Wednesday, June 17, 2009

Stealth Tactics

A lot of us conservatives are terrified over the way this health care "reform" pushed by the Obama administration is shaping up. The stated goal is a public health insurance "alternative" that will compete with the private sector, offering people alternatives to their current health insurance plans, and that the government has no intentions of completely taking over the health care industry (20% of our economy).

Sure. And I'm a leprechaun. The administration is using stealth techniques to take over the health care industry.

First, I see a huge disconnect between the stated problem and the offered solution. The problem is high costs of insurance and health care in general, yet the stated solution is a government health insurance program. Switching who pays for health care doesn't fix the problem...just who pays for it...and if the government is paying for it, YOU are paying for it as a taxpayer. Perhaps we should work more on decreasing the costs of health care rather than switching payers. Malpractice suits could be a place to start. I talked to a nurse here in Brookings who said her son was a doctor out in California. He QUIT delivering babies, because the malpractice insurance he had to purchase was simply too high...and he was paying $125,000! That's just for insurance to be a doctor! Our legal system needs reform to fix a lot of problems (although it may be tough with a Democrat-controlled Congress, as lawyers are the top contributors to that party).

The most disturbing thing about the administration's proposal is how Obama says that the government's new insurance plan will simply compete with private industry plans, as if that will somehow not be nationalized health care. In the end it will end up being just the government providing insurance, and I'll explain why through basic economics:

People often complain when a major chain store comes to town (like Walmart, Perkins, etc.). The biggest issue people have (although misguided, as I'll show), is that businesses that come in sell their goods very cheap, below cost, in order to push competition out of business in that area. The idea is that once competition is out of business, these bigger companies can then raise their prices to a higher level than before. This is a process referred to as "predatory pricing."

You with me?

The problem is, this rarely ever works, because it's not in the bigger company's long-run interests. Once they raise their prices again, competitors will once again move in to fill niches to compete with the bigger business, so once again they will have to sell their goods below cost to try and push competition out. Companies have to maintain profits, so chronically selling below cost simply to force out competition doesn't really pay, in that selling goods below cost for too long hurts the bigger store too much, and it's a losing battle anyway as smaller businesses return once prices go back up.

What does all this have to do with health care?

Enter the government. People like to hate Walmart and big business when they practice predatory pricing? The government is the ULTIMATE predatory pricer. The one thing that kept private sector, bigger businesses from predatory pricing was that in the long run, they have to eventually switch this process around and turn a profit, and turn consistent profits. When the government is "competing," with the private sector, they never have to worry about profits. Amtrak has turned a loss since 1970 and exists as a passenger railroad monopoly, even though it can't turn a profit. The government can keep operating things below cost for as long as it likes, through government subsidies (YOUR tax dollars thrown at it to keep it going)...eliminating private business competition and creating a government monopoly. Government does not have the private sector requirement of a profit to keep going, so it can unfairly undermine private business, even if they are hugely unprofitable, inefficient, and provide crappy services.

This is what will happen with the health care industry. Government will force all other insurance programs out of business simply because it can operate at a loss for so long.

Obama will not come outright and say this...preferring to stealthily take over the health insurance industry through these more subtle means--techniques that make me a little nervous and seem a bit Soviet Unionish.

If you want to take over the insurance industry, why not come out and say it? Because people might have a problem with that...and that doesn't get your party votes, does it now?


caheidelberger said...

Switching who pays for it? No: You and I pay for it now through huge insurance premiums. You and I will still pay for it post-plan... we'd just pay less, like the rest of the industrialized world (increased taxes, but private insurance premiums with 30% overhead gone... if Obama would put single payer back on the table).

"Terrified"? Come on, can you hype the language any further?

The gov't-Wal-Mart comparison is totally flawed. The Obama plan is not some stealth trick (keep cranking the paranoia, Brandon) to drive private companies out of business. How many times does the President have to say "Keep the policy you have"? But if the public option did put private insurers out of business, it wouldn't be from false predatory pricing; it would come from the fact that that government can deliver the service with less overhead (fewer bonuses and yachts for execs, more money going for actual health care).

Braden said...

Lindstrom you are a smart enough guy you should know not to believe in conspiracy theories.

When Republicans say they want to privatize Social Security, I assume it's because they think it will work better, not that they're using a 'stealth tactic' to try and destroy it.

Before we can tackle all the other issues with our health care system, we first need to tackle the outrageous costs. Here's 3 reasons why I think public health insurance will be cheaper:

1. The government doesn't have to advertise. Advertisement costs account for large portions of the budgets of many companies. No marketing budget means less costs to pass down to the consumer.

2. You're right, the government will not make a profit. But more importantly- they won't try to make a profite. Private companies by their nature will add a certain percentage to the product for their own profit. That comes directly out of our pocket. An option that doesn't take profit also doesn't take as much money from us.

3. The government will have enormous negotiating leverage with drug companies and health care providers, so they can drive down the costs to the consumer even more.

If the public option turns out to be a better option, more people will use it. Private insurance companies will be forced to lower prices or go out of business. If everyone chooses the public option, so what? The goal is to get affordable health care, not keep private insurance companies afloat.

In the end, our health is not something private companies should be attempting to turn a profit on anyway. Health insurance is health protection. You wouldn't expect a fire department to say, "Oh I'm sorry, you can't afford that type of fire coverage." You wouldn't expect a fire department to try and find ways to not cover you in order to lower their costs. This shouldn't be the case with health protection either. Contrary to what some say, quality, affordable health care IS a right, one that all Americans are entitled to.

Brandon said...

I hope I didn't make this sound like a conspiracy, but it is reality and what will happen.

The public option will be made artificially the better option, because the government never has to worry about making a profit.

So end result is that private industries, which cater more to the individual and work hard to meet the needs of individuals, will be pushed out by the one-size-fits-all government plan that is made uber-competitive because they can operate at a loss all the time.

I just wish they'd come out and say that, because inevitably this will happen if we go the way Obama is directing.

caheidelberger said...

But that's not artificial: that's the truth. Government provides health care more efficiently than profiteers.

And catering to individuals and meeting our needs? Ha! Business worries about the needs of shareholders and the bottom line. That thinking is out of place in health care.