I really don't have time to craft a decent post this morning, but in light of the Health Care Debate Palooza that's schedule, combined with a remarkable level of ignorance on the topic, I'm compelled to provide this primer (a discussion I heard while driving to work this morning between two radio disc jockeys--on opposite sides of the issue, both equally ignorant--is what has really motivated me):
First off, most Americans detest the fact that people with pre-existing conditions can't get insurance. And I agree: that sucks.
But here's the thing: you can't cover pre-existing conditions and call it "insurance." That's like buying house insurance after your home is on fire. It violates the two fundamental principles of insurance: avoidance of adverse selection and moral hazard.
Moral hazard: If I can get insurance after I get sick, I'll wait until it happens. As people starting doing that, problems of adverse selection arise: more and more sick people get insurance and fewer and fewer well people get insurance. The cost of coverage goes up, as do the premiums. As the premiums go up, more well people say "Screw it," with the result that their premium dollars drop out of the system and premiums go up even more. At some point, the system only covers sick people, and then the system crashes because the premiums will have gone up 10, or 20, or 1,000-fold.
Washington understands this, so they decide that everyone must have insurance. This is where a fundamental truth about political philosophy shows itself brazenly: If you're going to benefit some people, you must coerce others to do it. It happens with every tax dollar that is spent on welfare. But here, it's highly noticeable. Because you want to cover pre-existing conditions (a popular notion), you must force everyone to carry insurance, or you'll crash the system due to moral hazard and adverse selection.
Well, not everyone can afford insurance, or they don't have access to it through work. The option? The public option. The government will provide the insurance for those who can scarce afford it.
But now the government is in the insurance business, and it will drive out all comers. This last point is in dispute, but it will happen. The government, acting through the Federal Reserve, can create its own money through deficit spending . . . private insurance companies can't. The government, in other words, can offer low premiums and good coverage even though it means they'll operate at a loss. Private insurance companies can't. As a result, more and more people will opt for the government plan, which drives more and more private insurance companies out of business.
The eventual result: The one-payer system. Socialized medicine.
I gotta run. I hope this helps.
