Wednesday, August 12, 2009

Morons Amaze Me

Ask people their opinions on tax cuts, and many of them will give you the free market rant that letting me spend my money will help the economy.
Ask people their opinions with respect to healthcare reforms, and many of these same people suddenly forget about market dynamics:

Since his days on the campaign trail, Obama has promised the public that those who like their health insurance plans won't have to give them up, but he's stopped short of saying at what cost.

"I think that's the fear," said Diana Owen, an associate professor of political science and the director of American studies at Georgetown University. "Even though they are going to keep the plan, the plan is going to be at a much greater cost. And he's not been able to really allay that fear."

The themes coming up at town hall meetings across the country are broadly the same as doubts expressed during the campaign. Critics are voicing fears about socialism and the dismantling of the government they are used to. And those who have sufficient health care coverage worry they'll have to foot the bill for reform, echoing concerns heard during the presidential campaign that Obama would "spread the wealth around."

Utter rubbish, as even a moment's thought will evidence.
Right now, healthcare costs, particularly health insurance premiums, are rocketing skyward with no ceiling in sight. There are plenty of reasons for this (not least of which is too many doctors are underpaid by HMOs and are forced to identify profit centers in treating patients and requiring extraneous tests) and that could be the subject of a book.
Among the myriad reasons are two key elements to lowering costs: insuring a larger pool of healthier patients, and free market competition.
The larger pool of uninsured but healthy people can be found in twenty- and even thirty-somethings who delay picking up health insurance because they have not worked through that they are not immortal yet. By including them in the overall pool of insured, this will lower the relative risk an insurer takes in issuing policies to a particular person: that insurer is not inclined to make rapacious profits off the backs of middle-class families. In addition, many of the young who will be insuring under reform will already have banked a fair amount of equity in their policies that will generate income to offset the higher costs they will incur later.
Government insisting on mandatory participation in health insurance will do that.
Number two, free market competition.
Why is it that Wal-Mart's presence in a given market actually drives prices down?
Simple. Because it can order in such large volumes, this forces manufacturers to cut prices to a bare minimum profit. Since the law requires that, if I offer price X to Wal-Mart, I have to offer price X to you, this dynamic naturally brings down the price of the product.
Now let's look at government healthcare. Medicare has already provided a small obstacle to willy-nilly price inflation on the part of medical companies, big pharma and insurers, because it can negotiate on behalf of the millions of its insured, with the guarantee of government's backing on any deals made.
But it's not been enough. A larger pool of healthier individuals is needed and necessary in order to truly harness the increases of the future. Government plans provide that pool with mandatory insurance, much of which will go to those healthy people not currently insured.
Thus creating a single entity with the power to negotiate price declines, just like Wal-Mart does.