Healthcare insurance is expensive. This is why most people who have been going without it are relatively healthy.
And some unhealthy people have gone without coverage too, because of various conditions which amount to … insurance companies can’t break even covering them.
The goal of Obamacare is to get the latter group into the healthcare system. To pay for this, they need more of the former group in the system too.
The thing is, that former group — the healthy people who really don’t want to buy insurance — will need to be enticed.
So a basic yet understated goal of Obamacare is to sweeten the deal for people who know healthcare insurance is likely to be a bad purchase. This gets their money, and hopefully excess money, into the system. That excess can be used to cover the expenses of the less healthy.
Now, those people may be pretty willing to buy through healthcare exchanges, because they’re being offered a product they couldn’t obtain before. The thing is: if they buy too much, the system will run short of funds.
So, it’s critical to discourage those people from consuming too much healthcare. John Goodman:
… This means that to make ends meet they must overcharge the healthy and undercharge the sick. It also means insurers have strong incentives to attract the healthy (on whom they make a profit) and avoid the sick (on whom they incur losses) by, in effect, making their plans less appealing to the sick.
How do you do both of these at the same time? First, offer lower prices to attract the healthy. Second, require high deductibles to discourage the sick from using “free” healthcare. Third, eliminate as many expenses from coverage as you can: like specialists, trauma centers, and the latest pharmaceuticals that lack generic alternatives.
This is the water balloon problem of command and control policy decisions raising its ugly head once again. Economic problems are like water balloons: squeeze one end, and you get a bulge in a different spot. The squeeze here is opening up healthcare insurance plans to everyone at the same price. The bulge is the change in the plans from something that people liked to something they will like less.
And the game politicians play is called “Watch me squeeze one end while I blame others for the bulge”. Don’t fall for it.
Read the whole thing, entitled “The Obamacare Carnival of Perverse Incentives” in the January 24 issue of The Wall Street Journal.