ROFL! idiot "economist" on cnbc spinning that obamacare premiums are a drag on gdp

[unblock]

some people who weren't paying premiums before (because they were uninsured) are now paying premiums. this is what any other economist would call "economic activity", and in fact does get counted in gdp.

but he's saying that's a drag on the economy because those people no longer have that money to spend.


got that? he's saying that economic activity is a drag on gdp.

[lostincalifornia]

1. Watch Bloomberg, stay away from cnbs

[unblock]

5. it's the work tv, i don't have much (if any) say in the matter....

[lostincalifornia]

14. Ok

[okaawhatever]

2. Hmmm...is he saying that is happening now? Premiums won't be paid for until 1st Quarter 14 so I

don't understand how that could be a factor.

[LuvNewcastle]

3. Those guys are making some easy money.

They just sit around all day making up bullshit, don't they?

[NoOneMan]

4. Health costs in the US are a major drag on the economy

Its not Obamacare specifically (it just fails to fix it).

[unblock]

7. health costs are a part of the economy, so, no.

i suppose you could say that health costs are a drag on the *rest* of the economy.

in the same way you could say that energy prices are a drag on the non-energy portion of the economy.

[NoOneMan]

9. Is any cost therefore a drag under that obscure reasoning?

Sure, there is a multiplier effect from keeping someone from dying, but it may indeed be under 1, and cannot even be compared to using those funds to build bridges and infrastructure (especially with so much of it going to profit).

And yes, energy prices are a drag on the economy. The more energy costs, then it takes more and more of yesterday's surplus to purchase it (to produce more wealth).

Hell, by your reasoning the US can have a booming economy by doubling down on health costs. That's not the case. Surplus wealth must be generated (by using a portion of yesterday's wealth) to fix people. The larger you cut into the surplus, the less you have for projects with large ROI and multipliers. Fixing people is very much more of a cost of production anyway than production in itself

[lame54]

6. you gotta admit...

that if they didn't spend that money they would have it to spend
or something like that

[unblock]

8. i wonder if cnbc could figure it out, if they didn't spend it, hmm, what else could they do with it?

nope, i got nothing! it's either obamacare or spend it, every last dime!

[FarCenter]

10. More likely a drag on retail consumer spending

It won't affect gdp, since it is counted in gdp. But putting more money into insurance premiums will diminish consumer spending elsewhere.

Whether it will affect the Christmas shopping season is an interesting question. Haven't seen any solid projections yet.

[unblock]

13. *that* i'd agree with.

[Nuclear Unicorn]

11. He's right.

Same services for higher prices are a drag on the economy. It's called inflation and it is wealth destroying. The extra hundreds of dollars people pay to a single source, their insurance provider, is hundreds of dollars a month they aren't spending elsewhere, usually in multiple venues.

The money paid to an insurance provider only goes into the economy if the insured person seeks medical care and then only if the amount they spend is equal to the amount they pay in premiums. Then only AFTER their deductible has been met does the insurer starting chipping in.

Also note that you only have X number of health care providers and they can only work Y amount of hours. If demand goes up per capita supply of man-hours goes down. New jobs won't come on line to meet this increased demand for years if not a decade or more in response...assuming compensation is attractive. So expect that any new jobs in the health care industry are several election cycles away.

[unblock]

15. there's an esoteric point that one could make, though that's giving the guy on cnbc too much credit.

it's true that a dollar of spending on something with a smaller multiplier than something with a higher multiplier doesn't expand the economy as much. i suppose you could call that a "drag" on the economy, though usually one doesn't characterize growth that way.

though even that point is a stretch because we're not comparing spending on healthcare vs. spending on something else; we're comparing spending on healthcare vs. extra month in the hands of the uninsured. quite a lot of that money would have been spent, but some of it would have been saved or invested.

essentially he's arguing that a law this provides a financial incentive to spend money is a drag on the economy. quite the argument.


by the way, money paid to a insurance provider isn't out of the economy until there's a claim. if that were the case, life insurance would be a horrendous drain on the economy. in fact, today's premium goes to pay salaries, commissions, expenses and such; the rest is saved and invested, which puts it right back into the economy.

[Nuclear Unicorn]

16. Spending in and of itself is NOT economic activity.

No new jobs are being created. No markets are emerging or expanding. We're paying more money for the exact same services. That's cost inflation.

The money being shifted to insurers is coming out of other markets, i.e. home improvement, household debt reduction, big ticket purchases, etc.

These are not trifling amounts either, we're talking thousands of dollars annually multiplied by (tens of) millions of households means billions of dollars from the GDP.

Economic expansion has been an anemic 0.2 to 1.4% per quarter since 2008. Ten billion dollars per year translates to roughly 0.08%. That doesn't sound like much until you realize that is cutting off one-half to 1/14th of your economic growth. That's the kind of figure that terrifies people.

Odds are the bigger the price tag the bigger the hit a particular market will feel. That's washing machines not being manufactured and retailed, that's new cars sitting unsold, etc. That means the workers in the negatively impacted industries become less necessary. They become pure overhead.

The place where this money is now being concentrated will not be spending its way back into the economy to cover this new shortfall.

by the way, money paid to a insurance provider isn't out of the economy until there's a claim

That makes no sense. Yes, insurance companies can invest some of the money but it has to remain liquid to satisfy claims. Even money invested has to have something worthwhile to invest in. Why bother investing in washing machine manufacturing if the people aren't buying as many washing machines because their annual insurance bill is now $2800 more a year out of their family budget? The consumer demand has been depressed.

And keep in mind that we're currently only talking about the individual insurance market. The President himself waived the employer-based market requirements for a year because he admitted it would be bad for the economy. In other words, when that kicks in we could see it be even worse than what we're experiencing now.

[unblock]

17. ?????

"No new jobs are being created. No markets are emerging or expanding. We're paying more money for the exact same services. That's cost inflation. "

the original topic was previously uninsured people now spending on insurance. that is exactly what an expanded market is.

exact same services? for the previously uninsured, these are brand new services; for those already insured, it's not necessarily more money and it may be different services if the previous insurance was substandard.

no new jobs? millions of additional people insured, that creates no new jobs in the insurance industry or the health care industry for all these people finally getting the care they need?



saved money comes back into the economy through banks, who pay you interest so they can lend multiple times with your deposits as reserves. they effectively create money due to fractional reserve requirements, so one saved dollar effectively puts ten dollars into the economy (or whatever depending on the reserve requirements). the point is that your premiums do go right back into the economy today, notwithstanding that there's a way for the insurance company to pay claims at a later date.

[Nuclear Unicorn]

18. Yes, no new jobs.

You only have X number of healthcare providers servicing Y number of consumers. Now we have added Z additional new consumers for the original X number of providers. New doctors, nurses, PAs etc. do not materialize overnight. They take ~8 years to be educated AFTER the demand is recognized IF the incentives/compensation are sufficiently attractive.

Increased demand + static supply = higher prices

God help us if the medical profession ceases being attractive then you'll have --

Increased demand + decreasing providers = REALLY higher prices

Was there a corresponding number of people entering medical school to offset the number of new healthcare consumers? I don't remember any such thing. So we're probably a decade away from seeing the first new additional providers reacting to market demands; assuming anybody wants to endure the rigmarole. Right now things are so chaotic I can't imagine anyone saying, "To hell with all the new regs, I'm gonna skip being an MBA and go to school to be a cardiologist to clean-up!"

saved money comes back into the economy through banks, who pay you interest so they can lend multiple times with your deposits as reserves. they effectively create money due to fractional reserve requirements, so one saved dollar effectively puts ten dollars into the economy (or whatever depending on the reserve requirements). the point is that your premiums do go right back into the economy today, notwithstanding that there's a way for the insurance company to pay claims at a later date.

First of all, there is no money being saved because the number of claims being made against the reserves is, by your own admission, increasing due to more people seeking services -- and those services will cost more as prices are going up.

Second, insurance companies are single entities. They can only spend so much in so many places. People are the democracy of the dollar. Ripping thousands of dollars out of family budgets multiplied by tens of millions of families destroys their ability to purchase.

Please tell me exactly what shall insurance companies invest in if the consumers are losing money and cannot purchase whatever these investments are supposed to produce.

[grantcart]

12. It will be a minor stimulus, at least in the begining months.

The first people to sign up are going to be those with pre existing conditions that need a lot of urgent care.

Let's say 1,000,000 of these (could be more).

Let's say that their initial treatment is $ 2500 (could be more).

That would mean that the insurance companies would have to finance around $ 2.5 billion of treatment after having received just a couple of months worth of premiums.