Voluntary Requirement

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As founding treasurer and director of American International Group, my father is turning over in his grave at the shenanigans of AIG’s finance arm and the entire company’s subsequent government bail- out. But the proposed Obama plans for the health insurance industry- and New Jersey’s actual fiasco – have probably flipped him over so many times I have no idea which way he’s poInting now.

As you may already know, Obama would like the federal government to offer cheap, affordable, and voluntary health Insurance In the hope that the 47 million uninsured will suddenly see the light and join the plan. Problem is, accord- ing to Michael Tanner of the Cato Institute, the government could price its policies so cheaply that it would crush its competitors.

Right now, according to The Economist, hospitals enjoy a 48% profit margin on privately insured patients but suffer a 44% loss on Medicaid patients. The privately insured patient~ cross-subsidize the government insured. If the privately Insured stampede to join cheaper government insurance programs, hospitals will be squeezed and have to cut back. Expect European-style queues and rationing if the pro- posed program materializes.

But New Jersey, always in the vanguard of economic moral hazard schemes, is already bankrupting the health insurance business. By passing a law requiring that insurance companies deny coverage to no one, in spite of any preexisting condition, they’ve Incentivized the population to defer or drop existing coverage. Mayas well wait till you get sick to buy Insurance.

Of course, the elephant in the room is every state’s statutory requirement that hospitals refuse treatment to no one, regardless of their ability to pay. If Nevada had a similar law requiring prostitutes to take on all comers, would we call it rape?

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