Obamacare: Examination and Response
An appraisal of the Affordable Care Act and-- with some guesswork-- its tricky politics. Then, a way to capture major new revenue, even paying down existing Medicare debt, without raising premiums or harming quality care. Then, an offering of reforms even more basic, but more incremental. Finally, the briefest of statements about the basic premise.
Health Savings Accounts, Regular, and Lifetime
We explain the distinction between Health Savings Accounts, Flexible Spending Accounts, and Lifetime Health Savings Accounts. Sometimes abbreviated as HSA, FSA, and L-HSA. Congress should make it easier to switch between them. All three are superior to "pay as you go", health insurance now in common use, only slightly modified by Obamacare. It's like term life insurance compared to whole-life. (www.philadelphia-reflections.com/topic/262.htm)
Decline and Fall of Philadelphia
In 1900, Philadelphia was described as the largest commercial (ie non-capital) city in the world. By 1929 it was flat on its back, and never recovered its former position. Why did this happen?
Here's my macroeconomic nightmare, brought on by thinking too much about paying for health care costs, and supposing, just supposing, we were successful in doing it. The equivalent nightmare would be to imagine that some multi-billionaire walked into the offices of Vanguard or Fidelity, and said he would like to speak to the manager. After he had a cup of coffee, he would explain that he wanted to make a deposit of $5 trillion dollars in a total-market index fund. After an initial reaction resembling a Grade B comedy movie, the manager would begin to see the idea was pretty disruptive.
In the first place, $5 trillion is more than twice the size of the largest index fund currently in existence. We're getting there, but at the moment no one can be entirely certain what it would do. It might take months or even years to feed that much money into the markets without creating violence. That one buyer alone would dominate the stock markets of the world, bankrupting some, enriching others. In the Grade B movie I envision, dozens of beautiful starlets would be sent around for the sole purpose of learning what our buyer was buying next week. And what would he care, he would tell them. If he decided to make a big sale, markets would tumble, maybe crash.
Now, assuming this money was honest and not "dirty" as they say, the consequence of steady buying in huge amounts would be to flood the markets with liquidity. There might well be spurts of both directions, but in general, the addition of this much money concentrated in the stock market would send the price of stocks up, in response to supply and demand. If the price of a stock is generally raised without underlying business transactions to justify it, earnings per share would go down. In the long run, that could send the value of stocks down, resulting in inflation, because it would be possible to sell more stock without raising prices. In any event, reducing the scarcity of stocks would lessen the value of capital, compared with the value of labor. Reducing the value of capital would itself cause disorders in the economy before the markets regained equilibrium. Prices of labor-intensive goods would rise, prices of things which could be automated by using capital would fall. It would create new winners and losers; new elites.
For these reasons, students of economics generally hate macroeconomics. It's important, but it's hard to make final conclusions. In our Grade B movie, the bald-headed little manager ends the scene by jumping out the window.
Originally published: Friday, July 18, 2014; most-recently modified: Thursday, May 09, 2019