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The Arithmetic Absurdity of Obamacare

It will not be a "Wonderful Life" under Obamacare.

by
Charlie Martin

Bio

October 29, 2013 - 11:32 pm
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Once upon a time, there was a little town called Potterville, population — well, big enough. Potterville had a bookie named Harry. Harry was a happy bookie, taking bets on horse races and football games, and paying off with a smile when he lost.

Harry was also a smart bookie, which is why he always paid off with a smile; he always made sure his bets were covered, and he was making a little extra money to pay his rent and keep him in sharkskin suits, snappy fedoras, and two-tone shoes.

One day George comes to Harry. George is 25 years old and just married, and he’s worried that if he dies, his new bride Mary will be impoverished and unable to bury him. So he wants to make a bet. If George dies, Harry will pay Mary $1000, which will pay for the funeral and leave enough for Mary to pay off the ramshackle old house they just bought on the edge of town.

Harry, as a smart bookie, knows that the odds of George dying in the next year are about 1000 to 1. So he takes the bet, asking George to give him $2 and promising to pay Mary $1000 if it turns out George’s number is up.

Now Harry, being a smart bookie, knows that he should put away $1000 for that year so he can pay off the bet if George should happen to jump off a bridge or something, but he hates to tie up that whole $1000 for a year. So Harry starts talking to other people; a lot of them are also worried what will happen to their families if they are run over by a milk truck or something, so they want to make a similar bet.

Now, Harry thinks this is a pretty cool business, and he has a lot more people who want to protect their families against bad things happening than who want to bet on Soap Factory in the 8th. Bert the cop comes in; he’s a little older, and he’s got a risky job, so Harry charges him $10. Ernie the taxi driver he charges $5. Old Man Potter comes in: he’s, like, 90, in a wheelchair, smokes cigars. Harry figures his odds aren’t great, so he charges Mr Potter $400 — figuring the good die young but Potter is still likely to die soon.

Now, this really is a good business — he’s giving people some sense of security. He changes the name from “Harry’s Betting Parlour” to “Potterville Life Assurance.” Pretty quick, he can build a brick building on Main Street and change from the sharkskin suits to good conservative gray flannel. Still the same business, but “insurance” sounds so much more respectable. And here’s the funny thing: the more people he insures, the less he has to charge. See, the more customers he has, the less likely it is that a run of bad luck is going to use up all his money. And it’s a good thing, because it’s such a good business that Giovanni around the corner has closed his bookie parlour and opened his own insurance company; pretty quick both of them are competing on prices and service. He needs to be able to reduce that price or Giovanni steals his customers.

Uh, clients. That sounds more respectable too.

Then Oscar Barry, candidate for mayor, has this wonderful idea. Sometimes people die who don’t have insurance, and Potterville ends up paying for their funerals; sometimes people end up taking a collection to help the widows and orphans. Wouldn’t it be great if everybody had life insurance?

Of course, everyone thought it would be great. Even Harry and Giovanni thought it’d be great — after all, they made a little bit on every policy; the more policies they sold, the better, right? And Oscar is elected mayor, and he makes it a law that everyone over the age of 25 has to have life insurance.

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Top Rated Comments   

Bingo.

While we question how the government can afford all this, the
Democrats believe that there is an inexhaustible supply of money socked away in the hidden corners of the economy, just waiting to be liberated by clever tax schemes, ready to do good at their command. Harry Reid is openly calling for $1 billion in new taxes over the next ten years, even in the face of a struggling economy. Even that will not suffice to sate the spending monster, however.

Smile not, my friends. The money they seek is yours, your retirement, your kids college funds, your emergency fund. After all, Julio and Clarence down in the ghetto don't have as much as you, and that is unfair. Isn't it?

51 weeks ago
51 weeks ago Link To Comment
The only thing missing from this fable is the fact that Mayor Barry's entire understanding of economics comes from old Scrooge McDuck comics. He absolutely KNOWS that there is a huge vault stuffed with limitless piles of gold that he can tap into when needed.
51 weeks ago
51 weeks ago Link To Comment
As I have said many times only a MORON would propose and only CRETINS would believe that you could cover 30 - 40 Million MORE people and make pre existing cover mandatory along with a shopping list of other mandated coverage which for many people are either inappropriate or undesirable and then expect it to be both CHEAPER and more EFFICIENT. But the MORONS did so propose and the CRETINS did believe. Now the chickens are coming home to roost.
51 weeks ago
51 weeks ago Link To Comment
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All Comments   (78)
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50 weeks ago
50 weeks ago Link To Comment
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50 weeks ago
50 weeks ago Link To Comment
It appears that Obamacare is sowing the seeds of demise of not only medical care, but also insurance.

What impact will Obamacare have on the valuation of insurance stocks ? Could the total impact of Obamacare on the medical and insurance industries, and on employment be a Black Swan event that destroys the economy.
50 weeks ago
50 weeks ago Link To Comment
Gotta hand it to Mr Martin for giving us a thorough, if allegorical, primer in Actuarial Science 101. Since the stock market is (ideally) forward looking, and the Obamacare debacle has been in coming for the past three years, I'm sure the decreased valuations of the insurance stocks is already in evidence. Let's check the charts, shall we? Oops, Cigna (CI) and United Health (UNH) are both up 24% YTD and up significantly the past three years. Could it be that they've already priced in and discounted the Obamacare mess, or perhaps they're not listening to JoanE or Mr Martin.
50 weeks ago
50 weeks ago Link To Comment
OK, and it cost about a Billion $ just for the failed roll-out of the sign-up. How many folks were uninsured according to our gubmint? If 50 million people were uninsured couldn't we just have spent 50 million $ to insure them all for life? Couldn't we just have spent 330 million $ to insure EVERYONE for life. I don't understand I guess. It just seems to me that since a billion is a 1000 million, we could have given EVERY person in the US approx 3 million $ and then taxed them half of that through the same agency that now collects our taxes and pays some of us refunds. They are already set up to collect and disburse $. That way, everyone would have enough $ to buy insurance or just pay their medical bills, the gubmint would get back 1.5 million for each person in taxes for a total cost of 'only' 500 million $, a lot less paperwork, a lot less money spent and everyone getting the care THEY want. It's not about health care or being insured, it's about CONTROL and POWER folks. That and bigger and bigger gubmint.

Coeurmaeghan in Twentynine Palms, CA
50 weeks ago
50 weeks ago Link To Comment
Um, I think you're kinda missing that the $1 and $2 and $10 premiums I have here are imaginary, to keep the numbers conveniently small.
50 weeks ago
50 weeks ago Link To Comment
The history of insurance is terribly neglected in all this. Charlie's fable actually understates the scale and malice involved in the corporate and then governmental abrogation of the mutual aid societies, tithed charities and just neighborly lookin' out that once was the norm in Common Law countries like ours. Social Security is the diabolical version of savings that, as per the course, destroys ACTUAL savings without replacing it. Medicare/Medicaid, likewise are destructive dopplegangers of actual insurance and charity in medicine. Here in Atlanta, a shortfall in Medicaid reimbos is about to shutter half of Grady Hospital, the public institution built by Coke money a hundred years ago. As Groucho said so sagely, there are two ends to the insurance business.... taking the money in and refusing to pay it out. That is no less true when the gub is your insurer. Actually stats show the public programs deny MORE procedures, drugs and admissions than Big Insuro Corp. The chief difference is that the government can COMPEL the inputs and also deny the outputs with impunity. It should not need saying, they can also do this without being the actual insurer but making the financial and marketing decisions for the now nationalized insurance giants. Forward.
50 weeks ago
50 weeks ago Link To Comment
I keep asking liberals I know and none seems able to answer this question: when has any product/service become more efficient and/or less expensive when govt entered the market?

They act as though it is coincidence that industries heavily subsidized by govt - health care, higher education, housing - are the same industries in which price increases occur most often.
50 weeks ago
50 weeks ago Link To Comment
Coincidence is the god of the projectors. He never fails, apparently.
50 weeks ago
50 weeks ago Link To Comment
Of course no one asks how they can cover everyone in the rest of the developed world for 2/3 rds or less of what we pay? The answer appears that they "lop off" the high end. Which is really where the "big bucks" are...` Maybe that's what Obama should have done. Then people would have been happier. The trouble comes if you want "unlimited coverage", which is going to be really expensive even if most people never have to use it. This is why we need to understand that you buy coverage for the degree of risk you'll willing to take.
50 weeks ago
50 weeks ago Link To Comment
Excellent. So clear that even liberals will under be able to understand it.
50 weeks ago
50 weeks ago Link To Comment
Shirley, you jest.
50 weeks ago
50 weeks ago Link To Comment
Isn’t that just ever so much better than it was?

No.
50 weeks ago
50 weeks ago Link To Comment
Well, it is better for the old cigar smoker and diabetic and the snow-shovelers union, but not for anyone else.

50 weeks ago
50 weeks ago Link To Comment
Actually it will not be good for them either as the now unaffordable insurance will not be bought, collapsing the risk pool and making medical insurance illegal as a practical matter, since the deductibles will now be set above the average out-of-pockets, as they always are. Forward.
50 weeks ago
50 weeks ago Link To Comment
Excellent metaphor, thanks!
50 weeks ago
50 weeks ago Link To Comment
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