It has been quite interesting lately to listen to all of the rhetoric about how the new PPACA is going to solve all the problems we have today with health care and especially the insurance to cover the costs. From the sounds of it, the government has all the answers and can lower everyone’s costs and provide better coverage. So with that in mind, let’s take a look at a couple of the insurance plans that are run by the government today. Let’s start with The National Flood Insurance Program. Recently, especially here in Nebraska and Iowa, flood insurance has become a hot topic. Since flood insurance is only available through the U.S. Government, it must be doing great. Well, not so much. It is currently in debt to the treasury to the tune of $18 BILLION. It currently loses approximately $200 million each year. How can that be you ask? The government program allows people who are at the greatest risk (ocean side, river valleys, etc.) to not only purchase coverage, with the odds stacked in the favor of usage, but even after having suffered a loss, to continue to purchase and continue to incur losses. It would be like you having your home rebuilt every year or two because it burns down with the caveat that you live next to an active volcano. Doesn’t make much sense how the program is administered but when you have an unlimited checkbook (our taxes) you don’t have to run in the black. So paying claims isn’t a problem but raising premiums to offset the claims is considered a no-no. The flood program is not insurance, it is rather an entitlement program for those individuals who know how to use it. On the other hand, those individuals in the Midwest who have experienced a once in a lifetime event, find themselves without the needed coverage the government should have provided.
Let’s take a look at another insurance program that the government set up. Medicare is a program that has its roots in legislation from 1965. It was set up as a social program for those over 65 and others who are permanently disabled. The system has collected premiums for approximately 45 years from the workers paycheck. It now finds itself dealing with an influx of individuals turning 65 and is learning what every private insurance company already knows. You have to charge appropriate premiums for the benefits that you are going to provide. The unfortunate part of the equation for the government is that raising premiums is politically damaging as well as any cuts to benefits will be felt at the ballot box. So what does this insurer do? It runs the greatest Ponzi scheme we have ever seen. Bernie Madoff looks like a small time hustler compared to what medicare has been able to achieve. They take current “premiums” and pay big benefits to current beneficiaries and all the time knowing that they can’t make the same payments to those who are paying in to the program today when they get to age 65. It is projected to become insolvent in 2019. That means an individual who was born after 1954 will have paid in premiums for their entire working life and not see any benefits. If a private insurer were to collect premiums for the time and then just decided not to pay out benefits, people would be serving jail time. But hey, it’s government and they can just print more money.
So why do I bring this up? Because now the same people who brought you these two wonderful programs (as well as many others), are selling the public on being able to run Health Insurance and Healthcare in the same way. Lower costs and better benefits for everyone seems to be the rallying cry heard from Washington. Those in power are not satisfied with these small programs but now have their sights on 17% of our economy. Ask your legislators if they plan on running the new programs as well as they have administered the ones mentioned in this blog. Would be interesting to hear their responses.