No such thing as a free lunch

 

When arguing against the Genetic Information Nondiscrimination Act last year, I wrote

If discrimination based on comprehensive genetic screening is legal, we can expect health providers to tailor plans according to our individual risk factors. That might be to the disadvantage of a minority of high-risk individuals, but greater information about risk factors will lower uncertainty, and thus lower rates overall. Furthermore, insurers will offer incentives to people who take proactive steps to discover health risks and take steps to alleviate them. Expensive procedures such as frequent biopsies or preemptive removal of organs might be fully covered for individuals whose genetic profiles uncover a high cancer risk.

Unfortunately, Congress did not heed my arguments, and banned genetic discrimination anyway.  It is now illegal for health insurers to take genetic factors into consideration when setting premiums.  What effect do you think the law had on the incentive of insurance companies to pay for their customer’s genetic screening? 

If the goal of the law was to encourage genetic screening, it clearly had the opposite effect.  In response, celebrities are now “fighting for women to have access to MRIs and genetic testing.”  Having coerced insurance companies to ignore the results of genetic testing, people now want to coerce them to pay for it.

Do you think that people who find out that they have a higher probability of having an illness with genetic factors would be more likely to purchase more health insurance than individuals with a low probability of genetic illness?  As I wrote last year,

It does not take an economist to predict that rates would immediately rise, as healthy people, refusing to pay for their neighbor’s health risks, stopped using insurance altogether. As the young and healthy jump ship, insurance companies would have to increase rates, accelerating the trend. Without further government interference, the health insurance business would disappear completely, shortly after millionaires on their deathbeds became the only people able to afford policies.

Are you still wondering why healthcare is so expensive in the U.S.?

 

One response to “No such thing as a free lunch

  1. Phil

    Is anybody seeing and believing this? Is this a joke?

    Berlusconi Says Leaders May Close World’s Markets (Update1)

    By Steve Scherer

    Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

    “The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

    The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.

    Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.

    Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”

    The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5mpMUORBWM

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