Montag, August 24, 2009

Misleading or Deliberate Confusion?

President Obama and his administration have spent a lot of time talking about needed competition in the health care industry.

But they are either being deliberately misleading or are being deliberately confusing.

Read this.

What struck me here is that there is the deliberate use of the word competition between private offerings and the public sector in terms of health care offerings. They make it sound like there is none right now.

Wrong. This already exists: Medicaid does exactly that. Medicaid, after all, is the means-tested program of the US government to supply health care to around 40% of the US population whose income and other resources are deemed inadequate to finance a set level of health care

The problem is that Medicaid is unattractive and, because it is means-tested, has a large number of insured who are in there, to a certain degree, because they have serious illnesses that other insurance providers, as a result, don't have to carry.

What the Obama administration really means when it speaks of competition is that government-run health insurance competes with privately-run health insurance head-on for the customers of the privately-run health insurance.

Let's take a look at what President Obama says:

The source of a lot of these fears about government-run health care is confusion over what's called the public option. This is one idea among many to provide more competition and choice, especially in the many places around the country where just one insurer thoroughly dominates the marketplace.

What does this mean? It means that what the Obama administration euphemistically calls "public option" (aka: government-based insurance) is supposed to be that which provides "more competition and choice" within the universe of insurance options. And especially in those states where there are limited options.

But why are these options limited?

Because insurance can't be sold across state lines. Hence you have small states which literally can't sustain competition because their population base is too small ending up with expensive insurance because it comes from a single supplier (aka monopoly).

Why can't insurance be sold across state lines?

Well, it all has to do with a failed understanding of why does insurance cost the way it does.

When you buy insurance, you buy coverage against illness. The insurance company basically places the bet that on average, people will be paying in more than they cost in terms of insurance outlays. That is the entire insurance industry in a nutshell. It's their business plan. Hence: the more people paying in, the easier it gets to calculate this difference, since each individual case where the sum of the outlays are vastly more than the sum of the insurance premiums, aka outliers, becomes, on the margin, less and less important. Small markets mean that the outliers are more important, since these can easily eat up the profits that the insurance company earns on a dozen others whose outlays are smaller.

What is the reason, then, why insurance can't be sold across state lines?

The rationale for this is that states with lower costs (where health care costs are lower) would then end up subsidizing the insurance costs of states with higher insurance costs. Can't have that, since it would mean that if I live in New York with very high insurance costs, I might buy insurance from, say, Vermont, where the insurance costs are much, much lower due to the lower cost of living. Or some other nonsense.

I call it nonsense because it is, and it is a nonsense of the insurance companies and the nonsense of state insurance regulators who swallow that story. It's apparently "not fair" to increase the costs for Vermonters when the company that supplies the insurance gets a bunch of New York customers. Hence: it's not allowed.

Utter stupidity. If that was the concern, then insurance regulators (as they already do) would simply tell those in New York who are looking for insurance in Vermont to suck it up and have to pay insurance where they live, rather than where the insurance company is located: in other words, the US market for health insurance is fragmented, which makes economies of scale impossible, driving up ... insurance costs. Since the insurance companies' business model is based on insurance cost and premium differentials, they're happy with this.

Still stupidity. The reason that high cost areas are high cost is not because of the cost of living, but because ... insurance regulators require higher levels of service in high-cost areas. Mandated services like acupuncture and hair pieces. The problem with insurance mandates is that it takes away choice and competition, since if you don't want to pay for them, you have no choice.

So, if the real interest were greater competition, then all we need to do is allow national insurance companies to compete nationally (which also reduces costs, since duplicate management and administration isn't needed) and give consumers more choice.

But that's what the Obama administration wants. More competition...

But that's not what the Obama administration wants. Instead, they are taking the most obtuse and absurd circuitous route possible, enabling nation-wide competition via their government-run insurance scheme.

But Medicaid already exists. Hence the new insurance scheme starts where Medicare stops, competing directly against the private insurance companies. As a business model, it's one that will be able to crush the competition, since it can spread risk amongst a very large pool, rather than the smaller pools of 50 individual states.

Of course, that also means that as the Obama administration's national insurance goes nation-wide, it can use its position to crush the competition one state after another, based on the principle of divide and conquer: fifty individual markets cannot compete against a single supplier who can use both government backing and its larger risk pool to destroy the competition one state after another. Won't happen in a day, won't happen in a year: but in 10 years, if the Obama administration has its way (and subsidizes the insurance to the tune of $1 tr during this time period), there will be no other insurance providers.

In other words, the Obama administration wants to set up a monopoly that, when it reaches absolute dominance, means less choice and above all: less control over costs. After all, if there is no competition, then there is no need to conserve costs: if anything, those more capable of paying will be dunned for those less capable.

Each according to their needs, each according to their ability.

Now where have we heard that one before?

But what is the real reason for this attempted takeover? Understand where the Obama administration is coming from, that lovely city of Chicago, home of institutionalized corruption.

That is the future of the US insurance industry. And don't believe that it won't happen if the Obama administration has its way. It is, as far as I can tell, the only reason to choose this plan over the vastly simpler (and vastly less expensive!) deregulation of insurance markets to allow nationwide competition with prices set on residency (and hence local costs, mandated or otherwise).

If someone offers you a complex and obscure solution to a problem, ignoring a vastly simpler one, you really have to ask yourself the question: is that person being deliberately dense, or is there a hidden agenda?

Controlling 15% of the US economy is a pretty good reason for the crypto-socialists of the satraps of the Obama administration to want to kill real competition and sacrifice it on the altar of the "moral imperative" of providing insurance for everyone. Medicare cares for those who lack the means.

The Obama administration is being both misleading and deliberately confusing when it comes to their goal. But then again, given where they come from, that's not surprising at all...

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