Confused N&O Editors - Civitas Institute

Economically-illiterate and authoritarian commentary on health care reform has become the norm for the Raleigh News & Observer. Consider today’s latest installment, which indicates how confused and ignorant the authors of the article are on the topic. The article’s focus is on a report claiming the “cash reserves” held by Blue Cross and Blue Shield of North Carolina are excessive.

Like virtually every aspect of the health care industry in this country, however, the government mandates health insurance companies hold substantial reserves to cover an unexpected spike in insurance claims.

The company responds to the report by noting that the law requires a three- to six-month reserve based on claims and administrative costs, and that BCBS is at about 3.6 months.

The issue here, however, isn’t whether the company is up to something. It’s whether the law is out of kilter in what it requires.

Confusion sets in just a couple paragraphs later, when the author’s proclaim:

All of these things reflect the nature of a health care system that, unlike those in other nations of the industrialized world, is driven by profit margins and a free-market structure.

“Free market structure”? Really?

In a free market, insurance companies would not be forced by government to maintain any given minimum of cash reserves. Any company’s demand for cash would be left up to the discretion of the company.

But we’ll let this one oversight slide, maybe the N&O authors think government dictating cash reserves for companies somehow squares with a “free-market structure.” But let’s examine the health care industry a little further:

The government spends roughly half of all health care dollars in the US. (primarily Medicaid and Medicare) – with the government setting reimbursement rates for thousands of provider services – providing a massive disturbance to the overall pricing structure of medical care.

The government exempts employer-provided health insurance benefits from taxation, thus tying health insurance to employment and limiting consumer choices to what your employer chooses.

The government mandates specific services and providers be included in health insurance plans whether the consumer needs the coverage or not, driving up costs and restricting choices.

The government prevents consumers from purchasing health insurance across state lines, restricting choice and competition, and driving up costs.

The government certifies doctors and other health care workers, restricting the supply of providers and limiting what services they can provide – driving up costs.

The government owns a large share of hospitals and medical clinics. Non-profits own an even larger share, and many receive subsidies from the government and face different government rules than for-profits. Meanwhile, for-profit hospitals constitute a very small percentage.

The government (in most states, including NC) determines when, where, and how many medical care facilities, beds, equipment, etc. there are available for patients.

And these are just items off the top of my head, the government intervention into health care goes well beyond this list.

How can any reasonable person describe this system as a “free-market structure”?

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