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September 11, 2009

The predictable outcome of electing an economic dunderhead president

Rick Moran
It is a very special world our president and his equally clueless advisors inhabit. It is one where market forces have been repealed, common sense is outlawed, and up is down, black is white, and it don't rain in Indianapolis in the summertime.

Other than that, we're lucky to have him.

What I'd really like to know is when the geniuses who crafted national health insurance reform sat down to consider the real word consequences of what they were proposing, did any of them bother to take into account the vagaries of human behavior?

Sally Pipes at the New York Post and I were just wondering...

Under his plan, insurers would be faced with "guaranteed issue" and "community rating." In other words, they wouldn't be allowed to deny insurance based on a pre-existing condition, take coverage away in the middle of a treatment, set a premium based on one's medical history or set lifetime caps on coverage.

If there were a "guaranteed issue" law for fire insurance, no one would buy coverage unless his or her home was actually on fire. We'd see the same "negative selection" under the Obama plan: Lots of people would simply avoid buying insurance until they got sick. After all, if you can't be turned down when you are sick, why bother wasting money on insurance when you don't need it?

Sick patients cost more, of course. Insurance premiums would gradually get more and more expensive, because the only people in the insurance pool would be ill.

Community rating would have a similar impact, because insurers would be forced to charge the same prices to the sick and the healthy, to smokers and non-smokers, and to the obese and those who are fit.

Such measures guarantee that all customers will end up paying higher prices. The average state-level mandate for community rating hikes premiums by over 10 percent. The average guaranteed-issue ordinance drives up premiums a whopping 227 percent.

Pipes writes of the stealthy nature of the public option because, once the government forces these standards on for-profit companies, premiums will skyrocket and employers will find it cheaper to drop insurance for their workers, paying a fee equal to the subsidy the government will give to employees who are then forced on to the public plan. Meanwhile, insurance companies will be forced to hike premiums even further while the public insurance program will become more attractive due to its cost which will be kept artificially low thanks to us taxpayers.

Voila! The death of private insurance companies. All very well thought out in a "progressive" kind of way. One could weep at the sheer beauty of it except once the private carriers are gone, government will start reducing the subsidy or raise premiums - as Massachusetts and other mandated insurance states are finding - because health care costs will continue to rise.

No doubt all of this will be blamed on evil capitalists in the insurance industry. If only they had turned themselves into charities, operating at a loss, this situation would never have arisen.

This is what happens when we elect economic dunderheads.

Hat Tip: Ed Lasky



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