RE: Unintended Consequence of the Affordable Care Act.
September 26, 2014 at 12:49 pm
(This post was last modified: September 26, 2014 at 12:52 pm by Heywood.)
(September 23, 2014 at 1:54 pm)Bibliofagus Wrote:(September 22, 2014 at 9:56 pm)Heywood Wrote: My point is that before this government intervention every dollar of fraud and waste saved by the insurance company translated into an extra dollar of profit(if we ignore the cost of looking for fraud and waste for simplicity sake). After this government intervention every dollar of fraud and waste translates at best into only 20 cents of additional profit. The profit incentive to look for fraud and waste diminishes quite a bit.
Its very true that the market force you speak of didn't go away because of this intervention, but it wasn't the only market force in play. Insurance companies may still have some incentive to look for fraud and waste, but those incentives are much weaker now then before this government intervention.
You appear to underestimate consumers and overestimate investors. Which is funny, because the customer is always more often right than wrong in an economic context.
The thing is: the company that can suplly the best benefits at lowest costs will win.
Fraud is not profitable for investors, and its not profitable for consumers. Investers might react quicker, but the consumer decides in the end.
The consumer wants his/her claims paid promptly. Providing the best benefit to the consumer may now be simply auto paying claims without much scrutiny because the profit reward for stopping fraud has been neutered.
These are complicated situations with lots of little incentives and disincentives at play. Nobody really knows the end results until some time passes and we see how it plays out. I think it a little ludicrous to believe the incentives for rooting out fraud haven't changed at all with the enactment of this law. I don't see any reason why the incentive for rooting out fraud have increased with the enactment of the law(you certainly haven't given any) and only see reasons why the incentive would decrease. I suspect fraud and waste will increase with this government intervention into the market. I hope I am wrong....but I don't think I am.
