Depth of thought
“I think that’s a good idea!” When spoken by most people, this phrase causes me to assume the speaker is either lying or does not understand just what he is saying. The operative word is “think”. In my experience, this is exactly what most people spend all of their lives evading.
Thinking is not an automatic process, it must be practiced and exercised. Since practically nobody does this, how can they possibly “think” something is a good idea? Often times I like to quote Dr. Thomas Sowell who spells out for us in his book Applied Economics: Thinking Beyond Stage One, the concept of Stage One Thinking. He explains that Stage One Thinking is when an idea is accepted because of its stated outcome without considering the incentives and consequences.
Dr. Sowell generally discusses this concept as it applies particularly to government actions pointing out that the desired result rarely happen without undesired incentives and consequences. Lets look at an example.
The proponents of ObamaCare (in the common vernacular) have claimed that “If you like your current insurance plan, you will be allowed to keep it” while detractors of ObamaCare claim that “you will have to give up your private insurance.”
Section 102 of HR 3200 is titled, “PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE”. This sounds like a good idea, that is to those who only read the title of the section. However, if you dig into the details, you will learn that the incentives and consequences of this section mean something else entirely. You may keep your current coverage only if:
"Subject to paragraph (3) and except as required by law, the issuer does not change any of its terms and conditions, including benefits and cost-sharing, from those in effect as of the day before the first day of Y1."
Without reading the full section of the law, this is somewhat difficult to understand. However, what it is saying is that you can indeed keep your current coverage so long as your insurer does not change the price or benefits. This is where those pesky “incentives and consequences” rear their ugly head.
Health and Life insurance premiums increase as we get older. Furthermore, insurance carriers sometimes elect to revoke coverage of certain benefits when they are discovered to be ineffectual, over-priced or simply unnecessary. However, if the carrier makes any change to the policy, you will have no choice but to leave the plan and seek coverage in a “government approved” plan.
Since the carriers will do everything possible to retain customers, yet no longer have the tool of adjusting price or product, something will have to change. Maybe they will lay off members of their claims processing staff in order to avoid a price increase. Hospitals and physicians will have to wait longer for payment. Maybe they will not pay dividends to shareholders thus causing their stock value to decrease. That will have a negative impact on people who own their stock – some of these people will be retirees. The point is that we just don’t know what impact this legislation will have on the insurance industry but I think it is a fairly safe bet that bankruptcy will not be out of the question.
So before you go running off at the mouth saying that you “think” ObamaCare is a good idea, actually put some “thought” into the proposition.