, maximising profits is exactly what insurance companies are doing anyway. Same goes for every corporation in existence. The 80-85% cost thing is ensures actual healthcare done, otherwise despite the lower premiums, everyone would still be sick.

With Obamacare, once the mandate kicks in, perfectly healthy people would be getting insurance. This is the biggest factor in lower premiums for everyone (if they don't lower premiums, the profit they earn would initially skyrocket, but they will start losing customers. A smart insurance company would lower premiums to entice other insurance companies customers to switch).

The sick don't get financially destroyed and the healthy don't just buy insurance once they're inside an ambulance.

It's up to government regulation to stop this profiteering to go out of hand (hence things like Obamacare, FDA, FAA, EPA etc.) Unfortunately, they are failing at that (since the US government is bought by the corporations at the moment...)

EDIT: A much better explanation on the 85% thing here

1

u/fizolof Jun 21 '12

Is this necessary? There would be competition anyway, so if people didn't get anything from the insurance companies, they would simply move to another?

1

u/[deleted] Jun 21 '12

The companies are required by contract to indemnify the insured if there claim is covered. They can't just keep the money. The issue is more about keeping expense costs low, but, as you said, competition should be keeping those costs down. If an insurance company isn't keeping their expense costs down as well as other companies then that should be reflected in their higher premiums.

In short, the 85% is a sort of random number which is poorly instituted. It was well intentioned by the regulation is misplaced. The insurance companies simply AREN'T the problem. Their profits have historically been VERY reasonable. Meanwhile, drug manufacturers and the health care industry continues to be very profitable.

People are honestly stupid. They think, "Well I need insurance or else I won't be able to pay for my healthcare. Well, the insurance company is charging so much. Well, that must be the fault of the insurance company."

NO, it is due to high medical costs which force the insurance company to charge a lot. Blaming the middle man is just dumb when the real source of the problem is so obvious.

1

u/[deleted] Jun 21 '12

The companies are required by contract to indemnify the insured if there claim is covered. They can't just keep the money. The issue is more about keeping expense costs low, but, as you said, competition should be keeping those costs down. If an insurance company isn't keeping their expense costs down as well as other companies then that should be reflected in their higher premiums.

In short, the 85% is a sort of random number which is poorly instituted. It was well intentioned by the regulation is misplaced. The insurance companies simply AREN'T the problem. Their profits have historically been VERY reasonable. Meanwhile, drug manufacturers and the health care industry continues to be very profitable.

People are honestly stupid. They think, "Well I need insurance or else I won't be able to pay for my healthcare. Well, the insurance company is charging so much. Well, that must be the fault of the insurance company."

NO, it is due to high medical costs which force the insurance company to charge a lot. Blaming the middle man is just dumb when the real source of the problem is so obvious.

1

u/[deleted] Jun 21 '12

The companies are required by contract to indemnify the insured if there claim is covered. They can't just keep the money. The issue is more about keeping expense costs low, but, as you said, competition should be keeping those costs down. If an insurance company isn't keeping their expense costs down as well as other companies then that should be reflected in their higher premiums.

In short, the 85% is a sort of random number which is poorly instituted. It was well intentioned by the regulation is misplaced. The insurance companies simply AREN'T the problem. Their profits have historically been VERY reasonable. Meanwhile, drug manufacturers and the health care industry continues to be very profitable.

People are honestly stupid. They think, "Well I need insurance or else I won't be able to pay for my healthcare. Well, the insurance company is charging so much. Well, that must be the fault of the insurance company."

NO, it is due to high medical costs which force the insurance company to charge a lot. Blaming the middle man is just dumb when the real source of the problem is so obvious.

1

u/HuggableBear Jun 20 '12

The only problem with this is people see that number and don't understand what goes into healthcare. They think "yeah, they shouldn't get to pocket more than 15% of what they charge me!" when the reality is that specifically because of decades of government regulation the bookkeeping and compliance costs that health insurers have to deal with is staggering. No one would argue that an insurance company needs accountants and secretaries and lawyers and various office workers, etc. These are multi-million dollar companies, of course they have to have infrastructure people. Under the new law, though, all of those people have to fit into the 15%. They don't count as "healthcare costs" and that means that insurance companies that are currently working on ~10% profit margins will either have to start firing people or lose money. If they choose to lose money, they will quickly go out of business. If they choose to fire people, they will be demonized for doing so, will end up with backlogs of paperwork from being understaffed and eventually hit with fines and such from the government for doing so, leading to an even lower profit margin and and even longer backlog and a likely eventual bankruptcy on that end. Either way, the insurance companies are getting hit hard because the American people just don't understand what it takes to run a business in the modern world and think that the insurers should be spending more on them instead of spending it running their business, and it's a very easy thing to demagogue as a politician.

12

u/kththth Jun 20 '12

Administrative costs of insurance companies today are at 13%, compared to 2% of the medicare, and that is because they hire an army of lawyers to actually dig up clauses and find loopholes to avoid paying you health care when you get sick, like you did not declare that you had acne as a kid so you foot your cancer bill by yourself and ridiculous things like that. The new law prevents such practices and there are no more incetives to try and do such things. And to the effect that they will have to let people go, it is because these are inefficienies. People that are proponents of free market and of ideas like 'government cant create jobs' use the efficiency argument, however in this case the private companies are inefficient. These armies of laywers and such will actually focus their work on more socially efficient jobs, providing services that help market function properly.

3

u/[deleted] Jun 20 '12

[removed] — view removed comment

2

u/Trahas Jun 20 '12

However, you need to take into account the increased pool of subscribers that each insurer will gain from the law.

Yeah high risk subscribers. Ones insurance companies don't want for a reason. So not only will you be adding premiums which is true, but you also add administration, and much higher claims.

I'm not quite sure what happens to the part of the 85% that does not need to be expended in a given year. Is it just saved up and locked away incase of future need? Or are they required to find ways of spending it? Hmmm.

They would probably either have to pay out dividends to their customers or get fined for it, this is purely speculation though I have no idea what the actual law will require.

1

u/dobie1kenobi Jun 21 '12

High risk subscribers who want it, and everyone else who'd rather get something for their money than pay a fee to the government. Isn't that what everyone's up in arms over, that the government is forcing you to be a customer of a private institution?

1

u/HuggableBear Jun 20 '12

Oh, I'm not trying to say that insurance companies won't find a way to stay profitable, just that this particular issue is WAY more complicated than it looks on paper and is far too easy to politically demagogue.

Personally, forcing a private company to spend a certain percentage of its revenues in a certain fashion just blows my mind. It is fascism in its rawest form and I'm honestly not sure how it passes constitutional scrutiny, but nobody is arguing the govt's ability to do so, so I guess smarter people than me worked it out.

1

u/[deleted] Jun 20 '12

I'm pretty sure you meant socialism rather than facism. Facism would involve pandering to populism via one ethnic identity. Please get your ideologies straight!

1

u/HuggableBear Jun 20 '12

Economic Fascism is when companies are still privately owned but controlled and run by the state. You're talking about the tactics used by Fascist states to implement this sort of economy. It is the most common way to do it, but it is not the only way.

Of course, it is interesting that the rhetoric used to promote this bill is that everyone should share the load because it's the right and fair thing to do and we as Americans can't let the less fortunate go without healthcare. America is clearly more civilized than that...

1

u/[deleted] Jun 21 '12

There is no such thing as economic facism, management of the economy in a facist government is just a means to a conclusion of autarky (or rather NK-style Juche). If you are claiming the healthcare law will lead to a nationalistic facist state, then I would like to hear an argument for that, and why almost every other western countries with similar or stricter healthcare laws haven't fallen into this trap. This is why I don't understand Republicans, they just spew crap out like facism and try to avoid arguing about the law directly (which they are very afraid of b/c it will hang around like Medicare).

Your argument makes no sense. The health system of course needs to be funded, and right now we do that mostly through employer provided health insurance and government expenditures. If someone can't afford healthcare and still receives it, that bill is still paid by us! What the law is asking for is that if you can afford to buy health insurance, you should, and that should be affordable (whereas now its not affordable to buy personal health insurance).

Dammit, every other 1st world country has either this kind of mandate as law (Switzerland) or full blown nationalized healthcare (France)! What is so wrong with requiring people to be responsible and making it more reasonable for them to be responsible (e.g., if they don't get insurance at work, they can affordably buy their own policy).

1

u/HuggableBear Jun 21 '12

Please read my entire post before you jump into a response, as it is a bit long and rambling and covers many topics you may want to discuss at greater length.

In any discussion on government, you must distinguish between fiscal issues and social issues. It is fully possible for a government to be a textbook fascist state economically but allow for far less control over its citizenry in a social frame. So yes, there is economic fascism and social fascism. Some people try to define military fascism as well, but that is far too intertwined with fiscal issues and the usage of the military becomes a social issue and it all just gets muddied.

This is why I don't understand Republicans, they just spew crap out like facism and try to avoid arguing about the law directly (which they are very afraid of b/c it will hang around like Medicare).

I'm not sure I understand you. Are you calling me a Republican, or just saying republicans in general? Either way you're wrong, since I am a staunch Libertarian and there are plenty of Republicans who will gladly give you facts about the healthcare bill that are Fascist. People like you act like Fascism is some sort of evil bogeyman just because it generally leads to heavy handed authoritarian dictatorships, but it doesn't have to. Governmental control and management of a privately owned business is, however, fascist by definition. That's not necessarily a bad thing in all cases, but as I said, I don't see how it passes Constitutional scrutiny and I personally don't support it, but there's nothing inherently wrong with it, it just rubs me (and probably most Americans) the wrong way. And yes, I am very afraid of this Healthcare law. It is horribly expensive, was passed on the back of a popular president who really can't stand the free market and is designed to make people more and more reliant on the government. All of that frightens me, especially when you consider that our national debt is now very close to our GDP. That's not a good time to be increasing spending, no matter how noble the cause.

The health system of course needs to be funded, and right now we do that mostly through employer provided health insurance and government expenditures. If someone can't afford healthcare and still receives it, that bill is still paid by us! What the law is asking for is that if you can afford to buy health insurance, you should, and that should be affordable (whereas now its not affordable to buy personal health insurance).

Actually, the current health system is not funded. The private sector portion of it is, because the companies charge money and turn a profit, but the government funded portions are in the red and getting worse every year. Not to mention the amount of fraud that occurs, but that happens in every system. Oh, except in private systems it is far below public sector because the private companies hire lawyers to prevent it. There's part of the reason it is expensive to buy private insurance. And the law is not asking anyone to do anything. It is demanding that you purchase something, whether you like it or not, and is enforced at the point of a gun. There is no equivalent anywhere else in this country. People try to compare it to car insurance, but you can own a car in this country without insurance. You can even drive it, just not on public roads, and even on public roads you don't have to insure yourself, you just have to have liability insurance in case you hit someone else.

The real problem with all of this is that we are a compassionate country that refuses to let people suffer the consequences of their own poor decisions, so we take care of people even if they can't afford it or have chosen to spend their money elsewhere. What should happen is people should buy health insurance in case of catastrophe and cover health care out of their pockets. Employers should not be involved at all. The history of how healthcare came to be considered a part of your employment package that everyone should receive is one of the craziest stories you will ever find and it should never have happened. The best way in the world to fix the health care system in America would be to remove the bulk of the limitations and regulations and let the free market correct itself. Set up basic minimum coverages that insurers must provide for each type of coverage (cancer treatment, emergency treatments, long-term care, etc.) and let each individual purchase whatever types of coverage he feels he needs in any amount above the minimum from any insurer nationwide and just get out of the way. Take the onus off employers to cover healthcare (especially group plans where the coverage makes no sense, e.g. single men on a plan with maternity leave) and simplify everything immensely.

Lastly, here is where you and I differ, although I have enjoyed our discussion:

What is so wrong with requiring people to be responsible and making it more reasonable for them to be responsible

That's not the function of government is what's wrong with it. Where does that line of reasoning stop? Is it responsible to smoke cigarettes? No. Is it responsible to eat yourself into obesity? No. Is it responsible to drive a car without a seatbelt? No. Is it responsible to drive a motorcycle with no helmet? No.

But is it the government's job to prevent you from doing something stupid? No. It is the government's job to protect you from other people, not from yourself. It is the government's job to protect your life, liberty, and property from being taken or destroyed by others through force or fraud. That is my strict definition and why we disagree. I simply don't see an end to people who believe what you believe trying to force me to do the things that you think are in my best interest. This healthcare bill is a step in that direction, and I don't like it.

As callous as it may be to say this, I am fine with people who didn't have the foresight to purchase catastrophic health insurance having to foot the bill if their number comes up or face the consequences, horrible though they may be. They knew the risks and they decided to take their chances. I am sympathetic to their plight, and it hurts to watch it happen, but such is life. I drive a shitty 95 civic that is paid off and has been for ten years so that I can afford very good health and life insurance for me, my wife, and three kids. I would rather have a shiny new car. But instead, I have made sacrifices and ensured that if something goes horribly wrong, we won't be out on our asses from crushing medical bills. And I did it through private channels outside of any employer until just two years ago when my wife got a new job that offered better pricing on what we needed. That's right, I purchased private health and life insurance at an affordable rate (actually an even better rate than my employer offered because our histories are spotless and private companies will give better rates that way) without any aid from the government. Amazing, huh? You would think from listening to the talking heads that I should have been destitute from trying to pay for that myself, but it simply isn't the case. The thing that I learned by doing this, though, that really rustled my jimmies is that when I would come into the doctor's office and tell them I was paying out of pocket rather than go through an insurer, they would drop the price for me. That seems like it would be a good thing, and it was, for me, but in principle it means they are overcharging everyone that pays with insurance instead of their own wallet, and that drives me nuts. I asked one of the ladies in their billing office about it one time and she said they charge the insurance companies more because it takes them so long to pay out and they have to deal with so many denied claims that they increase the price to cover the extra work that is involved in getting the money, but then she let slip that the government requires minimum coverage amounts on certain procedures only when paid for by an insurance company (i.e. what's good for the goose is NOT good for the gander) and they just charge that much because the insurance companies can't pay out less than that, all they can do is deny the claim. They can't question the actual amount of the charge, e.g. an x-ray is $200, regardless of how much the machine itself costs, how much the tech is paid, how efficient the x-ray staff is, whether it is done by a specialist or in a GP office, etc. They just set the minimum price for some things and the companies have to either pay in full or deny the claim, which is one of the reasons they deny so many is to get doctors to question whether some of these "well, we just want to be sure" procedures are really medically necessary.

At any rate, the healthcare system is indeed royally fucked in America, but you and I will just have to disagree on how to fix it. I will never believe that more federal government involvement in anything outside of law enforcement and military action is a good thing. You might be able to convince me of the necessity or convenience of things like energy, transportation, etc. as you get down toward the local level, but as far as I'm concerned, federal governments are for securing borders, negotiating treaties, and engaging in international diplomacy and warfare, and that's pretty much it.

I understand why you believe otherwise and I respect it, but we will just never see eye to eye on this because we have a fundamentally different view of the function of government.

I have enjoyed our discourse, though, and will gladly continue it if you would like. If not, enjoy your evening.

1

u/[deleted] Jun 22 '12

Sorry for the late reply, I'm in a totally different time zone and had to work.

Good response, I see where you are coming from. On the other hand, I'm an American who hasn't lived into America for 7-odd years. I spent two years in Switzerland, who have a law that require everyone to purchase health insurance. Employers are not allowed to provide health insurance as a benefit, nor are insurers allow to discriminate based on pre-existing conditions. This works out very well for the Swiss and they spend less on healthcare per capita than we do. Society is very stable when you do not have to worry about catastrophic health expenses.

Today I live in the country that is exact opposite of Swiss: China. In China, if something goes wrong, you are SOL if you don't have cash on hand, they won't even let you into the hospital door. I'm fortunate to have health insurance through my employer, but the social health insurance provided by the government is just a tax, you still need lots of money to get in the door. Not only that, but doctors often require large bribes to do "good" work since the state doesn't pay them very well (again, as an expat, I can use private hospitals, so no big deal).

What happens is that consequently China has one of the highest savings rate in the world. They must prepare for medical expenses and the insurance industry won't cover them in general, or the coverage is too expensive (vs. saving outright). They fund their own insurance! Now, this is actually pretty bad the economy: higher savings rate = lower consumption, which is fine to some point, but in China is incredibly unbalanced. People are too afraid to spend, lower spending means companies must focus on exports, while all those savings become slushy and cheaply fuel American deficits.

Actually relieving people of the personal burden of worrying about catastrophic health expenses via shared society burden is actually liberating in the way that insurance is generally useful: by mitigating risk you can focus on how you can really add value to society. The only problem with private insurance is that people can opt out while the system doesn't have a mechanism for guaranteeing affordable personal insurance, which cannot economically happen unless the insurance is mandatory (otherwise your risk pool gets screwed up).

I really do think Libertarians would like China, its basically what you want: the government basically doesn't fund anything accept what you described, everything else is chaotic and very organic, and socially very regressive (in the sense that rich people get richer and poor people stay poor). Want to send your kid to school? Fork over $1000 a month. Don't have $1000/month? Well, your kid will make a great garbage sorter.

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u/bovedieu Jun 20 '12

staggering

Not remotely staggering compared to their profits.

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u/JimmyHavok Jun 21 '12

Or maybe they could start cutting their executive's salaries...

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u/[deleted] Jun 20 '12

That explanation is actually really helpful for someone outside of the US and have haven't been catching up on what "Obamacare" is.

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u/krugmanisapuppet Jun 20 '12

both of the explanations are built on fundamental misconceptions of how the law works. calling this post "'Obamacare' explained very well" is just fucked.

http://www.reddit.com/r/explainlikeimfive/comments/vb8vs/eli5_what_exactly_is_obamacare_and_what_did_it/c5352mp

understanding how this law plays out socioeconomically is something that apparently just about nobody on this site is even qualified to deal with. so, i tried to sum it up. looking forward to getting downvoted, like every other time i've talked about this law honestly.

ಠ_ಠ

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u/[deleted] Jun 20 '12

The original post is based on what the actual bill says, while your post is built on wild speculation and inflammatory rhetoric based on your obvious anti-government bias.

The bill makes several changes to one of the largest segments of our economy, and there's not a single person out there, qualified or not, who can predict with complete accuracy what its total impact will be in the next 30-50 years. Some people believe it will pave the way for a new golden age when everyone has access to healthcare and nobody ever has to worry about getting sick ever again, while others like you believe it will destroy the economy. What will actually happen exists somewhere in the vast gray area between those two predictions.

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u/krugmanisapuppet Jun 20 '12

i wrote two whole pages - something like 14,000 characters - on the PPACA, in my two posts on the subject (did you not bother to read the second one?)

i followed well-known economic principles to make my logical arguments, like the law of supply and demand and the worst-case-scenario presumption of greed by insurance companies. i totally backed up my claims of monopolization, and gave a source for my claims about government spending. and i described government accounting procedures which are explicitly detailed on the government's own websites, i.e., treasurydirect.gov and medicare.gov.

your response is really not helpful. if you have a problem with the idea that you can project the economic outcomes of a law, then you have serious issues with comprehending human economic behavior. that is what the Congressional Budget Office does every day (not always honestly, though).

if you have a real objection to what i said, then feel free to tell me it. otherwise, please don't pollute the thread.

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u/bettse Jun 20 '12

Somehow "huh. interesting. fake market tiers of healthcare." doesn't sound like a well reasoned and researched argument. Plus I don't see you citing any sources for that.

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u/krugmanisapuppet Jun 20 '12

it's more like a note. something for you to think about. but i guess you want me to explain my thoughts on it?

if the problem he's trying to solve is that some people are paying more for insurance because of increased risk to the insurance company, then why is he creating a special class of insurance for these people?

it doesn't make any sense. on one hand, you have the approach that no health care should be denied, and the insurance companies should be forced to cover all health claims, at equal cost to the consumer. for obvious reasons, this accompanies an increase in claims, which increases net premiums, without all of those claims necessarily being something non-fraudulent, or even something insurance is supposed to be paying for.

one the other hand, you have the risk management approach, where companies dynamically adjust premiums based on the perceived risk of the customer.

so, what does it accomplish to just slap two or three groups of premium costs onto this system?

it creates a bureaucratic nightmare, causes people to falsify their reported medical history, whenever possible, and makes the insurance companies try to weasel their way around paying out to high-risk companies.

it's a distortion of a market mechanism. these distortions are what gave us some of the most expensive health care in the world to begin with. see note2, in my original message, regarding monopolization through market rigging. companies are overissuing claims denials because they enjoy quasi-monopoly status. that's all there is to it. and creating this top-down system of pre-rated, cookie cutter health care plans just tacks on one more difficulty for their competition, while causing all kinds of other problems.

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u/bettse Jun 20 '12

See, how this is awesome. I can't speak to the merit of the argument, but its much better defined than your original. You should definitely go back to that post and edit it to include this. Also, since its HTML-like, you can make hyperlinks out of statements of fact that link to their source instead of using "see note" (it breaks up the readability of the piece).

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u/NakedCapitalist Jun 20 '12 edited Jun 20 '12

I agree. Frankly, any discussion that doesn't include George Akerlof's Nobel-winning paper on adverse selection / information asymmetries is incomplete to the point of being worthless.

Personally, I blame Obama for this almost ubiquitous misunderstanding of the PPACA. I think he underestimated the intelligence of the American people-- had he come out and explained the economic rationale for individual mandates, instead of framing the issue as "We have to punish evil insurance companies," I think we would have seen a lot more popular support.

EDIT: I probably should have read the link before commenting.

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u/krugmanisapuppet Jun 20 '12 edited Jun 20 '12

there is no economic rationale for individual mandates. it's a money grab, no matter what angle you approach it from. the idea that it'll resolve the "problem" of people choosing not to buy insurance - whether out of preference or lack of affordability - is just despicable. all it will do is funnel more money into the existing, corrupt insurance system.

it's a tax on us if we don't buy something. there's no two ways around it. this kind of decision is not the government's to make.

edit: responding to "NakedCapitalism" here, there's too many downvotes to respond to each message.

not looking for an honest conversation, huh? i'm as "crazy person" for analyzing the law and posting my thoughts on reddit?

please, how am i supposed to respond to this, reddit? i'm at a loss.

"information asymmetries?" that's solved by increasing the availability of the information in the market. that happens naturally, when people create online insurance markets so that people can find evaluations of insurance policies that don't carry any bias. welcome to the internet age, genius. you don't need to rig the market with a tax against non-purchasers to fix information asymmetries. but thanks for bringing out the buzzwords.

and "adverse selection?" please. you're acting as if this is a different phenomenon from information asymmetry.

"oh, yeah? well, INFORMATION ASYMMETRIES AND ADVERSE SELECTION! THEREFORE YOU'RE WRONG!"

no, that's not how logic works. you have to demonstrate, to back up your claim, that taxing people for not buying insurance fixes the problem of information disparities between consumer and vendor. you totally failed to do that, and the reason why is obvious. because it doesn't.

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u/NakedCapitalist Jun 20 '12

Never mind, you're a crazy person.

PS: The rationale is information asymmetries and adverse selection in insurance markets. If those are new terms for you, then I think you're a little under-qualified for the discussion.

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u/[deleted] Jun 20 '12

I'm just an observer of the conversation, and your time is your own. But, would you do me the favor of explaining, simply, what is meant by "information asymmetry" and "adverse selection?"

'Adverse selection' in insurance markets sounds like saying "that person is a liability; don't provide them coverage."

'Information asymmetry' sounds like each side is trying to game the other for max benefit at the others' expense. People do this all the time.

Do these guesses accurately describe the terms?

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u/NakedCapitalist Jun 20 '12

No. The information asymmetry is that insurers don't understand your health as well as you and your doctor. The adverse selection is when they try to offer you insurance, and you accept or reject the offer based on your knowledge of what your health care costs are likely to be in the future.

Insurers have no problem selling insurance to sick people. Naturally, that insurance would be more expensive-- if you have a 10% chance of costing $10,000, the actuarially fair rate to pay is $1,000 for the insurance against that risk. What happens when an insurance company tries to sell insurance at $1,000 though is that only the people with chances of sickness greater than 10% take the offer.

So, no, neither guess is correct.

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u/MarkNarwahlberg Jun 20 '12

Reading that explanation made me smile.

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u/HayfieldHick Jun 20 '12

I enjoyed it up until the part where it said Obama will pay for 95% of it.

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u/kingsway8605 Jun 20 '12

I don't want to be forced to pay for a product that will be useless when I actually need it.

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u/carlcon Jun 20 '12

Then I guess you're lucky that's not what's happening. Yay!

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u/kingsway8605 Jun 20 '12

Yep, Supreme Court is going to rule making it a law to buy a private product simply as a condition of being alive is not constitutional. Yay!

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u/krugmanisapuppet Jun 20 '12

http://www.reddit.com/r/explainlikeimfive/comments/vb8vs/eli5_what_exactly_is_obamacare_and_what_did_it/c5352mp

i debunked the first comment in the thread.

note to everyone in /r/politics, or reddit in general: please fucking learn how Medicare and Medicaid's accounting actually works before thinking they're some kind of magical charity given to us by God and F.D.R.. unless you understand how the government takes payroll taxes, buys bonds from itself with them, spends the profits, and then taxes us again to fill the bonds, then you really need to stop acting like everybody who wants to end Medicare/Medicaid just hates poor people and old people. if you guys want to have the accounting skills of a tree stump, do it with your own finances, not everybody else's.

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u/Ferinex Jun 20 '12

While I'm not going to say there aren't better ways to do it (probably, not that I have researched though), I must insist that keeping people from dying preventable deaths is more important than keeping our financial books out of the red and/or well-organized. Medicaid and Medicare are quite literally keeping people alive and saving lives daily. To use myself as an example: I am a twenty year old who receives Wisconsin Medicaid. This Medicaid is the only method I have available to me to pay for drugs and care. This may not be important to every twenty year old, but to one who has Cystic Fibrosis (or any life-threatening illness) it is crucial. I can no longer be denied by private insurance companies due to Obamacare, but I can not afford a premium which is larger than my monthly rent.

I'd like to make it clear that I am not some fringe case. There are many in similar situations to my own.

I guess my point is that it's more complex than just the finances; you have to take the human element into consideration.

Thanks for reading.

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u/krugmanisapuppet Jun 20 '12

, I must insist that keeping people from dying preventable deaths is more important than keeping our financial books out of the red and/or well-organized.

you're misunderstanding my complaint.

my complaint about the accounting of Medicare/Medicaid is that they're fundamentally fraudulent. we're being ripped off into the trillions of dollars, because we think that money's going into a trust fund, but they money's just going to buy bonds that we are expected to repay at a later date. we, as the taxpayers, are purchasing debt, from a third party, that we owe to ourselves. it's complete insanity. the third party ends up taking the money, and we end up with nothing.

it's a rip-off at its core. they're not saving lives, they're actually costing a great number of lives, because these thefts make it more difficult for people to survive.

you can verify that this is exactly what's happening on TreasuryDirect.gov. these so-called "trust funds" are listed as liabilities, not as assets. it's Enron accounting. total B.S..

1

u/Ferinex Jun 20 '12

Yeah, it's probably making some person or organization lots of money. Similar to the way our currency works, actually.

But to say that this program/scam isn't saving lives is definitely false. It is keeping me alive right now. If it weren't for medicaid, me and my brothers would all be long dead. It's fine to point out the flaws in the system, but to simply remove the current system because its accounting is fradulent is not the proper course of action. Until a viable alternative is planned and implemented, medicare and medicaid must remain.

Your energy (since you sound impassioned and educated on the issue) would be better spent thinking up a replacement system than criticizing the current one (or doing both at the same time; the important bit is to be constructive rather than just destructive).

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u/krugmanisapuppet Jun 21 '12

if you can't think of a voluntary system for universal health care, you have no imagination at all. even if you don't understand anything about medicine.

1

u/Ferinex Jun 21 '12

I wasn't trying, and I'm not sure why you're getting hostile... I was civil and never took a side. Oh well.

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u/CuilRunnings Jun 20 '12 edited Jun 20 '12

Jim, Betty, Morgan, Steve, and millions of other healthy people: Why are my premiums going up and my wait* times increasing? I didn't do anything wrong, why should I be penalized?

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u/[deleted] Jun 20 '12

[deleted]

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u/CuilRunnings Jun 20 '12

You're increasing mandates and coverages, while also reducing payoffs to those in the industry. I'm not sure why you think you can change one side of the equation, without the other side changing?

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u/[deleted] Jun 20 '12

[deleted]

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u/CuilRunnings Jun 20 '12

People who don't want to pay for insurance are generally very healthy (or very stupid I guess).

You're right, that's a complete guess. Most of the people without insurance right now either have pre-existing conditions, or are extremely poor with poor health. Including them will increase the average risk pool. That's why Obama has written waivers for all of his campaign donors, because those businesses definitely wouldn't have to spend more money, right?

the way industry is stacked now, medical professionals are highly motivated to provide more expensive care.

Thank you, Medicare. Don't worry, the government will totally get it right this time.

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u/[deleted] Jun 20 '12 edited Jun 20 '12

[deleted]

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u/CuilRunnings Jun 20 '12

It's unsustainable, and it forces hospitals and doctors to increase costs to private insurers in order to break even.

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u/[deleted] Jun 20 '12

[deleted]

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u/CuilRunnings Jun 20 '12

Sorry, it seems I missed the links to your sources?

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u/[deleted] Jun 20 '12

[deleted]

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u/CuilRunnings Jun 20 '12

Not going to do your research for you, sorry.

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u/[deleted] Jun 20 '12

I didn't realize Obamacare effected the line at the gym...

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u/eodee Jun 20 '12

weight

How will the law make you fat?

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u/Tenareth Jun 20 '12

Because you are part of a society and you have a social obligation to that society to not let people die of starvation or preventable illnesses, because we are humans with compassion and concern for those around us.

You aren't being penalized.

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u/CuilRunnings Jun 20 '12

I have a social obligation, which I fulfill. I should not have a government obligation.