In The Washington Times, Cheryl Chumley tells the 2008 story of her husband’s sudden illness and brush with death. Her insurer at the time, Blue Cross Blue Shield, didn’t deny any bills, even though the doctors keeping her husband alive told the family to prepare for his imminent death.
It was a few months after my husband left the hospital from his heart attack that we ran into one of the nurses who cared for him — at a presidential campaign event, no less. One chat led to another and the subject of socialized health care was raised. And this is what the nurse said: Had my husband been on Medicare or Medicaid at the time of his heart attack, the doctors would have quit their life-saving efforts long before his 10 comatose days had ended. Why? Because the government health care plan wouldn’t have paid for the around-the-clock intensive care. The situation would’ve quickly evolved into a pull the plug, wait and see what happens type of deal.
It occurs to me that, in a competitive market, of course this would be true. The insurance companies are selling insurance, which means everybody who buys insurance is thinking of these sorts of horrible circumstances. If it gets out that a particular insurance company doesn’t cover them, then the value of insurance for that company and generally goes down.
So, it’s in their interest to accurately price risk so as to charge a rate at which they can maintain their value proposition. They do this with a mix of pricing features, including premiums, deductibles, and maximum out-of-pocket limits. A consumer with a low tolerance for risk may choose to pay a high premium, while one who wants to save money understands that risk is part of the equation.
Central planning is a completely different thing. In that scenario, supposed experts are figuring out how best to distribute resources. They don’t have to have attractive products, because nobody has a choice. ObamaCare’s hybrid system of planning and choice transforms the insurance incentives into hiding costs, not accurately assigning them.