A thought experiment

Almost everyone uses some sort of shampoo – unless you’re bald, that’s just basic hygiene. A person who wasn’t able to afford to clean himself properly would likely be at a disadvantage in securing or maintaining a job.  Imagine now that the government, examining this, decided that insurance ought to cover shampoo and conditioner.  Further, they must do so at no cost to the consumer, regardless of which product is purchased.

Just out of habit, some people would probably continue to buy Suave and Herbal Essences or other low-priced hair care products.  Over time, however, those companies would figure out that competing on price no longer makes sense, as the “price” to the buyer is the same: “free”.  Likewise, a lot of people would say, “Hey, why am I buying this okay hair product when Nexium and Paul Mitchell are also included?”  Eventually, most consumers would purchase the highest-quality product they could find, and manufacturers of bargain-priced products would either go out of business or stop producing inexpensive products.

Thus, a formerly inexpensive product will only be available in a very costly form, and people who had previously purchased it will “need” the insurance to buy it.  The calculated costs to insurance companies will bear no relation to the actual costs, and premiums will rise more than predicted.

Please explain to me how this will not happen with “free” birth control, currently available for $9/month at Target and Wal-Mart, but with premium versions available for five or six times that price.  Tuesday marked the beginning of the end of the market for generic, low-cost contraception that women can pay for out of pocket.

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Filed under Economics, ObamaCare

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