Tuesday, June 21, 2005

Unintended Consequences…

It is axiomatic that demand drives price. That is, if there’s a particular item that is greatly sought after, the price of that item will (almost) inevitably rise.
At least until something better comes along.
At which point, the cycle starts again.
And so it is with health insurance, as well. Sure, there are risk factors and market pressures, underwriting issues and pre-existing condition exclusions. But by and large, insurance is subject to the whims of the marketplace.
Until now:
Gov. Mitt Romney doesn't just want to make health insurance universal. He wants to make it compulsory.” In fact, he goes further: "Everyone must either become insured or maintain an adequate savings account to cover their medical expenses." (fop cit)
Now, this may sound like a good idea, but let’s examine the consequences of such draconian measures. When something becomes mandatory by law, it has several effects:
First, people do vote with their feet. Those that rebel at the notion that the gummint is once again intruding into what should be a personal buying decision may well just pick up stakes, and vamoose.
Second, if something becomes mandatory, then the demand is, of course, going to go up. Given that that are a finite number of carriers, with a finite capacity for new business, prices will start to climb, and eventually become even more onerous than they are now.
Third, what about those that either don’t want to purchase, or can’t qualify for, insurance. Well, then, they’ll have to post a bond (or demonstrate that they have sufficient assets) to cover their medical expenses. Which is fine if we’re talking about the flu or a broken arm, but becomes problematic when we’re talking stroke or MS.
Fourth, and perhaps most critical is: “Or else what?” It’s one thing to mandate that folks buy coverage (or put aside funds), but where are the teeth? Is he proposing jail-time for “offenders?” Maybe a fine for those who underfund their accounts? Without some enforcement mechanism, such a law is worse than worthless: it’s a step backward.
Mr Romney would do well to remember that old admonition: Be careful what you wish for…
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