Brace Yourself for Obamacare “Sticker Shock”

Is Spain the Next Greece?

Today, we report on a new front in the Great Zombie War – the U.S. health care sector… and why costs there are set to rise. (More on that below…)

For now, we are sitting in the bar at The Hazelton Hotel. We always thought of Canadians as being a bit more reserved and conservative (socially, not necessarily politically) than their neighbors to the south. Well, not in this hotel!

It is more like Dallas than what we recall from our summers in Nova Scotia. People dressed in the latest gaudy fashions… loud hipster music… trendy decor… women who appear to have had extensive body work done. And on the TV above the hotel bar is a recurring ad from a zombie law firm advertising for personal injury cases!

Barrels of Spanish Rioja

Photo credit: illogronio.com.es

We floated our way through Europe’s wine country, foggily trying to keep track of what we are seeing. We surveyed the Greek front with a pitcher of red wine on a blue paper tablecloth. Greek wine is as mysterious to us as Greek finance – both make you a little light-headed.

The wine served in the street restaurants of Athens is cheap and plentiful. In Madrid, our host insisted on a classic Rioja… a rich, complex wine. Madrid is a cleaner, more modern, and more sophisticated city than Athens. The wine is similarly more advanced and reliable.

Ancient Greeks in wining and dining mode

Image credit: Sir Lawrence Alma-Tadema

And in France, a Bordeaux… a Saint-Émilion… or a Saint-Estèphe… usually anchors our red-checkered tablecloth. After the Rioja, the perplexing Greek wine, and months of drinking Malbec in Argentina, the French wines seem to lack character. They are like the French people: subtle and clever.

In Greece, we were there to witness a financial system meltdown. It didn’t oblige. The scheduled breakdown didn’t happen when it was supposed to; Greece and its creditors booted the can down the road yet again.

Even after two weeks of closed banks… and widespread expectations of a financial crack-up… we saw no sign of panic. Instead, the Greeks were prepared. Bloomberg, interviewing a local restaurateur, sheds some light on how:

“My son is a fisherman. Today I took two kilograms of my son’s fish to the butcher. He gave me two kilograms of meat in return.

We don’t take money to the bank. The money we earn is spent on supplies and expenses to eat and drink.”

Meanwhile, our sources in Madrid explained…

“There is a big political movement here to throw out the baby and the bathwater. There’s a whole new political party, called Podemos (which translates as “We Can”).

It came out of nowhere. It was organized on the social media. I’ve never seen anything like it. I don’t know what these people want… but I don’t think they’re going to be as predictable and as flexible as the traditional parties.”

Our guess is Podemos wants to slip Spain’s debts.

Pablo Iglesias of Podemos with Alexis Tsipras a few months ago. We’re not sure if they’re still buddies now that Tsipras has become austere.

Photo credit: Yannis Behrakis / Reuters

Zombie Math

Most people will be zombies – if they can get away with it. Everyone wants wealth, power, and status. And they want to get it in the easiest way possible. So, it really only makes sense for them to support the political party that promises to give them more than they can get on their own.

Someone was even so thoughtful to write a little book on zombie math – which we recommend to read in conjunction with Advanced Ghoul Trigonometry

Image credit: olin M. Drysdale

Or, to put it differently, in a modern democracy, politicians must promise to give voters back more than they take from them in taxes. If a party gives back only what it takes in from taxes, the zombies get no net gain.

And when the politicians promise to run a budget surplus to pay down debts from past spending, the zombie math no longer works. The voters must pay more in taxes than they get in redistributions. That’s when the logic of modern popular democracy breaks down. And when that happens, watch out!

Now, back in the New World, we turn our lips to a California wine and our attention to the North American front of the Great Zombie War. From the New York Times comes news of a big zombie push in the health insurance sector.

The “pre-sticker shock” situation. We strongly suspect many people will fall ill simply from looking at their 2016 health insurance bills. As so often, laws imposed by the federal government turn out to have Orwellian names that describe the opposite of reality. The “USA Freedom Act” does anything but provide freedom, and the “Affordable Health Care Act” apparently provides affordable health care only in Colorado and NY State for some reason. Almost everywhere else it seems to have become distinctly unaffordable at warp speed – via Heritage Foundation, click to enlarge.

You’ll recall the lay of the land. Crony lobbyists for insurance companies, Big Pharma, and the medical industry got together with the Obama administration and created “Obamacare.”

The law was so complex and so long-winded that politicians voting for it admitted they didn’t know what was in it. Only the cronies knew what was in this pudding; they had put the sugarplums in themselves.

The rest of us would just have to wait until we choked on the seeds:

Reports the New York Times:

“Health insurance companies around the country are seeking rate increases of 20% to 40% or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected. Federal officials say they are determined to see that the requests are scaled back.

“As a result, millions of people will face Obamacare sticker shock,” said Senator John Barrasso, Republican of Wyoming.”

Yes… the medical industry is a battleground, too. The zombies are fighting hard – by hook, crook, regulation, and legislation – to get even more of your money. Stay tuned for the next dispatches from the front lines…

A little observation in closing by F.A. Hayek

Image captions by PT

The above article originally appeared  at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.