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Monday, June 08, 2009

Being Distracted by Appearances

A widely noted feature of the health care reform plan being developed by the Democrats is a health insurance agency to be operated by the federal government in competition with private health insurance companies, including Blue Cross Blue Shield.

The proposal speaks to the general perception that health care can be reformed by reforming health care insurance. The source of that perception is not so hard to identify. For most people, the cost of health care is the cost of health insurance, which keeps rising year by year. Attempts to rein in the use of health care services take the form of the health insurance company refusing to pay, which infuriates both patients and providers.

Health insurance companies also get a bad name by trying to hold down their cost by not insuring sick people and by cancelling policies on people who get sick.

It is also true that private health insurance pays providers more than do Medicare and Medicaid. But I have not heard critics suggest that private health insurance should pay providers less.

Unless that is the argument, there is no basis to conclude that health insurance companies are the cause of health care costs being out of control. The health insurance market is highly competitive and any company that can devise a more attractive package of benefits or find ways to operate more efficiently would be quick to do so.

No doubt there are better ways to regulate the health insurance industry so as to mitigate some of its objectionable practices, but people should not deceive themselves by believing that doing so would have any significant effect on the cost of care.

It is the cost of providing the care itself that is driving up the numbers, not the cost incurred by the health insurance companies.

Aside from its merits or lack thereof, the proposal for a federal health insurance company reveals how easily we can be distracted by appearances.

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