Popping Health Care Bubbles

The MO is so similar we should simply look for it the way the government used to look for communists hiding in the bushes.  (Maybe that's why commies hate Bush's?)  What I mean is we should constantly be on the lookout for leftwing driven government regulations that create or force market conditions that escalate into failures big and small.  And to be fair, any government regulations no matter who concocts them.

The housing bubble--big.  Kash for Komrades Klunkers--small.  The Strepto-Baucus Health care outline-framework-thingy--potentially very Big!

(I sense the liberals are already crafting their pithy replies, talking points memo clutched in their cold bony Bush-hating hands. )

So what's the problem now? 

Death Spirals!! (Two exclamation points, cue dramatic music, replay School House Rocks "Interjections!")

That's right fair readers, death spirals.

It's what happens when you force rules on market mechanics that are un-sustainable.  In this particular model the only way to avoid it is a public option that either forces people to buy insurance they don't want or need or punishes them with a tax if they refuse.  In short, the party of Choice will have to force you to pay for insurance or confiscate your income from you, or another one of their well-meaning schemes will explode in our faces.

Here's how.

Not long ago I showed you why you can't just force coverage for preexisting conditions.  It removes premium payers who will wait until they absolutely need insurance before paying a dime in premiums.  With out enough money coming in from the low  risk insured to offset increasing pay outs, the company can't pay claims and could go out of business.  That leaves the government as the only possible entity that can come up with money (by force of law and a gun if necessary) in the form of taxes on everyone else.

Well the Strepto-Baucus Health Care Outline-Framework-Thingy does the exact same thing with all insurance.  When the government forces the premiums below the risk level (what it calls cost cutting and affordability measures) more high cost patients will naturally opt in.  This will of course drive up costs and push up premiums on everyone else--aka healthy people--to balance out the losses.  The healthy people will simply opt out if and when they can to avoid an expense they cannot justify or afford, denying the insurance company of any way to collect income with which to pay claims.   This causes the company to raise premiums on whoever is left to make up the difference, and the cycle escalates as more people measure cost and risk, and drop out.  

Since Insurance companies can't print money to pay for the extravagant laws of others, or make people pay them (the way the government abuses taxation) they can no longer support the policies and they have to drop the truly sick as well and very likely fold up shop.

So the only way to sustain such a failed cost structure is individual federal mandates, and punitive taxation that rises to meet un-sustainable costs as the sick use up all the money and other insurers are forced out of the market.

You don't have to believe me.  The Heritage Foundation gives us a good idea of how the failure plays out and at what cost with an analysis of Kentucky's efforts at Universal care back in the 1990's (here.) 

Now this might be a good time to point out that the government will be forced to cut obvious costs, but we might as well roll a rocking chair over a cats tail the way the liberals squawk at the mention of "death panels."  The only other alternative is to cut services or quality--but then we have to queue up the cat again.  That might prove that liberal caterwaulers have no sense of economics whatsoever, or are simply to enamoured of their agenda to care about the consequences. (Cue Housing Bubble)

We do need to rethink how insurance works, but if the new kids on the block want to sell the idea of change, then something other than government control would be both original, and different.  But then that might prove that reform was about reform and not government power.  At this point, that quest for power is only going to make more bubbles, none of which will likely come to a happy end.

H/T NRO

PriceWaterCoopers report