Sunday, August 16, 2009

Leveraging Our Health

The economy of the last several decades has been in a cycle of booms and busts as different sectors develop bubbles that burst.

The bubbles are generally caused by people taking out leveraged positions against equities. For example, a mortgage is a leveraged play against the value a house. The Credit Default Swaps that came into law in the last days of the Clinton Administration created a pirate trove of ways for banks to further leverage mortgages.

Insurance (links) is a product of this same type of thinking. People buy insurance with the hope of leveraging against the group for their health care needs.

Insurance companies use their policy holders to gain leverage to create a dominant position in the healthcare market.

Insurance companies use a formula where by they take a percent off the top of total healthcare spending. Not surprisingly insurance companies are the primary source for many of the inefficiencies that jack up prices in our current market.

This is the way bubble economies work. People with highly leveraged positions introduce inefficiencies to increase their profits until the system comes crashing down.

Most health reform efforts, including HR3200, were written by insurance lobbyists in concert with lobbyists. These bills systematically favor insurance companies over self funded health care.

The primary aim at HR3200 is to force everyone into a third party payment system. This effectively forces everyone to leverage their health care resources in ways that are unhealthy.

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