Wednesday, January 24, 2007

Little late on Health Care...

The state of the union speech is normally useless for political junkies. The speech is released to the press in sections which causes columnists write about it, reporters to report it, and pundits to pontificate on something that hasn’t happened. Axis of Evil proclamations not withstanding, the speech is very anti-climactic.

The predictable nature of the event makes it slightly more important than playing video games but definitely doesn’t rise to the occasion of a football game or The Office if they aired simultaneously. It rises above video games only because there is usually one golden nugget. This year’s golden nugget award goes to…tax deductions for personal health insurance.

While the details will change, the overriding theory is the best practical solution that has seriously been floated in a long time. As I have written about in the past, a major problem with health insurance is the lack of market forces. People do not shop for insurance.

States compel insurers to cover procedures that they deem necessary (in all their wisdom), and do not allow people to shop for policies in other states that may not have the same mandates. The lack of wiggle room creates a deficit of innovation and product diversity which results in higher prices. These higher prices make it unfeasible for either self employed or unemployed people to buy. They are instead encouraged to forgo the immense costs of insurance and use their money on something else. Hospitals are forced to threat the uninsured and recoup the difference by charging higher rates to paying customers. The higher prices cause insurance companies to charge more which causes employers to either charge more or drop coverage. It is a vicious cycle.

Promoters of universal health care recognize this problem also. The difference is that freedom fighters want the government’s hands off the private insurance industry while government lovers want to eradicate the private sector from the equation.

Bush has sided with the freedom fighters but, as the Wall Street Journal states, it is a little late. This would have been an easy win two years ago. The plan favors the poor (they will be able to deduct a set amount regardless of price), and frees employees from being controlled by their employer (or you can insert your favorite Marxist psychobabble here if you prefer) which are easy compromises for many Democrats.

This is the product of poor timing:

“Ways and Means Chairman Charlie Rangel was quick out of the box to call the President's idea "a dangerous policy that ultimately shifts cost and risk from employers to employees."

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