You can't open a newspaper or watch the news these days without hearing about health care reform. It's everywhere, and it's about time, though it can be a bit overwhelming. But there is a disturbing trend to this saturation.
With all the talk about health care reform going on, I have to wonder, why isn't anyone actually talking about reforming health care?
I'll explain.
According to virtually all observers, from the most liberal Democrat to the most conservative Republican, COST is the problem in health care, for both the public sector, in terms of entitlements without funding, and an ever-escalating cost to consumers and employees in the private market. Despite this consensus, the legislation currently before Congress does nothing to reform the market or address the main problems in American health care. If anything, it makes them far worse.
Up until recently, this is an assessment that even President Obama agreed with. Take this bit from one of his early debates during the Democratic primaries with Hillary Clinton:
"The reason, Senator Clinton, that most people do not have [health] insurance isn't because they don't want it, but because they can't afford it."
Irrespective of this (correct) observation, the centerpiece of what has become ObamaCare is a mandate that everyone purchase insurance. In other words, the government will force you to purchase health insurance whether you can afford it (or want it) or not. If people fail to purchase a federally approved insurance plan, they can either pay a fine or go to jail. This would be an unprecedented invasion into the lives of citizens in the history of the United States. For the first time, the ownership of an, ostensibly private, commodity would be a mandatory requirement as a condition of citizenship in this country.
Among other things, we would need to rewrite the inscription on the Statue of Liberty, just so ambitious immigrants have an idea of what they are getting into: "Give me your tired, your poor, your huddled masses yearning to breathe free ... now buy health insurance or turn around."
We've seen such a plan before, and we've seen the results. The state of Massachusetts has already toyed with this idea. Again, then candidate Obama did not pull any punches when it came to his assessment of the unavoidable consequences of such a policy course:
"You can have a situation, which we are seeing right now in the state of Massachusetts, where people are being fined for not having purchased health care but choose to accept the fine because they still can't afford it, even with the subsidies. And they are then worse off. Then they have no health care and are paying a fine above and beyond that."
This is the inevitable result when political authorities, subject to all manner of interest group pressures to include this or that treatment, dictate what must be included in a "qualified" insurance plan. This has produced a consistent affordability problem all over the country, in the 50 different state-based markets. This, along with medical liability and other issues, help account for the vast differences in insurance costs across state lines, with premiums in high-cost states like Massachusetts and Minnesota averaging thousands of dollars more than in low-cost states like Iowa and Idaho. The President and this Congress want to take the problems faced in the various states and make them ubiquitous across the country.
[Winston Churchill: "The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries."]
Of course, this issue could be quickly resolved (without a $1,000,000,000,000+ price tag) if only Congress would permit the interstate purchasing of health insurance, forcing states to compete to provide an affordable, and responsible, regulatory environment. As it stands now, consumers are trapped in whatever market they happen to live in, left with no alternative but to accept whatever their state governments say they must. This is not the healthy way to improve, let alone expand, health care coverage.
Not to debase the discussion, but if Jennifer Lopez can insure her, albeit worthwhile, posterior through Lloyd's of London (England, that is), it hardly seems fair that the government prohibits us from insuring against illness from a place like the far away land of the state of Iowa. Just as a sidenote, Bruce Springsteen has also insured his voice through Lloyd's.
Apparent government logic -- Asses and vocal chords: fair game. Cancer treatment: not so fast.
Back to worthwhile discussion.
While mandates are certainly an issue of some disturbance, they are not the be all and end all of the current "reform" push. Included with nation-wide benefit mandates are price controls on premiums, community rating and guaranteed issue.
For those who might not know, price controls mean, well, controls on the price of insurance premiums and medical treatments (already common practice under the Medicare and Medicaid programs, which has led to an ever-growing number of doctors refusing new patients enrolled in these programs). Community rating is legislation whereby insurers are prohibited from charging various consumers different premium rates irrespective of the risk a given customer might pose. Guaranteed issue describes legislation that forbids insurers from denying coverage to anybody who seeks it.
At first consideration, these proposals might seem benign enough, but their pernicious effects become far more apparent when one considers the issue beyond stage one, to borrow a phrase from the celebrated economist Thomas Sowell.
Firstly, the evidence that price controls lead to shortages has been so exhaustively demonstrated in the past that further explanation here is unnecessary. If you don't believe me, pick up any Econ 101 book or, better yet, ask any NYC resident how well rent control worked out.
By themselves, community rating and guaranteed issue are not especially malefic, though are certainly less than optimal policy prescriptions. Combined, however, they can exacerbate just the type of problems that "health care reform" is supposed to address. To begin, consider the seemingly obvious: insurance is meant to insure one against the possibility of a potential financially ruinous event, such as a house fire, a car accident or a terrible flood. You cannot insure against a possibility once is has already occurred. You cannot hope to buy flood insurance once you are standing in your living room in three feet of water. The risk to the insurance company is 100% that they will have to pay for the damages of the flood. The same principle applies to health care: you cannot insulate yourself from the risk of a broken leg after you have fallen off of the ski lift. It's already happened. You are not here paying for insurance so much as you would be paying an intermediary instead of the doctor who treats you. Of course, the intermediary must take something for themselves and charge the administrative costs of processing the claim, and you have effectively wasted a good amount of money.
If the responsibility for providing health insurance rested squarely on the individual this would not be so much of an issue. People who waited until they were hurt to purchase health insurance would be charged the appropriate rate of insuring against a 100% chance of injury or sickness. This reality would provide an incentive for people to do the responsible thing and insure themselves while they are young and healthy and contribute to the risk pool before they are a burden on others. However, when community rating is introduced the burden on others is greatly expanded.
Under such a scenario insurers are, as we've seen, forced to charge the same premium to everyone. Thanks to guaranteed issue, anyone can wait until they are sick to purchase coverage, thus, insurers must charge everyone a higher rate to subsidize those beneficiaries who, rightly, wait until they absolutely need it. The higher premiums will thus provide an incentive for the young and healthy (by far the largest demographic group lacking health insurance) to further delay the purchasing of insurance, further reducing the pool of insured citizens to pay for the cost of medical services while making coverage ever-more expensive for those who must remain due to serious illness or other health risks. In short, the people who need it most.
Now, some of you might be asking the perfectly reasonable question: "But wait, won't the individual mandate take care of this by brining more people into the system and thus pay for all of the uncompensated care of the uninsured?"
Short answer, no.
Long answer: uncompensated care in America accounts for just 2.2% of health care spending. When one considers that 85% of Americans have health insurance, and the CBO estimates that current legislation will bump that up just 9%, we can expect insurance premiums, assuming all other things remain the same, to drop just a little more than 2%. Further, $1,000,000,000,000+ spent on 9% of the population doesn't seem like a particularly good deal.
Of course, all other things will not remain the same. The costs of guaranteed issue, community rating and the new benefit mandates will far outweigh any potential savings. Independent analysts have estimated that current proposals will force up to 100 million people from their current health plan and into a new, more expensive and federally approved option which, as a new study has pointed out, can potentially grow as much as 300%.
More to the point, according to congressional planners, the individual mandate isn't even intended to coerce everyone into participating in the insurance system. Federal bean counters, like those in Massachusetts, are depending on the revenues from the fines on those who do not purchase health insurance to, in part, subsidize the premiums of those who cannot afford insurance. As President Obama pointed out however in the Massachusetts model, this hasn't worked out so well. In fact, predictably, health insurance premiums in the state of Massachusetts have continued to rise, the costs of the "reforms" have proven to be well higher than original estimates, taxes are insufficient to cover the costs of the subsidies, people are facing growing waits to see a doctor, and the state has still not reached achieved the progressive dream of universal coverage.
The President is right in one regard: the health care system in this country needs reforming. But his blind rush to pass a bill, any bill, would be far worse than doing nothing at all. Current legislation needs to be scrapped, political and artificial time frames need to be taken out of the picture and law makers need to go back to square one. It is important that we achieve some manner of health care reform, but it is far more important that we get it right.
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