Saturday, August 22, 2009

Obama offers a free lunch

President Obama writes an op-ed piece that purports to debunk false claims about his proposed health care reform measures. Here is one excerpt:
We'll prohibit insurance companies from denying coverage because of a person's medical history. They will not be able to drop your coverage if you get sick. They will not be able to water down your coverage when you need it most. They will no longer be able to place some arbitrary cap on the amount of coverage you can receive in a given year or a lifetime. We'll place a limit on how much you can be charged for out-of-pocket expenses, because no one in America should go broke because they get sick.

And we will require insurance companies to cover routine checkups and preventive care, like mammograms and colonoscopies. There's no reason we shouldn't be catching diseases like breast cancer and colon cancer on the front end. That makes sense, it saves lives, and it will also save money over the long-run. Taken together, the reforms we're seeking will help bring down skyrocketing costs, which will mean real savings for families, businesses, and government.
Some observations:
  • A health insurance company's ability to drop or water down coverage should be spelled out in the terms and provisions in the service contract you sign with the company. If they violate those terms they should be taken to court with the plaintiff awarded a substantial settlement.
  • A medical history is indicative of how expensive that person will be to cover, similar to speeding tickets with auto insurance. If health insurance companies can't deny coverage to someone based on their medical history then you are essentially telling them to lose money. Consumers are being offered a free lunch.
  • Obama proposes limits on how much consumers can be charged. Who will pay for this and make up the difference? Another free lunch.
  • Obama proposes that insurance companies be forced to cover procedures like routine checkups and preventative care. Again, who will pay? Another free lunch.
  • Obama says that provision of such care will save money over the long-run. If this were true, why wouldn't health insurance companies offer this already? As profit-oriented enterprises aren't they interested in reducing costs?
  • Look at the terms used: prohibit, not be able, no longer be able, place a limit, require. These aren't words of freedom, it's the language of regulation.
The bottom line is that the President of the United States can't change the laws of supply and demand by executive decree. The benefits he proposes will not appear out of thin air and have to be paid by someone, although he declines to say who. More rules and government regulation will not achieve cost reductions, only the introduction of market forces can achieve this. The introduction of such forces is not currently on the table.

On a related note, if you want to read about real health care myths and distortions I suggest reading this.

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