Sure Enough

Hi Mr. Boudreaux,

The point of your argument escapes me. Capping health insurance is not the same as the other examples for the following reasons:

1. Health insurance is essentially a game of dice between insurers and customers. The insurance company hopes its model, rate and chance of having to pay out later will be at least as much as the premium it gets. It is hence glorified speculation but on the health and life of human beings. Comparing it therefore to speculation - based industries like oil and gas etc. etc. is morally wrong in my opinion.

2. Another point you make is that it will make insurers go back to the "hidden fee" drawing board and hence make the problem worse. That insinuation seems a tad too similar to the "But if you punish the criminals, they'll find new ways to stab you" argument. That essentially is why its the government's responsibility to its citizens to ensure that it does not happen.

3. There is a general outcry over the prospect of private health insurers being driven out of the market. This is a claim not backed, to my knowledge, by any actual data but purely hypothetical. But let us assume, for the sake of argument, that this might come true. Well, so what? What exact medical benefit do private health insurance providers supply? How does their existence make anything better?

The point of the argument is simple. Price controls result in shortages. It's that simple. Do you want to experience shortages in health insurance coverage? Then you should oppose the administration's ignorant quixotic belief that they can make things better while dictating prices. It is as impossible as defying the laws of physics. Only the ignorant do not understand this.

Since your claim isn't backed by anything even close to actual data,but instead is a vague statement like "Price control results in shortages", I think I'll dismiss it and wait for a reply that consists of at least 2 coherent sentences strung together.

Prohibiting "excessive" (whatever excessive is) rate increases will lead to predictable (per ECON 101) results:
1. Higher co-pays
2. More people denied coverage

Higher co-pays might not be so bad. This will require customers to be more careful about the health care they buy.

But if more people are denied coverage, it's going to help the Obama-crats get support for their health care reform. I'm sure they're railing against health insurance rate hikes in order to get more support for their reform. But could they actually be devious enough to enact price controls as a way to eventually pass their reform?

Way to go, Don. Glad Stossel quoted you.

Terry

Not exactly related, but consider this article. How long will it be before I can't buy a blowpop because it is round and government has determined that lollipops need to be flat?

http://www.foxnews.com/story/0,2933,587133,00.h...

Watching people defend price controls is as amusing as listening to creationists defend a 4000 year old earth.

That was a little uncalled for in my opinion.

it requires about the same level of ignorance.

Can any intelligent and well-informed person not believe that Obama wants a fascist state? Sure, government ownership of businesses is good, but government control of businesses is better! You get the advantage of tremendously increased economic and political powers and can blame business owners and CEOs for all the problems caused by government controls.

And, if we're lucky, we'll get the garish leisure suits and mile-wide collars, too.

We've already got the offensively childish pedantic rube in office.

This fool is part Carter, part Mussolini.

Unintended consequence? http://alhambrainvestments.com/blog/2010/02/22/...

If I only had veto power over government spending rate increases.

We'll see reduced coverages (e.g. in NYC they offer hospitalization plans for about the same rate as regular insurance in MO, because few can afford the actual insurance plans NYC), surly service, all that.

And, we'll blame the free market.

I guess we shouldn't be surprised. Wait till the M1 and M2 start expanding rapidly once the economy kicks into gear. If you think these price controls are destructive, you ain't seen nothing yet!

Don Boudreaux suffers from two handicaps. He remembers things and he understands them. This is a handicap because it blinds him to the possibilities of our brave new world. If he could just get over these handicaps, he could see what a great future we have in store if we would just put our trust in the government.
Health insurance is already heavily regulated. So, the answer to our problems must be.....more regulation.

Look up the history of the PA Catastrophic Loss fund. It's the poster child for a government imposed rate cap that quickly became an insolvent albatross.

Doesn't it matter in this debate that consumers have no clue what the cost of their care will be for a procedure or a service before they use the medical care? or better yet, before they purchase insurance? the hidden price list of what amount insurance is willing to pay for each service would be invaluable to a consumer if we had real competition in the insurance market, which we don't. So why not have govt oversight on an industry with monopoly power? It can't be any worse than what we have now, esp for the millions of uninsured, those not lucky enough to belong to a group plan, such as, ahem, university professors.

But how is that uncertainty in what the future will hold any different than the uncertainty in how much it will cost to fix their car after a wreck of medium severity that may or may not happen? You are completely forgetting what insurance means. It's a bet. You're betting the health insurance company that you will need them to cover a service, and you pay them a premium in the meantime in order to keep the "bet" current. The way people use health insurance now (thanks largely to previous govt regulation that set up the paradigm) is akin to using your auto insurance for oil changes. That's not the purpose of it.

You say "if we had real competition in the insurance market, which we don't," but you never realize that that is a core problem that can be easily solved with less regulation, less govt in the way of competition. Then you wouldn't have "local monopolies" or "local oligopolies."

You are mistaken when you say that it can't be worse than what it is now. That type of "change for change's sake" mentality is how very bad ideas get put into place. Can you honestly state that you think that our current system is the worst it can possibly be? That taking away the power of incentives on human behavior couldn't degrade the quality of healthcare? That making healthcare "free" for millions couldn't cause an artificial spike in demand, causing an increase in prices (for those of us who *do* pay). For the hundreds of millions that are insured, it could (and would) be a lot worse if you gave govt control of the entire system.

Ben Bursae: "The way people use health insurance now (thanks largely to previous govt regulation that set up the paradigm) is akin to using your auto insurance for oil changes. That's not the purpose of it."

I agree with most of your comment. But not this part.

First, how do you know what is the purpose of health care benefits provided by employers or purchased by individuals? As a small business owner, I purchased not just catastrophic health insurance benefits but also health maintenance coverage for my full time employees. I did so because it was important to my business that these employees remain at work as much as possible. I did not want to incur the much higher costs of their absenteeism. So it was important to me, the employer, that my full time employees receive regular preventative health care.

How do you know, Ben Bursae, that most employers do not have exactly the same motivation when they provide health benefits packages for their employees?

Your auto insurance analogy - which I've seen before at Cafe Hayek - is not quite accurate. Most auto insurance covers only damage due to accidents or theft. That is not the case for health insurance, even the limited catastrophic variety. Health insurance companies must pay for catastrophic illness which is not accident-related. Many insurance companies and self-insured employers believe that routine medical care lowers the overall costs they will incur by catching medical conditions before they becomne catastrophic. Rather than routine care being a cause for health care inflation, it is, for them, a cure.

"the hidden price list of what amount insurance is willing to pay for each service would be invaluable to a consumer if we had real competition in the insurance market"

It is government permission and support that has created this controlled and regulated market where insurance companies can make it difficult or impossible for you to find these things. In other words, insurance companies are able to do it because of government, not in spite of it.

And, you'd like to increase government interference in this market?

That deserves rethinking if anything ever did.

You ask: "So why not have govt oversight on an industry with monopoly power?"

The questions arise: 1) What industry?; and 2) How does the monopoly power arise? (If as a result of government regs, ahem, then apply Occam's razor, ahem)

I had in mind insurance companies that have local monopoly power, for example, Anthem in California. I wonder if the market for individual insurance and for group insurance could be treated as two different markets .. since the choice for college professors is certainly different for the part-time worker making minimum wage (no offense, but my father was a college professor). There is limited choice in the group market as well, but the fact that health benefits are not taxed renders changes the dynamic in group plans when it comes to cost control. If all we see in the opt-in period are limited information about deductibles and premiums, then we cant possibly have enough information to know which plan is the most cost-effective.

It is true that the monopoly power is the result of govt restrictions, in part, on the ability to sell insurance across state lines. Reform was blocked early in committee, which if one accepts as a political certainty due to lobbying power of insurance companies, oddly enough regulation on top of regulation may the the only way to get at a more desirable result. Its not the most efficient but as Mancur Olson would say, "consumers" aren't really a powerful enough lobby group. Naderites aside.

Thanks for the reply; I'm more optimistic about the odds of achieving competition across state lines and other "undoings" of monopoly-creating regs. Olson's wisdom is generally true, but revolutions do occur. Time will tell.

I hope so.. I tend to play devils advocate in postings like these. And it
certainly raised some interesting points. My concern personally is that
before I purchase insurance I dont know (a) the true cost of care (which I
could know when I buy car insurance) and (b) the amount that the insurance
company considers to be a fair price for every specific service. I had a
routine blood test done at a local medical facility and only after the fact
did I find out that it cost $700 but the insurance company paid only $200.
Hospital administrators would be flummoxed by questions such as how much do
you charge for a blood test, when they know they just bill the amount to
insurance. A consumer could probably get that information but its not easy
to obtain. The other issue I have is that doctors and hospitals bill
separately in my state. It would be as if the chief mechanic and the body
shop would send out two separate bills rather than one itemized list of
charges. The insurance is less a problem than the cost of care.. and to me,
when you cant see the prices of something, I would think any economist worth
his salt would object to that "market" arrangement.

Cheers!

"My concern personally is that before I purchase insurance I dont know (a) the true cost of care (which I could know when I buy car insurance)"

When you buy car insurance you know the maximum payout for the policy. You know the covered expenses, the cap, and the co-pay amounts. The same is true for health insurance -- there's a cap. In either case -- you have no idea what the money will be spent on, or if it will be spent at all.

I hope to get through life without ever benefiting from the claims my insurance company pays -- but I still know the rules and the caps.

What they haven't told you about Anthem in California and the rate is increases is why. It turns out that the healthy people are leaving while the sick people remain. So, of course, the overall cost ration is going up.

We have seen the same thing in places like NYC where insurance companies are forced to take all comers at a single price. That single price goes up and the healthy people leave, forcing more price increases.

Besides all that, are you really claiming Anthem is the only health insurer in California or that all of them have the price? Otherwise it is pretty hard to claim a monopoly.

You're an old coot, who relies on Medicare for all your ailments, and your Social Security check for your beer and peanuts. Apply Occam's razor to that and you'd have no health insurance, and no one to treat your cooties at the public's expense. Instead of making obnoxious comments on this blog, you could be picking up trash at your local park, instead of polluting the blogosphere. I'd slash your SS benefits to zero and make you hit the road, Jack. You can still work, if you can type away your belittling prattle. Get a job and contribute to Gross Domestic Product instead of being plain gross. Ahem and shame on you!





!

Who is this guy?

To All_Red_Bull. Anyone collecting Social Security has paid for it all their working life. In fact, if all that money had been put into a provate annuity, the recipient would be much better off.

Medicare is the same. I have paid the maximum since 1968. Are you suggesting you want to say "just kidding" and not provide the promised benefits? Nice. Do you ever think things through or just make it up as you go along.

It wrong to say that you have been paying IN. You've been paying alright, but it hasn't go "in" anywhere. It was immediately spent. The money that you are receiving is the hard earned money of the current generation.

It's sad that the money YOU earned was taking from you when you were younger, but it certainly doesn't give anyone the right to take the current generations income.

Excuse me if this sounds hostile in the least bit. I mean no offense whatsoever, and this is no attack on you. It's an attack on the Ponzi scheme known as social security and medicare.

ddanta: "The money that you are receiving is the hard earned money of the current generation."

Not sure what you mean by "the current generation". There are currently four generations of the Dewey family who are earning income and paying social security and medicare taxes. Please be assured that all of that income is "hard-earned".

ddanta: "but it certainly doesn't give anyone the right to take the current generations income"

Actually, current laws of the U.S. - passed by the elected representatives of U.S. citizens - gives the government the legal right to "take the current generations income", as you express it. Since it is unlikely such laws will be changed, the federal government will retain that legal right to take that income for many years to come.

Arguments which emphasize generational conflict are not very helpful, IMO.

Some replies merit no response; beyond stating this, yours is one.