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October 29, 2013

Another Story the Media is Missing: How Much of the Sticker Shock Price is Attributable to "New Coverage," and How Much Pure Subsidization of Other, Sicker Customers?

First up, Hot Air has Charles Krauthammer attacking Comically Evasive Mouthpiece Jay Carney for imposing a raft of new mandated coverages on people, arguing, essentially, they're too stupid to know what's good for them, so Daddy Government is going to step in and choose policies for them.

Noah Rothman notes that Obama's minions -- here, one of Obama's claimed "favorite writers," a minor liberal hack at Business Insider -- are getting themselves right on Obama's Page as far as claiming People Don't Know No Better.

The technocratic conceit has always been that their judgment should supplant the will of the public. Their methods, they assure themselves, are always justified because the end is noble and the opposition is never arguing in good faith. If they were, the technocrat insists, there would be no opposition in the first place.

It is in this hubristic thinking that provides those seeking them with excuses that they believe vindicate so many otherwise indefensible ends – this includes subterfuge, and so much worse. The technocrats among us today justify the president’s lie because they believe the end is virtuous. And perhaps it is. But what they do not understand, just as [arrogant, bulldoze-happy city planner Robert] Moses never understood, is that no end is justified by any and every means. In fact, a virtuous project can be made forever toxic if its proponents adopt dishonest tactics in order to achieve it.

True. But we will have to discuss this word choice, "technocrat." I reject it. It implies skill -- tech is skill, after all -- that the putative technocrats do not actually evince.

We need a word for these people, but the flattering term technocrat is their preferred word choice, and it's not neutral. It's positive where it ought not to be.

Now, the story being missed here is this: How much, exactly, does adding a substance abuse treatment rider or maternal care rider to a policy actually increase a policy's premium?

Consider all the very expensive things a policy covers -- cancer, traumatic injuries from car accidents, back surgeries, strokes, heart attacks and related heart operations, diabetes, and on and on.

That's a lot of expensive treatments that hit with alarming regularity.

So how much will a substance abuse rider or mental health rider actually add to the premium to insure against these huge risks?

I don't know myself. But here is what I suspect: Such new coverage does in fact make ObamaCare insurance more expensive, but only by a little (say, 10-15%); the bulk of the increased premium costs, 85-90%, is due to forced, semi-hidden subsidization for other people.

What I'd like to see is a health policy expert put this theory to the test, assembling a policy per ObamaCare's rules, using 2011 costs for these additional coverages, and see how that Virtual ObamaCare policy stacks up to the actual ObamaCare policies in terms of premium.

If my hunch is correct, we'll find that the costs of the supposedly "better" coverage are quite minor, and that most of the new costs are simply imposed by distribution-of-wealth fiat.

And I'd suspect something else, too. Suppose I am a Tablet company executive. Suppose I sell tablets for $400. Suppose I intend, next year, to jack my prices up to near Apple's.

Well, if I were doing that, I couldn't just jack my prices up to $550. People would wonder, "Why am I paying Apple-level prices for a product I used to pay Amazon-level prices for?"

So how would I sell my new high prices to my client base? Why, I'd add features, and suggest that it is the cost of these new features which justifies the new, much-higher price.

Even if the cost of the features to me, and the fair price to customers, is only about 10% of the new price increase.

I'd need a pretext for jacking up prices, and I'd claim that "New Features!" was a good justification for doing so. I might not fool everyone, but hopefully, in my scheme, I'd fool some.

I think all this talk of the "new coverage" in ObamaCare is largely a smokescreen to hide the fact that people's premiums would be skyrocketing whether there were new features or not, because people are being charged a hidden tax to subsidize the uninsurable. It's the "New Features" claim that lets them claim that having your premiums jacked up double or triple is still, somehow, a really good deal.

Now, I don't know this: This is why I'd like to see Avik Roy or someone like this bust out his calculator, and tell me if I'm on the right track or off of it.

Until I see Avik Roy or someone with policy chops analyze these prices rigidly, I reject Krauthammer's casual acceptance of the spin that the increased prices are attributable to being forced into "better coverage."

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posted by Ace at 03:28 PM

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