Thursday, August 20, 2009

Arnold's latest thoughts on the current healthcare debate

Let me start with the issue of the evil of health insurance companies. As a matter of theory, I agree with my co-blogger, Bryan, that in a competitive market health insurance companies would not be evil. Those with bad reputations would lose business, and those with good reputations would obtain loyal customers.

As a matter of practice, the market for health insurance does not work that way. The individual health insurance market has been killed by a thousand cuts--or more precisely, 50 cuts, as each state regulates private health insurance and many of them (such as Maryland) pretty much regulate the insurance companies out of business.

The only functioning insurance market is the employer-provided health insurance market. There, it is up to the employer how the insurance company behaves. If the employer wants the insurance company to pay claims, that is what it does. If the employer wants the insurance company to play hardball, then that is what it does.

Now, on to the larger point. I am not a fan of employer-provided health insurance, of Medicare, or of Medicaid. That makes me totally unacceptable politically. For a politician, to question any of the major status-quo institutions in health insurance is like a soldier popping his head out of a foxhole surrounded by enemy machine guns--you just get your head blown off.

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