So why won't competition work for health insurance?

The right-wingers claim that competition would reduce the cost of health insurance. To which I have a simple, succinct, one word answer: Bullshit.

To put it simply: Health care is expensive, and insurance companies have no control over how much health care costs. That is determined by the patient, the doctor, and the cost of the technologies involved in modern medicine (as I explained in my post on 'Why is health care so expensive?'). Given this, there are only two ways an insurance company can charge less than other insurance companies while retaining the profit margin that investors demand:

1. Kick sick people out so that they don't have to disburse as much money, or
2. Deny claims so they don't have to disburse as much money.

That's it. That's the only two ways an insurer can reduce their costs while retaining the profit margin that investors demand. So if we went to a completely unregulated "competition-based system" like the right-wing is always touting, we'd end up with a) only young, healthy people being offered insurance by insurance companies, and b) most claims for rare but expensive illnesses (such as coverage for $1M leukemia treatment) automatically denied in order to keep insurance rates low. And if we regulated it to avoid points 1 and 2 above, competition would result in no overall decrease in costs, because insurers don't control costs, just payments.

In short, if our goal is to provide health care for everybody, and to pool money to cover rare but expensive illnesses such as leukemia when they happen, "free-market health insurance" is an oxymoron -- it simply is incompatible with those goals. That is why employer-provided health insurance is heavily regulated today in order to mandate that insurers can't kick out sicker/older people and can't arbitrarily deny coverage to expensive illnesses -- we found out the hard way that points 1 and 2 above are what happens if we rely on an unregulated free market for health insurance.

If our goal is to provide content-free buzzwords for use by ideologues pushing imaginary solutions to real problems, on the other hand, "free market health insurance" works quite well indeed. It's got all the right buzzwords and rolls well off the lips. It's bullshit, of course, but then, so is 99% of what you hear from politicians or on TV, so if you're an ideologue pitching nonsense, the majority of Americans (who, remember, don't even seem to know that Medicare is a government healthcare program) won't be able to tell the difference anyhow, so why not? Of course, it's horrible public policy and would result in tens of thousands more Americans dying per year, but let's not let facts get in the way of a cool sounding talking point, right? Right?!

-- Badtux the Health Care Penguin

Below: Democrats demonstrate their posture on health care.
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