“I WISH YOU HEALTH, AND MORE THAN WEALTH, I WISH YOU LOVE…”

While I am generally favorably disposed toward Representative Paul Ryan’s plan to reduce government spending by $6 trillion over the next ten years, one has to wonder how much thought was put into one of its major components, the reduction in spending on Medicare for those my age and younger.

Mr. Ryan proposes giving us a premium support payment (terminology used presumably because “premium support payment” sounds better than “voucher” after the teachers’ unions have beaten up on the latter term for the last thirty years or so, but I digress) of $8,000, presumably in today’s dollars, starting in 2022. We can then take that $8,000 and choose from a variety of plans participating in an insurance exchange of the type Mr. Ryan so detests when they are part of the Obama health plan. While $8,000 is far less than the $11,743 Medicare currently spends on each senior, Mr. Ryan depends on the miracle of the marketplace to bring down premia since so many insurance companies will be competing for the seniors’ business.

Hmm…

While I am a firm believer in the miracle of the marketplace and spend a large portion of this blog decrying efforts of government enthusiasts of both parties to squelch the workings of the free enterprise system, I am quite sure such miracles will not take place in the health care industry, and especially in delivering health care or, more properly, health insurance, to seniors. Why? Given the aggressiveness with which insurance companies deny coverage to those with preexisting conditions, many, if not most, seniors are uninsurable, according to insurance company definitions and preferences. Therefore, one has to doubt that insurance companies will be lining up to participate in Mr. Ryan’s exchanges to insure those deemed uninsurable. With a limited number of participants, the marketplace has a hard time working miracles.

This points out a larger problem with the medical insurance marketplace, i.e., the market does not work well, if at all, in this market, and certainly not in the marketplace for individual insurance policies. Why? Once one has what the insurance companies deem a preexisting condition, one has little latitude to participate in anything remotely resembling a market. Even if one can get insured, one is locked into that insurance policy, since no one else will insure him, regardless of the abuse his current provider chooses to heap on him in the form of higher premiums, higher deductibles, denial of coverage, etc. From the other direction, if insurance companies are allowed to legitimately underwrite, anyone with a preexisting condition (e.g., most senior citizens) will be unable to get coverage, and, by the way, legitimately so. No one can make money providing insurance when premium and investment income do not exceed outlays for claims. On the other hand, if health insurance companies are not allowed to underwrite, an activity proscribed by the Obama plan and, probably, as more details come out, by the Ryan plan, then we have effectively ditched the free market in favor of coercing insurers to write insurance at a loss. How does that differ from government coverage in anything but the most ethereal of forms?

One would think that Mr. Ryan and those who have helped him design his plan would be aware of this, but maybe not. Mr. Ryan, as far as anybody knows, has never purchased an individual health insurance policy but, instead, has obtained his health insurance through his employer. In the case of Mr. Ryan, the latest most vocal champion of free enterprise to emerge from the modern GOP, and most of those who helped design his plan, that employer has been either the federal government or some state or local government. Such is the low and absurd state our system of governance and political discourse has reached.