Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do - 18th Nov 17
Gold Mining Stocks Fundamentals Q3 2017 - 17th Nov 17
The Social Security Inflation Lag Calendar - Partial Indexing - 17th Nov 17
Mystery of Inflation and Gold - 17th Nov 17
Stock Market Ready To Pull The Rug Out From Under You! - 17th Nov 17
Crude Oil – Gold Link in November 2017 - 17th Nov 17
Play Free Online Games and Save Money Free Virtual Online Games - 17th Nov 17
Stock Market Crash Omens & Predictions: Another Day Another Lie - 16th Nov 17
Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe - 16th Nov 17
Announcing Free Trader's Workshop: Battle-Tested Tools to Boost Your Trading Confidence - 16th Nov 17
Instructions to Stop a Dispossession Home Sale and How to Purchase Astutely at Abandonment Home - 16th Nov 17
Trump’s Asia Tour: From Old Conflicts to New Prospects - 16th Nov 17
Bonds And Stocks Will Crash Together In The Next Crisis (Meanwhile, Bond Yields Are Going Up) - 16th Nov 17
A Generational Reset That Will Redistribute Wealth to the Bottom 60% Is Near - 16th Nov 17
Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - 16th Nov 17
Gold’s Long-term Analogies - 16th Nov 17
Does Stripping Streets of ALL of their Trees Impact House Prices (Sheffield Example)? - 15th Nov 17
The Trump Administration’s IP Battle Against China - 15th Nov 17
5 Ways Bitcoin can Improve its Odds of Becoming the Future of Money - 15th Nov 17
These Headlines Say Gold is Building a Base for Something Big - 15th Nov 17
Protect Your Savings With Gold: ECB Propose End To Deposit Protection - 14th Nov 17
Gold on the Ledge, Trend Forecast - 14th Nov 17
The Unbearable Slowness Of Fourth Turnings - 14th Nov 17
Silver Sign’s Confirmation & More - 14th Nov 17
Could This Be The End for Tesla? - 14th Nov 17
Harry Dent’s Fourth Cycle: More Evidence of Stock Market Downturn - 14th Nov 17
Why Having Good Credit Is Important If You Want to Invest - 14th Nov 17
The Bitcoin Bubble Explained in 4 Charts - 13th Nov 17
How the US Has Secretly Subsidized China to Produce Eco-Unfriendly Solar Panels - 13th Nov 17
The Increasingly Unstable Middle East Must Be On Every Investor’s Radar - 13th Nov 17
Stock Market Critical Supports are Being Challenged - 13th Nov 17
The One Chart All Investors Should See Before 2018 - 13th Nov 17
Short-Term Stock Market Uncertainty Following Recent Rally, Will Stocks Continue Higher? - 13th Nov 17
Is Hillary Just the “Fall Guy” for the Intel Agencies and their Moneybags Bosses? - 12th Nov 17
Stock Market Correction Phase - 12th Nov 17
Finally, The Fall Of The House Of Saud - 12th Nov 17
Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - 11th Nov 17
E-franc, E-krona... E-volution? - 11th Nov 17
Gold Investment Stalled - 11th Nov 17
Smart Ways to Get Loans Online - 11th Nov 17
What Can Pot Teach Us About Economics and Government? - 10th Nov 17
Can Stocks and Bonds go Down at the Same Time? - 10th Nov 17
Gold Market 2017 Will We See a Replay of 2015 and 2016? - 10th Nov 17
Oil markets turn bullish with shift to backwardation - 10th Nov 17
The Strange Behavior of Gold Investors from Monday to Thursday - 10th Nov 17
Where to Start Your Cryptocurrency Company - 10th Nov 17

Market Oracle FREE Newsletter

Forex Trading Free Week

Obamacare May Become Zombiecare In 2018

Politics / Healthcare Sector May 19, 2017 - 04:16 PM GMT

By: John_Mauldin

Politics

BY PATRICK WATSON : Before the election, few people would have predicted today’s healthcare standoff.

Clinton supporters expected Obamacare would continue with some minor adjustments. Those behind Trump thought Republicans would quickly repeal Obamacare, as repeatedly promised.

Instead, the GOP House (barely) passed a replacement plan that the GOP Senate has little interest in pursuing. Negotiations continue, so we’ll see.


Unfortunately, time is not on their side.

Obamacare Is In Deep Trouble Now

As I explained back in March, the insurance companies haven’t been able to run profitably because not enough young and healthy people buy Obamacare policies.

That’s made them raise rates, which drives away more people and ultimately creates a vicious cycle.

Insurers have no incentive to stick around and lose money—and they must decide by June 21 whether to stay in the Obamacare exchanges for 2018. In some states, filing deadlines are even sooner.

Yet the Senate seems in no hurry to act. The odds that they will hash out a bill and get the House and the president to agree in the next five weeks are pretty low.

Moreover, they can’t just extend the deadline. Insurers need months to reprogram systems, train staff, and build provider networks. Congress can’t dawdle into summer and then unveil something entirely new.

If they do, the 2018 rollout will be a catastrophe.

Insurers Are Pulling Back

So insurers are doing the rational thing. They’re either backing out or raising rates to compensate for all the unknown risks they will be taking.

Early signs are ugly:

  • Maryland’s top insurer, CareFirst Blue Cross, has requested an average 50% rate increase for 2018.
  • In Virginia, Anthem Blue Cross is asking for 37.7% higher rates.
  • Aetna said it will be pulling out of all Obamacare exchanges nationwide.
  • Iowa is down to only one carrier, Medica, which only covers a few counties.

We’ll see more such stories in the coming months. Barring some legislative miracle, the result will be an individual health insurance market with sky-high rates and deductibles—if your area has any insurers at all. Many won’t.

But There’s A Twist To This, One Few People Are Noticing

I learned it from healthcare policy expert Robert Laszewski, whom I’ve quoted before.

He says Obamacare won’t explode or collapse, even if Congress does nothing. That’s because most of the beneficiaries will still be heavily subsidized under current law.

They won’t care what the price is.

Here’s how Laszewski explains it.

The health insurance companies' defensive strategy is simple: Limit the plan offerings available to ones that bring in the most premium and then drive the rates as high as they need to be in order to protect the insurance company's solvency. Health plan executives realize this will push the unsubsidized and partially subsidized people off the rolls, but leave a core enrollment of taxpayer subsidized people insulated against the costs and ultimately profitable for the insurers.

Some experts have said that a death spiral by its very nature cannot be stabilized. Under Obamacare, that is not necessarily true. Because of the uniqueness of the program's subsidy system, there is likely a point where a health plan can concentrate its pool of covered people from among the most highly subsidized participants and collect enough premium to end the red ink. That is what these latest big increases are about.

So, health insurance companies are happy to take taxpayer money as long as they don’t have to take most taxpayers as customers. They only want price-insensitive poor people.

But in cold, hard business terms, it’s probably their best move.

Bottom line: In 2018, Obamacare will still exist, but only as taxpayer-provided indigent care. The program’s heart and soul—the grand vision of “Affordable Health Care” for every American—will be gone.

What’s left will be a mere shell, stumbling around and consuming resources.

Or, as Laszewski called it, Zombiecare.

The Middle Class Will Take The Biggest Hit

Aside from taxpayers, who loses in this scenario?

Not the poor—they’ll have subsidized health insurance.

Not the wealthy—they’ll have employer coverage or just pay out of pocket.

Not the elderly—they’ll have Medicare.

The losers will be in the middle: Working-age people who make too much to get Obamacare subsidies, but not enough to do without insurance.

They’re small-business owners and their workers, solo-practicing lawyers and other professionals, independent contractors, and others without employer coverage.

These folks are important to the economy. And next year, many will be uninsured. Insurance companies will identify the pain point and raise rates above it to keep them away.

Some in this group will get serious illnesses, have accidents, or otherwise need expensive healthcare that they won’t get—which will make them less productive to the economy.

The labor market is in an odd balance right now. Even while many remain out of the labor force or underemployed, good workers are scarce in some areas and occupations. Losing productive people to health problems won’t help.

But regardless, it appears set to happen.

The Healthcare Industry Will Feel Some Pain, Too

This will likely show up in stock prices. Hospital stocks are especially vulnerable, since hospitals are legally required to stabilize anyone who checks into the emergency room—even if uninsured and unable to pay.

Medical-device and pharmaceutical companies might see lower revenue as well, since uninsured people may not be able to afford the latest drugs and technology.

With the economy already stuck in slow-growth zombie mode, we don’t need zombie healthcare too. But it’s what we are going to get.

The good news: The impending fiasco might convince the powers-that-be to try some new ideas. Other developed countries have found better ways. We can, too.

FREE PREMIUM REPORTS: 3 Stocks You Need (and 3 You Don’t) in 2017

Discover the best and worst stocks in 2017. This bundled series of exclusive reports reveals three companies set to soar and three you should steer clear of (one of them will surprise you). Download Three Deadly Dow Stocks and Three Top Picks for Income & Growth for free now.

John Mauldin Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife