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Friday, November 15, 2013

Health Care Markets and Bubbles

Market Participant Watching The Price Of His Medical Procedure Go Through The Ceiling

Health Care Markets

It seems that the very nature of the Health Care Market is the proper focus of debate.

In McClatchy
Nevertheless, we need to keep in mind that even as they gleefully tear into the ACA, Republicans have not offered an alternative.

On reflection, however, this is no surprise. Republicans don't see a problem with health care in America. Insurers can sell what they chose to whom they chose; people can select policies they like and can afford, or save their money for other things. This is how markets work. The only change Republicans would make is deregulation, so insurers and good prospects can find one another more easily across state lines.
The sentence "This is how markets work" is, of course, patently false.

What is correct is "This is how certain economic theoretical entities called perfect markets work... by definition".

For in our economy, we have monopolies that are granted by the governments, such as many of the Utility Industries. In my area, Detroit Edison provides the juice, not Con Ed.
Electrical Utilities exist in an extremely modified version of a free market.

The military is a good example of a centrally planned economy within an economy. The 2008 experience put to rest a number of economic-political fallacies about markets and how they process information and evaluate risk; sometimes - as George W. Bush put it, they just act like drunken sailors on a weekend leave.
Yet, as far as I know, the Dodd-Frank Act did not rely upon any mathematical analyses nor algorithms describing the Brownian Movement of Inebiated Navy Men (Yay!) just hopped off the boat at the Brooklyn Navy Yard.

Health Care Bubble

Sometime ago I looked at the exponentially rising costs of health care and wrote that it sure looked like the graph of an economic asset undergoing a bubble phase, like housing did up until the crash in 2007-2008.

A Health Care Bubble?
Well, upon reflection, why not?

What happens when it bursts?

As for when it will burst, that may be right now. Perhaps all this brouhaha with the Affordable Care Act is certain facets of the process of the bursting of the Health Care Bubble. I mean, there were various unpleasantries associated with the bursting of the Housing Bubble before the Financial Industry collapsed in autumn of 2008.
How many of us connected the dots in 2007?

May it will be that flash crash we are not expecting that will be the big one... ? How many of us could imagine that a Health Care Bubble Burst - or, alternatively, a Health Care Bubble Out-of-Control-Inflation! - would be a dagger to the heart of the country?
An Out-of-Control-Inflation of Health Care costs would not last long, and would be the immediate precursor of definitive collapse, anyway.
Exercise your imaginations, and think about it.

That's why we should all work together and get it fixed, and soon.


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