Cause and Effect

We already know that Barack Obama is an ignoramus when it comes to insurance. Beyond that, he believes that demagogic attacks on insurers are the way to drum up support for government medicine. It happened again today:

Obama also offered his toughest criticism yet of a health insurance industry that he said placed profits ahead of patients. “Every year, they raise premiums higher and higher,” Obama said “They will keep doing this for as long as they can get away with it.”

Let’s parse that out. What might cause insurers to raise premiums? The obvious candidate is the rising cost of health care. Every time a state adopts a mandate–some states have hundreds–premiums necessarily go up. Every time the federal government chisels on Medicare payments, doctors and hospitals shift costs to non-Medicare patients, that is to say, the ones covered by the carriers whom Obama wants to demonize. It would be interesting to know what percentage of current premium increases can be traced directly to government actions. But that isn’t a question Barack Obama wants to ask.
Obama says insurers will raise premiums “as long as they can get away with it.” You could say the same about a lot of people, of course. We lawyers have tended to raise our rates as long as we could “get away with it.” Obama’s labor union supporters negotiate to raise their wages “as long as they can get away with it.” The newspapers that made Obama a national figure raise their advertising rates “as long as they can get away with it.” Any manufacturer will raise the price of its goods “as long as they can get away with it.” To do otherwise could expose management to legal liability to shareholders. What stops all of us from raising our prices indefinitely? Why, at some point, can’t we “get away with it?”
The answer is competition. Any company will–and should–raise the prices of its goods or services until they reach the point where they are constrained by competition. Our government has followed a perverse policy with regard to health care, by limiting the extent to which health insurers can compete against each other and thereby constrain each others’ prices. The obvious solution, if we want to rein in health insurance costs, is to 1) broaden competition in the industry to the maximum amount possible, and 2) repeal all mandates that require insurance companies to charge for coverages that many people don’t want.
If the Democrats took those two basic steps, they would significantly reduce the cost of health care. But they wouldn’t dream of doing anything so effective to reduce costs, because they want health care costs to remain high. They need high costs to justify government medicine, which means, at its core, a radical restructuring of the relationship between the citizen and the state.


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