Obamacare – Corporate Wealth Transfer or the ‘New Capitalism’?

Posted on January 17, 2014


Does the government reimburse your business when they lose money? Did the government make your business a protected monopoly?  Sorry, that’s how ‘capitalism’ works, ol’ son.

For some time now I’ve been attempting to convey the reality that Corporate America, or otherwise casually referred to as ‘Big Business’, broadly speaking – is not practicing what many of us who consider ourselves conservatives would classify as legitimate capitalism.  Corporatism, Corporatocracy, Corruption, Rent Seeking?, yes.  Classic capitalism? – no

The obstacle in exposing it is that there is a very vocal sub-strata of so-called ‘conservative’ personalities – mostly radio hosts, that define capitalism so loosely that just about any activity or transaction that concludes with a transfer of money or securities between two parties, must, according to their standards, be rigorously defended, or the consequence is that you are suspect of being a Marxist, Socialist, Communist or Occupy (OWS) supporter.  Horrors!

I know who these people are and you probably do as well, so I’ll not beat around the bush, but instead provide just one example. Back in mid 2012, when the GOP Presidential nomination was still in full combat mode between the candidates and their campaigns, the topic of Mitt Romney and his business practices as a principal in a private equity firm (Bain Capital), came into play.  Most of the dust being kicked around was coming from Newt Gingrich and his campaign.  Newt criticized Romney’s record at Bain.  Immediately the ‘capitalism as a religious doctrine’ bunch popped up and tore into Gingrich and anyone else that was questioning Bain.  Pre-eminent among them – and typical of the element I’m referring to, was Hugh Hewitt

Hugh Hewitt falls within the precise classification as a neo-con, which in my definition is not a conservative at all.  He is actually nothing more than a partisan hack, that carries water for the Republican party and does an extremely poor job of pretending to be objective.  I don’t know that he actually even pretends.  Hewitt, immediately lambasted Mr. Gingrich for being, if I remember correctly, a socialist or an anti-capitalist.  Whether you are inclined favorably towards Newt, or aren’t, that is a laughable accusation.

For the record, I am not and was not a Newt Gingrich supporter (nor do I have a particular dislike for him), and based on my research, Governor Romney was hit with a lot of unfair, inaccurate and distorted accusations from numerous directions.  I even wrote a column in which I went into the controversy in detail, analyzed the criticisms and for the most part, gave Mitt a clean bill of health on Bain – and this certainly had nothing to do with his candidacy.  On the wider subject of whether Mitt could be termed a conservative, I was extremely critical.

But my point here is not whether Newt was right or wrong about Mitt.  My point is that we have seen consistently, that the minute you call pretty much any behavior being conducted by Big Business, un-ethical, exploitative or possibly even criminal, you’ll have the Hugh Hewitt nimrods of the pseudo conservative galaxy, screaming foul and accusing you of being a Marxist. That, I suppose, is the neo-con equivalent of a Democrat calling someone who disagrees with them a racist.  It’s designed to be a debate ender. 

From Hewitt (and his ilk’s) standpoint, a drug cartel operation should be considered admirable and classified as capitalistic.  After all, they run a business and make lots of money – that’s all that’s necessary – right?  Hewitt, in order to be consistent with his principals on capitalism (whatever they are), should probably not pander to social conservatives in criticizing Hollywood and the Entertainment industry for the garbage and filth they churn out – because, well – after all, they are contributing to the economy and hiring people.

I don’t much care about where the chips might fall.  Likewise, I don’t feel any obligation or instinct to run with the pack on anything.  I don’t subscribe to any set litany of policy positions that would put me solidly in any particular group, whether it be Libertarians, Social Conservatives (SoCons), Republicans –  and certainly not NeoCons!  So, as an independent, thinking conservative, my benchmark is the Constitution and the world of facts and data mixed with common sense.  If I think Wall Street, as it is presently operating and constituted, is a species of organized crime, then by all means, if you are so inclined, call me ‘anti-capitalist’. You can hurl the accusation of “class warfare” too.  Load up the cart.

My strict definition of capitalism is Free Enterprise Capitalism. Why didn’t I say, Free Market?  The problem with ‘Free Market’  is that the meaning of that phrase is dependent on who is using it and much that is implied.  Free Enterprise, as I’ve come to understand it, is a prime type of capitalism that embodies the virtue of independence from government.  So, if you are a true Free Enterprise capitalist, you are not trying to leverage campaign contributions with a lawmaker or presidential administration in order to extract a favor or a carve out for your business, with a new law or regulation or a proprietary tax break. 

You are not using government influence to gain an unfair advantage over consumers or taxpayers.  You are definitely not throwing money at Congress through the auspices of the United States Chamber of Commerce, to advance legislation to flood the country with more cheap labor (amnesty and increased imported labor visa quotas).

At this point, it might be helpful to provide one  example among many, of what I think is illegitimate, but which is irrationally defended as ‘capitalism’.  I refer to the health insurance industry and their connection with Obamacare.  The reason Nancy Pelosi and Harry Reid, along with the White House, did not want to disclose the details of the ‘Affordable Care Act’, was that buried within the nuts and bolts of the law, is a colossal, absolute legalized theft of your money by Big Healthcare, Big Pharma and especially, Big Insurance.  You could legitimately classify the entire scheme as a wealth transfer.  If wealth transfers are capitalism, then I can’t go for that, no can do.  We don’t condone people mooching off of social programs and I don’t condone corporations leeching off of the taxpayer, either. What’s good for the goose …

Healthcare industry watchdogs have unearthed a remarkable provision of Obamacare.  As you have been hearing, the structure of this un-constitutional intrusion on Americans’ free access to the healthcare insurance market, hinges on the premise of the individual mandate coercing young, healthy adults into signing up for medical insurance.  While the Obama administration was creating the ‘act’, it was in private negotiations with the largest health insurers – while you, the public, (and your Congressional representative), were frozen out of the discussions.  I guess if a rape is being planned, it’s not a good idea to tip off the victim to when and how. 

So, what did they agree to in these hush-hush negotiations?  Well, one big giveaway, was that if the new premiums engineered by this law didn’t cover the expected profits that the insurers wanted under this monopolization process, that the taxpayer would pay the difference.  The government becomes an insurer of the market and you become the underwriter!  In the deep recesses of the Affordable Care Act, is a provision that the federal government maintains a $25 billion risk fund.

The government’s risk management program for the insurers has three parts as outlined by industry expert Robert Laszewski:

A revenue neutral Risk Adjustment System designed to level adverse claim costs between health plans, a Reinsurance Program that caps big claim costs for insurers (individual plans only), and a  Risk Corridor Program that limits overall losses for insurers.  Of the $25 billion, $20 billion is earmarked for the Reinsurance Program and $5 billion goes to the U.S. treasury.
First, the Reinsurance Program caps big individual claim costs for insurers––in 2014, 80% of individual costs between $45,000 and $250,000 are paid by the government.  That means you if you are a net producer in the economy, not a net consumer of government services.  Then comes the Risk Corridor program. Participating health plans will receive payments from the federal government if any of these conditions occur:

  • The plan’s costs for any benefit year are more than 103% but not more than 108% of the health plan’s targeted amount. The feds will reimburse 50% of all costs in excess of 103% of the medical cost target.
  • If the plan’s costs are more than 108% of the annual target, the feds will first pay the health plan a flat 2.5% of the target and then reimburse the plan for 80% of their claim costs above the targeted amount––with no upside limit.  Target cost is defined as a health plan’s “total premiums (including any subsidies) reduced by the administrative costs of the plan.” It is whatever the health plan projected its premium needed to be to pay medical costs.  So, a plan is on the hook for all claim costs up to 102% (2% more) than the target cost.

But, if the health plan has costs at 110% of the medical cost target, it (the insurer), will be responsible for only 102.4% of the target (a 2.4% shortfall)––only about a quarter of its losses.  If the health plan’s medical costs come in at 120% of the expected claim cost target level, the health plan will only be responsible for 104.4% of the target (a 4.4% shortfall)––again only about a quarter of its losses.

To put the above outline in the simplest of terms, Obamacare certifies that, the first $45,000 of payments to an insured patient come from the company’s coffers.  The taxpayer, as Dick Morris notes – will then obligingly pick up 80 percent of the remainder.  When 10 years worth of this looting by these ‘capitalists’ is complete, you will have stuffed at least a Trillion dollars into their pockets.  And what did you get out of it?  Reform of the medical industry?  Better healthcare?  More affordable premiums?  Try none of the above.

Show me where to sign up to start a business, where I can name the profits I expect and the government will guarantee them, coerce my customers into buying my product, and severely limit the choices available to the consumer, who previously could buy from my competitors  in an open marketplace.  As George Carlin wisely noted, “it’s a  big club, and you ain’t a member”.  Oh, no doubt, I’ll hear from someone whining, “eh,eh, are you sure you should have mentioned George Carlin, eh, eh, I believe he’s a commie”.  I don’t give a flying expletive finger what you call him, he stumbled onto the truth and so did the people (the original group) in Occupy.  I concur with their diagnosis, I simply don’t agree with their prescribed course of treatment at all.  I see the same disease, but I just don’t endorse the same cure.  We don’t need more government to solve the problem – we need a hell of a lot less of it

Government is the ‘moral hazard’ in all of this illegitimate wealth accumulation.  Take its influence to entice and foster corruption away and you give everyone an opportunity to produce something of value and benefit from it.

This government / private industry collusion isn’t a ‘win-win’ situation.  Instead, it’s an example of how, when private businesses and government form a cozy partnership, someone HAS to be a loser.  Guess who that is?  You got it!  But I shouldn’t have pointed any of this out, because in doing so, I demonstrate myself to be an ‘anti-capitalist’.  My friends, this isn’t capitalism, it’s Fascism and no, I won’t be quiet and I won’t pretend to support anything that comes along and preemptively slaps a tag of capitalism on itself. 

If it looks like a bag of stuff and it smells like a bag of stuff… hello????, it’s a bag of stuff!