I like to think that by the time people reach adulthood they have stopped believing in magic. But of course the evidence suggests otherwise. Case in point: one of my Facebook friends is shocked, SHOCKED! to find that his medical insurance bills have increased in the wake of the new healthcare legislation.
Well, hello mister fancy pants! My glorious insurance company undoubtedly anticipating the passage of the Healthcare Reform bill, has raised my monthly insurance rate to $374.32. That’s 34%! That’s worse than getting a lube-less colonoscopy with no anesthesia and they decided to keep the results to themselves.
I, of course, being something of a snark, posted something snarky that went a little something like this:
Gee, it’s almost like if you artificially inflate demand for a service, the price of that service increases!
To which he responds that while that’s true of general products, it’s not true of insurance. With insurance, the more people who pay in to the pool, the lower the cost to the individual payer should be. Which is true enough, but only under the assumption that payOUTs from the pool grow more slowly than the number of subscribers to the fund. Obviously – OBVIOUSLY – that assumption isn’t going to hold for a situation where you’ve suddenly mandated that insurance companies can now no longer screen their applicants – just have to take whoever comes begging. Obviously – OBVIOUSLY – in a situation where some insurance applicant expects to pay x dollars to get y in return, where y is strictly greater than x, then he’s going to do it. Obviously – OBVIOUSLY – therefore, this scheme is going to end up costing SOMEONE money. Which is generally true ANY time people consume more resources – medical or otherwise.
So I’m left scratching my head wondering whether the people who supported the healthcare bill ACTUALLY followed this line of “reasoning” when they assumed that the bill would lower costs? Did anyone ACTUALLY think that mandating that everyone buy insurance while simultaneously forcing insurance companies to take on customers they know are bad investments would lower insurance premiums? JUST on the basis of there being more people paying in? I mean – I always assumed that the claim that the bill would cost the average citizen nothing was just its supporters being disingenuous. They knew good and well that it was going to cost, they just found it politicially expedient to pretend otherwise in public. It’s not so unusual in politics.
But no, apparently there are people out there who think that you can increase demand for medical services and simultaneously lower the cost of insurance payouts. Citation: (their ass, ibid gullibility et al 2010) – or something. To believe this, of course, you have to be in a position to believe, among other things, that insurance profitability is entirely a function of how much gets paid in and that how much gets paid out has nothing to do with it. And you further have to believe that insurance companies knew all along that they could have clicked the ruby slippers and increased their profits at any time just by deciding (a) to lower their premiums to attract more customers while simultaneously (b) not rejecting anyone on the basis of a preexisting condition, and they just decided not to do it anyway, even though it would’ve helped their bottom line. Which just further implies that you honestly think that being “evil” is more important to insurance companies than making money. They are just so all about rejecting people’s applications that they can’t even be bothered to make more money? C’mon. Even Michael Moore doesn’t believe that!
What’s particularly astounding is that these people understand enough about economics to grasp similar concepts about, say, grocery stores. So, you go to the store one week, and you buy some amount of food, and of course you have to give the store money for this food, or else they won’t let you take it home. And then, if the next week, you go to the store and buy twice as much of roughly the same stuff that you bought the week before, you’re going to have to give them roughly twice as much money before they will let you take your double helping home. NONE of this is controversial. What’s more, these people even broadly understand the reason: the store has to stay profitable to, among other things, pay its employees, buy more stuff with which to stock the shelves, pay off its investors, possibly expand in the future to open more stores which provide more food, or otherwise attract people into the grocery business. They even get why the store has to charge everyone, broadly speaking, the same prices: because if you undercharge some people your profits become unpredictable, complicating your calculations, not the least of the reasons for which is that these people will buy more of this stuff than those charged more, etc. What’s mysterious is why, whenver the issue is political, all of this common sense just goes out the window, and people apparently become willing to believe that there’s some magic wand you can wave whereby the normal rules of economics don’t hold anymore, and you can just sell people more stuff from the store without actually charging them extra money for that stuff! It’s ludicrous, and yet, in essence, that’s what this Facebook friend was believing – up to and incredibly even beyond the moment he got his increased insurance bill!
OK, now to be fair, there is a lot of price inflation in the medical field, so in theory there actually is some kind of “reform” that’s cost-neutral or even cost-efficient. There hasn’t been real market competition in medicine for a long time now, and the fact that everything is mediated through insurance meanes that we the paying customers are largely shielded from the kinds of tradeoffs that one typically makes in an ordinary, functional market. So I’m willing in principle to entertain the notion that someone could put on the table a cost-neutral healthcare reform. But in reality it’s extremely unlikely that anyone would hit on the magic formula – and even if they did, there would STILL have to be readjustment costs of some kind. Because any time you’re shuffling around 13% of the economy, you’re talking about folding companies, laying people off, reeducating them, employing them elsewhere, etc. You’re talking about people choosing not to go into insurance because it doesn’t pay enough anymore, not to go into medicine because it doesn’t pay what it used to, etc. It’s just impossible to do this in a way that it never, ever shows up on your bottom line. Impossible!
Now, don’t get me wrong – just because it shows up on your bottom line doesn’t mean it wasn’t worth doing. I meant what I said in yesterday’s post after all: short-term pain in exchange for long-term gain is THE single secret of success. It’s THE reason we make fun of lottery winners as being trashy, actually – because in real life gains don’t typically just fall out of the sky. So saying that healthcare reform will cost in the shortterm isn’t the same as saying it’s not worth doing. (Though, for the record, the kind of reform I would be willing to support would have to be pretty heavy on deregulation and reintroducing competition into this field, not just new rules about who pays what to whom when.) My purpose here has just been to marvel at the kind of dogfood people are willing to eat. Obamacare increased your insurance premiums and you’re SURPRISED? REALLY? How do you even manage to tie your shoes, man?