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Death Spiral

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"Death Spiral"

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Jonathan Cohn has a very informative article on the Obama health care plan and the mandate debate. He sums up the case for mandates thusly:

Still, the most important rationale for a mandate may be a more practical one: It’s necessary to keep other reforms from unraveling. If you make insurers sell to everybody, even people with pre-existing conditions, but let people choose whether or not to buy it, people in good health will be more likely to wait until they’re sick before buying coverage, figuring there’s no point in forking over premiums while their chances of needing care are so low. This will cause a chain reaction. As healthy people opt out, insurance programs will be left dealing with a population of sicker and sicker people. Since insurance relies on contributions from healthy people to offset costs from sick, it will become more expensive–which will cause even more healthy people to opt out. The cycle will repeat over and over again, with the cost of insurance going up and enrollment going down. Wonks call this the “adverse selection death spiral.” And it’s hardly theoretical. By the late 20th Century, most of the nation’s Blue Cross plans had stopped offering insurance to all comers, regardless of pre-existing condition, because their competitors–who didn’t make the same generous offer–had stolen away all the healthy patients.

Now in my view promoting a death spiral among private sector insurance companies could be a good thing if the intention was to kill ‘em off and move people into an alternative public mechanism, but unfortunately I’m pretty sure this isn’t what Obama’s driving at. And there’s the rub. I like Obama and I don’t really like the mandate fad. And Obama doesn’t like it either. But all indications are that his team doesn’t come to this conclusion from the same direction I do, and his proposals are as bad as Clinton’s in terms of a misguided focus on taming private insurance firms rather than destroying them.

John Edwards, who’s publicly hinted around about his plan as designed to put us on a slippery slope to the bountiful world of socialized medicine, is a clear winner here in my view.

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