Stossel on Mandatory Health Insurance

If you are like many people – upset with the costs (a result of government interference and market distortions) of your medical care at present, wait until the entire system is bureaucratized, and your treatment is relegated to a budgetary line-item. Wait until your medical decisions are determined by federal budgetary constraints. But even this not inconsequential argument aside – the entire basis of government-provided anything rests on one form of theft, or another.

Discussing the idea of nationalized health-care, or it’s half-sister, federally mandated, employer-provided health-care, John Stossel, is dead-on-balls accurate in describing the prevalent, popular idea of insurance:

“People have gotten so used to having “other” people pay for most of our health care that we routinely ask for insurance with low or no deductibles. This is another bad idea.”

The problem is not that “people have gotten so used to having ‘other’ people pay for most of our health care…” but rather that people, by and large, are actually convinced that “other” people are paying for our health care. Stossel correctly notes, earlier in the article:

”Employer paid health insurance isn’t free. It just means we get insurance instead of higher salaries. Companies only provide it because of a World War II-era tax break that never went away.”

Yes, I’m glad he brought that up. For the time-being, insurance is still a wage-component bargaining chip. To many people, an employer who provides insurance is significantly more attractive than a comparable salary at another company which doesn’t. I’ve heard of plenty of people who work, or who have certain jobs that they’d otherwise not prefer, solely for the insurance it provides. Eliminate one of the major incentives to produce, and don’t be surprised when people stop producing.

“Finally, the worst news on the poll is that “56 percent support a shift to universal coverage.”

What could it possibly mean to have universal coverage? Everyone would be covered, regardless of contribution? What does it really mean to have everyone contributing to a program from which everyone expects to benefit?

The moment we simply take “insurance premiums” from low-risk, healthy people, and use that money to pay claims to higher-risk, relatively less-healthy people, the security thereby provided ceases being insurance in any meaningful context. And it is inevitable that this would happen – money taken from the young and relatively healthy, would most certainly be pissed away on extending the lives of octogenarians. If this sounds like déjà vu, don’t be surprised. It’s a practice, like the social security Ponzi-scheme, which will ultimately collapse under its own weight.

Efficient, profitable insurers can only work by accurately identifying risk, and pooling those with similar risks, charging them similar premiums (more or less) in accordance with the risk they represent. If your insurer also insures people of higher risks, he must charge them higher premiums. If not, he will find himself in quick financial distress. If he decides to charge everyone higher premiums, the premium paid no longer bears any relationship to the risk involved, there is room for improvement, and competition between insurers can be counted on to eliminate or significantly reduce this sort of risk-subsidizing.

A government insurer, a true universal insurer, would have no room for any of this. The price of premiums would not be regulated by any competition and there would be no reduction in one’s premium for living a healthier, or less risky lifestyle. Political expedience would demand that premiums would either be ridiculously progressive, or equal across-the-board, both situations which greatly reduce the incentive to take care of oneself; there would be no efficient risk-pooling. It’s a moral hazard of epic proportion.