Sunday, October 05, 2008

Let's Buy a Car!

Publius at Obsidian Wings makes a strong case against Sen. McCain's health-care policy on the grounds that individuals do not have the bargaining power with heath insurance companies as conservative believe they do. The McCain plan would tax employer-provided health care benefits while simultaneously giving a $5,000 tax credit to each individual. The expectation is that the individual would then be able to seek out the best, most appropriate health insurance thus spurring competition within the health insurance market. Horseshit.
The problem Publius notes with Sen. McCain's plan is how it restructures the health insurance market in a way that doesn't benefit the individual. Most people I know have precious little time to go comparison shopping or drag out a negotiation for a better price on coverage. With that in mind there's little incentive for health insurance companies to lower costs, provide wider benefits or relax their standards on pre-existing conditions. The consumer loses out because as an individual they have little force of their own to negotiate a fair rate. It's an issue of supply and demand. Since demand for health insurance is high, health insurance companies can increase the costs of what they supply. This isn't like buying a TV or a car because if the makers of said cars and TVs keep the price too high then consumer do have easily accessable alternatives.
Even the example of a car purchase has its own problems. I remember when I decided to buy my first new car. I spent six months figuring out interest rates, down payments, monthly payments and learning how to bargin for the best price. At that time, I did have the time to put that kind of effort into it. And the result was an affordable purchase of the car I wanted. But had I pushed for too low of a monthly payment or interest rate, the dealership could have simply told me to go elsewhere. Individual purchases such as this lack the power of a group purchase. If I were representing a company that wanted x number of cars for y cost then I would have greater bargaining power due to the backing of a corporation making a large number of purchases. It's volume discount and that does work.
Without said volume discount the individual is fucked. The market would not adjust to make health-care affordable because they have no need to. People will always need health coverage. Lacking any regulation that would keep health insurance costs affordable, the individual is left out. The problem isn't with how health insurance is paid for but with how health insurance prices are set. Until that changes then the McCain plan would essentially deny health insurance to working individuals. I don't think it would take much on the government's part to influence the health-care market to make it more consumer friendly, but what Sen. McCain proposes is exactly the opposite.