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John Lounsbury  

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  • Weighing The Week Ahead: Greek Ripples Or Economic Fireworks? [View article]
    @mpmassey

    Thanks for the reply. Your numbers make sense to me. From what you say you never use a significant portion of your deductible? If so then the difference in cost for the two policies is only the difference in premiums ($177.96, ACA policy cheaper). And if you have a major illness the non-HSA policy is maxed at $21,400 (which you indicated) while the non-compliant policy is $8,970 for premiums plus $12,700 deductible or $21,670 max. This slightly favors ACA cost. Below the max expense there are expense regions which narrowly favor the non-ACA policy. But there are no regions of major difference in cost.

    Now a very good point you make: In your current situation you would be best served by a policy that raised the deductible and lowered the premium. If you average $5,000 in health care expenses each year and could get a $25,000 deductible policy for about half the premium (say $370) then your annual medical expenses would average $9,440 vs. the $13,240 you would be averaging with the ACA-compliant policy you have.
    This would be an annual savings of $3,800 traded off against a risk of paying up to an extra $12,400 (difference in deductibles) + $7,400 (balance of current deductible) or $19,400 in the first year of a major illness. Which coverage/risk assumption appropriate for you is an entirely personal decision (if the choice where available to you).

    Finally, you make a good point about paying for coverage you do not use (maternity and child healthcare (although if there are no children on your policy I am not clear how you pay for that). However, a similar complaint is made by the younger people who do use those coverages about people in the 55-65 age cohort not paying premiums that fully cover medical expenditures for the entire group. Of course you are in a much better situation than the average for your age group (pardon if I have mis-assigned your age) so they are not thinking of you personally, simply your demographic group.

    And the young, single, healthy individual is likely also overpaying for coverage so someone else can under pay. That is the nature of insurance for large groups. But it is also the quality of insurance that the cost shared across large groups is also generally less than coverage for a very small group. Risk to the insurer skyrockets for small groups because the laws of normal distributions no longer apply.

    So your point about not having a policy plan available to you that suits your individual situation is very valid. And I think that very high deductible policies not now available are appropriate for some individuals. But I would suggest that there would have to be some sort of income qualification to make the system work, like max deductible allowed would be limited to 25% or 30% of gross income. Otherwise someone with $100,000 gross income could elect a $200,000 deductible and possibly not be able to cover the cost of an emergency without decimating savings or going bankrupt. That is called "gaming the system" rather than prudently using it.

    Bottom line, there are many wrinkles in the health care insurance system and we need some ironing to get them out.

    PS: As far as costs of ACA vs. non-ACA policies as you presented them, the costs are very similar. I see your issue as simply the lack of a wide-enough range of policy options.
    Jul 3, 2015. 01:45 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Greek Ripples Or Economic Fireworks? [View article]
    @mpmassey - - -
    Can you define 'horrible coverage'. And can you share what you think you should pay for health care coverage including out-of-pocket? I know people who say Obamacare is wonderful and others, like you, who say it is terrible. Most cannot tell me why they have either opinion with specifics except for those who are getting significant subsidies.

    A couple of people who don't like their Obamacare coverage have told me they had annual expense coverage caps on previous insurance. In one case I remember specifically the pre-Obamacare policy had $2,000 deductible and $10,000 per year maximum benefit and the premium was just over $600 per month. That was really not insurance - any serious illness would have risked personal bankruptcy. For a payment of a little over $7,200 they had a maximum benefit of $8,000 and a small risk each year of a six figure out-of-pocket. They told me they never reached the $8,000 in max benefits in the several years they had the policy and one year didn't even pay out the deductible. They were not surviving financially because of adequate protection against catastrophic loss - they survived on luck. That couple paid less than $500 a month for a bronze level Obamacare plan with a $5,000 deductible and a $10,000 out-of-pocket annual maximum. They were unhappy with that when I discussed it with them but thought differently when I ran case study examples of what happened if they had a serious medical event. When they saw the folly of the old plan if one of them got cancer (a 1 in 3 probability during their adult lifetimes before Medicare eligibility) the higher annual cost with the new plan (approximately $1,500 a year if they had $10,000 in medical expenses) seemed very reasonable to them for the catastrophic expense protection. (Note: If they had less than $5,000 in annual medical expenses the old plan would actually cost more. For example, with $2,000 expenses the old plan cost them $9,300 ($2,000 deductible + $7,300 premiums) while their Obamacare policy was $7,800 ($2,000 of their deductible +$5,800 premiums).

    My point here is that there is a difference between adequate insurance protection (protect against catastrophic events) and healthcare coverage which pays for the cost of normal medical events. Usually the plan that gives the best cost coverage for normal medical services, which can be anywhere from a few thousand per year up to maybe $10,000 (or more for a family with children) does not give the best coverage in the event of major accident or serious illness.

    There is a difference between the type of plan which could best be called 'pre-paid medical services' and insurance that protects against catastrophic loss. Many people do not think about this difference when they evaluate healthcare coverage options.
    Jun 28, 2015. 11:29 AM | 15 Likes Like |Link to Comment
  • Perpetualization Of The Too Big To Fail Banks [View article]
    Commenters so far are right on target. Here is some supporting data:

    1. From Josh Brown, in 2013 Financials had more than 16% of the capitalization of the S&P 500 and nearly 20% of the earnings. http://bit.ly/1QSmPzh

    2. From Vestin, in 2014 Financials had nearly 15% of the S&P 500 capitalization and 24% of the Dow Jones Industrials http://bit.ly/1QSmV9P

    3. From Wikinvest, at the end of 2009 Financials had 15% of the S&P 500 capitalization http://bit.ly/1QSmV9R)

    4. From S&P Dow Jones Indices, as of 30 April 2015 Financials had more than 16% of the S&P 500 capitalization.

    So the BEA (quoted in this article) says says the financial sector contributes 7.1% (average for the last 3 years) to GDP yet they are taking more than twice that in earnings and capitalization.

    Matt Taibbi can hold on to his vampire squid metaphor - it still applies.
    May 16, 2015. 04:16 PM | 4 Likes Like |Link to Comment
  • There Is Little 'Fact' In The Austerity Vs. Deficit Spending Debate [View article]
    sfpdf - - -

    The article you linked has an unstated assumption which is incorrect, namely that money which is borrowed (or lent) is done so from savings (or has some relationship to savings in a fractional reserve banking system). This assumption is that the "loanable funds theory of banking" is applicable to the real economy. See http://bit.ly/1b4iyse. Note in the first sentence the word "hypothetical" is used. This hypothetical concept has been used forever in economic textbooks for conceptual development. Unfortunately, fairy tales oft repeated can become considered real.

    The real world money and banking system creates credit based on assets pledged as security, be those physical items with current value or future earnings in supplement or in place of things with physical value. The role of the central bank is to moderate (and supplement when necessary) the required reserves among member banks. Savings have nothing to do with loan creation.

    Therefore the idea that the government and the private sector are competing for the same savings and that increased government deficits crowd out private credit creation is fallacious.

    The relationship to Cullen Roche's paper is that Cullen shows the direct empirical relationship (not a theory, but real monetary balances) in real time between money created by government deficit and the increase of money in the private sector. This is not just a correlation but a cause and effect relationship of sectoral balance accounting (which is what the complicated equations explain).

    Hard to Love is correct that Cullen Roche is not describing MMT but rather the monetary operation of the economy which is the same as the operation MMT discussants site in their work.


    sfpdf, you do not need to apologize for not being an economist. There are times when learning basic relationships may actually be easier when you don't have to unlearn some of the things you mistakenly thought you knew. That is a condition that many economists have to work through as the field progresses and some do so more successfully than others.
    Apr 26, 2015. 04:57 PM | 1 Like Like |Link to Comment
  • There Is Little 'Fact' In The Austerity Vs. Deficit Spending Debate [View article]
    sfpdf - - -

    Interested in your thought that government spending can crowd out private investment. Where does the money the government spends go? Doesn't it go to the public for the most part? Do you then propose that the public will invest less if it receives an increase in money? Why?

    For background for why I ask this question see the excellent paper by Cullen Roche http://bit.ly/1JqxGPI

    For a short note and a 60-year graphic: http://bit.ly/1JqxH5W
    Apr 26, 2015. 12:51 AM | 2 Likes Like |Link to Comment
  • The Economy Is Growing Slower While The Markets Rise [View instapost]
    Part of the divergence between cash flow and stock index advance can be accounted for by the spike in margin debt so far in 2015. See Doug Short: http://bit.ly/12gjPAx
    Apr 25, 2015. 03:41 PM | Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Tom - - -

    This is actually the way the utility industry is organized today. The generators and the distributors are separate companies in most cases and where they are combined all generators must be allowed access to any transmission lines that exist. This was established by Order 888 of the Federal Energy Regulatory Commission (FERC) issued in 1996. So, in principle (and in many cases in practice), the suggestion you make already has the necessary framework provided. Some utility bills today will show separate delivery and generation charges. All that would be needed is to break the delivery charge into two parts: the fixed grid connection fee and the delivery charge per kwh used.
    Apr 16, 2015. 04:27 PM | Likes Like |Link to Comment
  • There Are Strange Data Points For Our Forward Looking Markets [View instapost]
    One of the factors that still has some flotation left to ride out this soft spot. But we will need something else to pick up in another six months.
    Apr 11, 2015. 01:47 PM | Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Unless I missed it, no one has discussed solar farms. This is the way that utilities can fight back and actually win. A centralized solar photovoltaic facility can generally produce electricity at a significantly lower cost per watt than distributed rooftop systems. Where I live (North Carolina) numerous planning permits have been granted and now construction permits are being approved for solar farm facilities. I haven't seen the numbers of how much solar PV electricity will be coming on line in the next year or two here but it must be significant based on the zoning changes and construction permits approved. And building a solar farm power facility takes only a few months, not the years involved with other power generating plants.

    Why is this happening? Solar is cheap. Estimates I have seen are that distributed solar costs about $0.10 to $0.12 per kwh right now for rooftops and less for solar farms. Dubai will be producing solar electricity at less than $0.06 per kwh with facilities currently under construction.

    And just this week oil and gas rich United Arab Emirates has found that they can save billions by converting 25% of their electricity from gas powered generation to wind and oil. See http://bit.ly/1FpPnNW

    The projections I have seen from sources such as the U.S. Energy Information Administration and the International Energy Agency are that distributed solar production cost will come below $0.06 per kwh by 2018-2020 and centralized solar costs will be down in the range $0.02 to $0.04. These are a fraction of current generation costs for all other generation technologies, all of which are rising in cost over time, not coming down.

    There is a limit to how much solar can be assimilated within a grid, or by local use where generated, because of storage needs. How storage technology develops will determine how much solar can be economically used. However, the most successful utilities will be those that optimize their centralized solar production at the various stages of energy storage development.

    The economics of rooftop solar is not yet clear. It may end up being a costly experience over the long haul if utilities develop their centralized solar facilities efficiently.
    Apr 10, 2015. 12:46 AM | 4 Likes Like |Link to Comment
  • Rooftop Solar Will Prevail Against Utility Obstruction Efforts [View article]
    Valuebug - - -

    The economics of small scale thermal conversions to create electricity is not attractive. But there is no reason to use grid electrical power for attic fans - solar cell powered fans are readily available and cheap. I replaced my line powered fans four years ago.
    Apr 10, 2015. 12:13 AM | 3 Likes Like |Link to Comment
  • Is Obamacare Retarding Economic Growth? [View article]
    Excellent discussion in the article and the comments. One aspect of Obamacare that has not been mentioned is the efficiency it introduces to the labor market. No longer are many employment decisions made with employer provided healthcare as a significant consideration. This improves labor market efficiency in at least three closely related ways:
    1. People no longer are "trapped" into keeping a job they don't like because of health insurance concerns.
    2. People can move to a job that they are enthusiastic about and maintain healthcare coverage regardless of pre-existing conditions or relative merits of insurance plans offered by the employers.
    3. Companies can make hiring and firing decisions free from consideration of the future cost commitments for company paid healthcare coverage.

    The productivity of a labor force thus freed from an artificial constraint will undoubtedly increase.

    Of course, there is another advantage of Obamacare (or any other universal coverage program which requires customer costs decisions to be made by the customer): Costs will be restrained by market forces. This was well discussed in the preceding comments.

    Now we can go back to arguing about how to increase the availability of healthcare coverage, be it ACA, ACA modified, single payer in some form (which I would argue does require customer cost control in some way or it will lead to rationing), or something else not mentioned.

    If Obamacare has a list of benefits, a major factor among them must be that there is now more widespread discussion of healthcare systems than before.
    Apr 4, 2015. 03:39 PM | 2 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    EK1949 - - -
    :-)
    Mar 29, 2015. 02:27 PM | Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Green Elmo - - -

    Yes, most of what I said is contentious and that is why I said it. Without contention where is a debate?

    What has been going on in this comment stream is a discussion on one level but at the highest level we are debating. Unfortunately there is more debating on Seeking Alpha than in Washington. :-(
    Mar 22, 2015. 02:47 AM | 5 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Green Elmo - - -

    Your questions are all political and should be resolved politically. The way money is spent is a political decision and I was talking about how much money should be spent as a precondition to determine how it is spent.
    You can clearly start from your questions and work back to how much money.
    Bottom line, we are constrained to live within a political process and I feel that has been failing us.
    What Socialism is acceptable? As much as needed to provide basic safety nets but not so much as to suppress individual initiative, which is the driving force of economic advancement for any society.
    Unfortunately, I believe, the correct amount of Socialism at any time is not the right amount for many other times. So we are unlikely to be able to optimize "Socialism".
    Mar 21, 2015. 04:32 PM | 5 Likes Like |Link to Comment
  • The Federal Reserve Has Painted Themselves Into A Corner [View article]
    Logical Thought - - -

    We clearly have different definitions of money and different understanding of the differences between sovereign debt and non-sovereign debt. Since I expect you are confident in your understanding there is little we can discuss. My understanding is that the U.S. is not insolvent, can never be insolvent and all such discussion is done for political manipulation.

    You do not accept my understanding (based on your statement) so we have no common ground for discussion because I cannot endorse the concept of U.S. government debt as burden on our children. It is only a burden by political choice to subcontract the creation of money to private bankers.

    Private banking should be the business of the private sector and should not be a parasite on the public function. Get the government out of private finance and get private finance out of the government. That would be the end of TBTF and a return to more fundamental capitalism.
    Mar 21, 2015. 04:20 PM | 3 Likes Like |Link to Comment
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