Pick and Lose
By Jonathan Cohn
The New Republic
August 22, 2005
Has any word done more to cloak the modern conservative agenda than “choice”?
…what conservatives in this country never mention is that giving us these new choices also means taking something away–typically, programs that make us more secure.
Health care… may be the most vivid example of this. And a new bill quietly moving through Congress this summer shows why. It is called–what else?–the Health Care Choice Act. Sponsored by Representative John Shadegg of Arizona and endorsed by everybody from The Wall Street Journal editorial page to the Cato Institute, it was voted out of committee late last month. With both Speaker Dennis Hastert and Bush now embracing it, it seems destined for approval by the full House soon, though its fate in the Senate remains uncertain.
At first blush, Shadegg’s proposal seems utterly sensible. Today, if you are trying to buy an insurance policy for yourself or your family on the open market–i.e., if you don’t get coverage through your employer–you can buy only policies sold within your state. Your state, in turn, has set minimum standards for everything from the services insurers cover to the way insurers set their prices. Shadegg’s bill would obliterate that system: You would be allowed to buy any policy sold anywhere in the country, even if it doesn’t conform to your home state’s rules. So, if you live in Massachusetts, where policies tend to be relatively expensive in part because they have strict regulations, you could buy your coverage from Missouri, where they are generally cheaper thanks to looser guidelines.
Ideally, the bill’s supporters say, people would shop for insurance the same way they shop for consumer goods: online, comparing products and prices, and then deciding on the package that best suits their needs.
Lovely–except that health insurance isn’t just another sweater you can return to L.L. Bean if it arrives with holes in it.
There would also be a “race to the bottom,” as even the legitimate insurers would flock to the states with the most lax regulations about solvency and marketing practices… Even in those states determined to be vigilant, this move would render local rules on health insurance irrelevant.
Getting rid of those regulations, of course, is precisely what Shadegg and his allies have in mind, since they think needless state regulations are responsible for making health insurance so expensive in the first place. But along with regulations guaranteeing coverage of podiatry or acupuncture are mandates to cover cancer screening, psychiatric treatment, and other services that most Americans rightly deem essential. Other regulations are designed to prohibit insurance companies from discriminating among customers based on age or propensity for illness.
Do all of these rules drive up insurance rates, particularly for healthy people relatively unlikely to consume expensive medical services?
Absolutely. But they do so in order to make insurance more affordable for people who need intensive medical services–the ones who arguably need insurance coverage most of all. Get rid of the rules, and some of these people will have no choices at all. (Shadegg and others would theoretically address this need by supporting “high-risk” pools. But such pools, which exist in about two-thirds of the states, have proved woefully inadequate, typically offering skimpy coverage and charging higher premiums.)
That’s not to say the market for individual health insurance works particularly well. Large companies can spread the cost of insurance among all of their workers, thus securing relatively affordable coverage for them without restrictions on medical conditions. Individuals cannot do this, which is why their coverage is so ludicrously expensive and hard to obtain, even with the regulations.
But the best way to fix this isn’t to gut existing regulations. It’s to create one big pool of beneficiaries through some kind of universal health insurance system–whether it’s one that allows people to pick from among well-regulated private health plans (like President Clinton once proposed) or one that simply bypasses insurance companies altogether, giving consumers direct, affordable access to the doctors and hospitals they like best (like many European nations already do). Those aren’t the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they’re the kind of choices Americans would appreciate most.
http://www.tnr.com/doc.mhtml?pt=qCmennIQV1XefN%2BzenOwyX%3D%3D
Comment: In order to gain market share, many insurers are now offering plans with competitive premiums, made possible only by shifting much of the responsibility of paying for care to the individual patient through reduced benefits and increased cost sharing. Since these plans do not provide adequate financial security for those with significant health care needs, many states have enacted appropriate laws and regulations to ensure that insurance insures against financial loss. Shadegg’s bill would effectively replace existing state regulations with the regulations of the state with the least restrictive oversight. Can you imagine the race to the bottom as various states compete to be the home state of national insurers by abolishing essentially all effective regulatory oversight?
These “affordable” policies may be satisfactory for the majority who are healthy, but they won’t work for the minority with significant health care needs and who are responsible for much of our health care spending.
Concentrating high-cost individuals into a single pool will make insurance truly unaffordable for almost all individuals. So how do we fund these high-risk pools? There is only one way, and that is by spreading risk through the tax system.
Shadegg’s “affordable” coverage is a fraud since individuals purchasing these cheap policies will have to pay, through the tax system, the balance of the “premium” that would be required to fund comprehensive coverage. But this increased fragmentation of our irrational system of funding care would expose many more to insolvency, and, worse, to suffering and death due to impaired access to care.
Are our representatives in Congress going to join in on the Shadegg shag, or are they going to get serious about fixing the way we fund health care?
That’s a choice that really matters.