Another Preview Of What's In Store For Us

OK, run this by me one more time.

How is it by eliminating competition in health insurance (i.e. ObamaCare) we'll miraculously see a decrease in health insurance costs?

I haven't figured out the logic of this belief, yet both the federal government and the state of California are pushing it for all it's worth. Never mind that the federal program is full of so many holes, traps, and taxes that there's no way it will do what its creators says it will do. Never mind that California is, to all intents and purposes, insolvent and has no way to actually pay for their version of ObamaCare.

In a matter of days, California will set a precedent for the future of the U.S. individual and small-business insurance markets via ObamaCare's "exchanges," where people will purchase coverage at heavily subsidized rates. The exchanges don't start up until 2014, but the states were given wide bureaucratic latitude in how they're run, and Sacramento is using this flexibility to convert them into a pretext for imposing de facto price controls on the insurance industry.


The most dangerous precedent in the California plan is known as "selective contracting." Under ObamaCare, all benefits will be mandated and standardized at the federal level, so all individual and small business plans will be essentially identical except at the margins. Those margins include their brand names, the hospital-doctor networks they've set up, the size of their book of business as pricing leverage and so forth.


The California plan passed the legislature in August with the support of soon-to-depart Governor Arnold Schwarzenegger, who will sign them before the end of the month. The overwhelming sentiment among the authors we spoke with is that the brute force of limiting the number of plans will lower costs. "The only way to drive price, to drive value, is the power to say no," as one of them told us.

In other words, less competition is the best way to drive down costs.

That last line sums up the delusion from which the Democrats in California and Washington DC suffer. Since when have price controls or less competition ever lead to lower costs for the consumer? I can tell you when: NEVER.

They have fallen into the age old trap of assuming they can control prices from afar, short circuiting the necessary feedback mechanisms and pretending market forces are irrelevant. But time will show that mistaken belief to be wrong. Unfortunately the damage will be done, health care will be severely damaged as both the quantity and the quality of it will decrease as providers are priced out of the market. Some providers will close their doors and follow some other career path. Others will merely pull up stakes and set up practices just across the border in Mexico or on one of the Caribbean islands and provide medical services without the need to deal with health insurance or severely restrictive federal government regulations. And they'll be able to provide top notch health care for a fraction of the costs of those within the US.

It will be the Law of Unintended Consequences writ large and tattooed across the foreheads of every Democrat that voted in favor of that stinking-like-a-dead-mackerel piece of legislation called ObamaCare. And we'll be able to watch the health care meltdown happen in California...just like it's happening in the People's Republic of Massachusetts right now. It will be a preview of what's to come for all of us – worse care at higher costs, if it's available at all.