INSURANCE “REFORM” WILL LEAD TO GOVT. TAKEOVER PAUL HSIEH, M.D.
Republicans: Beware the Trap of ‘Limited’ Reforms
Posted By Paul Hsieh
President Obama attempted to revive his faltering health care initiative by releasing a revised version of his plan [1] on Monday. But as Grace-Marie Turner of the Galen Institute noted, the president’s basic approach remains to “Tax, Spend, Regulate, Mandate [2] — i.e., to impose massive new government controls over health care that Americans have already rejected in tea party protests across the country and in the polling booths of Massachusetts.
GOP leaders have been appropriately skeptical of the president’s demand that his plan be the basis for their “summit†negotiations, calling it a “nonstarter [3].†But while they’ve avoided that obvious trap, the Republicans are still in danger of falling for the subtler trap of agreeing to seemingly benign limited compromise “reforms†that would merely result in a slower government takeover of American health care.
One of the Democrats’ favorite limited proposals has been to require insurance companies to accept all customers regardless of pre-existing medical conditions — an idea supported by many Republicans [4].
But such a measure would merely create a huge incentive for patients to delay purchasing insurance until they got sick. It would be comparable to crashing your car into a tree, then requiring Geico to accept you as a new customer and cover your expenses.
If insurers were forced to cover all comers regardless of pre-existing conditions, premiums would skyrocket. In states with similar “guaranteed issue†laws, insurance rates are nearly double [5] that of states without such requirements. A national law would encourage millions of Americans to forgo purchasing insurance until they got sick, further raising rates, encouraging more people to opt out, etc.
This would create a “death spiral†for the private insurance market unless the government then required all Americans to purchase insurance [6] prior to getting sick. But this would merely bring us back to the ObamaCare plan of mandatory insurance that Americans have already resoundingly rejected. Massachusetts voters in particular already know firsthand how mandatory insurance leads to skyrocketing costs and long waits for care [7] — a key reason they sent Scott Brown to the Senate to stop ObamaCare.
Controls breed more controls. The seemingly innocuous “reform†of requiring insurers to cover all pre-existing conditions would merely set the stage for ever-tightening controls until liberal Democrats achieved their long-held dream of a complete government takeover of health care — only gradually, rather than all at once.
The Republicans must not help them succeed.
The government’s function is not to guarantee “universal coverage†any more than it is to guarantee everyone a car or a job. Instead, the proper function of government is to protect individual rights [8], including the rights of insurers and customers to trade in a free market under any mutually agreeable terms to their mutual benefit.
To specifically handle the issue of patients with pre-existing conditions, John Goodman of the National Center for Policy Analysis has detailed “Ten Small-Scale Reforms for Pre-Existing Conditions [9]†based on (predominantly) free-market principles that would “encourage insurers to compete to cover patients with chronic illnesses, rather than trying to avoid them.†Similarly, University of Chicago professor John Cochrane has proposed an innovative system of “health status insurance [10]†which would allow individuals to purchase options now which would protect them against future rate increases or loss of insurability due to illnesses they might develop later.
These proposals would address the problem of pre-existing conditions by removing (or at least reducing) existing controls, thus allowing patients, providers, and insurers to trade more freely to their mutual benefit.
More broadly, Republicans should advocate repealing existing bad laws that prevent many Americans (including those with pre-existing conditions) from purchasing affordable insurance. Insurers should be allowed to sell policies across state lines. States should repeal onerous mandates specifying what benefits insurers must offer, who they must cover, and what prices they may charge. Patients should be allowed to use Health Savings Accounts for routine expenses and purchase low-cost “catastrophic-only†policies to cover rare expensive events. Such free-market reforms could reduce insurance costs up to 50% for millions of Americans, without setting the stage for a future government takeover of health care.
The Democrats’ current difficulties [11] with passing ObamaCare legislation have created both an opportunity and a danger for Republicans. The GOP has a golden opportunity to demonstrate leadership by fighting for genuine free-market health reforms. But they also risk being suckered into supporting seemingly-innocent faux “reforms†that will merely give the Democrats a victory they couldn’t win at the ballot box.
Duke University professor John Lewis once observed that the Democrats’ last “secret weapon†against the American people was the Republicans’ willingness to compromise [12]. For America’s sake, let’s hope the GOP avoids that trap and instead chooses free-market reforms.
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