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Wednesday, January 10, 2007
(1:23 PM) | Stephen:
Health Insurance

The Wall Street Journal has long been known as having the nations' most conservative editiorial page - at least in terms of economic policy. That's fine, I guess, but the stuff that gets written there and then is eagerly read by our nation's financial elite is becoming more absurd by the day. It doesn't really help to increase our faith in the stockbrokers, mutual fund managers and analysts that bear the responsibility of our retirements and college funds.

Today, David Henderson predictably opined that California's healthcare problems would be solved by deregulating health insurance. At least he didn't mention the huge benefits that California has seen from energy deregulation.

Aside from all the usual conservative talking points - "government solutions rarely work" - Henderson manages to make some profoundly illogical claims.
  1. [Schwarzenegger] would require employers with 10 or more workers to provide health insurance or pay a 4% tax on all wages covered by Social Security: Look for employers with 10 to 12 employees to get creative about outsourcing. Hahaha! That's right, folks. Next time you take your dog into the groomer's, they'll just ship the critter off to India for the haircut and shampoo! And your neighborhood pub will just fire the bartender and have someone in Mexico get your drinks. . .using a robot. . .or. . .something. . .anyway, these small business owners are gonna ship all the jobs outside the USA, you'll see!
  2. [W]hen government provides health insurance, many people who take advantage of it drop their own privately provided health insurance. That is, of course, the point. Except that in California's case, this wouldn't even happen. Rather than the government providing insurance, the government would enable all of California's residents to be in the same group plan - getting rid of individual underwriting that insurance companies use to price "sick" people out of coverage.
  3. Henderson of course studiously avoids any reference to countries with so-called "socialized" medicine. He cannot mention them, unless it's for isolated anecdotes, because they disprove every "government regulation = bad" argument he makes.
Insurance of any kind, at the core, is an exceptionally simple idea. People band together to share risk. The more people that band together, the more spread out that risk is, and the less it costs any particular individual to participate. Anyone who tries to argue differently, whether it's through actuarial tables or underwriting or whatever other words they just looked up, is either unable to grasp the key concepts of insurance or has an agenda.

Even with all the Schwarzenegger Plan's shortcomings - see Ezra, of course - the main point to remember is that it creates a risk pool of about 45 million people and mandates community rating. Without intentional price-gouging from insurance companies, such a plan will make insurance premiums cheaper, because of how insurance works. By getting premiums from so many more individuals, insurance companies will make more money, but at a narrower profit margin for each individual. And, as long as the 4% mandatory contribution is slightly higher than the combined premiums at any one business - something that admittedly remains to be seen - there will be enough money in the system to provide subsidies for the poor.

By the way, the sky is blue, and 2+2=4. Let's not make this harder than it needs to be, because that just serves the interests of those who want to exploit illness and misery for profit - people such as, apparently, David Henderson of Stanford's Hoover Institution.

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