Obamacare Subsidies

In a case involving Federal government payments to Obamacare insurers to “reimburse” them for health coverage plan discounts the government requires those insurers to provide low-income plan buyers, a Federal district court judge in the United States District Court for the District of Columbia (which gives the judge’s ruling nationwide jurisdiction) ruled those payments to be unconstitutional—the payments had been being made even though no funds had been appropriated for the purpose by Congress.

Following President-Elect Donald Trump’s election, an appeal of the ruling to the DC Circuit has been HIAed at the request of the House of Representatives, one of the litigants in the original case at trial.  The pause was requested—and granted—to give the incoming Trump administration time to set up its own actions regarding Obamacare and so render the present case moot.

Now two DC lawyers have filed an “emergency” motion on behalf of two California citizens (can you say, “Yay! Fees!” boys and girls?) to get the appellate court to actively settle the matter, in so far as an intermediate appellate court can settle anything.  The California citizens’ argument, through these lawyers goes something like this:

suspending the litigation until during the power transition would essentially allow the lower-court injunction against the Obamacare subsidies to stand. They say they expect that a Trump-led Justice Department would either dismiss the Obama administration’s appeal or strike a settlement with Republicans allowing the injunction to take effect at some later date.

Litigants are allowed to do that, and it’s irrelevant to the matter at hand.  This case, of the question of constitutionality of the reimbursements, has nothing intrinsic in it concerning the right of litigants to it to ask for a pause pending nearby government action that would render the case irrelevant, nor is there anything present that would prevent a court from granting that pause based on that same nearby pending action.  Indeed, the court would be wasting its time arriving at a ruling when that ruling would soon become irrelevant.

The citizens’ argument continues:

Either way…the effect would be “devastating consequences for the individuals who receive these reductions, as well as for the Nation’s health insurance and health care systems generally.”
…without those payments to help offset deductibles and out-of-pocket costs, more insurers likely would drop their participation on the marketplaces. The exchanges, a centerpiece of the health law, would further wither.

That’s certainly a worthy discussion to have, and the nation has been discussing it for the last six years.  However, it’s a purely political discussion, and it has no place at all in a court.  This argument has no bearing on the case before the DC district or appellate court, and it has no bearing on the Circuit’s decision to hold the appeal in abeyance pending Trump administration action (or inaction).

The citizens also raised this item:

The enrollees essentially argue that if they were allowed to intervene and were to succeed in overturning the injunction against the subsidies, Republicans could no longer say their hands are tied by a court order.

That there is a true fact.  And it’s just as irrelevant as the citizens’ foregoing arguments.  The discussion and the question of whether the subsidies ought to be made are political ones, not legal ones, and so the discussion and associated debates are the exclusive province of the political branches of government: the Congress, ultimately in conjunction with the President.  Whose hands are tied and by what is not a question for a court of law.  Full stop.

A Redistribution

Erik Cafarella had a Letter to the Editor in Friday’s The Wall Street Journal in which he took notice of the added costs of ethanol mandates for our gasoline fuels.  The headline of his letter suggested that ethanol should be required to compete in a free market rather than be given a free ride via government mandate.

I offer a redistribution alternative that Progressives and their Democrat cronies should love.

Tax ethanol-laced gasoline, in that competitive market, at a higher rate than unadulterated gasoline.  Then send the extra tax money to the poor, whose food costs are elevated by the Federal mandate to produce ethanol.

How could a Progressive or Democrat deny our poor this boon?

Four Pillars of a Health Care System?

The Wall Street Journal posited this in a Wednesday op-ed.

1. Provide a path to catastrophic health insurance for all Americans.

The WSJ then supports this with old saws: being covered generally leads to better medical results, health insurance is good for the wallet, and so on.  Then they want a government solution—while they carefully avoid saying how they would pay for it:

The ObamaCare replacement should make it possible for all people to get health insurance that provides coverage for basic prevention, like vaccines, and expensive medical care that exceeds, perhaps, $5,000 for individuals.

Those Americans who don’t get health insurance through employers, or Medicare and Medicaid, should be eligible for a refundable tax credit….

They don’t even say why catastrophic health insurance should be particularly targeted by Government.  They ignore an actual market solution for this: free market competition, accompanied with lower tax rates (which leave more money in people’s pockets), and no annual or income caps or requirements for high deductible insurance plans (and no requirement for any insurance plan at all) on Health Savings Accounts.  Folks are fully capable of making their own decisions about the structure of their health insurance plans without the Know Betters of Government holding them by the hand.  And insurance companies, in a fully competitive environment, are fully capable of developing and delivering the products actual customers want without Government mandates.  If that includes catastrophic insurance plans, those will appear.

2. Accommodate people with pre-existing health conditions.

See above regarding free markets.  Of course such coverage would come at a higher cost than other sorts of health coverages; the risk being transferred to the insurer is higher.  But even this risk is not certain.  Folks who’ve had a heart attack (or more than one), for instance, have a preexisting condition (unless a single heart attack has occurred sufficiently far in the past that a medical doctor (the patient’s, not the insurer’s or a Government hireling) says it’s a one-off and not preexisting), but not everyone who’s had heart attacks will have their next one simultaneously.  Even a preexisting condition can be amortized across time given a free market that allows pooling of [those who’ve had heart attacks] so that premiums can be adjusted to match the actual payout requirements, the actual risk—just like “ordinary” insurance plans.

So as long as someone remains insured, he should be allowed to move from employer coverage to the individual market without facing exclusions or higher premiums based on his health status.

This conflates two separate questions.  The preexisting question is addressed just above.  The mobility of an insuree (or someone who’d like to buy a health insurance plan) is separate: and yes, in a free market environment, an insuree would be able to take the plan he’s purchased, whether originally obtained through his employer (unless it was the employer who actually did the purchase and the premium payments) or bought on the individual market, with him wherever he went or to whatever job he moved.  The latter case, too, would reduce or eliminate the need for the new employer to offer health insurance coverage through his benefits program.

3. Allow broad access to health-savings accounts.

There should be a one-time federal tax credit to encourage all Americans to open an HSA and begin using it to pay for routine medical bills. And HSAs combined with high-deductible insurance should be incorporated directly into the Medicare and Medicaid programs.

Another Government solution—again carefully unpaid for—and it’s much too timid.  I addressed HSAs and their market availability above.

4. Deregulate the market for medical services.

This is the only move necessary.  It’s the move to enable the free market solution.

Full stop.

Foreign Investment Risk

The People’s Republic of China seems about to illustrate one form of this risk.

The State Council, China’s cabinet, will soon announce new measures that subject many overseas deals to reviews of “strict control,” according to people with direct knowledge of the matter and documents reviewed by The Wall Street Journal.

Targeted for particular scrutiny by the pending measure are “extra-large” foreign acquisitions valued at $10 billion or more per deal, property investments by state-owned firms above $1 billion, and investments of $1 billion or more by any Chinese company in an overseas entity unrelated to the investor’s core business.

This is nothing but an overt attempt to restrict capital flows across the PRC’s borders.  Restricting such flows from one nation to another, no matter the rationale, elevates the risk of foreign investment.  The investor, whichever the nation of his domicile, cannot count on a reliable income flow from his investment or even being able to get his money back from that investment at the expiration of the arrangement.

Separately, it demonstrates an attitude toward law and government that’s been extant in the PRC and its antecedents for thousands of years: “I don’t like what you’re doing—this investment plan of yours—here’s a nice ex post facto law that makes your activity illegal.”

Times to Invest in the Market

My personal stock market investing mantra has always gone like this: “The best time to invest was yesterday; the second best time is today; the worst time is tomorrow.”  I decided to take check that and see how accurate it might be, so I built a simple Microsoft Excel® spreadsheet to take a back of the envelope look.

I looked at a few scenarios over a 30-year investment period, each of which consisted of a single $10,000 investment done in Year 1 that then grew at 3%/yr for 29 (or 30) of those years.  In one of those scenarios, the investment simply grew at those 3%/yr.  In the other scenarios, the investment would spike upward by 20% in the first year, in the last year, or in the middle of the sequence; or the investment would spike downward by 20% in those three selected years.  It’s important to note, too, that since I’m comparing these three scenarios with each other to look at the underlying principle, it doesn’t matter whether those 3% are nominal, real, or compared to this or that stock market index.

The bottom line is this: the 20% spike up or down makes a significant difference in the final value of the investment.  That final value becomes $24,300 if the investment grows without the spike, rises to $28,300 with a spike up, and falls to $18,900 with the spike down.

That seems to make my mantra useless, until we look at the effect of when the spike occurs.  That difference is zero.  It doesn’t matter whether the spike occurs at the start of the investing period, at the end, or in the middle; the end values are all the same: $28,300 with a spike up and $18,900 with the spike down.

My bottom line: unless I can time the market with considerable specificity, I stick with my mantra and simply enjoy the spike or ride it out.

My spreadsheet, which unrolls this year by year, is here.

Note: use this at your own risk.  I’m not a licensed investment (or any other type of) advice giver, nor do I play one on the radio.