"We would probably be better off just giving the farmers the money directly"


The Washington Post has a very interesting and very detailed report on how a public/private partnership in crop insurance works to privatize profits and socialize risks. It tells of

the power of a collection of niche insurance companies that have made billions in profits from the federal crop insurance program, even as the government has lost billions covering the riskiest claims…..

Last year, the companies made $927 million in profit, a record. They received an additional $829 million from the government in administrative fees to help run the program. On top of that, taxpayers kicked in $2.3 billion to subsidize premium payments for farmers.

All of that to pay farmers $752 million for losses from bad weather.

And see this beautifully terrible example of government accounting:

Government officials maintain that the crop insurance program pays for itself. But they count the billions of taxpayer dollars for premium subsidies as revenue to the program. Take away the subsidies, and the program would have lost $12 billion in the past decade……
Last year, including net payments to farmers and profits and administrative fees for the companies, it cost the government $3.34 for each $1 it paid out in claims to farmers whose crops were damaged by storms and bad weather, federal data shows.

The story is framed with an account of how one company attempted to introduce some price competition to this highly regulated and cartelized system, and was quashed by an upsurge of angry political pressure from the companies rolling in dough from the federal crop insurance program.

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  1. “We would probably be better off just giving the farmers the money directly”

    Never gonna happen! Guaranteed.

    The next Democratic majority in Congress will “address” this problem by creating an additional layer of beuracracy in Washington, more restrictions on competition, and throwing more of the public’s money down the rat-hole.

    Do you want Veteran’s to get 100% medical coverage for free? So…create a bunch of VA hospitals, and hire VA doctors – or, go on the medical market, and pay the premiums Vets need to get full coverage with unlimited choice. What’ya bet they opt for in Washington, and what’ya bet costs US more?

  2. Give them the chance, and they will do both.

    I could see a rationale for “Veteran’s Hospitals” if they were to specialize in battle-related injuries/disabilities that a ‘civilian’ hospital would rarely see. Otherwise, your ‘pay the premiums’ model is probably the better one in both the quality of treatment and cost dimensions.

  3. Andrew

    Apologies for the brain-fart moment. I accidentally put your name in the name slot instead of as a header in the comments box.

    [Now I just pray to the server-squirrel gods that they will let this one through.}


  4. There is no government program so inefficient or ill conceived that some well connected citizen cannot derive substantial personal benefit from it.

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