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Health Care

Predictable Consequences, part II

Richard Adams explains why one of the unintended consequences of the recently-passed health care reform is likely to be a rise in medical tourism.  Here is one more, courtesy of economist Steven Horwitz:

Requiring that insurance companies cover people with pre-existing conditions is like asking an auto insurer to cover a car with demonstrably bad brakes.  That is, it's not so much insurance as it is an outright subsidy.  Larger firms will probably be able to afford this, particularly with the individual mandates, but smaller ones will be pushed to the wall.  The result will be an oligopoly.  Of course, for most liberals the bill is only supposed to be a way station on the road to a single-payer plan, so they might not see this as a problem.

Categories > Health Care

Discussions - 1 Comment

I've been driving insured cars in this country for almost 40 years and none have ever even asked about the brakes. So yes, auto underwriters are required to insure all cars.

The point of insurance is to spread risk. If either side has a disproportionate amount of power in the relationship then the transaction isn't what economists call an efficient transaction. The same is true if one side has an asymetric access to relevant information.

Allowing insurance companies not to cover pre-existing conditions (which they now have to do but only for employer paid plans) is their defense against healthy people not signing up for insurance till they are likely to get ill. If you empower both sides in this you get a lot of people who can't afford insurance and health care. If you dis-empower one of these aspects you have to dis-empower the other for the risk to be spread properly.

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