Archive for September, 2009

I just read this article in the Wall Street Journal that I thought I should share.  The author approaches the conversation on healthcare from a different perspective that I find worth a discussion or two.

Last week, I asked South Carolina Congressman James Clyburn, the third-ranking Democrat in the House of Representatives, where in the Constitution it authorizes the federal government to regulate the delivery of health care. He replied: “There’s nothing in the Constitution that says that the federal government has anything to do with most of the stuff we do.” Then he shot back: “How about [you] show me where in the Constitution it prohibits the federal government from doing this?”

(I, personally, find the Congressman’s comment very unnerving).  Have a good day.

Competition, Competition, Competition!!!  That’s what our leaders want out of the healthcare reform act.  They use a 1-pager from the Center for American Progress to show that most states are dominated by 1 or 2 greedy insurance companies, therefore, drawing the conclusion that we need government competition to make them honest.  Well, I’m all for competition and a level playing field upon which competition can drive better value for consumers.  Actually, I have grown up thinking that was best implemented through free market principles.

However, my note today is not about how best to offer competition to the market.  Instead, I wanted to look closer at the data that is being used to show the lack of competition.  Actually, my interest is in the jump to concluding that high market concentration of a few large insurance companies leads to higher healthcare insurance costs.  It makes sense if that were the case, but is it shown within the data?

No.  It’s not.  At least with the data that I have.  I took the data provided by CAP and data from the Kaiser Family Foundation website on healthcare costs by state as a percent of personal income.  The scatter graph below shows that there appears to be no direct correlation between the healthcare cost in the state and the amount of market concentration in insurance providers.

So, from this simple look at things, I don’t think one can draw the conclusion that having market concentration impacts the cost of healthcare.  Interesting, no?  I was shocked.

But, it occurred to me that maybe the impact from the lack of competition is drowned out by something else, some other factor that “weighs” on the cost of healthcare.  So I looked at the obesity rates by state and compared it to the cost of healthcare by state.

Hmm.  Seems to be correlated, huh?

And it kind of makes sense.  We know that being overweight causes diabetes, heart attacks, etc.  So why should it be shocking that as our nation’s individuals eat more, it costs more to care for them?  I don’t know about you, but to spend upwards of $1 trillion over the next decade to implement a reform package that doesn’t address the real cause of ever higher healthcare costs seems a little unnecessary.