Obamacare Hypocrisy

Proponents of Obamacare and other aggressive government health care interventions often argue that government health insurance will be less expensive than private health insurance.  Ignoring the whole history of government provided services (which you have to do to accept this argument), it is entertaining to press them on what costs will go away.

First, they will argue "profits."  Health insurers "obviously" make a lot of profit, so doing away with that will amount to a lot of savings.  Several years ago, when Obama was actively demagoguing** the health insurance business, the profit margins of health insurers were all around 3-4% or less.  Which means in exchange for eliminating all private profit incentives towards efficiency and productivity, we get a 3% one time cost reduction.  Not very promising.

After profits, Obamacare supporters will point to administrative costs.  Their philosophy that private insurance administrative costs drive health inflation is built into Obamacare, which places a cap on non-care related costs as a percentage of premiums.  I would argue a lot of this cost is claims management and fraud detection that government programs like Medicare don't have, to their detriment, but let's leave that aside.  I think most Obamacare opponents are convinced that there are billions in marketing costs that could be eliminated.  This has always been their bete noir in pharmaceuticals, that drug companies spend too much marketing.

I have said for years that to a large extent, what outsiders call "marketing" in health insurance is actually customer service and information, in particular agents who go out to companies and help people understand and make their insurance choices.

Well, it turns out that when the shoe is on the other foot, Obamacare supporters suddenly are A-OK with massive health insurance marketing costs, even when what is being marketed is essentially a monopoly:

[California] will also spend $250 million on a two-year marketing campaign [for its health insurance exchange]. By comparison California Senator Barbara Boxer spent $28 million on her 2010 statewide reelection campaign while her challenger spent another $22 million.

The most recent installment of the $910 million in federal money was a $674 million grant. The exchange's executive director noted that was less than the $706 million he had asked for. "The feds reduced the 2014 potential payment for outreach and enrollment by about $30 million," he said. "But we think we have enough resources on hand to do the biggest outreach that I have ever seen." ...

The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members.

New York is off to a similar start. New York has received two grants totaling $340 million again just to set up an enrollment and eligibility process.

** Don't be fooled by the demagoguery.  This is standard Obama practice.  In exchange for eating sh*t from Obama in public, private companies get all kinds of crony favors in private.  Remember, health insurers got the US government to mandate that everyone in the country buy their products, and got the Feds to establish trillions in subsidies to help people do so.  This may be the greatest crony giveaway of all time, and to cover for it, like a magician distracting your eye from the sleight of hand, Obama made it appear in public as if he were health insurers' greatest enemy, rather than their sugar daddy.


  1. SamWah:

    All lies, from top to bottom. With union labor doing the work for the gummint, jacking up the costs.

  2. MingoV:

    "... health insurers got the US government to mandate that everyone in the
    country buy their products... This may be the greatest crony giveaway
    of all time..."

    If the executives of those insurance companies are smart, they will give themselves big bonuses instead of stock options. Then, when the federal government decides to nationalize the healthcare industry, they won't lose a fortune when stock prices plummet.

  3. joe_dallas:

    One of the major contentions against the health insurance companies in promoting the benefits of a government run programs was that health insurance companies make "profit by denying benefits and coverage".
    This is a common fallacy made by the unknowledgable
    1) health insurance companies make more money by selling more policies. Insurance agents in the market place know which companies are denying coverage, and they quickly steer customers away from those companies. As insurance companies lose market share, they also lose the ability to control prices with the hospitals and doctors. As a result, there is a disincentive to deny coverage.
    2) The second fallacy is the denial of coverage is that when insurance copies deny coverage, they have significant costs related to lawsuits. The government on the other hand has sovereign immunity and therefore has no disincentive to deny coverage.

  4. mesaeconoguy:

    Again, leftists have zero concept of economics.

    The costs of Obamascare will be enormous, 3 -5 times current costs.

    Here is the track record of government health care program cost estimates



  5. obloodyhell:

    }}} Ignoring the whole history of government provided services

    The most obvious being the claim by the USPS that, since they were handing MORE mail, they'd have to raise the rates they charge per piece.

    A "government company" is the only kind which never experiences economies of scale. :-/

  6. bigmaq1980:

    When I've encountered people who badmouth the "obscene" profits that one company or industry makes, I reply that they ought to buy stocks in them.

    If these companies are making so much money compared to any other, wouldn't their share ownership compensate them for some/all the extra costs they may incur?

    Most stop there.

    Some may put up some objection, usually along the line of they don't believe in profiting...to which I asked if they ever sold their house or car - usually yes - then did they not try to get top dollar for it? When they bought, did they not try to get the price down as much as they could? Why should companies behave differently?

  7. nehemiah:

    The insurance companies may feel like they cut a good deal for themselves, but in time they will be driven out of the market. We are headed for single payer (government).

  8. Arthur Felter:

    $250 million is a lot of marketing money....

    How much does the average superbowl ad run? $4 million per 30 seconds sounds about right. $250 million could buy over half an hour of advertising during the superbowl.