Friday, January 16, 2009

If you increase demand without increasing supply... 

...and you control price, bad stuff happens.

Fausta has an interesting observation on the French health care system, that errors are made at rather alarming rates. But we Americans think no problem, it's not our system.

Think again:
Congressional negotiators trying to assemble a mammoth economic stimulus bill are considering including a provision to have the federal government subsidize COBRA health care continuation premiums for employees who lose their jobs, business lobbyists say.

Few details of the proposals are known, though lobbyists say their understanding is that the government would pay 50 to 60 percent of the premium, while the length of the subsidy would be 18 months, the maximum period of time employees can obtain COBRA coverage from their former employers. In other situations, such as divorce, death or marital separation, beneficiaries are eligible for up to 36 months of COBRA. A federal COBRA subsidy �has been pretty much agreed to,� said Sen. Max Baucus, D-Montana, who chairs the Senate Finance Committee.
That was last week. That appears to have made it into the House plan, and Democrats seem focused on propping up state Medicaid plans too. Now most people who are offered COBRA don't take it, as it is rather expensive (you pay both your and the employer's share, plus potentially 2% on top.) Those that do, as you might guess, are those who need insurance and therefore cost more. "Experts say that for every dollar of COBRA premiums, employers pay about $1.50 in claims," says the first article. If we put more people into COBRAs, the question will be whether they are those with high claims or those with low. Co-paying COBRA plans will increase the quantity of COBRA plans demanded (lowering the price), without adding anything to the supply of medical services. The experience of the French is instructive on the consequences.

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