Economics 101: #Obamacare : making the inexpensive cost more Updated!

The original article was published last November, but in light of the Supreme Court’s decision in Burwell v Hobby Lobby Stores, Inc., I wished to revisit it, and bring it up to date. First, the original article:
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After seeing the ad to the right on several sites — The Lonely Conservative, Sister Toldjah and The Pirate’s Cove — I started thinking, once again, about the costs of the Patient Protection and Affordable Care Act. During the Sandra Fluke kerfuffle, it was noted that a Target just a few miles from Georgetown University, where she went to school, sold generic birth control pills to women without health insurance for a whopping $9.00 a month.

That was a couple of years ago, so I decided to check the Planned Parenthood website for their estimates concerning the costs of oral contraceptives:

How Do I Get Birth Control Pills? How Much Do Birth Control Pills Cost?

First, you’ll need to get a prescription. Visit a Planned Parenthood health center, a clinic, or a private health care provider for a prescription. Your health care provider will discuss your medical history with you, check your blood pressure, and give you any other medical exam that you may need. If you need an exam, it may cost about $35–$250.

Birth control pills may be purchased with a prescription at a drugstore or clinic. They cost about $15–$50 a month.

Planned Parenthood works to make health care accessible and affordable. Some health centers are able to charge according to income. Most accept health insurance. If you qualify, Medicaid or other state programs may lower your health care costs.

Call your local Planned Parenthood health center to get specific information on costs.

Now, for a woman who is paying cash for oral contraceptives, that means writing a check or using a debit card for $15.00 to $50.00, the cost of the prescription. The WalMart or Target or RiteAid pharmacies get their money, right away.

But the Obama Administration wants to change that. The President and his minions want everybody to have health insurance, and they want all health insurance policies to cover contraception, without any patient copayments. If that is the case, no woman will pay cash for her pills; she’ll show her insurance card instead.

And that means that the pharmacy will have to bill the woman’s insurance company. Rather than the quick cost of the cashier accepting the patient’s payment, the cashier will have to enter the insurance information, and someone — probably someone else — will then have to put together a bill to the insurance company.1 The insurance company will then have to process the bill, make certain that the expense is covered, and then make the payment to the pharmacy. All of those extra steps cost money!

Back at the pharmacy, it has to wait for payment. Instead of having the cash on hand, in payment for the medication received at the time it was sold, there will be a period of time — which could be weeks — that the pharmacy will, in effect, have to finance between the sale of the medication and being paid for it.

Well, someone has to pay those costs. The pharmacy will have to add their costs to the price of the medication, thus billing the insurance company for a higher amount. The insurance company, bearing an overhead cost of their own in processing the claims, will have to add that into the premium prices they charge.

The simple economic truth: oral contraceptives will cost more, because the PP&ACA is adding expenses to the purchase.

Of course, there’s still more. Oral contraceptives are fairly inexpensive, and there is some actual competition between brands for sales. When women pay cash for their birth patrol pills,2 there is an incentive for them to buy a less expensive brand if they have the option. But once price is removed as a consideration for the patient, there is no need for the patients to choose lower-priced generics or request their physicians to prescribe a lower cost pill. The PP&ACA requirement that contraceptives be completely covered, with no patient co-pays, removes the incentive for price competition concerning the patient.

Pharmaceutical companies exist for only one purpose: to make money for their shareholders. Without an incentive to reduce prices to gain market share, since patients won’t be price shopping, the pharmaceutical companies will be able to charge higher prices. This factor could be held in check, if PP&ACA regulations required co-payments from patients for prices beyond the generic brands, but the current requirement is for no copayments.

The government could start its own buying program, to buy the medication in bulk, but that would make the government the seller of medication, not the pharmaceutical companies. In theory, the government could get lower prices for the bulk purchases, but, in practice, government procurement of items has never been something which led to lower prices. Even if such a program were put in place, it adds additional overhead costs.

This is not exactly PhD level economics; this is just a simple recitation of the reality of business. Anyone who knows anything about business would have been able to see this . . . which is probably why the government cannot.
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Update, June 30th:

As you might imagine, the left are going ape over this decision. But Burwell v Hobby Lobby is fairly narrowly tailored, exempting only those “closely held” companies, not major corporations with widely-held stock. From The Wall Street Journal:

Hobby Lobby Ruling Raises Question: What Does ‘Closely Held’ Mean?
Companies Who Won Supreme Court Contraceptive Case Are Owned, Controlled by Single Family
By Stephanie Armour and Rachel Feintzeig | June 30, 2014 2:56 p.m. ET

The Supreme Court’s decision to exempt some closely held, for-profit firms from covering contraception in workers’ health plans sparked immediate questions about whether other companies may try to claim such an accommodation.

Their success may rest on the type of company they are and state corporate laws that can vary.

The three firms in the lawsuit—Hobby Lobby Stores Inc., Conestoga Wood Specialties Corp. and Mardel—all have the same business structure: they are owned and controlled by members of a single family.

But closely held firms can take other ownership forms. The Internal Revenue Service defines a closely held company as a corporation that has more than 50% of the value of its outstanding stock directly or indirectly owned by five or fewer individuals at any time during the last half of the tax year. Personal-service corporations, for instance health-care and law firms, don’t qualify as closely held.

Closely held companies are owned by a relatively small number of investors, typically including their founding families and management. Roughly 90% of all companies in the U.S. are closely held, according to a 2000 study by the Copenhagen Business School.

More at the link. It seems to me that this decision will actually wind up creating more court cases than it settles.

But it’s so useless: the actual costs of contraception in this country are so low that there is no need to make such an insurance-covered item.

  1. I am assuming a form of electronic billing rather than a printed and mailed bill, which would add even more costs.
  2. Not a typo; Archie Bunker called them that on the old All in the Family television series.

20 Comments

  1. Dana,

    That’s got to be a spoof. It’s one thing for critics to point out that Obamacare in its fundamental conception of the individual mandate is fascist, which it is, or that its proponents are the same, which they unarguably are, or that many of its biggest fans are likely to be behaviorally incontinent imbeciles or their would-be managers, which is obvious.

    But for some Obamacare advocacy group to actually create ads reinforcing such a critic’s case, is a little too much to believe. No rational person looking at the giddy morons and nihilistic flotsam featured in these “advertisements” touting their glee at latching onto a wagon pulled by others, could believe that they are meant to incite anything but contempt both for Obamacare and for the kinds of sub-moral persons pictured in these ads.

    These brainless human caricatures are obviously not intended to represent real human beings of the kind capable of self-government, and therefore deserving of fellowship and inclusion as peers in a constitutional polity populated by those who are.

    These are the kind of people you should let lie wrecked in their cars after they brazenly cut you off and then as a result roll their vehicle over into a ditch filled with stagnant water.

    It’s got to be the equivalent of those supposed “quotes” from dictators asserting that “Our great task is to undermine the Americans’ practice of public school prayer which has heretofore kept our evil plans at bay!”

    Very funny though.

  2. You would think it was a spoof, but if it is one, it’s caught the major media, too:

    MILLER: New Obamacare ads make young women look like sluts
    By Emily Miller, The Washington Times

    So few people have enrolled in Obamacare that desperate Democrats have stooped to launching a war on women with demeaning and sexist ads.

    The latest marketing campaign implies that young women would only be interested in Colorado’s government-run health care exchange if they get coverage for birth control pills to have sex with strange men.

    The most offensive ad shows a 20-something woman named “Susie” holding a packet of birth control pills with an open-mouth, wide smile. She is wearing a flesh-colored, low-cut, sleeveless top, tight skinny jeans and open-toed black heels.

    Susie is leaning against “Nate,” who is wearing an untucked shirt with the top four buttons undone to show his hairy chest. He has a smirk on his face and one hand in the pocket of his jeans.

    “OMG, he’s hot!,” Susie is shown saying. “Let’s hope he’s as easy to get as this birth control. My health insurance covers the pill, which means all I have to worry about is getting him between the covers.” . . .

    The latest ads are part of a marketing campaign from Colorado Consumer Health Initiative and ProgressNow Colorado Education that are a takeoff of the “Got Milk?” ads that instead say “Got Obamacare?” These groups first went after young men with ads showing them doing keg stands and binge drinking.

    Liberal groups paying for marketing campaigns to target young people to buy health insurance is to be expected. The whole Obamacare scheme will only work if young, healthy people get into the system so that the government can hand out subsidies to the uninsured.

    More at the link. In the original, the link came from yahoo news And Business Insider wrote about The People Behind The ‘Brosurance’ Obamacare Ads That Are Making The Internet Cringe.

    And yes, I did check those things out before I published it, because, like you, I thought it just had to be a spoof. But what it really is is proof that, if you are a liberal, your brain really isn’t that strong.l

  3. This is not exactly PhD level economics; this is just a simple recitation of the reality of business. Anyone who knows anything about business would have been able to see this . . . which is probably why the government cannot.

    At the risk of repeating myself – This has NOTHING to do about economics, and EVERYTHING to do with ideology. Pointing out that Obamacare is stupid, from an economic point of view, is pointless. The point we SHOULD be making is that it is IMMORAL.

  4. It’s not a spoof, and it’s directed at the boys. It’s an accurate portrayal of exactly the message Obama and his supporters gauge will motivate young invinciblemales to sign up for health care plans they don’t want, don’t need, and can’t afford. As a group young men are the least likely to use health care services till they’re in their late ’50s and early ’60, and young men are also the group most willing to spend money to get laid. By encouraging the girls to reward boys who buy into ObamaCare with sexual favors, Democrats are reviving an old Vietnam War tactic, the same one the devil used to ensnare Adam.

    This Ad has its roots in anti-Vietnam War protest songs. Joan Baez sang it to the girls of that era, Say Yes to the Boys who Say No to the Draft. Only this time around it’s I Might Say Yes to You After you Bend Over and Say Yes to Obama.

  5. To whom, Dana? To whom shall we point out foolish economics and immorality? To those like the 2Pee’s who know nothing of economics and who are obviously immoral? What will that gain us? We note they are immoral but do we note they are anti-God? Anti-American? Anti-Freedom? No! You Dana, are the one who refers to these pigs as “our friends on the left”. I learned from DNW and Eric. They ain’t our friends. They are not “the loyal opposition”. They are traitors and commie thugs, no more, no less. We can’t have a “dialogue” with ruthless vermin that want nothing but the end of America. We can fight them, destroy them but we can never, ever “dialogue” them.

  6. Sandra Fluke, the slut who wanted to be a whore, should be so proud of herself. She can go tell everyone:

    Obamacare: Now all you sluts can become whores, too.

  7. Remember, this is the same side of the aisle that made that collegiate video where all these hot college students were declaring they would not have sex with anyone who voted Republican — as a selling point to vote Democrat.

    If you vote Democrat, you can get yourself a hot college slutty cutie.

  8. Sandra Fluke, the slut who wanted to be a whore, should be so proud of herself. She can go tell everyone:

    Obamacare: Now all you sluts can become whores, too.

    Another example of conservative Christianity at its finest.

  9. I left out a consideration from the original. I noted that the pharmaceutical companies would lose incentive to hold down prices, which is true enough. But discount pharmacies such as WalMart and Target will also lose an incentives to discount prices on oral contraceptives, because the patients will not be price shopping. It makes more sense not to discount, not only to recover the additional overhead costs, but to improve margins as well.

  10. From Sister Toldjah:

    Racism! Bowie State (MD) cancels student health insurance plans due to #Obamacare

    Katherine Timpf at the Campus Reform reports:

    Officials at one one of the nation’s oldest and most elite historically black colleges are citing the Affordable Care Act (ACA) as the reason they have cancelled a school-wide affordable health care plan they had offered students.

    The official website for Bowie State, a Maryland public school less than an hour’s drive from Washington D.C., explains that Obamacare’s new regulations would force the cost of the the insurance to rise from $50 to $900 a semester.

    “Bowie State University has suspended offering health insurance for domestic students for the 2013-2014 academic year,” states the school’s official website. “Due to new requirements of the Affordable Care Act which will go into effect on January 1, 2014, the cost of insurance for domestic students will increase to approximately $1800 per year.”

    More at the link.

  11. Hoagie is right. You can’t “Dialog” with moral vermin. If you had cockroaches in the house, would you invite them to your dinner table and try to have intelligent conversations with them? Or would you get out the RAID?

  12. Hoagie is right. You can’t “Dialog” with moral vermin.

    Proverbs 26:

    21 As charcoal to hot embers and wood to fire,
    so is a quarrelsome man for kindling strife.
    22 The words of a whisperer are like delicious morsels;
    they go down into the inner parts of the body.
    23 Like the glaze[b] covering an earthen vessel
    are fervent lips with an evil heart.
    24 Whoever hates disguises himself with his lips
    and harbors deceit in his heart;
    25 when he speaks graciously, believe him not,
    for there are seven abominations in his heart;
    26 though his hatred be covered with deception,
    his wickedness will be exposed in the assembly.
    27 Whoever digs a pit will fall into it,
    and a stone will come back on him who starts it rolling.
    28 A lying tongue hates its victims,
    and a flattering mouth works ruin.

    Exodus 23:1

    “You shall not spread a false report. You shall not join hands with a wicked man to be a malicious witness. ”

    John Hitchcock:

    Sandra Fluke, the slut who wanted to be a whore, should be so proud of herself. She can go tell everyone:

    Obamacare: Now all you sluts can become whores, too.

    I think who the moral vermin actually are is quite obvious, Eric.

    How’s the book going, by the way?

  13. I like the way the lines run up the back of her stockings
    I always liked those high heels, too
    No no no, don’t take ‘em off, leave ‘em on
    Yeah, yeah, a little more to the right

    David Lee Roth
    Everybody Wants Some!

  14. A troll, after having previously stated: “I don’t bother obeying the Wholly Babble …”

    Then adduces verses from it in order to assert,

    “I think who the moral vermin actually are is quite obvious …”

    Well it certainly is obvious; but not in the way the troll imagines.

    It’s obvious that secondarily, the moral vermin are the kind of person who expresses the attitude quoted below: trumpeting the government wealth-transfer and subsidy it now receives which will allow it to draw on self-governance capable others in order to act even more mindlessly.

    “OMG. He’s hot!
    Let’s hope that he’s as easy to get
    as this birth control. My health insurance
    cover the pill. Which means all I have
    to worry about is getting him between
    the covers. I got insurance”

    Thanks Obamacare!

    “Let’s get Physical”

    But primarily, it’s obviously self-serving vermin like the troll Phoenician and Sandra Fluke, who represent the more politically minded advocates of such fascist political principles. As matter of fact, the Obamacare advertisement text quoted above could have largely been written right off Oswald Mosley’s own templates with a minor adjustment here or there for generational sensibilities and jargon.

    Sometimes even a troll serves a purpose … such as here, where we see Phoenician comically set a firecracker off in its own mouth.

    Doesn’t mean Dana shouldn’t ban it though.

  15. Hell, York, I’d probably sign up if one of Obama’s Navigators shows up at my door looking like that. I’d likely buy a set of Encyclopedias, a new vacuum cleaner, and a boatload of fancy brushes too. Can you just imagine the hullabaloo if the Jehovah’s Witnesses set similarly clad posses of proselytizers loose on stay-at-home sinners? It might not square with traditional recruitment practices, but the numbers would improve.

  16. Can you just imagine the hullabaloo if the Jehovah’s Witnesses set similarly clad posses of proselytizers loose on stay-at-home sinners? It might not square with traditional recruitment practices, but the numbers would improve.

    It might be the first time the JW’s would get past the front door. But the two that showed up the other day if they were dressed like this, I would give them clothing.

  17. Well, it looks like dear leader assumed Congressional Powers again and made a unilateral Change to the BarackObamaCare Law. It’s like nevermind about that Grandfather Clause. Let’s hope Congress does force him to sign for the change unlike what they did for the group policy delay.

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