"There is always a philosophy for lack of courage."—Albert Camus

Wednesday, November 21, 2007

The Silliness All Around Us

The august Los Angeles Times does it again: Yesterday's edition features a front-page op-ed by Ricardo Alonso-Zaldivar in which the glaring gap in the Republican candidates' health-care plans is revealed. To wit: The reliance on private insurance yields no guarantee that those without coverage will be able to obtain it, particularly in the case of those with pre-existing conditions, since insurers purportedly have obvious incentives not to cover such individuals.

And so the utter ignorance of the journalists is revealed yet again. It is government policies---in particular, constraints or proscriptions on underwriting (allocation of premiums in accordance with expected costs)---that lead insurers to avoid those with pre-existing conditions. In the absence of such regulations, premiums would be driven by competitive pressures to reflect actuarial reality, and there would be no reason not to cover people whatever their health status, except in the case of those with conditions so expensive to treat that they would not be willing to pay the actuarily-fair premiums. Perhaps such individuals are worthy of compassion and even subsidies; but that is not a very powerful argument for socialism in health insurance.

Such regulations are exacerbated by legal/regulatory mandates for coverage of a broad set of medical services, the effect of which is higher costs for coverage, particularly given the absence of interstate competition in health insurance. And the tax subsidy for employer-provided insurance makes it easier for legislatures to pass such mandates, as the attendant costs are hidden from the employees buying the coverage indirectly.

And so Mr. Alonso-Zaldivar's central argument, in this waste of fine newsprint, is the need for government regulation to ensure the availability of coverage. That it is government regulation that has yielded this problem in the first place is a reality with respect to which Alonso-Zaldivar is utterly oblivious.

[cross-posted from www.medicalprogresstoday.com/blog/]

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