Comments and observations on social and political trends and events.

Thursday, November 7, 2013

On Getting To Keep The Insurance You Like (or maybe not)

About this time last year I was visiting one of my accounts based in Toronto when one of my customers, who is a strong advocate of the Canadian health care system, asked what I thought of Obamacare. My answer: I thought there were far better ways of helping the 10 or 15% of Americans who didn’t have health insurance than forcing the other 85 – 90% to change what they had. She repeated what Obama and his minions have been saying: that we could keep our insurance (and doctor) if we liked it so what’s the big deal? Well, after the initial October roll out we’re learning that we could keep our insurance ONLY if it met the criteria laid out by Obamacare. The news media has been reporting that thousands of people have been receiving notices from their insurers that, oh, their plan doesn’t meet this minimum criteria and that the plans available on the exchanges are much more expensive and have higher deductibles.

Who could have seen that coming? Anybody with a basic understanding of Economics 101. By that I mean that the package of promises sold to us like a miracle balm (or snake oil) contained contradictory claims. We were going to save money, lower the national debt, reduce overall medical spending while covering people with pre-existing conditions and adding millions of folks who previously didn’t have insurance.

How did this happen? I think a constellation of factors made it possible for politicians to sell some people on Obamacare. (Notice I didn’t say most people because the polls have consistently shown a lack of strong public support for Obamacare. It is dropping like a rock since October 1.) One is the lack of understanding how a market works and particularly how distorted the healthcare market is. Second, the mammoth bill was too complex even for its supporters to fully understand. (Hence, Nancy Pelosi’s infamous comment about needing to pass the bill in order to find out what is in it.) Third, I think a lot of people harbor animosity for insurance companies precisely because (a) we don’t know how much medical services truly cost (see examples below) and (b) insurance companies delay or deny payments to protect their bottom line. And lastly, I’m sure there is a minority of people who think they were going to get something for almost nothing while tucking it to the big insurers. Several Obamacare supporters have voiced dismay that they didn’t think they would be the ones footing the bill only to find out, to their dismay, that the bill collector tolls for them too.

During the discussion with my customer I also mentioned that the health care system in the U.S. was far from a true free market system for a number of reasons (best covered at another time) and that having insurance cover most of normal medical expenses hides the true price from the user. I likened it to going into a grocery store and for a $20 co-pay you could fill your cart with anything you wanted, from cheap hamburger to caviar (if the store would carry it). Or it would be like going to the car dealership to get whatever work you wanted done on your car for the measly co-pay. So you could have an oil change or rebuild the engine for the same out-of-pocket cost. As a result of this arrangement there is no incentive for the customer to shop for the combination of best price and quality like we do for other goods and services. But that too is a topic for another post. For more information on this I highly recommend John Goodman’s Priceless: Curing the Healthcare Crisis.

For a much deeper analysis I recommend Robert Tracinski's article.