Economics proceeds apace

Massachusetts’s health care law is destined to be a case study in Economics 101 textbooks:

  1. Massachusetts passes a law that mandates coverage of pre-existing conditions (and also institutes other expensive mandates).
  2. Adverse selection: People learn to game the system, by purchasing coverage when they need expensive treatment and dropping it immediately afterward.
  3. Prices skyrocket.
  4. Massachusetts imposes price controls.
  5. As always, price controls create shortages. Insurers refuse to issue new policies at the mandated rates.
  6. Massachusetts forces insurers to resume issuing new policies, at the mandated rates.
  7. Insurers post huge losses.

That’s where Massachusetts is now. In part 8, insurers stop doing business in Massachusetts. In part 9, Massachusetts institutes a public option. Since there is no private insurance, the public option is de facto single payer. In part 10, Massachusetts’s deficit skyrockets. In part 11, health care rationing is instituted.

Massachusetts could turn back at any point. But if they don’t, each step in this progression is inevitable. It’s basic economics.

The United States is still at step one. Let’s turn back now.

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