17 Oct 2009

Assuming a Can Opener?

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Something is screwy in the health care debate. Advocates of “reform” keep repeating a point that doesn’t make sense to me. I’ll quote Krugman, but others are saying it too:

As I said, the individual mandate probably should be stronger than it is in the Finance Committee’s bill. But there’s a reason the mandate was weakened: fear that too many people would balk at the cost of insurance, even with the subsidies provided to lower-income individuals and families. So why not address that cost?

Aside from making the subsidies larger, which they should be, there are at least two changes to the legislation that would help limit costs…

OK Krugman didn’t say the point as clearly as I’ve heard others doing it on radio. The argument goes like this: We need to get more people paying into health insurance, to make it viable. Otherwise the system is going to go broke. But, a lot of the people who aren’t currently insured, can’t afford the premiums that we’d need to charge them in order to make the system viable. So, we’ll have to subsidize them.

Am I missing something? That doesn’t make any sense to me. How do you make a system viable by bringing in people that you have to subsidize?

I suppose it’s a form of price discrimination, where really the government is still extracting a net payment from the currently uninsured. I.e. we’re going to fine you $1000 unless you pay your $2500 premium for the public option, but oh if you’re too poor then we’ll spot you $500.

So really, it’s just a fancy way of saying, “If you’re poor you can pay $2000 for the public option, or get fined $1000.”

Yet that’s not the way it’s being framed, at least on public radio. There they are talking as if giving subsidies is a magic way to reduce costs.

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