"The welfare of humanity is always the alibi of tyrants" - Albert Camus

Friday, April 23, 2010

The Other "Reform Shoe" About to Fall

It has long been my opinion that the health care reform was about one thing and one thing only: Eventual take-over of the health care sector of the economy. The critical mechanism that was accidentally missing from the recently enacted legislation (thanks to law makers who do not read the bills they vote on) was the direct authority of the government to control pricing of health insurance premiums. Well, enter Senator Dianne Feinstein.
The good senator introduced a bill that would give the secretary of health and human services the authority to review health plan premiums and block "any rate increase found to be unreasonable."
This, after the public was told many times over that the Democrats' health care legislation would bring down costs and rein in those troublesome health insurance companies that are making so much money - you know, the obscene 2% profit margin that put them in no. 86 as an industry.
It doesn't take a Ph.D. in economics to see where the Democrats are going with this. Their regulators will establish price controls, which will drive health plan providers out of business as the restrictions make it impossible or unreasonable for them to make profits. After all, if a company has to accept anyone with any pre-existing condition, where is the only place they can make up for the steep losses that will be incurred by those irresponsible new enrollees? Premium increases for everyone else. However, if you are not allowed to increase the premiums, what are the options? There really are two options. One is to cut down on approved treatments and reimbursement rates, or go out of business. Both of these options will run most insurance companies out of business one way or another because in the event of restricting treatments significantly, the government will be able to step in and force these insurance companies to comply or go out of business, with no one left but for government to take over.
To deal with the shortage of health plans, Democrats will then complete the government takeover of medicine by placing Washington in the position of being the sole provider of health care. Far fetched? Depends on your political view.

As usual, Democrats are demonstrating that they have little or no understanding of how markets work and the role profits play in business. Sen. Tom Harkin, who, as chairman of the Senate Health Committee, is ready to push Feinstein's bill, is the spokesman for the economically illiterate on this issue.
"Rate review authority," the Iowa Democrat told the New York Times, "is needed to protect consumers from insurance companies' jacking up premiums simply because they can."
No business raises its prices just because it can. Companies raise prices to generate profits, which they cannot stay in business without. They are not charities existing on the good will of contributors.
Nor are they agencies of the government that must do the bidding of self-serving lawmakers.
They are businesses that have to compensate employees and provide returns to investors. They have to pay their vendors, landlords and the lenders that advanced them funds to buy property and infrastructure. And they must compete against rivals.
They can do none of these things without profits.
Cynics would say that the Democrats understand markets and profits quite clearly and are laying out conditions under which businesses will fail so that they can respond with ever more government. As undoubtedly my uninformed progressive friends will say this is nothing but a conspiracy theory. A theory is by definition is an unproven assertion. This is no theory and the proof is plentiful and all around us.
The Democrats have been telegraphing their punches for years. President Obama, for instance, told AFL-CIO members in 2003 that he was a "proponent of a single-payer, universal health care coverage."
In 2007 he spoke at another union event — cosponsored by the SEIU and the Center for American Progress — this time talking about eliminating employer coverage, in the context of not being able to do it immediately.
More recently, Democrats were openly admitting that the public option for health insurance, which was in an early version of the Democrats' reform but not in the final bill, provided a path to a single-payer system.
But that's expected. In each session of Congress since 2003, Democratic Rep. John Conyers of Michigan has introduced a national health care bill that would establish a single-payer, universal scheme similar to the system in Canada. The bill went from 25 cosponsors the first year to 88 in 2009.
The health care insurance industry is no more an angel than the automobile industry or the hotel industry. Nor is it a corrupt or monopolistic industry that can increase its profits simply by, in the words of the White House, jacking up rates as much as it wants.
What it does is provide a service that many Americans appreciate and don't want to lose. It operates through a system of voluntary exchange based on ground rules and actuarial calculations based on those rules, while government engages in coercion and is hopelessly corrupt when it doles out goods that it doesn't own.
Which is the better system? By any measure it's the one that the Democrats are trying to force out of business by choking its profits.

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