The New Bubble must be fed. Unlike yesterday's bubble - the now infamous U.S. housing bubble that played an integral part in ruining the world economy - we consumers cannot be accused of complicity, or self-delusion, or greed. We are not willingly participating in the bubble; we are literally being harvested to feed the bubble. Max Baucus is at the wheel of the harvester, tasked by his paymasters in the healthcare and insurance industries to legislate compulsory purchase of private health insurance and increasing governmental subsidies for the private healthcare and insurance industries that will inevitably feed the rampant healthcare inflation that has raged unchecked for more than three decades.
The public option is the only option that can effectively bring healthcare hyperinflation under control. That is why the healthcare and insurance industries are paying millions to buy Congressman who will block meaningful healthcare reform.
The housing bubble was a classic bubble in the sense that it was fueled by demand, demand created by the expectation of rapid appreciation of housing assets, which appreciation was fed by nothing more than...the increased demand. The demand was financed by making ever riskier mortgage loans, an insane assumption that the appreciation in housing prices could continue indefinitely, and the myth that credit default swaps could effectively diffuse, if not eliminate, the risk inherent in these risky mortgage loans underwritten on the basis of fantasies.
The healthcare bubble is a different, more frightening kind of bubble. Quite simply, there is no demand to feed the bubble. To the contrary, demand for health insurance coverage has been declining for years as a result of the ever increasing cost of health insurance premiums. Not only has the number of uninsured increased, those with insurance coverage have been purchasing policies with less coverage, i.e., higher deductibles, higher co-pays, more caps on coverage, and greater exclusions. Demand must be created to feed the healthcare bubble, and so Max Baucus has graciously complied with the insurance industry's demand for mandates - the compelled purchase of private health insurance. In a market already marked by a huge disparity in bargaining power, the option individuals have to forego purchasing health insurance will now be eliminated altogether. The number of uninsured will indeed go down, at least initially, but the rate of inflation in healthcare insurance premiums will increase.
In an efficient market, rapid inflation could not co-exist with falling demand for very long; continued price inflation would create a spiral of falling demand that would ultimately arrest inflation. But the healthcare and healthcare insurance industries are the antithesis of efficient markets. The cost of healthcare in this country has been increasing at more than double the general inflation rate, and healthcare insurance premiums have been rising faster than that. Between 2000 and 2007 the profits of ten of the largest health insurance companies in the nation increased by more than 400%. But the healthcare and insurance industries have compensated for falling demand by using their influence in Congress to create government subsidies. The most absurd subsidy is the subsidy Medicare pays to private health insurance companies in order to participate in the Medicare Advantage program. The only problem was that private insurance companies couldn't compete with Medicare, and so Congress agreed to have Medicare pay a subsidy to private insurance companies of approximately 12%. And the very same Congresspersons who backed this absurd subsidy that increased the cost of Medicare then went around complaining that the cost of Medicare would bankrupt the nation!
Other examples of Congress throwing money at the healthcare and insurance industries abound, including the disastrous Medicare Part D drug coverage program. The healthcare, insurance and pharmaceutical industries love the program, and why wouldn't they? Their lobbyists trailed Tom DeLay around the House floor in 2003 as he held open voting for three hours while representatives - republican and democrat alike - were bribed and threatened into changing their votes. In the end, the legislation prohibited Medicare from negotiating for lower drug prices, prohibited reimportation of drugs at prices lower than domestic prices, and created a massive $12 billion subsidy for HMOs, insurance companies and the pharmaceutical companies.
Now our government, unwilling to raise taxes a dollar to finance the near-term costs of establishing a meaningful public option, and under pressure to direct spending toward the Stimulus Package rather than ridiculous subsidies of enormously profitable industries, has decided to cut out the middle man - the government. Rather than taxing you to subsidize the healthcare and insurance industries, the government will simply COMPEL YOU to purchase private health insurance and FINE YOU if you don't. The good news is that the policies will not include lifetime or annual coverage caps, will guaranty renewability, eliminate "pre-existing condition" exceptions and cap co-pays and beneficiary out-of-pocket expenses. The bad news is that these kinds of coverage restrictions were the only thing exerting any pressure against rampant inflation in healthcare insurance premiums. The cost of purchasing policies without these limitations will be exorbitant.
Between compulsory private healthcare insurance and mandated expansion of policy coverage, the cost of premiums will now explode. Inflation in the cost of employer based health insurance premiums was 120% between 1999 and 2007 - nearly three times the general rate of inflation and more than FOUR TIMES the increase in wages. Again, this occurred even though employers were negotiating group policies that increased deductibles and exclusions and increasingly imposed lifetime and annual caps on coverage. If Baucus's plan is adopted we will see an explosion in the rate of health insurance premiums. As a matter of basic economics, it is simply preposterous to believe that Baucus's forced increase in demand for health insurance could do anything other than increase the rate of inflation in premium costs, swamping any possible savings from increased efficiency, or standardized forms, or improved medical information technologies.
Baucus's plan exacerbates the very problem that has created massive uninsurance and underinsurance in this country over the last three decades: the exploding cost of healthcare. Even though purchase of private health insurance will be compulsory, rising costs will cause the number of uninsured to continue increasing after an initial and temporary decrease. Indeed, even Baucus recognizes this, and the measures Baucus believes may be necessary to coerce people into buying private health insurance are simply macabre: compelling people to enroll when they go to an emergency room, or as a condition to enrolling their children in school. That's right, in Max Baucus's mind we don't have enough disincentives for the uninsured to seek treatment. In Max Baucus's mind, your child's education should be held hostage to health insurance industry profits.
In the view of Max Baucus and his insurance industry paymasters, we are not really human. In their view, healthcare and insurance do not exist to serve our needs, we exist to be harvested for their profits. We are nothing more than consumption devices, and when we can no longer consume because our incomes have been depleted then we are forced to consume by Congress, like ducks or geese being force fed to make foie gras.
We are literally being harvested by Congress and the healthcare/insurance industries. We exist only to sate their rapacious demand for profits. We have gone from being consumers to being the consumed.
The public option is the only option that can bring healthcare costs in the U.S. more in line with the rest of the world. The negotiating leverage of a public plan representing tens of millions of Americans and available to all Americans is the only means of introducing meaningful competition into the healthcare market. The efficacy of a public plan in constraining healthcare costs is not theoretical or speculative: public plans or variations thereon are the means used by every other developed nation to insure ALL of their people for FAR LESS money than we spend here in the U.S. And that's why they live longer, why their newborns die less often, and why they are less susceptible to preventable disease.