Around the Horn

It's a shakedown cruise
And I was just another tool
There ain't no easy way out
They're gonna shake you 'til you shout
--Jay Ferguson

In his renewed efforts to push his health care plan thru, President Obama has once again targeted his rhetoric on the health insurance sector. Demonizing sectors to jam thru government programs has at least a century's worth of history behind it here in the U.S.

The president seems to be banking on the lack of reasoning capacity of American citizens. He paints premium increases by insurance companies as bad without taking a balanced view of the situation. Let's offer a couple here that are unlikely to be offered by the president.

Cost shifting. About 40% of health care expenses in the U.S. are covered by Medicare/Medicaid. Providers (hospitals, docs, pharmacies, etc) bill Medicare/Medicaid patients at the governent's reimbursement rate. These prices are fixed below the market. If you're a provider, how will try to recover those losses? You'll jack up the prices to the non Medicare/Medicaid sector. Higher private sector bills mean higher private sector premiums. 

Regulation. Health insurance companies operate under a mountain of regulations and oversight, including restrictions in doing business across state lines. The dirty little secret about regulations from a strategy standpoint is that regs generally reduce competition--which benefits incumbent operators. For instance, complying with government regulations is a large expense; high costs discourages entry. Less competition reduces motivation for improvement and innovation.

Clearly Mr Obama hopes people do not think the situation thru. And based on the historical success of demonization strategies perhaps he's placed a good bet.

However, if citizens do apply their reasoning capacity to the situation, they'd conclude that root causes for current health care concerns can be traced to past government intervention in this sector.