The Health Care Domino Effect

August 3, 2009 by  
Filed under Economics

health_dominoNo matter your personal feelings on Obama’s health care “reform” initiative, do not be fooled by what is happening on the surface and in the short term. Mr. ToughMoneyLove is convinced of two things about what will happen in the longer term, depending on how long the Democrats retain their legislative power.

First, the “public insurance option” is merely a stepping stone or “foot in the door” strategy toward a single payer system. If you listen to past rhetoric from those in power, that is their objective. Recently, Barney Frank was asked why single payer is not part of the present reform effort. His response was pragmatic:  not enough votes. But he was quick to add that the public insurance option was a first step toward that goal. Past campaign speeches from President Obama and his campaign advisors express similar views.

Why is this important in the personal finance realm? For one thing, the public insurance option will mark the beginning of the end of the private health insurance industry as we know it, with single payer killing it altogether. If you are an investor in any of these companies, think about the long term value of that investment.

The second major financial event that will accompany ObamaCare is a tax increase on the middle class. Forget what Obama the candidate said. There is too much deficit and not enough economic growth to fund government involvement in universal health care. The foundation for a middle class tax increase is already being prepared. Treasury Secretary Geithner and Economic Advisor Summers made the rounds of the Sunday talk shows this past weekend. When pressed, they acknowledged that a tax increase to fund health care was likely. They refused to rule out extending it down into the middle class.

The first domino is about to fall. Two very large dominoes will fall right behind it. Be ready and, depending on your attitude, be afraid.

Photo Credit: aussiegail

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17 Responses to “The Health Care Domino Effect”
  1. Rick Beagle says:

    I’m shaking in me boots! Oh gawd the sky is falling because we might provide universal healthcare like every other civilized country in the world (at our tech level). From a pragmatic standpoint, the cost of doing nothing is far more damaging that any of the proposals on the table.

    And one last question, where is the moral imperative here? Do we let people die because insurance companies hold an unfair advantage in this battle, or do we do something about it? Honestly, how can you guys complain about the government and overlook the issues that are currently out there with regards to the insurance industry? Why in the heck would you back them? Greed? Arrogance? Why are you folks fighting against your own self interests, is it because you are making a few bucks off the scam they are running?

    Your comments about getting out of the healthcare is dead on, if you have stocks – might want to rethink that. As for tax increase on the middle class, i doubt we will see that until 2012 elections at the soonest. The economy has to improve before that is even considered…. But you are right, there will be a tax increase and if capable strong willed people are in charge it will be used to pay down the deficit.

    Rick Beagle

  2. MasterPo says:

    Hey Rick.

    How many hot dogs, pizzas, beeer do you have a week? A month?

    Enjoy it now!

    BTW, ever hear of VAT?

    Coming to an IRS office near you soon!

    (I 100% agree with TML on this one. Buy gold.)

  3. Rick Beagle says:


    So, are you happy with your health insurance now? Don’t think you are going to be disqualified when you need them most because of a “pre-existing” condition?

    Difference between my comment and yours, mine is actually based on facts, you, and your right winged brethren just make stuff up.

    Just look at the numbers, we are being fleeced by the insurance companies, why in the heck are you going against your own self interests? Are you more afraid of our government than the insurance industry? Yikes…..

    MasterPo, quit sticking your head in the punch bowl.

    Rick Beagle

  4. MasterPo says:

    Educate yourself on the terms. Otherwise you’re just showing your ignorance (though when did that ever stop a liberal).

    “Pre-existing condition” means you come into the policy with some condition. Like you have cancer and want in on the policy.

    It does *not* mean you’re on the policy and you develop a condition. Heck, that’s what health insurance is for!!! Taking your stance then life insurance won’t pay off if you die!

    I have no great love for the insurance companies per se. But if you’re car needed a tune up would you fix it or junk it?

    ps- Yes I am more afraid of gov than a company. And I’m far from the only one. So what does that say about our government today?

  5. Rick Beagle says:

    “Educate yourself on the terms. Otherwise you’re just showing your ignorance (though when did that ever stop a liberal).
    “Pre-existing condition” means you come into the policy with some condition. Like you have cancer and want in on the policy.

    ROFL! Let me help you out MasterPo and give you a few links to review:


    Daily Dish.

    There are links about abuses, but I will save those up for another time. As a teaser, do you think it is possible that insurance companies might be exploiting the “pre-existing” condition loophole to avoid paying for a condition discovered under their plan? LOL! There might be a few billion dollars in fines because of this….

    Rick Beagle

  6. MasterPo says:


    Exactly! She was pregnant. That is a pre-existing condition! May not be flattering to think of a baby that way but it’s reality. She wanted to buy into an insurance plan with a condition that soon would definately need to be paid for. IOW, she was looking for someone to pay the bill!

    Philosophically, I don’t have a problem with this! Yup, I said it. Because INSURANCE is the business of measuring risk vs. payment.

    His mother was pregant. That’s a fact.
    She was going to give birth soon. Also a fact.
    And a birth costs $$$, not to mention the care for the child – especially if there are problems. Also a fact.

    So from a risk POV she was a bad risk coming into the plan with a condition that definately would need to be paid for shortly. OTOH, if she had bought into the plan and a year later got pregnant, if then the insurance company denied to cover her then I would totally agree with you. But that’s NOT the case!

    Same way car insurance is more expensive for someone with many accidents and traffic tickets than for a clean record driver.

    Or the way someone with cancer can’t get life insurance.

    I have no problem with either. It’s business. Insurance COMPANIES are in the BUSINESS of insurance, NOT giving away money or paying other’s bills.

    Sometimes (ok, most of the time) I just don’t get your thinking and the thinking of those of your ilk. You want someone else to pay your bills. You think whatever happens someone else should pay your way. I just don’t get it. Talk about feeling entitled!

  7. Rick Beagle says:

    “Sometimes (ok, most of the time) I just don’t get your thinking and the thinking of those of your ilk. You want someone else to pay your bills. You think whatever happens someone else should pay your way. I just don’t get it. Talk about feeling entitled!”

    Because you do not have the capacity to understand the ramifications of your views. It is just all buzz words to you, and the thought that a pregnant mother should somehow impact you or your wallet is intolerable. But if you can separate your selfishness and greed from your POV for just one moment and think about the job losses in the market right now. Do you think it is fair, or morally acceptable to send a child that has cancer to their death because Dad lost his job and when he got a new job, the insurance company declared the child’s illness a pre-existing condition? How about that mother to be where they both lost their jobs, got new ones, and were told that her pregnancy was a “pre-existing” problem.

    And let’s talk about your stupid analogy. You are comparing whether you have car insurance with health insurance? You think people who are dying of cancer should need to fight for health insurance because it disagrees with your sensibilities? WTF kind of human are you?! How in the heck do you think it is a GOOD idea to argue about coverage when one of the parties is dying, and the other is looking to increase their profits? How in the heck do you think that is a fair, or noble fight?!

    Your sound bite about entitlement is crap. This isn’t an entitlement argument, it is about finding a better way. Unfortunately you are too busy reiterating the talking points of idiots who are interested in their own bottom line to understand your own logic failings.

    Someday Karma is going to get you MasterPo or someone you care about. It is inevitable that you will be the target of someone else’s greed, and it as that point you will realize that your talking points affect real people and cost real lives. Until then, rabble on sir….


  8. MasterPo says:

    “Do you think it is fair, or morally acceptable to send a child that has cancer to their death because Dad lost his job and when he got a new job”

    There are DOZENS (if not more) charities and other organizations that will be glad to pay for someone in that condition. Many doctors and hospitals will donate the care too.

    “How in the heck do you think it is a GOOD idea to argue about coverage ”

    Because people like YOU want people like ME to pay for it! You think you have a devine right to stick your hand into my wallet anytime you feel there is a social cause to be advanced simply because I may have more than someone else. There is NO moral or ethical justication for that.

    BTW, my analog is 100% valid. Years and years and years ago health INSURANCE was just that: insurance. People went to the doctor for a cold or cut or whatever, paid the doctor’s fee and that was it. If they broke a limb, got in a accident, got seriously ill etc. then they made an insurance claim.

    Somewhere along the line people (like yourself no doubt) started crying that insurance should pay for a cold, a cut, an annual check up, etc. So when the insurance has to pay out more they have to charge more for premiums. Insurance companies don’t just print it (unlike the U.S. Treasury under Obama).

    So my analog to car insurance remains 100% valid. Most people complain about the cost of their auto insurance as is. If Allstate, Geico, State Farm, et al had to also pay for your annual inspection, a new set of breaks and tires every so miles, tune ups, etc. it would be several times more.

    (I must have really shaked the tree of your views to be so hostile towards me. 😀 )

  9. PT Money says:

    “Do we let people die because insurance companies hold an unfair advantage in this battle, or do we do something about it?”

    Rick, you’ve been smoking the peace pipe too long. No one is refused care when they are dying. Stop spinning it. You make it sound like there are people dying in the streets, or at the hospital doors. That just isn’t happening.

  10. Rick Beagle says:

    Here is an interesting comment from another blog which does a far better job of expounding on my thoughts than I’ve been able to convey:

    “makeitwright wrote:
    “Susan Wells, a Red Cross technician, likes her current insurance coverage, but said her benefits are due to be cut…”

    I sold health insurance for 15 years for various health insurance companies. In the comments I read regarding health care reform I am continually amazed, as I was when I sold health insurance, at how uninformed and uneducated the general public is about the true nature of insurance.

    The original principles of insurance were quite simple. Large numbers of people pay in small amounts of money to create a large pool of money to pay for catastrophic events that had a very low chance of occurrence. This risk pool worked because only those who were most unlikely to incur such occurrences were admitted to the risk pool, or were charged higher premiums based on the likelihood of occurrence, or were excluded from coverage for certain events that were likely to occur for particular members of the pool.

    Insurance companies have historically prospered by carefully controlling membership in risk pools, and rejecting claims that they did not deem appropriate based on the terms of the insurance contract.

    The exclusionary principle of insurance is why it is totally inadequate to cover the health care needs of a modern industrial economy. We have progressed, thankfully, to a society that recognizes that the collective health of our nation demands that health care should be available to all citizens, not just those lucky enough to enjoy health that will admit them to the risk pools managed by insurance companies.

    The real argument now comes down to who will manage the distribution of health care to citizens and how will it be paid for.

    An amazing and repeated conversation that I had as a health insurance agent usually occurred on Friday afternoon. I would receive a call from someone wanting an appointment on Monday morning. They had just quit their job and were going into business for themselves. I would immediately ask them if they had any pre-existing medical conditions. Usually there was an incredulous response. They would ask why that should make any difference. They had coverage through the company, and they never asked about pre-existing conditions.

    It was at that point that I became an educator. I had to explain that insurance involved excluding risk. A second painful lesson was that the premiums for private health insurance would be double or triple what they had paid while employed by a company or corporation. I watched many entrepreneurial aspirations crushed by the realization that the expense of health insurance, and worse the inability to obtain coverage were explained.

    The sad truth is that insurance cannot provide health insurance of all Americans. It simply is not a model that will work. Insurance companies know this. It is why they are spending millions of dollars to stop reform. The irony is that they themselves helped create the illusion that they could provide coverage for Americans through employer sponsored health insurance. Large corporations became their partners in alliance that served both of their interests.

    The development of company sponsored health insurance had it’s origins in the labor shortage created by World War Two. With a reduced labor population, and wage controls posed by the federal government, companies , working with insurers came up with a plan that offered subsidized health plans to prospective employees. It was a win win situation. Employers attracted employees without violating wage controls imposed by the governments. Initially, insurers were allowed to exclude pre-existing conditions, creating a health risk pool that created a new profitable book of business.

    Doctors, hospitals, and other health providers came to rely on a new group of patients with insurers who would pay a percentage of the cost of care. Everyone was satisfied. Since World War Two the evolution of health insurance has inevitably deteriorated as the expectations of patients providers and the society have outstripped the ability of insurance and companies to effectively provide coverage and absorb the costs. All other industrialized societies in the world suffered the same dysfunctional evolution and of necessity turned to the government to create models that provided mandatory universal coverage either paid for by participants or through taxation. They did so because they realized that inaction would lead to an inevitable collapse of the health care system and unacceptable social consequences with massive parts of the population without even basic health coverage.

    The U.S. alone still clings to the belief that the private insurance model alone can provide cost effective health insurance for all segments of it’s population. Why?

    Insurance companies and health care providers enjoy enormous profits from the current system. Providers continue to escalate claims to insurers through duplicate and sometimes blatantly fraudulent services and procedures. Insurance companies maintain vast administrative bureaucracies to deny or defer claims to the insured. By and large though, the maintain profitability by passing along costs to corporations through increased premiums offering reduced benefits. They use their profits to hire armies of lobbyists. They effectively buy state and national legislators through campaign contributions forming a powerful partnership with health providers and corporations.

    Employers have recognized that employer provided health insurance is an effective means of tying employees to companies without increasing wages , although recently they have had to confront the dysfunctional economics of a system that perpetuates escalating charges from providers, and increasing premiums from insurers who can no longer effectively regulate the behavior of providers who continually escalate fees to cover the cost of new technology and the mandated care of the uninsured. The modern corporation is forced to strip down benefits, increase deductibles, and illegally make every effort to hire and retain employees from the healthiest populations. At some point corporate America will reach a tipping point. Escalating premiums will make it too expensive to provide health care benefits as an incentive to, and retention of employees. They wil stop providing health care insurance. At that point insurance companies will likely revert to the outdated model of private individual health insure that covers fewer and fewer Americans as costs continue to escalate and the health of the country continues to decline making fewer of us healthy enough to qualify for coverage.

    Few of us will be able to afford private individual health coverage, even if we qualify. A family who loses health coverage under the current health system incurs premiums between $800-1000 a month. This is 70-80% of many Americans income. Treatment of malnutrition will be important coverage for many maintaining health insurance.

    It is impossible to know if health care reform will pass this year, or if any kind of plan that can survive the full scale assault of health insurance companies will truly be reform or an extorted deal that allows extended profitability of insurance companies who will continue to milk the system while it lasts. Employers are uncertain of it makes good business since to partner with insurers, They continue to reduce benefits until they are almost meaningless, while paying increasing premiums that are straining their bottom line.

    Recently Wal-Mart made it clear that they have suddenly become fans of health care reform. When a conservative business icon as formidable as Wal-Mart withdraws from it’s partnership with the insurance industry it should be a clear signal to everyone that this system is sick and unlikely to recover.

    Rest assured, change is coming. It may not occur this year, and it may not occur during this administration. The insurance model cannot serve a society that views health insurance as a right that should be extended at an affordable cost to every citizen. In survey after survey Americans have made it clear that this is their view. The current system demands profit by excluding those who are not healthy. No one can agree what the new system will be. They know only that a new system must be found.

    An old car repair ad from the 70’s when talking about repairs says, ‘ you can pay me now, or you can pay me later’.
    Bus loads of angry ill informed political ideologues and loud mouthed thugs recruited by the insurance companies and the Chamber of Commerce may delay the bill for health care reform until later and allow the insurance industry to remain profitable for a few more years. Unfortunately, all of us will pay billions more later.
    8/10/2009 1:00:41 PM”

  11. MasterPo says:

    That is because in today’s age health *insurance* is really a health PAYMENT system, not true insurance. Insurance is to protect against unforeseen and catastrophic losses, *not* routine or common or expected events.

    I again go back to the auto insurance example. You buy auto insurance to protect yourself against loss due to theft or collision. But you’re auto insurance doesn’t pay for annual maintenance and routine repairs. If it did youy’re be paying triple at least!

    IOW, your auto insurance doesn’t pay for oil changes, annual inspections, new brakes and tires, a new muffler, etc. And as your car gets old, like a human body, more things are going to fail costing more in repairs. But you don’t expect your auto insurance to pay for it.

    Same with what health INSURANCE *should* be. It’s expected babies will need vaccinations, teens will need medical approvals for school sports, you’ll want an annual check up, you may need to see a doctor if your cold doesn’t go away, you will get bad cuts and burns, etc. That’s all routine as part of life. OTOH, if you suddently develop cancer that is unforeseen (inspite of some possible risk factors). So therefore insurance should pay.

  12. Rick Beagle says:

    “That point couldn’t have been made clearer than by the man standing in line to get free care at Remote Area Medical’s recent health care “expedition” at the Wise County, Virginia, fairgrounds, who told a reporter he was dead set against President Obama’s reform proposal.”

    Excellent article today at CNN.

  13. robert says:

    Good points, this is not an easy problem to solve.

    Everyone hears the downside of public medicine, but with advances in healthcare, it may not be as bad as what we feared 20 years ago.

    My wife is from El Salvadore, and the quality of care for most common diseases is not that far removed as from here….

    I think health care costs are rising and we will have to do something. $5000 for outpatient procedures is simply too much – it takes 2 hours! Doctor’s scream about their rising costs – but how many live in a small home or drive an inexpensive car. It is time for some change.

  14. ttfitz says:

    Pre-existing conditions:

    I am 47-years-old, my wife is 46. For our entire lives, we have had health insurance, first on our parents policies, then group policies from my job or hers. We’ve been paying into the system in one way or another for nearly half a century, with very little in the way of payouts over the years, for the most part.

    In December, my wife (the primary wage earner in our family) was laid off. She had a severance period where she got payments and we were still covered under the group insurance, and she was lucky enough to find work shortly after her severance ran out. But the work she found was as a consultant, and it didn’t include health insurance.

    We started on COBRA, which costs us nearly $1500/month. Everyone says, “Don’t do COBRA, an individual policy is usually cheaper.” Only problem is, my 12-year-old daughter was diagnosed with Crohn’s Disease when she was 10. She hasn’t had any problems requiring treatment (beyond the checkups and medications) in nearly 2 years now, but we’ve been told that no one will write us an individual policy that covers her until they are forced to by HIPAA eligibility when we have exhausted our COBRA coverage, and even then it will be very expensive. We’re lucky, because her consulting job pays well and we can manage the COBRA payments. But how many people in our situation wouldn’t be able to put out $18,000 a year for health insurance?

    I understand arguments about pre-existing conditions where folks wouldn’t pay for coverage until they were already sick, but I think the problem is with folks like us, who have been covered forever and can’t get coverage due to an employment change.

    And for all of you who are happy with what you have and are afraid of reform because you think your current coverage will be hurt – you are quite possibly only a job loss away from being in a world of hurt.

  15. AnnJo, Seattle says:


    You are right that your situation reflects a problem with our health insurance system that DOES need reform (unlike the problem with someone who just doesn’t want to pay for health insurance until they get sick).

    The problem that needs to be corrected is the linkage of insurance with employment – a problem created by government intrusion into the insurance market.

    This arose during the wage controls imposed during FDR’s administration, when employers were forbidden to raise their employees’ wages but were allowed to offer tax-free health insurance as additional compensation.

    The result was a huge market distortion. Workers being, by and large, healthier than the rest of the population, and large employers having better negotiating clout, the market for individual policies has suffered ever since.

    In the meantime, workers, and especially unionized ones, started demanding lower deductibles and more and more non-insurance type coverage from their plans – coverage for preventive care, office visits to doctors, routine lab work, etc. – so even with their healthier pool and better negotiating abilities, the prices of their plans soared and people’s expectations for what health insurance should cover grew exponentially. Then, as people realize they are paying thousands of dollars a year for “insurance,” they feel entitled and even pressured to make sure they use it rather than “waste” it, so restraint in seeking care went out the window for insured people.

    The true reform solution would be to de-link insurance coverage from employment. Take away the tax deductibility of employer provided insurance and give a tax deduction for individual plans. This would create a huge and much better market for such plans. Additionally, allow plans to market across state lines and limit the ability of state and federal politicians to add mandated coverage to plans, but require guaranteed renewal. Impose some limits on denial of coverage for unknown pre-existing conditions, but allow exclusions for known pre-existing conditions.

    Create an add-on to Medicaid (for people like your daughter) that subsidizes treatment for the excluded pre-existing conditions on a sliding scale, so that those whose care is uninsurable are assisted to get needed care, IF THAT ASSISTANCE IS NEEDED. In your case, if you and your wife earn a great income, that might be very little help, but the fact is, if you have a great income, why should you be the beneficiaries of other people’s compelled charity? Why should I, for example, have to give up my vacation to pay taxes so that you can spend your money on vacations for your family rather than your own daughter’s care?

    There is no reason the health insurance market should not work just as well as the auto or homeowners insurance markets for 95% of the population. Conversely, if the government did to those markets what it has done to the health insurance market, they would likewise be in just as much trouble. Imagine having most auto plans obtainable only through employers, having them mandated to pay for new tires, oil changes, detailing, tune-ups, and every additive sold a company with a strong PAC and good lobbyist. Imagine the premiums if companies were required to issue coverage after you crashed your car, or to people with three DUI convictions. Would anyone who loves to peel out from a stoplight and hates to worry about maintaining proper tire pressure have an incentive to restrain themselves if they were entitled to new tires every 20,000 miles?

    What about the other 5% who might not be well served by such a system? 95% success may not seem like enough to people who demand perfection from human systems, but there is no such thing in the real world. Every system is going to have a certain number of losers. A sensible system can address the needs of your daughter, but may not be able to provide “coveraage” for the schizophrenic drug addict who visits the ER two or thre times a week seeking drugs or the chronic alcoholic who needs a liver transplant. I have known such people, and no health care delivery system can be devised that will deal with everybody perfectly.

    Every poll taken about satisfaction with one’s own personal health care shows Americans as much more satisfied, by and large, than participants in single-payer or government-run plans. This is a track record that should be messed with carefully as we talk about how to pay for it.

  16. ttfitz says:

    AnnJo – I’m not going to address most of your comments, as I either agree with them to some extent, or disagree to an extent that I don’t care to argue the point, but I did want to speak to one part of your statement; to wit:

    “Create an add-on to Medicaid (for people like your daughter) that subsidizes treatment for the excluded pre-existing conditions on a sliding scale, so that those whose care is uninsurable are assisted to get needed care, IF THAT ASSISTANCE IS NEEDED. In your case, if you and your wife earn a great income, that might be very little help, but the fact is, if you have a great income, why should you be the beneficiaries of other people’s compelled charity? Why should I, for example, have to give up my vacation to pay taxes so that you can spend your money on vacations for your family rather than your own daughter’s care?”

    While I, of course, would not want you to give up your vacation to pay for my daughter’s care for me, that’s a false choice, for a very simple reason – =I=, and my family, have been PAYING for insurance our entire lives. I’m not looking for a handout here, I’m just looking for what is owed to me – all those years where I paid into the system without (rightly, I might add) getting anything back, because that’s what insurance IS. I’m not sure where my situation falls in regards to your idea that a reformed system should “allow exclusions for known pre-existing conditions”, given that we are currently being treated in exactly that manner, but regardless of our financial situation we are folks that have played by the rules and now find the rules no longer apply to us because we are no longer cost effective.

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