- The Washington Times - Sunday, July 26, 2009


To President Obama, profits are bad. They create perverse incentives for doctors and nurses to deliver too much care or do too many tests to rack up big bills for health care.

During his July 22 press conference, Mr. Obama told the country: “But having a public plan out there that also shows that maybe if you take some of the profit motive out, maybe if you are reducing some of the administrative costs, that you can get an even better deal, that’s going to incentivize the private sector to do even better. And that’s a good thing.” To further the point, he said, “Our proposals would change incentives so that doctors and nurses are free to give patients the best care, just not the most expensive care.”

It’s not easy to figure out exactly what Mr. Obama thinks is the main problem with health care. At the same time he decries doctors for performing expensive, unnecessary procedures, he attacks insurance companies for trying to make profits by denying appropriate medical care. Which is it: Are we getting too much care or too little?

The president might not get it, but insurance companies act as a balancing force. It’s true that a few doctors may charge high prices for services or deliver care that is above the minimum necessary, but insurance companies have the incentive to rein this in and not allow unusually high charges or unnecessary procedures because they pay the tab.

Choice works because people do not want a lousy plan. Employers and individuals study alternative insurance policies and weigh competing provisions. When considering a health-maintenance organization (HMO), it is natural to look at how much the co-pays are, the level of deductibles and what services are covered. If a particular company or plan does not deliver, it will not be purchased. If the market system is allowed to work, the firms and individuals who pay for health care prevent insurance companies from making unreasonable profits by denying service.

Mr. Obama doesn’t appreciate that there are checks and balances in the system and that government will only make health care more expensive and less effective. As the late, great economist Milton Friedman said, “On the average, anything government does costs twice as much as if it were being done by private enterprise.”

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