Health Plans Belly Up to SCHIP Trough

For those of us who believe that American families should control our health-care dollars, instead of government, employers, or other 3rd parties, the recent behavior of health-care lobbyists in DC is disturbing.

A key insight of the political philosophy of “public choice” theory is that it is impossible for politicians to know what the “public good” is. It’s also impossible for ordinary citizens to effectively communicate their preferences to politicians: It’s too expensive, and we have better things to do.

So, democratic politics becomes the playground of competing, focussed, interest groups, who have the incentive and resources to lobby for their priorities. Hopefully, the clashes and compromises forged between these groups will result in outcomes somewhat favorable to the citizenry. For example, shoppers who want to buy low-cost goods cannot lobby government to pass laws and regulations promoting innovation in retail competition. However, Wal-Mart’s lobbyists will do so, thereby serving as proxies for individual citizens.

In health care, it looks like the focussed interest groups are deviating more and more from the public interest. I’ve already questioned Big Pharma’s investment in flattering politicians who want to rope more kids into government dependency for health care, via the State Children’s Health Insurance Program (SCHIP). (The Wall Street Journal refers to this episode as “pharma sells the rope”.)

The health plans’ encouragement of the same policy is simpler to explain: easy money from winning contracts to administer SCHIP, according to the Wall Street Journal. I’d bet the risk-adjusted required rate of return from administering SCHIP or Medicaid programs is a lot less than that required of their private lines of health insurance that bear actuarial risk.

The Democratic Congress and President-elect Obama are sure to expand SCHIP quickly, and conscript more kids into government-run health care from health care of their families’ choice. With lobbyists going over to the government’s side, who will speak for these families?

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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