O-Care - A Good Government Advocate's Nightmare
As Nancy Pelosi proclaimed: Let's Pass the Bill to Find Out What is In It
Now that the bill has passed, we can check out the pig in the poke.
The essence of O-Care is quite simple: Health insurers are now de facto Government Sponsored Entities (GSEs) by virtue of extensive federal regulation of the terms, conditions and comparative rates health insurers can offer. The law tells insurers how to run their business and then offers to pick up the cost where conditions prove uneconomic. Hmmmm. If this all sounds a little dodgy, your instincts are correct. We tried this kind of experiment in housing with GSEs: Fannie Mae and Freddie Mac, which were pressed to buy non-economic sub-prime loans dressed up by intermediaries to look respectable via bundling and shaky insurance.
This secondary market "nudge" by the government was a major reason for the bubble and subsequent collapse of the financial system under the weight of $2T of bogus AAA securities. Expect similar results from health insurers who will look a lot like the housing GSEs going forward. Fannie Mae and Freddie Mac started with a modest mission to help first time home buyers and morphed into near monopolies in the residential home market ... which then collapsed.
It gets even worse with O-Care. Housing is real property with an underlying intrinsic value unrelated to human behavior. Medical expenses are consumer expenditures with no floors or ceilings and highly susceptible to behavior signals. Extensive regulation will mean only a few "too big to fail" mega-insurers are likely to survive -- and for how long who knows. With fewer competitors, the prices go only one direction: UP. Americans will not put up with rationing, and they have come to expect the best care in the world, so any pretense of cost controls is just that: pretense. O-Care only expands the cancerous dynamics of the third party payer and deploys a few cynical heartstring pullers to create more of a sense of entitlement to be paid for by the ever diminishing "other guy".
And what about HSAs and other consumer-driven ways to reduce costs? They are scheduled to fade in to the sunset. That is Washington: the bad ideas stick around like venereal disease. The good ones just ride off into the sunset like good soldiers who served us well, but whose time is too brief. Instead, we are left with a system that appears to be ready to fail by design, as the individual mandates necessary to pay for the new government mandates whither.
More disturbing is that the comparative effectiveness of medical treatments will not be determined by medical practitioners and their patients, but rather Gucci-garmented lobbyists. If you want your procedure or technology to be validated by "the system", do not bother to win the battle in the marketplace -- at the hospitals, conferences and universities -- make sure to spend your time and money in Washington, where the real decisions will be made about what "works" and what does not work.
Beyond the inevitable failure of central planning, the unavoidable increases in premiums and overall costs, the abdication of personal responsibility and cost control through choice and consequences, and the likely reduction of successful private initiatives, the ultimate victim will be the quality of our health care.
It has only one direction to go and that is DOWN.
If you liked what Fannie Mae and Freddie Mac did to the mortgage market and the world financial system, you will LOVE Obamacare.