Tuesday, March 9, 2010

Is Health Insurance Company Greed to blame for the High Price of Health Insurance?

President Obama is making another final push for the passage of health care reform legislation. He is basing the need for this legislation on the recent price increases made by certain health insurance providers. He is blaming their greed for these price increases. And the health insurance providers don't like it. He does have a point. On the other hand greed is not the only reason for these price increases. But he must use greed as a rhetorical trope because the American people remain opposed to the only real solution to our health care crisis; make health insurance a universal entitlement.

Now greedy health insurance companies are a problem. But greed is not a problem of the health insurance industry alone. Greed is the Achilles of Capitalism. Should Capitalism one day fall it will be greed that kills it. In maximizing their profits health insurance companies are only doing what they have been told they should do. The main problem with health insurance at present is not the greed of the health care industry.

The main problem with health insurance is the ability to, and sometimes the need to, game the system. People can, either because they don’t want to or can’t afford to, avoid buying health insurance until they really need it. Indeed they can go to emergency rooms which are duty bound to take in people whether they can pay or not. This increases the cost of health care and thus health care insurance for those who do have it. This is the real problem, at least in a financial sense, with the present system.

Proposed changes, the popular ones at least, only make things worse. Denying claims and denying people the right to buy health insurance at all are ways in which insurance companies keep their costs down. Its no accident that health insurance companies announced massive price increases as soon as Scott Brown was elected to the Senate. Scraping the Senate bill now waiting passage in the House and replacing it with a bill containing only the popular remedies for the situation spells financial disaster for health insurance companies. Massive premium increases are their only recourse. So now banning massive premium increases is popular enough to be enacted into law also. The health insurance industry does have a problem.

The only way out of this dilemma is to bring everyone into the system. This is why the Senate bill has a universal mandate. If everyone is required to buy health insurance gaming the system is no longer possible. But many people don’t have health insurance because they can’t afford it.. So health insurance subsidies are a necessary part of any universal mandate. The subsidies make health insurance an entitlement. Once health insurance becomes an entitlement the government must play a large role in all aspects of the health care industry.

It is a this point that health insurance reform becomes unpopular. People would rather have the present system than create another big government universal entitlement. But as we can plainly see the present system is just not sustainable over the long term. We either have health insurance so expensive only those people who don’t need it can afford it or we can create another big government universal entitlement. The health care dilemma is that neither choice is very popular

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