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Looking Back — And Forward
May 15, 2013 | 19 comments
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Lies About Libya
May 14, 2013 | 80 comments
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Bouncing Ball Politics
May 8, 2013 | 16 comments
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Words That Replace Thought
May 7, 2013 | 57 comments
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Is Thinking Obsolete?
May 1, 2013 | 36 comments
The Public Policy
Risky Business
Can the insurance market survive the biggest risk factor of all — interference from politicians?
Insurance is all about risk. Yet neither insurance companies nor their policy-holders can do anything about one of the biggest risks — namely, interference by politicians, to turn insurance into something other than a device to deal with risk.
By passing laws to force insurance companies to cover things that have nothing to do with risk, politicians force up the cost of insurance.
Annual checkups, for example, are known in advance to take place once a year. Foreseeable events are not a risk. Annual checkups are no cheaper when they are covered by an insurance policy. On the contrary, they are one of many things that are more expensive when they are covered by an insurance policy.
All the paperwork, record-keeping and other things that go with having any medical procedure covered by insurance have to be paid for, in addition to the cost of the medical procedure itself.
If automobile insurance covered the cost of oil changes or the purchase of gasoline, then both oil changes and gasoline would have to cost more, to cover the additional bureaucratic work involved.
In the case of health insurance, however, politicians love to mandate things that insurance must cover, including in some states treatment for baldness, contraceptives and whatever else politicians can think of. Playing Santa Claus costs a politician nothing, but it can cost the policy-holder a bundle — all of which the politician will blame on the “greed” of the insurance company.
Insurance companies are regulated by both states and the federal government. This means that, instead of there being one vast nationwide market, where innumerable insurance companies compete with each other from coast to coast, there are 50 fragmented markets with different rules. That adds to the costs and reduces the competition in a given state.
When there are innumerable insurance companies, it is by no means clear that political regulation of them will produce better results than the regulation provided by competition in the market. In a competitive market, insurance companies would cover only those things that their policy-holders are willing to pay to have covered. Policy-holders would have no reason to pay to have insurance cover things that would be cheaper if paid for directly — or not paid for at all, in the case of things that are not a real concern to many people, such as baldness cures.
One of the factors in the number of the “uninsured,” for whom politicians are willing to turn the whole medical care system upside down, is the high cost of insurance that covers far more things than most people would be willing to pay for, if it was up to them. The uninsured who use hospital emergency rooms and don’t pay are a problem only because politicians passed laws forcing hospitals to let themselves be taken advantage of in this way.
Too many political “solutions” are solutions to problems created by previous political “solutions” — and will be followed by new problems created by their current “solutions.”
There is no free lunch. In the case of health insurance, there is not even an inexpensive lunch.
Health insurance would be a lot less expensive if it covered only the kinds of risks that can involve heavy costs, such as a major operation or a crippling disability. While such things can be individually very expensive, they don’t happen to everybody, and insurance is one way to spread the risks, so that the protection of a given individual is not prohibitively expensive.
The problem of “pre-existing conditions” is a problem largely because of the way that politicians have written the laws — more specifically, by giving a tax break to employer-provided health insurance. If individuals bought their own health insurance, with the same tax advantages, the fact that an illness occurred after they changed employers would not make it a “pre-existing condition.”
There is no inherent reason for employers to be involved, in the first place. The fact that some guy manufactures furniture or plumbing fixtures in no way qualifies him to understand insurance for his employees. Including him in the loop adds another unnecessary layer of bureaucratic costs.
Political risks are the biggest risks.
COPYRIGHT 2012 CREATORS.COM
About the Author
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
Pecos Pete| 8.28.12 @ 7:56AM
The unintended consequences of good intentions override the good intentions. Not to mention graft in the passing of legislation/regulations.
JD| 8.28.12 @ 8:24PM
Good intentions have no value. There is nothing to override.
Von Mises Jr| 8.28.12 @ 8:36AM
Company sponsored health care came into being in the United States when FDR imposed wage and price controls. Companies then used benefits to attract and reward talent.
Our Founders knew that government was a necessary but dangerous entity. This is why they kept speaking about liberty versus security. If you turn over your decisions, you turn over your decisions and empower others. It always leads to tyranny.
The wage and price controls under FDR also resulted in WPA digging and filling in holes that created unpaid for jobs that created no wealth. They also burned crops and paid farmers NOT to grow crops to try to force up prices as people waited in soup lines.
Read "Great Myths of the Great Depression available at http://feestore.myshopify.com/ for $2, and you will see that the Obama, Reid, Pelosi, Bernanke, Geithner policies will repeat a Second Great Depression if they get four more years.
Make sure you explain this to the Stupid voters leaning toward Obama.
TLP| 8.28.12 @ 9:15AM
I pay cash for my stuff.
I took my Boy for X-RAYS this Spring, on his Sprained Ankle. Because I paid Cash it was $15. If I had used Insurance? Each Picture would have been $60 and they took 6 Pictures.
I paid $15 for the whole thing.
As far as Employee Health Insurance?
Stupidest thing Business ever did. It would be Astronomically Cheaper to just give your Employees more money in their paycheck and let them get their own.
Of course we still need to Open Up this Market to Competition like every other Form of Insurance and if people want to form Insurance Co-Ops on their own to get the price down? They can do that as well.
This is all Pie in the Sky, anyway.
The Muslim and his fellow Marxists in the Democrat Party, have another Cornerstone in their Quest for One Nation under Marx, and God can GO TO HELL Worker's Paradise, to go along with the Progressive Income Tax, the Inheritance Tax, the Control over most of the Country's Land (as well as our Homes through Fannie and Freddie, and our Children's Education through their Lockstep Teachers Unions) and now the Forced Incarceration of disgruntled Returning Military Personnel WITHOUT A WARRANT in to Psychiatric Fascilities, Incommunicado and with NO ATTORNEY.
The only Insurance against that, is our 2nd Amendment and they're working on that one, as we speak.
When they come for our Guns?
Like Dirty Harry once said: They won't believe what's happening to them, even while it's happening.
SIC SEMPER TYRANNUS!
Latin is Fun.
Alan Obama Fan Brooks | 8.28.12 @ 9:56AM
Pure grain alcohol in unfluoridated water is fun, too.
TLP| 8.28.12 @ 10:30AM
You have obviously wandered on to the wrong site.
The Homemade Anal Douche Recipe Contest is not on this site.
Perhaps Purp, or RCV, or the Jackass From London can help you get where you're supposed to be?
Alan Obama Fan Brooks | 8.28.12 @ 3:34PM
POE (Purity Of Essence):
drink un-fluoridated water while sitting on the Grassy Knoll reading the Turner Diaries.
And I don't mean Kathleen Turner!
Von Mises Jr| 8.28.12 @ 10:06AM
TLP, people do not really understand how destructive ObamaCare is to their health. In Jersey, we have well established doctors setting up free clinics. This is because after the government cronies steal much of the money from Medicaid, the reimbursements plus the cost of the basic office results in about $13 per one-hundred. And for accepting Medicaid patients, the doctors are liable for malpractice lawsuits. At $25K average settlement, the first 1,923 office visits are the reserves just to cover the one average lawsuit per career.
So they are combining with Churches, VFW and medical companies to help the poor for FREE. If they can make a $15 donation toward the cost, it is appreciated, but not required.
People don't realize ObamaCare makes Medicare reimbursements similar to Medicaid, so doctors won't accept that either. You will have a shortage of doctors by design.
And it will be against the law for them to accept your $15 for treatment unless you use the limited free clinics that were intended for the poor.
Fine mess he got us into this time, Ollie!
TLP| 8.28.12 @ 10:43AM
You are right, on every account.
But, what's even worse, is the fact that, by Mandating what Insurance must cover, while at the same time, Forbidding Insurance Companies from Raising their Prices, they will force these Private Companies, out of Existence, thus obtaining the Liberal Brass Ring that is - SINGLE PAYER.
Medicare is Unsustainable. He has completely DEFUNDED Social Security, by Eliminating FICA, under the guise of Cutting Taxes. (If you wanted to Cut Taxes, in this Country? Why would you pick FICA to cut, out of all the other Taxes, out there? Isn't that interesting?)
There's not gonna be any Doc Fixes, and the Good Doctors - The Specialists - will go elsewhere, where they can get Paid, and the rest of us will be seeing Doctors with names we can't pronounce, and the Cream of the Crop of Affirmative Action Physicians, who Failed all their Tests, but we're promoted via a Disparate Impact Ruling, by a Democrat Appointed Judge.
Have a nice day.
Von Mises Jr| 8.28.12 @ 10:53AM
If one understands that the Medicare raid screwed seniors to redistribute their premiums to low-life liberal voters, then the youth must understand that the defunding and refusal to fix Social Security is a rip off that makes the $716B child's play.
At $50K income and 2.9% Medicare tax, you pay in $43,500 over 30 years. Obama just stole that from grandma.
Assuming $50K at 12.4% Social Security tax for 30 years means that if kids can get a job paying $50K, they will pay $186K into Social Security. But it goes bankrupt in 25 years, so it won't be there.
If you are young and ambitious, and you vote for Obama; you got to be the dumbest bastard alive.
Von Mises Jr| 8.28.12 @ 10:59AM
Here is an article from Heritage posted today about Medicare $716B heist.
http://blog.heritage.org/2012/.....rning+Bell
CJW| 8.28.12 @ 6:10PM
Von
The wage controls also led labor unions to bargain for benefits such as health insurance that were not classified as wages by the feds. Thus health insurance became a staple in the labor contracts of the unions, and everyone including non union employers, had to offer the health insurance, as you said.
Thus everyone has come to expect that someone else, the employer or government, must pay for your health insurance. Another example of the government passing a law, wage controls, and resulting in unintended and unimagined consequences.
Everyone pays for their own car and home insurance,and shops for the best prices. I found a $500 difference in the identical auto policies, and found a $2,500 difference in our malpractice insurance.
Imagine if unions were able to continue bargaining for benefits and got car and home insurance as a benefit.
Von Mises Jr| 8.29.12 @ 6:10AM
CJW, Scott Walker saved millions by getting rid of a no-bid corrupt insurance plan in Wisconsin and simply shopping it on the market.
The government creates monopolies that are then exploited by unions, crony capitalist and crooks in and outside government.
THKrupp| 8.28.12 @ 8:49AM
Mr Sowell these are the same thoughts I have often had but you have said them much better.
fmm| 8.28.12 @ 9:55AM
I have always found it fascinating that the low level industry worker who rails against the company who pays him as being unnecessary does not see that the government is much worse. The government not only rules him but takes away his money instead of paying him for his efforts. Public overhead is many times worse than private overhead.
Harry the Horrible| 8.28.12 @ 12:13PM
No, insurance can't survive government interference. But that was the intention all along...
JD| 8.28.12 @ 8:26PM
Smart liberals know exactly what they're undermining, and do it for the purpose of justifying more liberalism. But many liberals are fools who truly buy into the notion that their brilliant ideas keep being sabotaged by evil businessmen.
Controse| 8.28.12 @ 1:19PM
It almost makes you want to cry. The solution to our health care dilemma is so simple. Get politics out of it. With a nod to the first amendment let's get an amendment that states "Congress shall make no law that directly or indirectly influences the delivery of health care."
pomdter| 8.28.12 @ 1:50PM
I'm surprised at the number of real conservatives that call for standards across all 50 states. Yes, it may be cheaper than many different laws, but without the competition across the states, how are we going to find the laws that work the best? Once we do, the consistency will fall into place as all states mimic the best rules.
Houdini| 8.28.12 @ 5:45PM
Opening the insurance markets across state lines without ridulous mandates would bring down the cost PDQ and if you throw in medical savings accounts that are tax deductible to all then consumers have an incentive to get the best deal not only on insurance, but on the care itself. Primary care doctors would no longer have to have large staffs just to process reimbursements, just a credit card machine and a cash register. We would all be responsible for check ups and the like...no more running to the doctor for the sniffles because someone else is paying for it. While you were building up your medical savings account a major medical policy might be necessary, but as your account grows, your deductible could be raised and if you were reasonably healthy, your premiums would either go down, or up much more slowly as you aged. Stripped of the overhead a primary care doc could probably charge $50 or less for an office visit. When folks have skin in the game they are less likely to spend THEIR money foolishly. Now if they would only accept that single malt scotch was medically necessary........
cicero| 8.28.12 @ 9:56PM
The problem with healthcare is mostly caused by the manipulation of the insurance industry by the government, and the manipulation of government by the insurance industry. The governments of the various states keep adding mandates into the standard policies because various providers lobby to have their specialties included. If the consuming public were allowed to buy what they were willing to pay for, things would change. I have negotiated union contracts where the bargaining unit paid a portion of their own healthcare premiums. When given a menue of policy coverages, they invariabley chose that policy coverage that cost them the least. It can be done.
The insurance ind has propagandised for years that medical mal insurance is so outrageously high because of runaway law suits. This has been shown to be malarkey in every government study - that is why they don't publish the results of the studies. In Michigan, we have had med mal tort reform for over 20 years, and our docs still pay the 2d highest permiums in the country.