Saturday, October 3, 2009

Weeping, wailing, gnashing, and clueless

This opinion piece by Frank Rich is almost a month old - someone sent me a link to it while I was on hiatus. Rich’s points are interesting but in his hand-wringing over the insidious influence of corporate interests on lawmakers and law-making why does it never occur to him - or apparently to most such hand-wringers on both sides of the aisle - that the easiest way to reduce the impact of corporate interests on government is to have government less involved in everything from soup to nuts?

Pundits like Rich weep and wail and gnash their teeth as they desperately search for ways to keep corporate interests from deforming the kind of health care the Federal government is going to provide to all of us. Instead of struggling to limit corporate interests’ role in the law-making process, how about if we take a step back and see if we can limit the Federal government’s role in the health care process?


Beard said...

From this comment, I assume that you'd prefer the government to keep out of the anti-trust business as well. Right?

The whole point of capitalism is for there to be a competitive marketplace, in which sellers compete for the attention of buyers by improving value of their product. Right? This means that if a company, or a small group of companies, figures out a way to game the system and maximize profits without improving value, then they are violating the reason why we are so fond of capitalism. Anti-trust laws were created for exactly this reason. By leveling the playing field, the government can ensure that the capitalist system is a competitive one, not a collusive one that simply exploits the customer and maximizes profits.

So, what about insurance? An insurance company is in the business of making certain kinds of bets, having done the statistics to make sure they have a house edge. (The smaller the house edge they are willing to tolerate, the more value to the customer.)

However, a far better way to game the health insurance system is to make sure that you only give insurance to healthy people. (Far better from a profit maximization perspective.) A second part of the same trick is to deny claims from the sick people who you have been so unlucky as to insure.

Given the structure of corporations, if not prevented by law, they will do these things, just like a 2-year-old will try to swipe candy from the supermarket if you don't make him put it back.

Therefore, we need to level the playing field, establishing rules by which insurance companies must play. Limiting the government's role in the health care process is like unleashing the 2-year-old in the candy store with no rules. This will not end well.

In fact, there are ways for consumers to game the system, too, by only buying insurance when they feel likely to get expensively sick. This is what leads to mandates to buy insurance. (Though in another venue I argue that it is far more straight-forward to simply go to the SIngle Payer system, covering everyone by law, and just pay for it with taxes. Good example of taxes paying for tangible value for every taxpayer.)

Elise said...

My response to Beard's comment is up as a new post entitled "Blue laws".