Ted Cruz got Obamacare right—massive transfers from the healthy; His contempt shows Republicans’ health care bind

Last week’s CPAC conference’s discussion of health care was dominated by (yet more) calls for Obamacare’s repeal, along with preeminent mocker, Sarah Palin’s memorable I do not like this Uncle Sam. I do not like his health care scam.” More measured Republicans worried that CPAC offered no constructive health care suggestions and ignored the new Republican alternative to Obamacare.

No one seems to have noticed that Ted Cruz fairly accurately characterized Obamacare as “a massive wealth transfer from young healthy people to everyone else.”  That’s a pity. That sentence and Cruz’s contempt for such transfers are revealing. They show that Republican rhetoric conflicts with the economics of health insurance, in particular with the fact that only government interfering in the market can solve our health insurance problems. Republicans can only produce good health care policy when they build it on a base of reality.

Here is the economic reality that Cruz misses: health insurance consists of transfers from the healthy to the sick. It’s just like fire insurance. Everyone pays premiums. Those who have fires get massive transfers of wealth, paid for by those who don’t have fires. All insurance is about transfers from the lucky to the unlucky.

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If My Health Plan Died, Did Obama Lie? Sort Of, But It Died For a Good Cause

Right-wing pundit Michelle Malkin’s insurer has canceled her health insurance plan, due, they say, to the Affordable Care Act (aka Obamacare). She quotes Obama, “If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what.” Malkin concludes, “Obama lied. My health plan died.”

Did Obama lie? Yes—and no—and yes. But Malkin fails to admit that her plan died so that people like her could be protected for life. Period. No matter what medical tragedy might occur.

In some sense, what Obama promised was obviously impossible. Millions of Americans have experienced the end of their health plan—or major changes in it—even without health care reform. Insurers (and employers) change their plans because of recessions, rising medical care costs, hospital mergers, and such. In a market, companies react to market forces. Continue reading