Don’t They Teach Economics In School Anymore?

By Liz Handlin

Recently I have seen a lot of news coverage about the various democratic presidential candidates? plans for overhauling the U.S. healthcare system. Hillary Clinton?s plan seems to be getting the most air time and I have to say that every time I hear her talk about this ?great plan? she has I start feeling a little ill. Didn?t she take an economics class somewhere along the line? What about all the talking heads on TV? Why don?t they question her plan about the problems it will cause for small business owners and to employees of small businesses?

Background

Many Americans seem to feel that healthcare is an entitlement rather than a service, like any other, that is purchased based on our ability to pay. When I hear the talking heads on TV talk about how the U.S. healthcare system should be more like the U.K. or Canada I wonder if anyone considers why wealthy individuals from around the world flock to the U.S. when they have serious health problems? Because our system, while expensive, is the best. It is the best because the U.S. is on the cutting edge of drug and medical research. Certainly you can get free healthcare in some other countries but if you are really sick you may not get the best care available. You get what you pay for.

When political candidates talk about ?problems in the healthcare system? they always trot out a cancer ridden patient who has gone bankrupt to pay for his/her medical care as an example of how the U.S. healthcare system is failing. The truth is that any seriously ill person, no matter how rich or how poor, will have to pay for some treatments from his or her own bank account at some point in the process. Insurance coverage doesn?t equal free medical care.

I have always thought that the problem with the U.S. healthcare system (if you accept that there is, in fact, a problem) is the insurance companies. Think about it. Insurance companies exist to earn a profit for their shareholders and since most of the big insurance companies like Allstate and Blue Cross & Blue Shield are publicly traded that means that they are subject to the demands of Wall Street. In order to earn profits for shareholders insurance companies need to minimize the amount of money they pay out to the folks they insure.

In contrast, most individuals would like to believe that insurance companies exist to provide a safety net for the folks they insure. I would submit whether we like it or not – insurance companies are simply businesses that earn profits for their investors.

If you, as an employee, are covered by an employer-sponsored insurance plan at a big company like IBM, GE, or the Federal Reserve System you are probably paying a relatively low monthly premium and you can feel safe from getting dropped from your insurance plan if you get really sick. Small employers and sole proprietors who purchase health insurance on their own pay much higher premiums than employees of large companies. Small business owners and sole proprietors also run the risk of getting dropped by their insurer if they actually become seriously ill.

Why do insurers sometimes drop their sickest clients? Because it costs a lot of money to pay for medical treatments and if an insurance company pays too much money out it will reduce profits realized by investors. And their investors won?t be happy.

Oh, and before you blame doctors for being ?too expensive? remember that they are required by law to carry malpractice insurance which significantly increases the cost of the services they offer to patients. Hospitals are in the same situation. Why do you think an aspirin at a hospital can cost a patient $9? Costs of every service and drug provided to hospital patients increases in proportion to hospital?s cost structure (salaries for doctors, nurses, administrative staff, electricity, water, and insurance coverage to name a few).

Proposed solution:

What is Hillary Clinton?s answer to this problem? She wants health insurance to be required for every individual in the same way that car insurance is required for all drivers. Apparently she believes that individual lives are as dangerous to society as individual drivers who traverse the roads in 2 ton automobiles.

Hillary wants to require that every American purchase health insurance and that every small business owner offer health insurance to his/her employees. That includes seasonal businesses like restaurants on Martha?s Vineyard or surf shops in San Diego. Under her plan insurance companies would have to offer plans priced ?affordably? (how will ?affordable? be defined?). There would be penalties for anyone who chooses not to purchase health insurance. Hillary must think that Americans are too stupid to purchase health insurance on their own so she figures she will just force us purchase insurance and that will solve all the problems with healthcare. Typical of a ?big government is better than small government? thought process.

Problems:

Where do I start addressing all of the problems with her ?plan?? First of all it should be noted that Hillary is receiving more campaign contributions from the insurance industry than any other democratic candidate. What a shocker.

If insurance companies were providing insurance plans that were affordable and appealing to consumers the market would support those plans. What I mean is that if the product was one that the market (American public) wanted then Americans would purchase the product (insurance) and no one would be uninsured.

Clearly some consumers are making the decision not to purchase health insurance for a reason. Could it be that the insurance plans available to lower or mid-level income consumers aren?t cost effective for them? Or maybe extremely healthy people opt not to purchase insurance if they feel they don?t need it? How will a government mandate that consumers buy a product that doesn?t suit their needs help society?

Hillary?s plan amounts to a tax increase and the beneficiaries of this ?tax? are the insurance companies. If Hillary?s health plan is implemented I would recommend that everyone buy stock in insurance companies because they are the only ones who will benefit from this ill conceived plan.

What about small business owners? Forcing small business owners to provide health insurance for all employees increases their fixed costs. And what happens when business costs increase? The cost of the products a business sells will also increase which means that you, the consumer, will cover the additional costs. Or, it could mean that some small businesses will have to close if the price increases they are forced to implement to cover the cost of mandated insurance make the products they sell too expensive for the market to bear. Scary.

The net effect of the Hillary Clinton health plan as I see it is as follows:

1.Insurance companies will continue to use the same decision making model that they currently use in order to determine whom to insure, who not to insure, and who gets dropped from a plan

2.Insurance companies, if mandated to offer ?affordable? insurance available to everyone, will provide an insurance product that doesn?t cover much in the way of prescriptions or medical treatment. Why? Because they can?t subsidize the cost of healthcare for individuals. If they pay for the costs of too many medical procedures insurance companies won?t be able to maximize profits to their investors.

3.Small business owners, individuals employed by small businesses, and sole proprietors will be forced to purchase health insurance whether they want to or not which will reduce their income and it will increase the cost of goods and services that small businesses provide to the public.

4.If the cost of hiring an employee increases because of the mandate to pay for health insurance, some small businesses may hire fewer people. At risk: restaurants, seasonal shops in tourist areas, boutique stores, hair salons.

5.If employers hire fewer employees it stands to reason that unemployment could increase.

6.Most importantly: if insurance companies are forced to offer a low cost program (see #2) the people who purchase this insurance will still wind up footing huge medical bills if they are unfortunate enough to get seriously ill or if the insurance company drops them for some reason.

I hope that small business owners, entrepreneurs, and employees of small businesses will pay close attention to what presidential candidates are proposing. Even if you don?t like what President Bush has done with his term in office, resist the urge to simply run in the opposite direction because the products that some of the democratic candidates are selling may make your life more difficult than you think. It seems like a lot of people are mad at President Bush and they want a complete change from this current administration. Their reaction is to throw their support behind the Democratic frontrunner, Hillary Clinton because they figure if she is the opposite of Bush then she must be an improvement. Demand a candidate who understands economics because government policies will affect your bank account.

There is no such thing as a free lunch and big government programs don?t deliver on their promise of a better quality of life for everyone. Please remember that when you select a presidential candidate to support.

Article courtesy of Recruiting Blogswap http://www.RecruitingBlogswap.com , a content exchange service sponsored by CollegeRecruiter.com http://www.CollegeRecruiter.com , a leading site for college students looking for internships and recent graduates searching entry-level jobs and other career opportunities.