by Linda Chavez
The health care reform bill that has now passed two committee hurdles in the House still faces an uphill battle to become law. Many tea party Republicans have already said they won’t vote for a bill they call Obamacare Lite, and it is likely that very few, if any, Democrats will cross over to support the GOP bill on the floor. But President Donald Trump says he will do what it takes to get the legislation passed, though it is unclear exactly what that means. The biggest problem, however, is not Republicans breaking ranks but the fact that despite Obamacare’s many flaws, Americans now feel entitled to guaranteed health insurance but don’t necessarily want to pay for it. Something has to give.
Anyone who believed that we could expand health care coverage to more people, insist that those with pre-existing conditions be covered, mandate that more procedures be paid for by insurance and impose one-size-fits-all policies for the young and healthy and for the elderly and sick and not see premiums explode doesn’t understand basic economics. Insurance, by its nature, is about shared risk. When a driver goes to buy auto insurance, his driving record, age, sex, type of vehicle and location are all factors in determining his premium. A 16-year-old boy with a new BMW living in New York City is going to pay higher premiums than a 40-year-old woman living in Sioux City who drives a Volvo and has never had a speeding ticket. What’s more, the premiums also depend on what kind of coverage you want. Do you want to be covered for damage to the vehicle or just liability in case you or someone else gets hurt in an accident? And what deductibles are you willing to absorb? No auto insurance policy I know of offers maintenance as part of the package, either; you pay out of pocket for oil changes, brakes, tires, tuneups, etc. The same theories apply to homeowners insurance. You pick how much coverage you want and what deductibles you are willing to pay, and your premiums are based on these factors, as well as where you happen to live.
But Americans have gotten used to the idea that health insurance should operate differently than all other forms of pooled-risk insurance. Going back to World War II, when unions successfully sold the idea that employers should pay for health insurance to circumvent wage-price controls in effect during the war, which limited their ability to bargain for higher wages, most Americans started receiving insurance through their employers. They also got this benefit tax-free. This third-party payment disrupted the feedback loop that is necessary for markets to operate efficiently. We haven’t had a free market system in health care ever since — and Obamacare made it much worse.
Some of what the House Republicans’ plan attempts to do is to restore at least some free market opportunities to the system. If the plan were to be successful, over time, this might have some effect on driving down the price of health care. By giving people a choice about what kind of insurance they wish to buy — including catastrophic plans for the young and healthy, which make the most sense for this cohort — and including stiff penalties for purchasing insurance if an individual has allowed previous coverage to lapse, the House bill reintroduces some market discipline.
The House bill is by no means perfect, but it is at least a beginning. Would some people end up paying more for their insurance under this plan? Yes, but the choice would be theirs. Others could find cheaper plans that better suit their needs; they want to be covered if they get cancer or some other life-threatening disease or have an accident but are willing to pay out of pocket for routine visits for a common cold. And it is only fair that older Americans — who consume far costlier treatments — pay more for their premiums, as should smokers, heavy drinkers and overweight people.
The working poor and those below the poverty line will need subsidies. But the GOP plan would provide those, in the form of tax credits for the former and Medicaid for the latter. The challenge for the president and the GOP leaders in Congress will be to explain to Americans — many of whom have become increasingly insistent on benefits but don’t want to pay for them — that there are no free lunches, not even in health care.