Monday, November 09, 2009

Will the house and senate bills raise insurance premiums and actually decrease coverage?

According to Harvard economist Martin Feldstein they may well. See his article here. Here is how that could work.

If the monetary fine for not having insurance is less than the premiums on available insurance AND a person can get insurance AFTER a medical condition occurs, a rational strategy would seem to be to not insure yourself , pay the fine and wait until you need insurance and then buy some. Is this really a major flaw in the Pelosi bill ? Will this be a flaw that will defeat some of the purported purposes of the legislation?

Economists are fond are saying that economics is largely about incentives.If Dr. Feldstein is reporting the facts of the bill accurately and unless the bill somehow repeals human nature , it appears that one of the purported aims of the "reform",namely to insure [almost]everyone will not be achieved. He argues further as to what might happen as the number of insured actually decline:

But as the number of those who are currently insured declines, a future Congress might respond by increasing subsidies to middle- and upper-income individuals to buy private insurance. More likely, it would subsidize a public insurance company--whether or not such a public option is in the initial law--just as it now subsidizes Medicare in a way that was not contemplated when the Medicare program was created.

So, it seems even if there is no public option provision enacted now the consequences of certain other provisions will make it come to pass later on anyway. So, it is a flaw or a clever ploy?

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