Why The US Consumer Is About To be Crushed: The Obamacare Inflationary Deluge Arrives

Tyler Durden's picture

For the past three years, the biggest argument supporters of Obamacare would trot out every single time when faced with opposition to the mandatory tax, would be that despite widespread predictions of soaring prices, US medical care service costs had remained low and even, on occasion, declined (we leave aside the lack of discussion about soaring deductibles which are recurring "one-time" charges incurred whenever anyone does need medical care, and whose weighted impact on overall medical outlays is dramatic).

A big reason for this delayed increase in prices is that many insurers were unable to gauge the full base-effect impact of Obamacare on their P&L: after all, effective implementation of Obamacare had been materially delayed thus preventing an apples to apples comparison of incurred fees versus revenues.

All that changed moments ago when core US inflation finally spiked the most since 2013 driven by a 0.7% monthly surge in medical care service costs: the highest since 2007!

 

What's far worse for the troubled US consumer, this is just the beginning. Because after finally digesting the true cost of Obamacare, any recent insurance prime hikes will seem like a walk in the park compared to what is coming.

According to the WSJ, key insurers in some states are proposing hefty rate boosts for plans sold under the federal health law.

Case in point: 

  • In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016.
  • In Tennessee, the biggest insurer BlueCross BlueShield of Tennessee, has requested an average 36.3% increase.
  •  In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products.
  • In Oregon, the largest insurer Moda Health seeks an average boost of around 25%.

All of them cite high medical costs incurred by people newly enrolled under the Affordable Care Act.

The irony is that while the Obama administration "can ask insurers seeking increases of 10% or more to explain themselves, but cannot force them to cut rates. Rates will become final by the fall."

Why the explosion in costs? Simple: take on look at the IBB or any other biotech index, all of which have exploded in recent years as a result of one key thing: pushing prices of medicines ever higher. Now, finally, these soaring prices which have likewise resulted in soaring stock prices, are about to be funded by everyone else.

Insurers say their proposed rates reflect the revenue they need to pay claims, now that they have had time to analyze their experience with the law’s requirement that they offer the same rates to everyone—regardless of medical history.

 

Health-cost growth has slowed to historic lows in recent years, a fact consumer groups are expected to bring up during rate-review debates. Insurers say they face significant pent-up demand for health care from the newly enrolled, including for expensive drugs.

 

“This year, health plans have a full year of claims data to understand the health needs of the [health insurance] exchange population, and these enrollees are generally older and often managing multiple chronic conditions,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans, an industry group. “Premiums reflect the rising cost of providing care to individuals and families, and the explosion in prescription and specialty drug prices is a significant factor.”

 

David Axene, a fellow at the Society of Actuaries, said some insurers were trying to catch up with the impact of drugs such as Sovaldi, a pricey pill that is first in a new generation of hepatitis C therapies.

Now Sovaldi has been great news for one group of consumers: those who were long the stock of drug maker Gilead. Alas, now the time has come to pay the piper. And while Sovaldi's cost at $1,000 per pill and $84,000 for a typical 12-week course of treatment, has been a goldmine for GILD, the piper's invoice will be massive.

Who pays it? Why everyone dear America. That's the magic of socialized medicine the Obamcare tax, which means everyone has to chip in for the healthcare of the few. Meanwhile, GILD shareholders are laughing all the way to the bank.

As a result, expect Obamacare premiums, which are about to spike across the board virtually everywhere, to become a key talking point:

Insurance premiums have become a top issue for consumers and politicians as they evaluate how well the law is working. Obama administration officials weathered a storm as some younger, healthier consumers saw their premiums jump when the law rolled out, but were also able to point to modest premiums overall as insurers focused on other ways to keep costs down, such as narrow provider networks.

 

For 2015 insurance plans, when insurers had only a little information about the health of their new customers, big insurers tended to make increases of less than 10%, while smaller insurers tried offering lower rates to build market share.

Since the insurers have now had a chance to evaluate the impact of Obama's landmark tax on the top- and bottom-line, they have decided that they will need to charge the mandatorily insured Americans more. Much more. After all, it's not like Americans have much of a choice to say no to a "mandatory" tax.

BlueCross BlueShield of Tennessee, CareFirst in Maryland and Moda in Oregon all said high medical claims from plans they sold over insurance exchanges spurred their rate-increase requests.

 

The Tennessee insurer said it lost $141 million from exchange-sold plans, stemming largely from a small number of sick enrollees. “Our filing is planned to allow us to operate on at least a break-even basis for these plans, meaning that the rate would cover only medical services and expenses—with no profit margin for 2016,” said spokeswoman Mary Danielson. The plan’s lowest monthly premium for a midrange, or “silver,” plan for a 40-year-old nonsmoker in Nashville would rise to $287 in 2016 from $220.

 

* * *

 

Moda Health said that with more than 100,000 individual members, it had the best data “on the care actually being received by these Oregonians. Our proposed rates reflect that.”

 

Under Moda’s proposal, a 40-year-old nonsmoker in Salem would pay $296 a month in 2016 for a silver plan, up from $245 a month this year. “It is a balance,” said Oregon Insurance Commissioner Laura Cali of her rate-review process.

But wasn't the Affordable Care Act supposed to make healthcare prices more, well, a?. Well no, as we have explained time and again, most recently last summer.

But the biggest irony: just as Obamacare was the primary reason for the US Q3 GDP surge to 5%, as we explained last December, fooling many pundits into believing the US economy was finally in a self-sustaining liftoff mode...

 

... so this year it will be up to Obamacare to single-handedly pump up core CPI inflation - that biggest missing link from the Fed's "successful monetary policy" checklist.

As for US consumers? Why, they are about to get the short end of the stick again, as any and all "gas savings" now and in the future, will be once again spent on, you guessed it, health insurance.

The problem with that being that unless oil crashes again, there are no gas-savings to be had. Which means one thing: the only thing crushed yet again will be the US consumer, that 70% component of US GDP.

But don't worry: when the US economy slows down to a crawl once more, and posts a negative GDP print this time during the summer, there will be a double seasonal adjustment for that.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
NoDebt's picture

Bah!  It's be fine.  You'll see.

y3maxx's picture

...It's all free if you have an EBT card or an illegal alien.

Real democracy at work.

Almost Solvent's picture

When the ultimate plan was always single payer federal system, the plan is right on track. Hopefully, the plan pulls an Amtrak (too soon?) before reaching its destination.

pods's picture

You didn't think it was just going to be "the tip" did you?

lololool.

 

CrazyCooter's picture

Karl Denniger had this up recently:

http://www.newsweek.com/how-keep-down-sky-high-hospital-bills-dont-pay-3...

Basically a service that writes down hospital bills and appears to be very successful doing it - because the hospitals, in order to challenge, would have to go to court and prove out their costs.

That said, after getting charged 1k for a routine physical, I quit going to the doctor for anything other than emergiences (e.g. I cut my hand wide open a year or two ago). They can kiss my ass! If I die, then fuck it, I die.

Regards,

Cooter

Captain Debtcrash's picture
Captain Debtcrash (not verified) CrazyCooter May 22, 2015 10:12 AM

Wait we actually have to pay for all of the new services the ACA provides?!  This was not part of the deal Obama!

MillionDollarBonus_'s picture

This is exactly why I urge congress to mandate an extra 20 days' public holiday per year. This will increase the leisure time of all permanent employees without lowering their incomes or damaging their career prospects. Studies show that employees are far more productive when they are well rested, so this bill should have a positive effect on worker productivity. Many Americans will also use this time to go shopping and spend their hard-earned wages, thereby boosting the economy. It's a win-win for everybody. Economics doesn't have to be complicated - simple policies like this can solve our problems. We just have to have the courage to implement them.

Dr. Engali's picture

Sounds good to me. Where do I sign the petition?  Can we suggest 30 extra  days though? I ususally like to rest after a vacation. You know how exhausting they can be. better than 30, lets make it 40. No need to be so conservative.

N2OJoe's picture

Why half ass at 30 days? I want 90.

SuperVinci's picture

No MORE CLINTONS

 

No MORE BUSHs

Dr. Engali's picture

16 moar years! 16 moar years!

new game's picture

FSA, 365 1/4 days off w free everything (no need to list the programs if one is disadvantaged).

WTf MDB, free everything distributed fairly of course, just transfere the money or equiv monthly.

like being wealthy with no labor output cept to get the things that are free. i would go so far as to say free delivery, food and all. nurses make house calls - right?

de3de8's picture

How about one week on and one week off

NoVa's picture

MDB is a conservative ? 

Now the world is really messed up!  Squirrels chasing dogs et al.

 

NoDebt's picture

Well, we're not quite sure what he is, but if you think of him as being a conservative who pretends to be a liberal, you're in the ballpark.  He's the most down-voted funny-ass troll on the board.  Most people don't "get" him and assume he's serious.

If you don't like his stuff please realize the alternative trolls are guys like Satoshi.  So, like, think carefully before answering. 

 

Dr. Engali's picture

It's always cracked me up, especially in the early days of the Hedge, how many people MDB would suck in. I could practically see them frothing at their mouth as they pounded out a response on their keyboard.

cnmcdee's picture

Hey great idea!! While everybody is at home on their extra 20 days off they can make like $7000 / month working part-time over the internet!!!  Holey Fruck buddy they should make you a Congressman, I think you are made of the right stuff.

daveO's picture

sarc? All the extra drinking and partying will clog the hospitals.

Richard Chesler's picture

So basically everything Obozocare is not,

"guided by principles of transaparent pricing, objectivity, and fair reimbursement practices"

nevadan's picture

I tend to agree Cooter.  I have had some issues in the last few months that required things like MRI and ultrasound proceedures.  I have been paying cash at the time of service and it is amazing how much less it costs than the full bore insured price is.  For instance an MRI that would bill at $3200 cost me only (cough cough) $1250.  Obviously the provider is still making a profit at that price so the difference is attributable to the expense of dealing with the insurance companies.  Savings for paying cash seem to range from 20-60% with the larger discounts coming with the more expensive procedures.  I'm in about $5000 total out of pocket which is still less than the $6k deductable that I had with my last policy.  I lost my insurance last November and about the time I was going to replace it with a catastophic policy Anthem, who I had previously got hacked so I didn't go ahead with a purchase of a new policy.  So bottom line is, with the deductable and the cost of yearly premiums I'm ahead of the game unless the bills get over $20k or so.  And there is always the "On a long enough timeline..." thing.  So screw 'em.  I guess I gamble that I won't have the disaster health problem that cleans me out instead of being bled out over time.

CrazyCooter's picture

This is one of those things that looks very different with longer timelines. Modern medicine isn't really good at much other than prescribing pills and surgery. And once they start you on the pills, there are always side effects, which leads to more pills - it becomes circular. It wasn't log ago that anit-biotics were discovered and these ass hats were lobotomizing people.

No one lives forever, so to me the game is simply staying as healthy as possible, while enjoying life, and hope for the best. If I had a serious problem, I would take care of it, but I feel docs today just go fishing for a reason to write scripts. They run a huge panel of tests, say "OMG, your XYZ is out of tolerance. You need ABC." This is on the back of the lack of conversation about booze, smoking, physical activity, eating habits, and pretty much everything else that has MORE influence on health.

A perfect example is that my wife has fibroids. I have no doubt if the gyno got ahold of her they would have scripted tons of meds and ended up with surgery. Instead we did a bit of reading and found out that some foods have "fake estrogen" which when dosed up, starves the fibroid tissue of the estrogen it needs to grow/maintain its size. We bought huge bulk bags of organic soybean and make our own soy milk now. Wife goes through half a quart every day. It took the better part of a year, but she is basically normal now. No meds. No surgery. And she has had this problem for a decade. Now it's gone!

Can't turn a profit on that shit - so no sense in mentioning it, right?

This is one of a million examples of (1) eat a good, balanced diet, (2) get some exercise, and (3) live in a relatively clean environment where those three items fix most health problems in so far as they are fixable.

Regards,

Cooter

nevadan's picture

Exactly!  We seem to be on the same page.  I was turned on to this book by a friend and by changing only my diet I have lost ~25 lbs over the  last 10 months.  I feel great.

http://www.amazon.com/Perfect-Health-Diet-Regain-Weight/dp/1451699158/re...

 

CrazyCooter's picture

I find there are so many diet books, I have a hard time sorting them out. Common sense dictates they can't all be right. Often times I think they are just monetizing the desire of people to be healthier (so I don't trust any of them). It may be written by an MD, but they never put their GPA on there either do they?

Hi, I am Dr Crazy Cooter, M.D. GPA 2.2, you should write me a big check for my advice (and buy my book). There are a lot of docs out there that barely graduated.

Anyway, I gave up trying to get an inside track with nutrious by reading diet books. Diet implies temporary, so I settled on lifestyle instead. I still like my beer, but I eat very high quality foods and we do almost all our own cooking at home. We don't have chickens, but I hope to make a solid run at stocking all our fish for a year this season. I figure if I eat like my ancestors, then I am probably donig the best I can, since that is what my genes survived on/were selected. No guarantee, since there is enough random through procreation, but it is likely the best odds I got! :-)

Regards,

Cooter

nevadan's picture

I agree with that but this book doesn't advocate a "diet" so much as a lifestyle change.  You are what you eat so to speak.  It is basically changing from a high carb diet that most Americans eat to more of a paleo diet that aligns with simpler foods.  Stay away from sugar and cereal grains that change to sugar after consumption which spikes insulin levels.  Eat more meat and vegetables.  It isn't a deprivation diet as much as just getting back to what humans used to eat before the agricultural industrial revolution.

CrazyCooter's picture

We still eat carbs (wife makes bread at home usually - and I love potatoes and rice) it isn't the center of anything we eat. Most of our meals are a wide range of veggies, chicken, and salmon. Wife uses tofu a lot more often now too. We work very hard to avoid processed anything!

Based on your comments, I agree with the premise of the book.

Tegards,

Cooter

daveO's picture

Decades ago, my mom went to a brand new money hungry doctor who was hell bent on pegging everyone who walked thru his door with cancer. She was also a nurse who occassionally worked in the same office. He examined her, made mention of her enlarged uterus and wanted to cut it out. She said no. His reply was, "But, what if it's caaaancer?" She said,"I've had 5 kids so, of course, it's enlarged." That same doctor is now the regional director of the Hospice (death industry). Mom never did get caaaancer and she never returned to that schmuck. That BS scare tactic probably worked on 9 out 10 of his female patients.  

Supplements are cheap and they work. Doctors are greedy and dangerous.

MachoMan's picture

Based upon my reading of the standard contracts between service providers and the insurance companies, negotiating cash prices cheaper than the rate you charge insurance may be prohibited.  The wording is generally something like, "you may charge insurance the lesser of what you charge patients without insurance or our stated allowed amount for any billing code."  There are a few exceptions, the most notable being a sliding fee scale based upon income (to help ensure that medical services are available to all) and, although not an exception, you can effectively charge people less if you make a good faith attempt to collect and the patient fails to pay, then offer a discount. 

What you are describing doesn't appear to fit any exception, but I believe it is still incredibly common.  Essentially, every service provider makes their "standard rate" just above the highest reimbursement rate for insurance...  so as to not leave any money on the table.  The problem with this rate is that very few could ever pay it out of pocket.

Despite widespread use, there really isn't a practical way the insurance companies can prove your standard rate for a service without first suing you and conducting discovery...  where HIPPA will pose an initial hurdle, but then you'll be required to redact all the patient identifying information and supply it anyway.  Then recoupment!  Given it's a breach of contract case, the fear of losing attorneys fees in this scenario keeps insurance companies from suing in the dark.

But, this goes back to my general thesis, which is that there is widespread fraud in the medical services industry...  I dare say even worse than wallstreet. 

nevadan's picture

It pretty much boils down to the fact that the medical industry lobby outnumbers congress by 5 to 1.  They are buying them with campaign contributions and they write laws that grant monopoly priviledges.  So much for representative government.

daveO's picture

If one can't negotiate lower bills, then stay away from them altogether(my only exceptions would be stitches or bone set). Even if you survive, they will take everything, by design. Better to take your chances than to become homeless or to make the family homeless. 

James-Morrison's picture

Why the angst over astronomic rates?

Hey, it's only money.

We'll just print some more.

Rama Rama Ding Dong.

AGuy's picture

Perhaps some can explain to me:

 ACA forces high deductables and already had higher premiums. I would believe that the combination of these two high costs would reduce the number of people seeking treatment (Just like CrazyCooter).  Therefore I would presume that Insurance outlays would have decreased since fewer people would be seeking medical treatment. I also see that Hospitals and Clinics have been cutting staff as the number of people seeking treatment has declined. My question is how is that insurance companies are experiencing rising costs? Or this this really just to increase profits and has nothing to do with actual rising insurance outlays?

Thanks in advance

 

 

CrazyCooter's picture

I am not as well read on this subject as I should be ... but ...

People have a choice (1) pay a fine, or (2) get insurance. If the fine is less than the cheapest insurance (someone got numbers for your area/state/market?), folks will just pay the fine and go on a cash basis. If you are healthy, but need routine type stuff, the deductibles keep you from actually claiming a benefit. However, if you are completely fubar, you blow through the deductible in a month and suck the teat for the next eleven.

So, healthy people are bailing out of the system or not using benefits (despite paying for them), but the sick people are sucking up all the resources (and then some).

Think of it as going into an auto insurance car pool where everyone but you bought their insurance when the bar closed at 2am. You have a perfect 20 year driving record. What do you think your rates look like?

If our demographics were not so jacked up, I would say that HEALTH CARE is a bubble. But there may come a time when the systems by which the bloated prices are paid breaks down and that may force a very serious crash in rates that docs and hospitals can actually COLLECT.

One last comment.

Health "insurance" is not really insurance. That is new speak. Insurance is calculating the risk of an event across a pool of actors, valuing the loss associated with that risk. and distributing the loss (plus a small profit) across the pool of actors. Auto insurance is a great example of insurance.

Health insurance isn't insurance when EVERYONE gets sick (which they eventually do in old age). It is a different model. Mentally think of it as "health care wealth redistribution" and you will have a better anchor when thinking about its associated problems.

Regards,

Cooter

AGuy's picture

Here is the thing, I believe the majority of sick people are covered under Medicare/Medicaid not ACA. So Unless Insurance Companies are now paying for Medicare/Medicaid expenses, I don't see where the money they are collecting in Premiums is going to.

 

"Health "insurance" is not really insurance"

Yes I know it's now a tax. As soon as your yearly medical expenses exceed the deductable+premium  collected, they raise your premiums to match your medical costs. So since there are still a very number of people paying the Health insurance TAX, and those that are sick, are forced to pay for their total medical expendures, I still fail to understand were the money is going.

daveO's picture

Well, before O'Care, the money was going to the con artists in the cancer treatment and drug industry. So, I imagine they will engineer price increases to take a majority of that money. The Ins. Co's should show some very profitable quarters during the lag time. HUM is up 9X's since the anointed one went into his puppetship.

MachoMan's picture

Insurance generally dictates the reimbursement rates for services...  so, the costs for a particular service are not experiencing any material increase.  If there are increases in reimbursement outlays, I suspect it would have to be from the number of services provided, not the cost per service increasing.

daveO's picture

No kidding. They just add expenses on your way out. Like a restaurant refusing to let you leave until you've purchased a $100 desert from them, too. I see umpteen local obits with the phrase "after a 'X number of years'  courageous battle with cancer". People are more than happy to spend someone else's cash on their useless chemo. Insurance was already a fraud, before Obama's tax scheme started. O'care is just like the late 90's tech bubble. Pouring gas on the fire of fraud. 

VinceFostersGhost's picture

 

 

Open immigration in a welfare state.

 

Brace for impact.

Headbanger's picture

The operation is a success!

The patient died as expected.

Pet Rock's picture

Seriously - We all just voted for a pay increase.  We can afford this now.  Everything is good.

Model T's picture
Model T (not verified) NoDebt May 22, 2015 1:50 PM

The signature itself is very frightening; it's the mark of the deeply in-secure, hopeless, non-producer; a person reduced to saying "hey, look at me, I'm special". It's the very modern signature of a Trayon La Jones; a useless eater, a non-member of the adult social contract. It made me shudder to be reminded that this creature is our "President". Go look up John Hancock's signature; it used to appear in insurance company advertisements; one of the signatories of the Declaration of Independence, it became a name for a signature in modern American Language, "put your john hancock right there"; what you'll find is copper plate; hand-writting; a simple statement of the person's name; their deeds do the talking not the decoration. Of course, here there's nothing but decoration. What a tradgedy.

HonkyShogun's picture
HonkyShogun (not verified) May 22, 2015 9:56 AM

Hopey McChange rides again.

Dr. Engali's picture

"All that changed moments ago when core US inflation finally spiked the most since 2013 driven by a 0.7% monthly surge in medical care service costs: the highest since 2007!"

 

 

Highest since Lehman.

Dr. Engali's picture

That would make them still around in 2007 would it not? Therefore the statement holds true.

NoDebt's picture

Reminds me of the conversation between Fletch and the doctor.

"Oh, so you know he died?"  

"Yes, his death was very sudden."

"But he had cancer for years, he spent the last 6 months of his life in the hospital."

"Yes, but I mean at the end.  At the very end.  When he actually died.  It was very sudden."