(I thought this comment from Mr. Dukes to an earlier post deserved its own post)
The idea that the government is putting health insurers out of business is a popular straw man in this debate, but like all straw men, is void of substance.
There are all sorts of services we expect our government to provide at the expense of privatization. I don’t recall anyone defending the private security firms when the TSA was formed to conduct airport screenings. And in this case, nobody is preventing health insurers from offering plans.
In addition, anyone who has this notion that health insurance is a competitive marketplace is mistaken. For the basic laws of economics to apply to a market, there are certain criteria that must be met, the cornerstone of which fails right out of the gate.
Buyers and sellers must be free to enter and exit the market place with little or no barriers to entry and exit. Clearly this is not the case with private health insurance. The inability for consumers to easily switch providers is a deal breaker here. If a person has a current health problem, they cannot switch to another provider with the same coverage because the other provider will not offer the same benefits, or they will raise price barriers that prevent any sort of market competition. In addition, we all have very little input to the purchase decisions, as they are dictated by employers in most cases. So there is no market for insurance. At least not one to which you can apply micro-economic analysis.
In addition, health insurance is insulated from being penalized for poor performance. If a bank screws up someones checking account, they move to another bank, taking their deposits and base for the bank to lend money with them. This creates a strong incentive for the bank to act in the consumer’s interest. When a health insurer does not perform, in many cases the consumer dies. Virtually no penalty for poor performance while a huge incentive to actually work against the interests of the consumer. In essence, the way the “market” for insurance works, the incentive is directed toward innovation on abdicating the duties under the policy, not innovating to create a more efficient system. Actually, the private insurers are incented to create the most inefficient system available by denying coverage, payment, and benefits to policy holders, hoping enough of them die before they can get through the 17 levels of 1-800 hell that accompanies their new found ailments.
I am convinced that anyone who thinks the health insurance industry “works” has never had to actually USE their insurance for much more than office visits.
A member of my family (mother) was diagnosed with a blood/bone cancer 18 months ago. A transplant and treatment has cost over $400,000 since then. My father was a member of a strong labor union for his entire career and because of that, my parents are better off than most. Even still, it is a Herculean effort to actually get paid for those expenses.
And I never fail to consider the person diagnosed with this sort of disease who has no health care coverage. In most of those cases the option is to check in to hospice and die.
We evaluate the public good versus liberty all the time. It is why we are screened at airports and have our phones tapped on international calls. It is why we don’t privatize the fire department. It is why we have Social Security and Medicare. This is another one of those evaluations. There are many, many ways an innovator in insurance can make a living. So health insurance isn’t one of them anymore. Seems like a trivial price to pay for the betterment of tens or hundreds of millions of lives.
The key questions are the extent to which the market for insurance deviates from the competitive model, the extent to which this deviation is caused by a wide array of government interventions, and the extent to which the market for insurance would be deviate from competitive in the absence of those interventions.
The answers, as best I can tell, are significant, significant, and modest.
More broadly, will even more federal govt activity– in tandem with interest group activity– increase or decrease the problems we face in this arena?
Your first sentence is very interesting:
The idea that the government is putting health insurers out of business is a popular straw man in this debate, but like all straw men, is void of substance.
What I find most interesting about it is that you make it your lead, and then you spend the entire rest of your post….not backing it up.
Instead, you seem to verify it’s validity with a very feeble attempt to justify the government’s role in doing just that.
I think my whole post backed it up if you go deeper than cursory thought.
Health care reform needs to put the consumer front and center, and since it is clear that health insurers are failing in that regard, they are putting themselves out of business.
There is no government mandate for a single payer system. That is the straw man. A public option INCREASES competition and will drive the health insurers to either close shop or innovate in a way that the market wants.
Right now, there is no market, no competition, and no innovation.
As for the feebleness of my arguments, that is up for each person to decide, but I would argue they have more substance than your contention that somehow the Constitution prevents the government from offering a health plan. Seriously, did you not consider Medicare or VA benefits? Or the Commerce clause? Or maybe I missed the reserved right for corporations to be protected in the marketplace? The Founding Fathers expressly considered the public conversion of property in the 5th Amendment, why would they not ascribe the same principles to a product?
Using your Constitutional argument from the previous thread, if I created a water treatment facility, then the government should stop providing clean water because it will kill the public market for it. Absurdity.
Health insurance used to be very simple. It was merely premiums based on pooled risk. The bigger the pool, the less your premiums were. Insurance of any type is by nature very simple, it got complicated when the feds and (no offense Doug) the lawyers stepped in about 20 years ago. I recently switched health insurance carriers, and unless you are an attorney, or an insurance agent that actively sells health policies, you’ll have a pretty hard time comprehending the similarities/differences in coverage etc……And wait until you begin the HIPPA/COBRA….
I’ll grant you, it’s a mess, but more govt involvement will only bring more of the same.