Conservative Blog Post for October 13, 2009
‘Duh’ Economics
Democrats this morning scrambled to contain damage resulting from release of a report highly critical of the health care takeover plan currently being debated in the US Senate. The report – paid for by the Insurance industry and undertaken by highly respected Price Waterhouse Coopers – claims that the current plan would drive costs for an average individual up by at least $600 per year and would result in additional premiums of $1,700 per year for family coverage by 2013.
This prediction drew the predictable Democrat reaction. “Hatchet Job,” said a spokesperson from Senator Max Baucus’ (d-MT) office. “Fundamentally Flawed” added AARP. Without specifically addressing the reasons the study was flawed or incorrect, liberals proceeded with their usual method of handling dissent – impugning the motivations of the messenger. “Insurance Company and Industry Greed,” seemed to be the central theme coming from Congressional Democrats.
Price Waterhouse Coopers has been crunching numbers well before Barack Obama was riding the waves and attending his private high school in Hawaii. The well-respected firm wouldn’t put its professional reputation into the cross-hairs of the Democrat party character assassination squads unless it was absolutely sure of its position – regardless of who paid for it. Despite what Democrats claim, corporate integrity is alive and well in the US.
The study identifies three central economic themes that Democrats can’t seem to grasp. So for the purpose of identification, we’ll call these ‘Duh’ principles . Leftists who reject or can’t understand the principles of Economics just won’t get it, but perhaps the use of ‘Duh’ can shame them at least into listening.
‘Duh’ Principle 1 – Additional requirements placed upon an industry drives up costs to providers.
As the Price Waterhouse Coopers study points out, heaping more responsibility on the industry will result in rapidly escalating costs to those organization that currently provide insurance services. The only thing difficult to understand here is why Democrats have such a hard time understanding.
Covering pre-existing conditions – although perhaps a noble objective – requires the industry to assume payment responsibilities for conditions they do not currently have to cover. Does this increase their costs? Of course it does! There are a myriad of new requirements in the proposed legislation under consideration in both houses of Congress as well. Each will drive up provider costs.
‘Duh’ Principle 2 – Higher provider costs means higher prices for consumers.
Will these new requirements directly increase costs to consumers? It better or the company will soon fail. Every organization must generate a profit for its shareholders or owners to remain viable. It also may be that the government intends for insurance providers to fail so that the government option – or complete federal takeover of the insurance industry – will become the only remaining course.
When Democrats can’t tax value from an offending group or industry, they typically resort to adding costs and responsibilities to somebody else. Astonishingly, the Democrat theme is that shareholders – not customers – absorb cost and tax increases. As shareholders are viewed as members of the oppressive wealth class, this is an acceptable course.
Shareholders can’t operate any business without a respectable profit margin. They will compel the organization to pass on any additional costs to consumers. And if all insurance providers must meet the same new set of requirements, all insurance company prices will rise concurrently. There will be no advantage in moving from one provider to another. One additional note on shareholders; most of these folks are average Americans that own portions of health provider companies as part of their stock holdings or 401(k) plans. These aren’t rich New Englanders (like the Kennedys and Kerrys) who spend their summers on Martha’s Vineyard.
Unfortunately for them, Democrats are going to get blamed for rising health care costs at the same time service levels to customers will decrease. As there are no Republicans around to blame, Washington lefties will have to face public wrath on their own. So what are they to do? There really is only one option – which the left will never accept.
‘Duh’ Principle 3 – Only by decreasing operating costs and lowering risk can the cost of health care be reduced.
In addition to dumping service requirements on the health care industry, Government can influence the cost of doing business in only two additional ways; setting legal standards and taxation. Democrats have allowed the legal industry to drive the cost of American health care well above the rate of inflation. Risk of being sued is a primary financial consideration for every medical professional. And although nearly all Americans agree that fair compensation should be paid to victims of malpractice, the punitive damages – those damages that are awarded to a victim and his attorney as punishment for a wrong doing – are out of control. John Edwards has a mansion and a mistress as proof of how much money the legal industry bleeds from the misfortunes of others.
Physicians must limit their exposure to lawsuits by ordering every test, exam and treatment imaginable for each patient – regardless of the likelihood of success. This is termed ‘defensive’ medicine, which provides only marginal benefit to the patient and significantly escalates cost to the provider. A legal reform effort that would limit punitive damages but leave actual damages up to court discretion would be hugely helpful in lowering the cost of doing business in health care. And lowering costs allows physicians and insurance providers to compete for customers with better rates. Unfortunately, the American Bar Association and the legal community is a primary owner of the Democrat party and will never allow their ability to leech a huge income off the misfortunes of others to be restricted.
Increased taxation only elevates costs to the provider and applies further upward pressure on the price structure. Upward pressure applied to the entire industry only raises internal costs, and as we have already seen raises costs to consumers.
So the three ‘Duh’ Principles of Economics are obvious to all who look, read and research the health care issues. Democrats who live as ostriches or only watch CNN, continue to believe that laws of economics do not apply to them or their policies. And even though consumers may be gullible for a while, consumers can add and subtract. When they see their costs outpacing their ability to pay, Democrats will be held accountable.
