Political Attempts to Ignore Economics in Health-care ‘Reform’

Politicians are experts at ignoring economics. One of their favorite activities is to mandate price and service requirements from private companies and just expect that, like magic, all will be fixed. They seldom acknowledge the perhaps unintended, but yet inevitable, consequences of their wishful mandating.

The most pertinent example is the list of nice-sounding mandates on insurance carriers included in the new health-care ‘reform’ law. Many of them took effect this week.

The list includes, among others, the following requirements:

  • Insurers can no longer deny coverage to children with pre-existing conditions
  • Insurers can no longer put lifetime caps on benefits
  • Preventive services are now free
  • Kids can stay on a their parent’s plan until 26

All of these, of course, will add to the overall costs of insurance policies. There is a difference between “price” (how much is directly charged a consumer for a service) and “cost” (the amount of money required to provide the service).

President Obama speaks on health-care reformAllowing kids with pre-existing conditions will most certainly increase the overall amount of care policies will have to cover – a fact which has already led to several carriers choosing to no longer write children-only policies. No lifetime caps will also increase overall costs. Preventative services, like any other service, are not “free”; they will cost the insurance company – which will be passed on to policy holders. Covering policy holders’ children until they are in their mid 20’s will also add to the cost to insure.

Make no mistake: These ‘reforms’ are going to add to the cost of insurance – which will be passed on to consumers. Not wanting to admit this fact of economics, supporters of the new law have resorted to demonizing and threatening the insurance companies.

Take for example this clip (around 1:11) from a Democratic member of Congress threatening to “black-ball” carriers:

Secretary of Health and Human Services Kathleen Sebelius shared a similar threat to insurers in a letter she wrote to them earlier this month. She chastised them for blaming rate increases on the new law.

In the end, this is either ignorance or willful denial of this simple economic fact: There is no free lunch. Either way, it’s not very helpful.

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