NCPA - National Center for Policy Analysis


July 17, 2008

In a rational world, deductible and copayments serve an economic purpose, says John C. Goodman, president of the National Center for Policy Analysis.  But in the irrational world of health insurance, normal market forces have been systematically suppressed and no one ever faces a real price for anything.

The economic principles that govern other insurance markets are increasingly being turned upside down as a result of government interference and providers' attempts to cope with it:

  • In the small group market, for example, a typical plan covers primary care visits from the first dollar, but imposes high deductibles and copayments for inpatient hospital care.
  • And whereas tiered pricing for drugs once encouraged use of generics of more expensive brand names, today tiered pricing is being used to impose thousands of dollars of costs on patients who must take expensive drugs with no generic substitutes.

State and federal regulations have made it illegal to charge employees premiums that reflect their individual expected health care costs or to deny them employment for health reasons.  But the reality, says Goodman, is that in today's market employers and insurers are choosing health plans that appeal to the healthy and repel the sick. 

Ironically, there is only one product in the insurance marketplace that by law must limit the out-of-pocket exposure of the chronically ill.  That product is health savings accounts (HSAs), says Goodman.

Source: John C. Goodman, "Health Care an Irrational World, Thanks to Government," Heartland Institute, July 2008.


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