Saturday, October 17, 2009

The "Good Idea" Syndrome

There is no shortage of "good ideas" that can be translated into legislation. Years later these good ideas become the present day nightmares. A great example of this is the tax free status of employer provided health care insurance. This tax gimmick was inserted into law back in the days when the free market reigned in health care and,in its early years, it did not do much damage.

As time passed having a tax free benefit in health care created an arbitrage for employers. They could provide a benefit to employees that, unlike ordinary wage and salary income, would be tax free to the employee, even though the employer received the full tax benefit as if the health care benefit were simply part of ordinary wage and salary expense. As a result of this arbitrage, employers provided "comprehensive" health care plans, not "catastrophic" health care plans. If employees paid for their own health insurance (if it were not a tax free benefit provided by employers), employees would no doubt choose a catastrophic plan just as they do with auto insurance, home insurance, life insurance and all other forms of insurance that average citizens routinely purchase.

As a result of employers choosing "comprehensive" health insurance, the result is what you would expect if auto insurance were comprehensive and paid for routine oil and gas bills and tire changes -- massive and unbounded cost increases. And, of course, that is exactly what happened. Perfectly surprises here.

As if that wasn't enough to push health care cost increases to astronomic levels, the Congress went further. In the mid 1960s, the Congress passed the Medicareprogram into law. After the dramatic expansion of Medicare that occurred in the mid-1970s, it then became a fact that most Americans who use health care do not pay for it directly. They pay for it and then are reimbursed or they are reimbursed at the point of purchase.

Anytime you don't think you are paying for something, then you don't much care what it costs and that is precisely what happened to health care.

Nothing will stop the escalating and skyrocketing health care costs as long as the free market is basically outlawed by Congress, as it is with Medicare and tax-free Employer provided health insurance.

So, in essence, the Obama plan is to take the current disastrous health care payment system and extend it to everyone. Once Obamacare is in place, it obviously will bankrupt the nation if it works as proposed. So, the Obama folks and their successors will begin the process of eliminating health care procedures they don't like and promote the ones they like. They will also dictate, as a matter of law, who gets what treatment and who doesn't and when and where and by whom.

Free choice in health care will become a thing of the past.

The quality will collapse because the kind of folks that have historically gone to medical school to become doctors will abandon that pursuit and find some other, less bureaucratic profession. Being a doctor in the future will be a detested profession of low esteem. It won't pay much either.

All of this because of what seemed like two "good ideas:" tax-free employer provided health care and medicare.

Just abolishing tax-free employer provided health care and medicare (for future, not current, recipients) would solve the problem of rising health care costs and let Americans decide for themselves how to deal with their health care needs, instead of almighty government. The problems that we have now would simply disappear.

Unfortunately, such an outcome is not now in the cards thanks to Obama and his cohorts.

Beware of Congressionally mandated "good ideas." They inevitably become the nightmares of the future and are extremely difficult to reverse.