Tag Archives: economics

How’s Obamacare Working Out?

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How’s Obamacare Working Out?

President Barack Obama offered this justification for the structure of his Obamacare:

My guiding principle is, and always has been, that consumers do better when there is choice and competition. That’s how the market works. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. And without competition, the price of insurance goes up and quality goes down.

How’s he doing by his own standard?

  • In 2015, 89% of total US counties will have five or fewer companies selling coverage in the exchanges. In 2014, 94% of counties had five or fewer insurers on the exchange.
  • In 2015, the exchange market in 57% of US counties will feature competition among three or fewer insurers. In 2014, 78% of all counties had three or fewer insurers.
  • In Texas, 62% of the state’s counties have only one or two insurers offering coverage in the exchange in 2015. There are 14 different insurers selling policies on the Texas exchange, but no Texas county has more than nine carriers offering coverage.
  • West Virginia still has only one insurer offering coverage on the exchange in 2015. Thus, any state resident purchasing coverage on the ACA’s exchange has no choice of insurer.

A tiny bit of improvement over last year, except in West Virginia, where 100% is controlled by just one company.

But.

By another measure, this one the GAO’s, as reported at the link above,

…in 2013 the individual insurance market encompassed 1,232 insurance carriers selling full health coverage. Obamacare exchanges support just 310 insurance companies as of 2015.

Lastly, this is the trend according to the GAO since Obamacare became law; some of the data predate ObamaMart’s activation:InsurerShare

Hmm….

Good Medicine for Bad Bankers

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That’s the title of an Alan Blinder op-ed in The Wall Street Journal. It’s subtitled One way to keep bankers from behaving badly is to hit them in their pocketbooks with penalties that affect bonuses.

Blinder cited remarks by New York Federal Reserve Bank President William Dudley:

Mr Dudley highlighted the “ongoing occurrences of serious professional misbehavior, ethical lapses and compliance failures” at giant financial institutions. And he warned the audience, which included a number of the world’s leading bankers, that unless the epidemic of bad behavior stops, “the inevitable conclusion will be reached that your firms are too big and complex to manage,” in which case “your firms need to be dramatically downsized and simplified.”

You bet. However, Blinder wants more government interference, even after government’s proven failure to manage economies of any sort. He wants a points system for bank(er)s’ misbehavior, with a sufficient accumulation of points leading to an offending bank’s loss of its banking license. And he wants government to dictate where in a bank its losses should be allocated. Because businessmen and their accountants can’t be trusted with this judgment. But government can be.

No, the best way to achieve “hitting them in their pocketbooks” is to have the bankers’ jobs at risk through free market sanctions on their banks’ continued viability—let those banks fail and enter bankruptcy. And the best way to achieve that would be to eliminate the too-big-too-fail sewage of Dodd-Frank.

Sorry I’m late with this today.  Ate up with dumb and with lazy.

A Misunderstanding of Economics and Human Nature

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Plainly, too many have never read Adam Smith, whose Wealth of Nations showed that allowing individual self interest—personal greed—to operate in unfettered in a free market was the fastest, most efficient way to broad prosperity for the entire population of economic actors. Apparently we don’t teach basic economics in school, anymore.

In a Wall Street Journal op-ed about the failure of Vermont’s overt move toward a single-payer health system, the paper noted that Harvard’s William Hsiao and MIT’s Jonathan Gruber, architects of that state’s plan, had assured all concerned of the following:

The promise of single payer is that governments can save money by eliminating the profit motive and administrative costs.

But that could be true (but not certainly so) only if there were only one player in the market.

It’s that profit motive, after all—that individual self interest—that saves money. It’s that profit motive—that personal greed—that drives down costs.

The economically illiterate—not just Hsiao and Gruber—miss (or, a cynic might suggest that a Liberal ignores, for political gain) the competition factor: the fact that there is more than one player in the market, and every one of them—competing suppliers and competing buyers—want profit.

Suppliers (of health insurance and health provision services, for instance) compete for the buyers’ dollars, so they work hard to drive down costs so they can lower their prices farther than can their competitors. Buyers want those cheap services so they compete with each other to pay as little as possible for them, but to pay a skosh more than their competing buyers so that they succeed in closing the purchase.

The result is what those in the trade call a market clearing price: the price at which all the service sellers sell their product, with nothing left over and no seller left out, and all the buyers get what they want, with no buyer left out. That price is fair, too, because no one was forced to sell or buy at a price they didn’t want or couldn’t afford.

It’s also the lowest price, with the lowest “administrative costs” (there is a non-zero floor to those costs because the workers doing the actual production get to be paid, and the producers of the services being bought for assembly into that final service get to be paid), available in order for the service to be saleable—available to interested buyers—at all.

And it’s a more accurately set price than even well-intentioned government politicians can achieve through mandate.

Crony Capitalism

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Montreal-based CGI Group Inc, the company that received a $74 million contract to develop and maintain the Hawaii Health Connector web portal, will be awarded another year-long state maintenance contract despite the ongoing problems with the site.

The money comes from a $204 million federal contract the state received in 2012 to set up the Obamacare network in the islands.

This is the same crowd that had so much fun with the ObamaMart failure in 2013.

Hmm….

Obama and Economics

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In the question and answer period following President Barack Obama’s end-of-year Friday press conference, Obama offered this regarding the Keystone XL pipeline, gas prices in the US, and global markets [emphasis added]:

So there’s no—I won’t say ‘no’—there is very little impact, nominal impact, on US gas prices—what the average American consumer cares about—by having this pipeline come through. And sometimes the way this gets sold is, let’s get this oil and it’s going to come here. And the implication is, is that’s going to lower gas prices here in the United States. It’s not. There’s a global oil market. It’s very good for Canadian oil companies, and it’s good for the Canadian oil industry, but it’s not going to be a huge benefit to US consumers. It’s not even going to be a nominal benefit to US consumers.

Pick one, Mr Obama. It’s either a global market or a Canadian one. If it’s global—which includes US consumers buying gas—the large increase in supply, especially if it’s more cheaply delivered to the global market via Keystone and Gulf Coast ports than via truck and train to British Columbia ports, most assuredly will have a salubrious effect on the prices US consumers pay for our gas.

And that ignores the fact that a lot of that Canadian oil going to the Gulf Coast via Keystone will be sent to US refineries there, and a lot of the refined product will be sold in the US—a prompt and nearby increase in supply.