Posted by
Andrews on Sunday, January 10, 2010 1:42:10 PM
I have written on the topic of health care reform so much it seems almost futile to write about it again, but the logic of the present law is so bizarre I feel I have to write a short post pointing out the problems.
Before we begin, let us look at the claims. First, there is the claim that the average American, or at least one sixth to as much as one half (by some absurd figures) can't obtain it, which, since insurance is sold to all comers, means they cannot afford it. Second, the government is upset that insurers have the ability to exclude pre-existing conditions. I explained why this only makes sense in "
Preexisting Conditions", but ignoring that for a moment, it has to be assumed that legislation will remove this ability. Finally, the claim also seems to exist that insurers do their best to cover as little as possible.
Now, this leads me to ask, how does the present law fix any of this? And if it "fixes" it, won't it bankrupt the insurers? After all, it isn't as if insurance is a hugely profitable industry at the moment.
Right now, our insurance model isn't really insurance. It is a mix of catastrophic health insurance and an incredibly inefficient system for paying for expected events. ("
The Insurance Sham","
Redefining Insurance... To Actually BE Insurance") But, at the moment, the way it works is modestly profitable. However, part of that profitability depends on being able to exclude obvious losses, such as preexisting conditions, or excessive risks. And the current law simply will not allow that. So, the current reforms will introduce known losses into the system.
And worse still, the state clearly will not allow increased rates to make up for those losses. As the state already imagines insurance is out of reach for most Americans, and as the state will be required to subsidize those who can't afford it, rates will need to be capped, and, though the law does not say so, I do not doubt will begin to decline once the law goes into effect. Once the government is subsidizing insurance, I am sure the claims of "gouging" will start and we will see political pressure to reduce premiums.
And so, what are we left with? Insurers who are forced to take additional losses without the ability to raise rates, and likely to see a future decrease in allowable premiums as well. In other words, a recipe for bankrupting insurance.
Of course, for those pressing for single-payer, this is a boon, as it will create conditions ideal for adding a government owned insurance firm to the mix, which will eventually become the sole source of insurance. But it is a remarkably dishonest way for the state to pass single payer.
POSTSCRIPT
My many posts on health care reform can be found listed in the bodies of and postscripts to "
Medical Reform, An Overview", "
Redefining Insurance... To Actually BE Insurance", "
Reviving Nonsense in the White House", "
A Simple Question", "
An Interesting Conversation", "
Bad Economics Part 10", "
Semantic Games" and "
A Food Security Plan".