October 30, 2009
Health insurance is too cheap and covers too much. Really.By C. Edmund Wright
Now the figures are in. The evil greedy immoral health insurance industry has the audacity to post an average profit of 2 per cent! And according to ObamaCare proponents, that two percent can cover everybody for everything while all are paying lower premiums. This from the economic geniuses in congress claiming they will solve all of our health care problems without restricting coverage.
Remember that government bureaucrats are the same wizards who had to outsource the Senate Dining Room operations. They are the bureaucrats who could not handle the paperwork for Cash for Clunkers. So what could possibly go wrong with bureaucrats running 17 per cent of the entire economy?
For starters, let's simply do the math of that 60 billion dollar Medicare scam exposed by "60 Minutes" Sunday. That single South Florida scandal would wipe out the entire 2% profit for an industry of 3 trillion -- yes 3 trillion -- dollars. Interestingly, 3 trillion is approximately the size of the health care system in the country.
(For Obama voters, that is 60 billion X 50 = 3 trillion. Note: 2% is the same as 1/50th, thus the multiple of 50 in the equation.)
Let me translate: just the losses of this one scam shows that a government run health program could not possibly be as efficient as the private health insurance industry. Private enterprise would never let that happen because they could not afford to. In this one scam, the government was losing about 10% of the Medicare gross. Oops. There goes that 2 per cent profit model -- and then some.
"Insurance" may be most used -- yet least understood -- word in our political parlance today.
Without insurance, the entire concept of private property rights is not sustainable. The industry does a poor job of making this point, because you never hear it, but it is true. If you can lose any property with one strike of a match, one cutting of a bolt or one turn of the wheel -- then you effectively have no real property ownership.
Further, without insurance, the concept of ever getting a loan for a car, boat, a Harley or a home is out the window. Even if you obtain these things by writing a check for the full price, the concept of a good night's sleep is out the window without the financial protection of insurance.
Thus, the idea of a vibrant free market economy is in fact moot without risk management by way of insurance. (And you know, maybe that's the whole point behind the trashing of the insurance industry. More on that later.)
Further, not only do we need the concept of insurance to have private property and a vibrant economy, we need to have rich insurance companies as well. After all, if the check the adjuster writes you for your wrecked car bounces, then you still have a wrecked car and no way out of the situation. Does anyone ever think about this?
The same is true of health insurance, which is really protection against financial damage to your family from paying for health care.
Just a thought: if the insurance check bounces for the electrocardiogram, you can probably forget the check for the by-pass surgery being any good.
And as we now know, there is only a 2 per cent gap between the check being good and bouncing as it stands now. You should absolutely adore insurance company profits, but no one seems to. It will only help your 401 K and your piece of mind if your insurance companies are wealthy. If that makes you mad, then start an insurance company -- or invest in them -- so you can share in the massive profits! Resentment is wasted energy.
This lack of understanding of what insurance is and what place the industry plays in a free market economy seems universal. It is against this backdrop of ignorance that our nation debates health care. Daily we see examples of the media elites and members of congress discussing systems they literally know nothing about. Or worse, as Ronald Reagan said of liberals, most of "what they know isn't so."
Which brings us to what they "do know." They know that insurance profits are obscenely high, even though it is not so. They know that companies routinely get out of paying claims they should pay, even though it is perhaps the most regulated industry in the country and coverages are very specific and dictated by government in the first place. They know insurance should cover every little daily expense anyone incurs, even though administering that is a major factor in rising costs.
And perhaps the worst of all: they know that companies must forget the concept of pre-existing conditions, even though doing that would be the exact antithesis of the entire concept of insurance. Hey, why not wait until the flames reach the living room before buying homeowners insurance? Or let your spouse get the life insurance policy once you're on the slab at room temperature? Don't laugh. That's the same concept as a health insurance company having to take a sure fire loss of several hundred thousand dollars for folks who already have the pre-existing condition of cancer or heart disease when they start writing their 300 dollar a month check.
Which now brings that 2 per cent profit margin back into focus. How many surefire six and seven figure losses can an industry with a thin margin absorb? How much more of the routine expenses can this same industry pay, not to mention paying for handling the associated paperwork?
Oh, and let's not forget covering the uninsured -- be it 12 or 30 or 47 million.
We are to believe that the same government that brought us Fannie Mae and Freddie Mac and the Post Office (not to mention a Medicare system losing ten percent of its gross to a single scam) will now manage the health insurance industry well enough to absorb all of this and still "drive costs down" as promised?
The sad part is, while this is being debated by Pelosi and Reid and Frank, there are sustainable and simple obvious mneasures like tort reform and opening up interstate competition that are being ignored. These could be implemented along with portability programs for pre-existing condition and put into place without destroying the insurance industry and our children's future.
So we have to ask: What are they really trying to do? They have to know that they are dismantling the entire private insurance market. Don't they?