Those of us of a certain age recall the gasoline shortages of the early 70's. Oil prices had jumped considerably, and so the government (in its infinite wisdom and keen understanding of market forces) put in place price controls, basically telling the oil companies how much they could charge for their product.

As one might expect, these companies, faced with the reality that they were going to lose money on each sale, began to limit availability of their product. This lead to the infamous "gas lines," where folks lined up to purchase their 10 gallon maximum, every other Thursday between 9:00AM and 1:00PM.

I'm reminded of this because of a rather silly piece in yesterday's New York Times, with the deceptive title "How Insurers Are Finding Ways to Shift Costs to the Sick."

First, the Grey Lady gets the premise exactly wrong: by purchasing insurance, consumers shift their risk to the carrier, not the other way around. All that a carrier can do is to limit the amount of risk it's willing to assume.

In the event, the point of the article is that some carriers, chafing under the restrictions placed on them by the ObamaTax but still needing to turn a profit, necessarily have to find ways to limit their exposure. One way is by the use of "narrow networks," whereby fewer and fewer providers are actually in-network.

But that only goes so far: a lot of people are on some form of prescription, often a "maintenance" one (for chronic conditions). Many of these are of the generic variety, which used to be the most efficient way of reining in out-of-control med costs. Unfortunately, this has proved to be insufficient for the task. So what's a carrier to do?

Well, if they're smart (and they generally are), they'll do what Shell and Sunoco did 40 years ago, and cut their losses. Limiting how much they'll pay for generics, or even which generics they'll cover at all, is simply their version of a gas line. To categorize it, as the NYT does, as "trying to skirt the spirit of the [ObamaTax]" is not only pernicious, but irrelevant: they are doing what they need to do to stay in business. It's perfectly understandable, perfectly legal, and it's what happens when the heavy hand of government meddles in the market.

[Hat Tip: David Harlow]
 
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