Health Insurance And The Free Market

Ken AshfordEconomy & Jobs & Deficit, Health Care1 Comment

Tthose opposed to health care reform do so because they want to keep "their" insurance.  (Forget for a moment that under the Obama health care public option, you can keep "your" insurance).

But how many people can actually claim that "their" health insurance is actually theirs?  I mean, did they select it?  Was it their choice?

I buy insurance for my car; I get to pick the insurance company.  But health care?  No, I'm on the plan offered by my employer.  As are most workers. 

In fact, most of us don't choose our insurer. Twelve percent of us are on Medicare. Thirteen percent are on Medicaid. Fifteen percent are uninsured. And 53.4 percent get our health-care coverage from our employers.

This is one of the reasons why the free market hasn't worked in the field of health care.  The real consumers of the product aren't the ones who buy it — we don't get to pick and choose our insurer, like we do with auto insurance. 

And what about employers?  Well, they don't have much incentive for helath care cost control.  Health insurance is part and parcel of employee compensation.  If employers were to pay lower premiums, that just obligates them to play higher wages…. and vice versa.  It's a zero-sum game.

So as the proxy consumers of health insurance, employers don't have a stake in the matter.

In other words, in the free market of health insurance, there is no "invisible hand" that keeps prices low and benefits high.  There's no consituency for cost control.  Which may explain why health care costs are so ridiculously high in the first place.

All the more reason why a public option should be available.