Health Care BS

As part of the health reform plan his administration has finally cobbled together after a year in office, the President proposes price controls for the health insurance industry.

President Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies.

This will be carried out by a new health care bureaucracy, the “Health Insurance Rate Authority,” comprised of seven “experts” who will decide what insurance companies can charge for their policies:

[The experts] would issue an annual report setting the parameters for reasonable rate increases based on conditions in the market.

In other words, this soviet-style central planning committee will busy itself setting price caps. For anyone who hasn’t taken Econ 101, price controls always (as in every stinking time) lead to shortages.

A textbook example of a very real shortage caused by government price controls is the primary care crisis Medicare patients are facing. About 20% of these patients are unable to find a primary care doctor.

Why? Because the government won’t allow physicians to charge Medicare patients enough to cover the basic cost of an office visit. Thus, more and more doctors simply refuse to accept Medicare patients.

What would a shortage look like in the health insurance market? It would manifest itself in the absence of companies willing to provide coverage for the ”reasonable rate” dictated by the government.

And this unwillingness of insurance companies to remain in the health coverage market will not be ameliorated by Obamacare’s provision dictating the benefits they must include in their policies.

Such benefit mandates, combined with the price controls dictated by the ”Health Insurance Rate Authority,” would increase the number of people who can’t get insurance coverage.

In other words, Obama’s new stroke of genius will actually exacerbate the uninsured problem. The stupidity of this is absolutely breathtaking.

UPDATE I:

For more on this resurrection of a bad idea, MM reminds us that she predicted this 2 weeks ago when the WH began bullying Anthem,  Cafe Hayek recalls what happened when the Beltway geniuses imposed price controls on oil, Hot Air points out that this will make the Public Option more or less inevitable and Just One Minute has what I think is the best quote of the day on this:

If price controls are the answer, I guess we have to stop comparing Obama to Carter and start comparing him to Nixon.

UPDATE II:

For the Libertarian perspective, Alan Reynolds at Cato debunks the primary claim made by the White House about this feature of its health care “reform” plan:

The thinly-veiled threat of Nixonian price controls on health insurers would drive capital out of the industry, and likely end in “cost-plus� regulations that are simply encourage higher costs.

And Arnold Kling provides a good metaphor to explain why the limited data available to any panel of “experts” is never sufficient to make this kind of top-down approach work:

Top-down health care reform is like a moon shot. You have one chance to get it right.

In other words, one serious miscalculation and the whole project crashes and burns. And there are so many obvious miscalculations in this plan that a smoking hulk is inevitable.