And I won't give any dignity to the pathetic pretense that what they are calling "health care reform" is anything less than an attempt to socialize medicine in this country.
If, based on the title of this post, you think I'm going to talk about how socialized medicine in this country won't happen, or how the Dems will get voted out in 2010 because of it, etc., you're wrong. I want to talk about what the actual result will be of this bill.
To the leftists reading this blog, let me present you with a few concepts you may never have heard in all of the propaganda you've read railing against the health insurance industry. Here they are:
1) Health care costs are not dictated by insurance companies, they are dictated by providers.
2) What providers charge for services is determined partly by supply and demand, but also by what the government pays them with Medicare and Medicaid. The government automatically influences prices on health care at the provider level whenever it fixes fees. Costs are squeezed onto the private health care consumer.
3) Insurance prices are the sum total of the costs of health care plus profits. Despite what cooked statistics you may have seen, profit margins in the health insurance industry are not high (absolute figures, or figures picked from particularly profitable years, tell us nothing).
4) Insurance prices are thus dictated by provider prices, and to a large extent, the government, when the government mandates that all policies must carry particular types of coverage (such as private care for autistic children, check-ups, etc. etc.).
5) Insurance for the serious illnesses and injury you often talk would be far cheaper if it could be purchased legally, if people could choose a la carte what coverage they want (to say nothing of being able to purchase this insurance from literally anybody, anywhere on the planet, instead of only from licensed companies in their home state).
6) Provider costs for services are drastically higher than they need to be because of licensing laws. Licensing laws prevent services from being performed at the lowest possible cost, and generally work to constrict the available supply of doctors and nurses and other professions. People are restricted from opening cheaper, doctor-free clinics for ailments that a nurse or other less expensive laborer could perform.
7) Drug costs are ridiculously high partly because both our own and other governments abroad coerce companies into selling drugs too cheaply, and thus squeeze the cost onto the private consumer, and also (this is the big one) because the FDA and other government bodies/laws act as a wall between drug companies and consumers. Most people are unaware of just how expensive it is to get a drug approved for sale in this country, and as a result drug companies often focus less on life-saving treatments and more on easier, more profitable ventures such as impotency pills.
What I'm trying to say here is that you shouldn't blame the free market, because there is no such thing in the health care industry. Licensing laws, subsidies, regulations, all act to constrict the workings of the industry.
Why do insurers not cover previous conditions? The same reason you cannot buy car insurance right after a wreck and expect the insurer to cover the costs of the wreck. Insurance is (or should be) a risk management technique, but a preexisting condition isn't a risk, it's a certainty. You are asking the insurance company to pay out a large sum of money in exchange for which you will give them a much smaller sum of money. Any idiot can see how that would bring the insurance industry to its knees. It's worth adding here that the only real reason insurance companies don't cover preexisting conditions is because the laws prevent them from doing so efficiently: in a perfect world they would simply charge higher rates due to the increased risk, but the law often keeps them from doing that.
Why do insurance companies charge different people different rates for the same service? Because of differences in risk. Older people are more likely to file claims than younger people, so are the obese, so are smokers, etc. Women have the risk of pregnancy, men don't. Differing risks by definition mean that people are getting different services, not the same service. Because you are buying protection against risk, not health care. The health care providers might provide the same service when they give an old man or a young man a blood transfusion, but insurance companies don't.
What happens if you required that insurance companies charge the same rates regardless of risk differentials, or if you require that they cover preexisting conditions without charging different rates? The only solution to keep from going out of business is to raise the rates of all of their less-risky, condition-free customers, to subsidize all of their riskier customers.
How dramatic an effect will this have on health care in this country? Well, this would transform insurance companies from companies that manage risk into companies that are simply privatized middle-men through which the American population subsidizes the health care of the sickest, the poorest, the fattest, etc.
Add to that this ludicrous "public option" which is where the stealth socialization comes in, and for many people, the artificially low prices of the government plan will seem attractive and they will jump ship.
In short, I wouldn't buy stock in any health insurance company right now. In fact, I'd sell it, and I'd take whatever I could get for it, ASAP.
Now, dear liberals, I hope I don't blow your little childish minds, but let me make this clear: the government isn't going to lower health care costs. Nope, sorry, it's just not possible. They are changing the mechanism through which health care costs are paid for in this country (the ostensible "insurance" companies) from private companies to a government bureaucracy, but they are not doing one little thing, NOT ONE LITTLE THING to affect the actual costs of health care--which as I've said earlier begin at the provider level.
Due to regulation, licensing laws, restrictions on this and that, these costs will just continue to grow and grow (this is beyond the scope of a single blog post, but for the econ nerd a study of why health care costs continue to grow and grow is fascinating) and the government won't do anything about it.
I know. It'll seem, at first, like health care is suddenly cheaper. That's because the full cost of it won't be passed directly to you. And even after they hike taxes, it won't be passed directly to the tax-payer. Nope, it'll be financed through deficit spending and thus the cost will be passed onto future tax-payers. Your children, your grand-children, etc. The government will have to borrow money to pay for this, in addition to covering Social Security.
Where I'm going with all of this is that one-sixth of our economy can't just be punched in the balls without expecting some fallout. Things will not just keep ticking along but only with a better way of funding it all--rather, health care in this country is about to face a catastrophic restructuring, a major shock to a system that won't be able to face the sudden new demands that are about to be put on it, and with no real way to pay for it. Budget estimates are not taking this into account, they are not expecting people to respond to the incentives that they will face. And they are about to be shocked.
Here are two things that might happen. I guarantee you with all my heart that one of these things will happen, and both of them may happen together (God forbid):
1) Health care must be rationed, as it is in other socialized health care systems, because there is too much demand and too little supply, and the supply is capped from growing because it is socialized and not a free market. This will lead to drastic changes in how Americans get their health care, and it will be decided by bureaucrats and special interests, not individuals making their own choices. IOW, the sky-high standard of care we get in this country is about to end.
2) Or, rather, the government will be even more naive/foolhardy than I expect, and they will try to provide the same level of service Americans are used to, without rationing, and funded through deficit spending. I find this one less likely, because it could only go on for a short while before people stopped buying Treasury bonds.
Part of me thinks (the optimistic part, that is) that this could turn out to be a Nixon price controls-style boondoggle, i.e. a bad policy that is enormously unpopular right away and is repealed within several years. I won't guarantee that.
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