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Thursday Idiocy: A Correspondent Who Wishes Me Ill Makes Me Read John H. Cochrane Edition

A commenter who wishes me ill sends me to something I had not seen before:

John Cochrane (December 25, 2013); What to Do When ObamaCare Unravels: "The unraveling of the Affordable Care Act...

...presents a historic opportunity for change. Its proponents call it “settled law,” but as Prohibition taught us, not even a constitutional amendment is settled law--if it is dysfunctional enough, and if Americans can see a clear alternative. This fall’s website fiasco and policy cancellations are only the beginning. Next spring the individual mandate is likely to unravel when we see how sick the people are who signed up on exchanges, and if our government really is going to penalize voters for not buying health insurance. The employer mandate and “accountable care organizations” will take their turns in the news. There will be scandals. There will be fraud. This will go on for years...

Did it happen?

Was any reputable health economist back last December saying that the individual mandate would unravel "next spring"?

If so, they escaped my notice.

What the real ObamaCare critics were saying was that the individual mandate was likely to unravel "someday"--as it is likely to unravel somewhere, someday, for pooling equilibria are genuinely subject to instability. But that day looked last December--and looks today--to be decades or generations off. As John Gruber convinced Mitt Romney in the mid-2000s, the pooling equilibrium is, for the moment, stable if backed by an individual mandate, and provides the best way to keeping a competitive private health insurance market that can provide comprehensive care functioning.

John Cochrane goes on, convincing me that he has never learned anything about health finance and health insurance markets--has not even read Arrow (1963):

We need to permit the Southwest Airlines, Wal-Mart, and Apples of the world to bring to health care the same dramatic improvements in price, quality, variety, technology and efficiency that they brought to air travel, retail and electronics. We’ll know we are there when prices are on hospital websites, cash customers get discounts, and new hospitals and insurers swamp your inbox with attractive offers and great service.... Only deregulation can unleash competition. And only disruptive competition, where new businesses drive out old ones, will bring efficiency, lower costs and innovation...

And I wonder: What regulations does Cochrane think have been blocking insurance companies and HMOs from innovating and bringing "disruptive competition" to the health-insurance market for the past generation. Has Cochrane bothered to learn anything about why Southwest has been successful? Wal-Mart? Amazon? Apple? Kaiser? And has he bothered to learn anything about why Kaiser has been able to successfully disrupt health insurance markets in northern California but not elsewhere--although it has tried, and tried hard?

And low and behold, barely a sentence after his call for "deregulation", what does Cochrane do? Why, he calls for a whole new set of regulations! A new set of regulations which would impose burdens on health-insurance companies that would make all their actuaries gibber in fear:

Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick...

Would you give any 21-year-old a quote for health insurance that gave them the option to renew "with no unexpected increase in premiums" for the rest of their life? Plus the option to see any provider they wished? And if you were sitting in Bermuda, would you offer backstop reinsurance to any company that did offer 21-year-olds such quotes to cover the eventuality that their actuaries got it badly wrong?

It sounds to me like Cochrane is the kind of naive gull who thinks that it is valuable to him when a new condo complex promises that it will always repurchase the condo at the original purchases--for the only circumstance in which you would want to exercise your option is one in which your counterparty is gone: in which the condo complex has already gone bankrupt.

It really does not seem to me that Cochrane has thought any of this through.

Here's a bet that I do find attractive: I will bet that Cochrane will devote no more time to rethinking his position and marking his beliefs to market on health insurance now that his prediction of imminent adverse-selection meltdown has, itself, melted down than he has devoted to marking-his-beliefs-to-market on monetary policy in view of the continued failure of the U.S. to become "Argentina"--no more time and effort than he devoted to coming up with his position on health insurance in the first place.

Any takers?

More Thursday Idiocy:

Thursday Idiocy: John Stewart Does the Intellectual Garbage Collection on Dick Cheney - Loyal to the Group of Seventeen * Thursday Idiocy: The "Traditional" Population of North Carolina: State House Speaker Thom Tillis - Loyal to the Group of Seventeen * Thursday Idiocy on Wednesday: Dana Milbank Tries to Get the Dylan Byers Off His Jacket... - Loyal to the Group of Seventeen * Whiskey Fire: Ruth Marcus vs. The Onion - Loyal to the Group of Seventeen * Yes. Max Boot Is a Boldfaced Liar. Why Do You Ask? - Loyal to the Group of Seventeen * Thursday Idiocy: David Brooks (December 27, 2003): Arguing With Oakeshott on Iraq - Loyal to the Group of Seventeen