Tuesday, June 30, 2009

Peter Schiff is the man

It's always reassuring when your beliefs are validated. Peter Schiff tends to do this a lot with mine. Of all the possible people to validate my viewpoints, he's a good one.

"The bottom line is that aggregate medical costs will never come down unless services are rationed more wisely. Rather than being used as a pre-payment plan for routine care, insurance should only cover unpredictable, catastrophic costs.

As a comparison, homeowners often carry fire insurance, but seldom maintenance insurance. You buy fire insurance to guard against a catastrophic loss, which is a low probability but high cost event. As a result, fire insurance is relatively affordable, since premiums paid by all those homeowners whose houses do not burn down more than pay for the losses on those few whose houses do.

On the other hand, no one carries home maintenance insurance to pay for a clogged drain or broken garage door. If insurance paid for the plumber visit every time a toilet overflowed, we would now have a plumbing crisis, and Congress would be looking to rein in runaway plumbing bills with 'national plumbing insurance.' " Peter Schiff, via lewrockwell.com.

[I've been saying the same thing for a long time. Health insurance has less in common with traditional insurable risks than it does extended warranties. And you know how I feel about those.]

"In his press conference, President Obama claimed that government insurance would not drive private providers out of business. This is absurd. As the government provider will not have to produce a profit or accurately account for its contingent liabilities, it will provide insurance on an actuarially unsound basis. With taxpayer subsidies, the government provider can run losses indefinitely. If private insurers did this, they would either be shut down or go bankrupt. Therefore, the cost of government-provided health insurance will not be confined to the premiums paid, but will include the taxpayers’ bill to continually bail out the government provider." - Peter Schiff

[I agree completely.]

"When Medicare was first proposed back in 1966, it cost $3 billion per year, and the projection was for inflation-adjusted annual costs to rise to $12 billion by 1990. The actual cost in 1990 was $107 billion, and the 2009 estimate is a staggering $408 billion! So much for government estimates on health care." - Peter Schiff

As I've said before, government forecasts for its own programs almost invariably underestimate the costs, and overestimate their effectiveness. Then, when the government is finally forced to admit their ineffectiveness, the response is to take more of the public's money, and give it to the ineffective programs. It's a system that literally rewards failure by design.

If only there were an alternative that rewards efficiency and punishes inefficiency...

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