Health care competition

With the unveiling finally of the Democrats health care reform package, we now can finally see exactly what we will have to deal with. The most annoying, to me anyways, is the idea that the 1,300 or so insurance companies in this nation apparently aren’t enough to ensure fair competition, so we’re going to add another one: Uncle Sam.

It’s being argued by Democrats, both at the White House and on the Hill, that this new plan will compete with health insurance companies and force them to be honest, but is it a level playing field?

To start with, the public option plan put forth doesn’t have to adhere to state regulations, a major hurdle that private insurance companies have to deal with, meaning that they have a leg up from the start. In addition, the government is the regulating authority of insurance companies, and have the ability to tip the scales in their favor at any time. Will that happen? Maybe, maybe not. What remains is the spectre of it that will reduce insurance company’s ability to compete in the open market.

Another factor to keep in mind that while there is competition in health insurance, there isn’t really any in health care. When Palmyra wanted to deliver babies, they had to apply for something called a “certificate of need”. This is basically permission to offer services to a community based on the needs of that community, as I understand the concept. Phoebe was able to successfully block the certificate, as well as several others by not just Palmyra but private physicians as well. This essentially gives Phoebe a monopoly on these services (provided there wasn’t additional providers of course), which negates the idea of a free market.

The thing is, the certificate of need is state mandated. The government enforces this monopoly in a misguided effort to maintain effective medical services for a region. However, what they fail to understand is that a free market is more than capable of doing the same thing. A free market would allow as many clinics of a given type to function as there are people to support it. If one to many opens, then they have to compete to survive, the weaker one closes. The same would be true of labor and deliver, cancer treatment, sports medicine, surgical care, and a whole host of services.

In addition, insurance has made all of us rather cavalier about our health care decisions. Since we aren’t paying for whatever services the doctor orders, we don’t really worry so much as long as our co-pay is minimal. A doctor may order a battery of expensive tests based on what is really a fear of litigation, and since we’re not footing the bill, we’re happy to go along with the battery. This has driven our health care costs through the roof, and laid the foundation for what we are currently seeing in Congress.

Evidence for both of these can be found in the costs for non-covered treatment, things like cosmetic surgery and lasix procedures. Costs for these services have been steadily declining over the years as more and more providers enter the arena. The law of supply and demand kicks in, as demand for a given service is the same, but the supply has increased, so the cost decreases accordingly. These procedures are cheaper now than they were just a few years ago, and will likely continue to drop (all if adjusted for inflation, obviously).

Unfortunately, we are faced with a health care bill that no one will have read being voted on by people who don’t understand such basic concepts as these. The problem isn’t a lack of competition among the insurance companies, but clearly because of government involvement in the system that artificially drives up prices.

But that’s hardly anything new, now is it?