More Loot than TARP

Wednesday, January 15, 2014

Dick Morris has penned a column about more of the goodies in Nancy "Pandora" Pelosi's ObamaCare Box. Just one of the many things that stood out to me was the following:

Robert Laszewski, a healthcare consultant, points out that ObamaCare is really a giant reinsurance program, capping the liability of health insurance companies. Under its provisions, the first $45,000 of payments to an insured patient come from the company's coffers. The taxpayer, through the federal government, then obligingly will pick up 80 percent of the remainder.

In addition, insurance companies are to estimate their payouts during the coming 12 months every year. If they miss, or the costs are greater than they supposed, the feds will pick up 80 percent of the overage. It is a kind of cost-plus deal for insurance companies.

All told, insurance companies are to get $1 trillion in subsidies over the next 10 years, a staggering amount of tax money. They will make out far better than General Motors, defense contractors or any TARP recipient banks. [links removed, emphasis added]
If by "make out better", you mean, "get some loot and lose all autonomy", then Morris is absolutely right.

The rest of the carnage is of the nature of what voters will feel on their own hides when, for example, "their current policies were shot out from under them by Health Department-forced cancellations". Like Karl Rove, Morris predicts electoral disaster for the Democrats. I expressed my doubts about that then, so I won't repeat myself now.

But I will add another misgiving: Let's say the Democrats do get what they deserve in November. Will the Republicans do anything remotely serious in the vein of permanently removing this albatross from our necks and moving our economy back in the direction of more freedom? Hint: The problem isn't that this enormous scheme of theft and meddling wasn't rolled out smoothly enough; it's that it exists al all.

-- CAV


Anonymous said...

Hi Gus,

Dick Morris wrote;
It is a kind of cost-plus deal for insurance companies.

Ah yes, the reimbursement model of choice for defense contractors, public utilities, and corporations in highly regulated markets.

Well you can put paid to the idea that Obamacare will reduce medical costs, now. Not that you couldn't have done so earlier, of course, but the classic response to these kinds economic incentives is a burgeoning and completely un- or counter-productive middle management tier. They will be the drivers of the "cost" in "cost-plus" both in finding ways to increase the plus and in providing an ever greater cost by swelling their own numbers and salaries.

Almost every public utility suffers from this middle management sandwich problem, and unlike a real sandwich, where the meat in the middle IS the point, the cost-plus model inverts that; you have a thin veneer of productive "meat" on the outside with huge bolus of doughy unproductive "bread" in the middle.

When AT&T lost their monopoly status (and the public utility cost-plus revenue model that went with it) most of the layoffs came from middle management.

In the travails of the US Post Office, the people deciding on the cuts are in middle management. As such, they are laying off the line personnel but leaving the middle tiers intact. At one Post Office locally, they have 3 supervisors managing 2 window clerks.

In the highly regulated market that was trucking where I was working for a "500" company, the trucking side was regulated, unionized and bloated; the air freight side was unregulated, not unionized, and svelte. We actually had a sales rep come over from that side "to show you [us] how it's done." He left after two months when he realized that he couldn't buy the customer with fancy dinners but actually had to provide a differentiating service. On the trucking side, due to the regulation, the only way to "differentiate" oneself was in ever more lavish entertainment.

So, as if the market information weren't screwed badly enough in the medical system already, we're going to add a cost-plus model on top of it. Good Going Pelosi.

Oh, and I think I should pass this on. One of my sisters is in the medical community. She said that one of her bosses, when he heard Pelosi's line about, "We've got to pass the bill to find out what's in the bill," responded, "That sounds like a stool sample to me."

Combine that insight with my sandwich metaphor above and you have pretty good representation of exactly what Obamacare is going to be.

c. andrew

Gus Van Horn said...


Nice analogies. Too bad for us how spot-on they are.