American Elephants


Democrats Don’t Understand the Principle of Insurance. by The Elephant's Child

When Sandra Fluke appeared at a hastily arranged pretend congressional testimony event to demand that taxpayers pay for birth control for all deserving young women,  many were offended at the idea that all young women were going to have premarital sex as a matter of course and we were supposed to pay for it. Many were a little embarrassed, and glad that it wasn’t their daughter making such a public claim. Attention quickly turned to Rush Limbaugh who suggested that she was a slut, and then to shrill claims that there was a “War on Women.”

This falls under the “full of  storm and fury signifying nothing” category. Democrats, who consider Feminists as one of their major support groups, always overestimate feminist numbers.  Nevertheless, they are apparently planning to organize their entire convention around the “War on Women.” Barbara Boxer, always ready to fight in that war, is delighted.

Ms. Fluke’s impassioned plea for free contraceptives so all young women will be free to be sexually active without consequence, spoke of bills for $35 and $45 and more a month. It was quickly determined that discount pharmacies had the prescriptions for no more than $9 a month, which would seem to be affordable.

The idea of insurance is protection from catastrophic events by spreading the potential cost to many people, which will pay for the rare catastrophe. Actuaries, people good at math, do studies to determine how frequent and how expensive catastrophes are. The federal government apparently doesn’t have actuaries, and just wants everybody to pay for whatever free stuff the politicians want to give folks in exchange for their votes. This really isn’t how insurance is supposed to operate. And that is the point.

You don’t expect your car insurance to pay for replacing your wiper blades, replacing worn tires, changing your oil.  You expect it to be there when you get in a wreck, because your car cost a lot, and if somebody sues you it will cost a lot, and you are not prepared to keep that amount of money set aside for the disastrous event.

Ms. Fluke is wrong, Barbara Boxer is wrong, and there is no silly “War on Women.”

Same problem, different event. Obama is bragging about fixing Medicare. He has eliminated the “donut hole” in the Medicare Prescription Drug Plan. There is a lot of criticism among Republicans of the Bush administration for passing it. No one, as far as I can tell, has attempted a serious study of the extent to which the plan is saving lives, for many seniors have their lives extended with new drugs. I understand that the Democrat Congress was going to pass the Drug plan anyway, but Republicans managed to insert the so-called “donut hole.” This  is a major incentive inserted in the program to get seniors to participate in keeping costs down. And it has worked spectacularly.  Bear with me, I know it’s insurance talk but I’ll be brief.

Seniors may choose from a number of different plans. There is a monthly premium and a yearly deductible. Once the deductible is met, there is a co-pay for drugs, high for brand name, low or free for generics. Once  the senior and the plan have spent $2,930 for covered drugs, she is in the “donut hole.” As it was, the senior then had to pay her own costs until she had spent $4,700 for the year— when her coverage gap ends, and she pays only a small co-pay till the end of the year. Lots of incentive to avoid the “donut hole” where she has to pay for her own drugs — using generics whenever they are available, using mail-order pharmacies. Most will never reach it. If they needed help during the donut hole, it was available. That incentive made the drug plan come in far below estimates of what it would cost — a novelty in government programs. They never cost less than estimated.

Democrats, however, have a different understanding of insurance. Republicans believe you spread the cost to protect against catastrophe. Democrats believe that insurance means they give you free stuff and make the taxpayers pay for it.

The left could not stand the “donut hole”— it was so mean. So they are working on getting rid of it entirely.  But what they are removing is the incentive to keep costs down.

Democrats don’t understand incentives, and it always shows up in their policies.




Follow

Get every new post delivered to your Inbox.

Join 6,432 other followers

%d bloggers like this: