Sunday, November 8, 2009

Brilliant piece on why Gov. care will destroy the industry

"Martin Feldstein explains a fatal flaw of Obamacare in the Washington Post: It will be rational for individuals and companies to drop their current health insurance, pay the penalties, and wait to purchase insurance when they get sick:

A key feature of the House and Senate health bills would prevent insurance companies from denying coverage to anyone with preexisting conditions. The new coverage would start immediately, and the premium could not reflect the individual's health condition.

Consider: 27 million people are covered by health insurance purchased directly, i.e. outside employer-based plans. The average cost of an insurance policy with family coverage in 2009 is $13,375. A married couple with a median family income of $75,000 who choose not to insure would be subject to a fine of 2.5 percent of that $75,000, or $1,875. So the family would save a net $11,500 by not insuring. If a serious illness occurs--a chronic condition or a condition that requires surgery--they could then buy insurance. Since fewer than one family in four has annual health-care costs that exceed $10,000, the decision to drop coverage looks like a good bet. For a lower-income family, the fine is smaller, and the incentive to be uninsured is even greater."

My Perspective:

Not much to say about this. Just click the link and read the entire thing. Can anyone really believe that government run insurance will help anyone? It relies on fixing markets and force. If you don't want insurance it will cost you (which is immoral). Yet, taking the fine will in many cases, especially for the poor, be cheaper than obtaining insurance and paying for it in advance. This will cause insurance companies to have barely any money coming in (mostly from the rich and tax payers) and a lot going out (mostly to the poor). It is another redistribution of wealth scheme. This is why government can neither fix economies nor actually try to.

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