Wednesday, January 20, 2010

The bullet we may have dodged

....with the election of Mr. Brown in Taxachusetts may be immense. How immense?

Glad you asked. This morning, I woke up to (yikes!) hear Senator Franken BRAGGING that the health insurance deform bill he's working to pass would require that payouts from health insurers be at least 85% of revenue.

That may sound good on the surface, but reality is that this will push marginal insurers out of the market (supply curve goes down) while eliminating low payment/revenue insurance plans--I'd guess the first ones to go will be high deductible plans popular among those who have figured out that they can save a bundle if they take care of their own health.

In other words, "you can keep the insurance you have" is not a promise supported by the bill currently under consideration, and if the goal is to reduce the size of the medical tsunami that's due to hit with baby boomers starting to retire, the 85% rule is exactly the OPPOSITE of what you want to do--especially if the bill also cuts hundreds of billions of dollars from Medicare funding.

Little things like this are exactly why the Democrats haven't exactly been keen on discussing the particulars of this bill, to put it mildly.


pentamom said...

In addition to what you've said, it's hard for me to believe that Franken could possibly have done the hard work of research and familiarizing himself with the workings of insurance well enough for that figure to be anything other than "85%, that sounds good!" I don't care how serious he's decided to become since being elected, I find it really hard to believe that someone could go from being an "entertainer" to someone with that thorough a grasp of policy matters in a year, while holding down a more than full time position of responsibility. Yeah, yeah, there are think tanks and staffers and whatnot to tell him this, but there are think tanks and research groups that come to quite different conclusions, as well.

Mr. D said...

A guy who couldn't figure out how to pay his taxes probably shouldn't be mandating cost structures to business. Good post, BB!

Bike Bubba said...

Bingo, bingo, and I'd actually go a step further, Mr. D.; politicians, no matter what their skill and experience, ought not be dictating cost structures at all. What is appropriate for one business may be wildly inappropriate for another.

For example, a startup insurance company's payments/revenue ratio isn't going to be at all good for a couple of years, most likely. Franken's move essentially locks new competition out of the market. Not a good thing if you're aware of how businesses tend to merge to get a horizontal integration advantage.