This is part 4 in an article series addressing the current healthcare reform proposal by President Obama.
Yesterday, I explained why forcing medical clinics to upgrade technology before calculating a ROI is not going to reduce costs and is not even necessary if the payment system was not so complicated. Today I’m addressing why forcing everyone onto an insurance program will not increase efficiency or reduce costs and a government insurance program will only further distort the free market and drive up costs.
4. Not everyone is insured, increasing the cost to government programs like Medicaid
The reason that 50 million Americans are uninsured is because they cannot afford healthcare insurance at the current prices, which have been driven up by too much government intervention and not enough free market dynamics.
Obama’s solution is to create a government run health insurance provider for all uninsured Americans and mandate that ALL Americans must have a health insurance provider, and insurance companies CANNOT deny services to any customers.
This is the basic idea of socialized medicine. Everyone pays a similar amount and everyone gets access to the same service. This will either put all private insurance providers out of business or cause the government insurer to drastically ration healthcare services.
The fact remains that the average American cannot afford many of the medical advancements that are available today. No matter how we collect the money, from the rich or the middle-class, health care advancements cannot be handed out to everyone like popsicles.
Today, medical care rationing is a decision between the patient, family, the doctor and the insurance provider. Obama’s new plan takes the decision of medical care rationing out of the hands of families and puts the decisions into the hands of government agents.
Obama’s government insurance provider will be the only option for millions of Americans in which rationing decisions will be conducted. If they don’t ration medical treatments, then private insurance providers will never be able to compete and will be driven out of business as everyone switches to the government insurance provider.
The costs of the government insurance provider will cost the average tax payer much, much more in the long run than any private insurer would have cost them today – even if the insurance premium is initially lower. The increase in taxes collected to make up the difference will be 10x higher than paying a private insurer today.
Gabriel E. Vidal recently wrote an excellent article addressing healthcare reform, here is a quote further explaining this position:
“Obama's plan also includes a reform of our private health-insurance market. He would like, first, to make health insurance mandatory for all Americans, second, to offer an affordable public option, and third, to eliminate the ability of insurance companies to "cherry-pick" which services to cover and which to deny. These changes, he believes, will reduce cost shifting — the practice that providers use to subsidize charity, bad debt, and unprofitable government programs by charging more to insurance companies and private payers and patients — and will spread the risks of the insurance company to healthy individuals, thereby reducing the costs to everyone.
These insurance reforms ideas are flawed. They are based on the assumption that health insurance companies can charge premiums to a pool of policyholders, predict and pay for a large loss triggered by an event outside the control of the policyholder, and make a profit. But sickness combines risks that are uncontrollable with risks that are indeed controllable by the policyholder (eating, exercise, preventative habits, and adherence to treatment plans, for example) and the provider (selection of diagnostic tests, specialists and hospitals, for example). As a result, insurance companies are left with tools of rationing via higher premiums, deductibles, copayments and utilization controls placed on providers, which have a tendency to create nonrandom groups of policyholders and providers.
Health insurance companies are more instruments of income redistribution than risk managers, and they are left with only one option: to charge healthy individuals enough to subsidize sick individuals. Eventually, when the impact of the redistribution on individuals is high enough, many either opt out or are priced out of the market, creating the 50 million uninsured individuals.
Obama explicitly states that he wants to force the redistribution of income from healthy to unhealthy individuals but with the illogical belief that somehow this scheme will reduce the costs to everyone.
But we have seen that even if the size of the risk pool is extended to the whole population of the United States by mandating every American to have health insurance and hence fixing the size and selection of the risk pool to the whole population, this does not address the fundamental flaw of mixing controllable with uncontrollable risks.
Any sensible insurance reform should separate these risks and only cover uncontrollable risks, allow individual underwriting (the practice of insurance companies assessing each individual's pricing and eligibility) move away from community rating (the practice of offering the same price to large groups of individuals regardless of each individual's age, sex, health status, and risk level) so that healthy people pay lower premiums and sick people pay higher premiums, exactly the current model for life insurance. In other words, we should allow and encourage "cherry-picking," not ban it.
The logical tendency of Obama's insurance reforms, despite his explicit denial, will be an inexorable movement towards a single-payer system as his reforms will not control costs or utilization, and the only alternative left will be to enhance the control of the plan via explicit rationing, by a bureaucrat, of the care delivered.”
A Better Solution
Obamacare will result in higher costs of healthcare for everyone and more dependence on governments to manage the industry.
The real solution that congress should be proposing is to reduce the government involvement in the industry and encourage more private businesses to take their place and compete for the profits of the industry by creating lower costing alternatives.
A government insurance option increases the moral hazard created by Medicaid by letting people do whatever they want (drink, smoke, eating, sex, abortion, etc.) while socializing the medical reproductions. We need a system that rewards personal responsibility to health and that is what private health insurance gives us today.
I understand that too much money is going to the health insurance industry (about 20%), but this plan in not going to fix that. There are a lot of ideas that are better than this one.
Here is a video clip detailing some of the better solutions that have been proposed.
Last night Obama said that when someone gets sick they cannot be expected to pay for their healthcare services that could cost $10,000 because this is America. That is typical victim politics, sold to the public in exchange for slavery to the government. Victim politics is anti-capitalism.
Why should American's be encouraged to spend all their money on big screen TV's and new cars and then expect the neighbor to pay for there medical bills when they get sick? This has zero chance of increasing the wealth of America or lowering the cost of medical expences.
The real solution is to encourage people to STOP spending all their money and create an emergency savings account to pay for your own unexpected medical bills. Then, the government could get out of healthcare and let the free market compete for profits and drive down healthcare costs.
After hearing Obama's speak last night, it is clear to me that he doesn't just want healthcare reform he wants complete government run socialized healthcare. He deeply believes that government run healthcare will be the best way to ration and limit healthcare from the sick and elderly in an effort to reduce the cost of healthcare.
Yet, history proves that government run healthcare will cost more and reduce quality. It will be amazing if he can sell this one to the public.
Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 1
Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 2
Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 3
Obama’s Healthcare Reform Will Be a Colossal Failure, Causing Prices to Increase Even Faster: Part 4