Politicians Are Partly Responsible for Higher Medical Costs and They Now Want More Control?
"What adds to health care costs are politicians at both state and federal levels who mandate additional benefits to be paid for by insurance companies, thereby driving up the cost of insurance. If medical insurance simply covered risks-- which is what insurance is all about-- that would be far less expensive than covering completely predictable things like annual checkups. Far more people could afford medical insurance, thereby reducing the ranks of the uninsured.
But all the political incentives are for politicians to create mandates forcing insurance companies to cover an ever increasing range of treatments, and thereby forcing those who buy insurance to pay ever higher premiums to cover the costs of these mandates. That way, politicians can play Santa Claus and make insurance companies play Scrooge. It is great political theater.
Politicians who are pushing for a government-controlled medical care system say that it will "keep insurance companies honest." The very idea of politicians keeping other people honest ought to tell us what a farce this is. But if we keep buying it, they will keep selling it."
~Thomas Sowell
20 Comments:
Where can one obtain the much needed "Sowell 2012" bumper sticker? Thomas Sowell and Walter E. Williams ticket! That would scare the progressives all the way back to 1899!
Mandates are a problem. They arise from the need to define minimum benefits so that if you buy insurance, you are actually getting what you think you paid for. Unfortunately, specialty groups, practices, and rare disease and illness groups get ahold of the process and lobby for their profession or illness to be included. These forces work best at the state level, going undetected.
But, I would argue it is different at the federal level, as employers and business have better control of the legislative process.
So, while I agree with part of Sowell, I would argue that minumum benefits standards at a federal level -- while still letting states set benefit levels for state regulated insurance -- would actually work if we had a competing system of federal chartered insurance companies which could sell across state lines. Not something the Blues would like, nor some of the other large regional carriers. And, then you would have pressure going in the other direction at the state level to curtail mandates.
This would require some zealots to abandon idio(t)logy and support a federal charter and alternative federal insurance regulator for federally chartered carriers, thereby increasing competition. But, because it involves federal regulation, this won't happen.
the current plan is much more sinister than mere theater. once the government can set private insurer's price points in addition to mandating coverage requirements, they have both the hammer and anvil to drive insurers out of business.
then, they will crow "capitalism has failed" and force single payer on the public.
then we'll really learn what denials of coverage are like.
Read about the Indiana HSA (health savings account) plan for state govt workers, "Indiana Saves $8m, 35% on Health Costs with HSAs" in Monday's Carpe Diem. While this plan seems to attract mostly healthy workers, it saved 35%, nothing to sneeze at.
About 85% of people have "free" coverage - insurance or govt programs. They have no incentive to care what things cost, or shop for price.
Govt is the direct cause of about 40% of health costs, maybe more. Defensive medicine, because of predatory lawsuits, raises costs 10%, probably over half could be prevented.
Massive fraud in govt welfare programs boost costs 3-7%. State mandates boost another 10%. State line limits cost a few percent. Govt underpayment in Medicare and Medicaid by an average of 30% costs everybody else 10% more to cover them.
The Safeway grocery company has incentives to maintain health which has led to zero increase in coverage costs for 4 years now.
Democrat bills do virtually nothing to address any of these cost opportunities. In fact they make them all worse. Govt causes financial disasters, then uses the crisis to do yet more, and make things even worse.
Bulldoze DC.
At 3/04/2010 10:05 AM,
Anonymous said...
“Mandates are a problem. They arise from the need to define minimum benefits so that if you buy insurance, you are actually getting what you think you paid for.”
That statement is merely an opinion. That is not an empirical fact. In other words the statement is based on verbal virtuosity.
Mandates occur due to lobbying efforts of narrow groups of consumers afflicted with maladies, activist groups, health-care business segments that want coverage expanded to their industry e.g. acupuncture, and sometimes by legislatures who base their efforts on the hollow position/argument of “..the right thing to do”.
Mandates are by no means based on “actually getting what you think you paid for.”
WEH-
actually, if you think about it, all insurance is based on not getting what you pay for. it has to be.
even if we assume non profit insurers, you are going to have administration and management costs.
that means that if we all pay fair value for our policies (FV = size of loss X likelihood of loss) there is not enough money left.
insurance is never a "good bet" from an expected return standpoint.
this does not mean it is irrational. avoidance of complete financial ruin is valuable, even if ti is an unlikely outcome. what we are really paying for is peace of mind in that regard.
however, this inevitably leaves most of an insured population paying more than they get back because of the few folks who got cancer or needed heart surgery.
that's how it works - most purchasers of insurance will always be upset, but it's because their number didn't come up. they guy who got $250k heart surgery feels great about their outlay.
this tend to leave the many angry at the few, making insurance, especially health insurance, an effective populist issue.
there will always be more people angry because their rates went up despite having made no claims than people happy that they just got the extremely expensive care that drove the rates up...
Morganovich:
Agree with you.
As Sowell points out, you insure the catastrophic event, which is where the insurance mechanism works best, then yes some people never experience the catastrophic event and hence do not “collect”. It boils down to frequency and severity. Insurance works best in cases of low frequency but high severity. Hence with low frequency, some surely never suffer a loss from a particular loss exposure. Other do however experience the low frequency claim and suffer a high severity loss (catastrophe).
However, “collecting a return of premium” does creep into the insurance world by some consumers of insurance. It is the moral hazard of insurance caused by insurance existing in the first place. Some consumers of insurance believe that if they pay “x” per year then they must collect “x” as benefits. Other moral hazards are engaging in a risk that you otherwise would not engage in if no insurance existed.
When you insure everyday regularly reoccurring events, then you are insuring high frequency but low severity events. It’s the old story of insuring your weekly grocery bill. Insuring your grocery bill carries a premium roughly equal to your weekly grocery bill. Hence in health care, insuring high frequency but low severity events such as the flu is merely paying a premium roughly equal to the doctor charge for treating the flu plus administration cost of the claim. High frequency but low severity events are basically non-insurance events.
"
risks-- which is what insurance is all about-- that would be far less expensive than covering completely predictable things
"
Thus consumer has to pay for premium which pays for predictable risk plus predictable annual checkup. The premium collector takes a bit out of the pot as the money passes from consumer to supplier. The government enjoys seeing the pot pinched knowing that the pinch markup is taxable. More excuse to tax us all out of business thus reducing us to desperate slaves, desperadoes. And the beat goes on.
Even if they government weren't partly responsible, the clear evidence is government can not make any large program work.
So they not only shouldn't be first choice to solve the problem, the part they do manage should be taken away from them over time.
Sowell seems to think that business can do no wrong. He wants an entity not tied to this nation to be able to influence the people within it. Either he's found a LOT of honest businesses, or he's just slagging on government for the sake of slagging on government.
He thinks that said industry will magically become honest and not attempt to do what SD & DE did w/ credit cards. I'd like to see him go against an equally dishonest business as well as the government.
Tom:
The problem with that cost-cutting issue is that you also cut quality of care. Doubly so if you go to a narcostate or some Third World facility because your HSA makes it the more attractive option.
Just cut the dirty pool out of healthcare, not add more to it.
"He wants an entity not tied to this nation to be able to influence the people within it. Either he's found a LOT of honest businesses, or he's just slagging on government for the sake of slagging on government"...
ROFLMAO!
As usual, sethstorm ignoring the realities: Medicare’s Low Administrative Costs Cost You $60 Billion a Year
Consider how Rep. Paul Ryan PWND Obama at the health care song & dance back on Feb. 25...
Medicare’s Low Administrative Costs Cost You $60 Billion a Year
Well, if you don't have capable enforcement of law, go figure what happens. Is it more wrong to allow business-friendly fraud such as with illegal immigration or H1/L1/etc. abuse?
I don't know what or whom you were talking about in the other paragraph. Skipped it.
What makes politicians think they can run health care facilities?
They are nuts.
What makes politicians think they can run health care facilities?
What makes far-removed administrators of insurance agencies and health care facilities any more capable? Just because they "aren't government" doesn't give them an automatic pass.
There's nothing quite like having control over that which you're in competition with. --There's just something so sinister about that.
Here in New York, our health insurance plans have roughly $1,000.00 a year, per family policy that goes to pay for that "free" state insurance. This is so that moms can get on TV advertisements and boast about their "Child Health Plus" plan that New York steals the money from those of us who pay for our children's insurance.
Well don't you know that it is just not fair of us to pay for our children, without paying for theirs too? --Who wrote that law?
What ever happened to, "Those who don't work, don't eat!"
Oh, but that is so cruel of me. It is cruel of me to want to pay my bills and not end up on forced government health care that is not only unconstitutional but is in no way, as good as what we have. So my family should have less. Basically, we are no longer allowed to have more than the next family. We are not allowed to have the pursuit of happiness, anymore. We are no longer allowed to do as well as we can do, for our family, if the next family cannot do as well as we can.
Whatever was I thinking?
Well, there ya have it!
Debra J.M. Smith
of
www.InformingChristians.com
"Is it more wrong to allow business-friendly fraud such as with illegal immigration or H1/L1/etc. abuse?"...
Where is this supposed fraud and abuse sethstorm or is this more of that "Well, if you don't have capable enforcement of law, go figure what happens" you mentioned?
Just asking is all...
Where is this supposed fraud and abuse sethstorm or is this more of that "Well, if you don't have capable enforcement of law, go figure what happens" you mentioned?
Documented here in 2000:
www.gao.gov/products/HEHS-00-157
PDF:
www.gao.gov/cgi-bin/getrpt?GAO/HEHS-00-157
Documented here in 2006:
www.gao.gov/products/GAO-06-720
PDF:
www.gao.gov/new.items/d06720.pdf
Unless the situation has changed for the better, I'd expect to see the same results.
Consider a few government-run businesses (entities that could easily be privatized). How does the government do with the businesses that it currently runs?
postal service - consistently loses money while the price of stamps has gone up much faster than inflation
social security - expensive (check your paystub) but still underfunded, if you're planning to live on social security alone you are planning to spend the final decades of your life in poverty
public schools - are you kidding? on a per-student basis public schools cost more than most private schools while they provide inferior education
Anonymous:
Even federal mandates are a problem - while possibly less problematic than 50 states doing so, they still buy into the idea that the federal government has a role in determining what two contracting parties want to agree on. Abolish mandates entirely and let the market determine what individuals actually want and what companies can responsibly underwrite without the nanny-state's intervention.
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