Whenever government takes over an industry, regardless of which country or which sector, shortages will soon follow. This is because the free-market mechanism has been altered due to regulation, legislation, nationalization, or perhaps due to antitrust laws. More often than not we see this in socialized countries. We see it United States with utilities, and other so-called “natural monopolies” also. In fact, we’re seeing it right now with ObamaCare. Although we haven’t seen the shortages yet, we will, there are already signs.
There have been a number of mergers with health insurance companies, hospitals, HMOs, and medical device companies as everyone readjusts to the future Affordable Health Care Act. When there are shortages the price goes up, and when the price goes up too much, the government will institute price controls. One only has to look at the history of governments meddling in business, industry and economies to see this is true.
Now then, there was an interesting piece in the Wall Street Journal on August 13, 2013 titled; “Flood Insurance Prices Surge – Law Passed by Congress Before Sandy Is Causing Sticker Shock – and a Backlash,” by Siobhan Hughes which noted that; “the $24 billion cumulative loss for the National Flood Insurance Program.
The government says they have no choice but to raise the price. Isn’t that interesting? If it were left to the private sector the price would eventually fall in line, and it would be reality based. It would be based on risk, region, and the potential for a real flood, overflowing river, early ice melt, tsunami, storm surge, or what have you. Insurance companies are not stupid, they do their homework. They use the same ERSI software that the GIS experts working in government and their consultants use. They also use the same map when it comes to probability and risk.
Okay so, perhaps you can understand why I find it fascinating that the government is raising prices when it provides the insurance, but wants to institute price controls further exacerbating the challenges they’ve caused by manipulating the free-market system when it comes to the Affordable Health Care Act. If you ask me this is a bit of hypocrisy, but that’s how government does things. Recently the Kaiser foundation had done a study about the increase in health care insurance plans, showing that they have and will continue to increase. How can they not, I ask? And Kaiser went mellow on the recent price increased and future estimated costs (I believe underestimating it all by a factor of 30).
Still, the government has told health insurance providers that they may not charge more than 20% for the administration of their healthcare plans, and they must spend at least 80% on actual medical services. Really? The government usually spends 45% of whatever it gives out in administration costs. Meanwhile the government tells the insurance companies how to run their business, using approved methods, designed by the same government which cannot possibly live with its own mandate of only 20% administration costs.