Mandated Insurance Purchases: Terrible Economics

The dishonest Obama administration and equally dishonest Congressional Democrats keep bashing insurance companies. In fact the insurance companies love the mandate to purchase insurance. If you were an insurance company wouldn't you? The insurance companies are not worried too much about the follow-up regulation. They control plenty of campaign contribution dollars.

Even before the Obamacare mandates, the widespread system of health insurance coverage for the trivial, doctor visits and all the minor stuff, has directly caused the raise in overall medical costs. After all, if visiting the doctor and getting care is free or virtually free, more medical services will be demanded. Doctors have an incentive to over-prescribe in a abundance of caution. The ability to pay is no impediment thanks to insurance. And the doctors desire to avoid a potential malpractice claim. More is better for the doctors. As more services are demanded due to low marginal cost to the consumer, more services are supplied and total medical expenditures rise. Who care if the office visit is $35 or $100? Let the insurance company worry about it. Let the insurance company worry about whether those shots for which the insurance company is billed were really received. It is really easy to spend someone else's money.

As people are forced to buy medical insurance, they will use it. Total medical expenditures will necessarily rise even more.

A far more sane system was the health savings accounts (HSA's) controlled by the consumer with catastrophic insurance coverage. No one gets their appendix out unless it is necessary. With HSA's, people care about the cost of their care, because they pay directly for normal care. They get to shop prices for their own care. Normal medical services are paid for with their own money, not someone else's money, so they pay attention to the cost.

The insurance companies try to keep costs down. High school graduates are hired at barely over minimum wage to second-guess doctors on medical decisions. They are ineffective at rooting out fraud or sloppy billing.

I reviewed my mother's final hospital bill and found numerous overcharges. I contacted Medicare and was told not to worry about it because the bill was going to be discounted in such a way that those overcharges would not get paid anyway. OK. I was glad the overcharges would not get paid, but what if they had been legitimate? The hospital would have to bear those charge because of excessive discounting. Horrible system.

The insurance mandate will drive up total demand for medical services and will drive up the total costs.

I will probably address the evils of substituting the overpaid government bureaucrat high school graduate for the insurance company's barely more than minimum wage high school graduate for the job of second guessing medical decisions. Or maybe it speaks for itself.

Update: It begins now, Medical Schools Can't Keep Up.