Wednesday, June 27, 2012
I'm scared.
I fear that even if the Supreme Court overrules most of
Obamacare (or did already, by the time you read this), Republicans will join
Democrats in restoring "good" parts of the law, like the requirement
that insurance companies cover kids up to age 26 and every American with a
pre-existing condition.
Those parts of Obamacare are popular. People like getting
what they think is free stuff. But requiring coverage to age 26 makes policies
cost more.
Even Bill O'Reilly lectures me that government should ban
discrimination against those with pre-existing conditions. Most Americans agree
with him. Who likes discrimination? Racial discrimination was one of the
ugliest parts of American history. None of us wants to be discriminated
against. But discrimination is part of freedom. We discriminate when we choose
our friends or our spouse, or when we choose what we do with our time.
Above all, discrimination is what makes insurance work.
An insurance regime where everyone pays the same amount is called
"community rating." That sounds fair. No more cruel discrimination
against the obese or people with cancer. But community rating is as destructive
as ordering flood insurance companies to charge me nothing extra to insure my
very vulnerable beach house, or ordering car insurance companies to charge
Lindsay Lohan no more than they charge you. Such one-size-fits-all rules take
away insurance companies' best tool: risk-based pricing. Risk-based pricing
encourages us to take better care of ourselves.
Car insurance works because companies reward good drivers
and charge the Lindsay Lohans more. If the state forces insurance companies to
stop discriminating, that kills the business model.
No-discrimination insurance isn't insurance. It's
welfare. If the politicians' plan was to create another government welfare
program, they ought to own up to that instead of hiding the cost.
Obama -- and the Clintons before him -- expressed outrage
that insurance companies charged people different rates based on their risk
profiles. They want everyone covered for the same "fair" price.
The health insurance industry was happy to play along.
They even offered to give up on gender differences. Women go to the doctor more
often than men and spend more on medicines. Their lifetime medical costs are much
higher, and so it makes all the sense in the world to charge women higher
premiums. But Sen. John Kerry pandered, saying, "The disparity between
women and men in the individual insurance market is just plain wrong, and it
has to change!" The industry caved. The president of its trade group,
Karen M. Ignagni, said that disparities "should be eliminated."
Caving was safer than fighting the president and
Congress, and caving seemed to provide the industry with benefits. Insurance
companies wouldn't have to work as hard. They wouldn't have to carefully
analyze risk. They'd be partners with government -- fat and lazy, another
sleepy bureaucracy feeding off the welfare state. Alcoholics, drug addicts and
the obese won't have to pay any more than the rest of us.
But this just kills off a useful part of insurance:
encouraging healthy behavior. Charging heavy drinkers more for insurance gives
them one more incentive to quit. "No-discrimination" pricing makes
health care costs rise even faster. Is it too much to expect our rulers to
understand this?
Of course, the average citizen doesn't understand either.
When I argue that medical insurance makes people indifferent to costs, I get
online comments like: "I guess the 47 million people who don't have health
care should just die, right, John?"
The truth is, almost all people do get health care, even
if they don't have health insurance. Hospitals rarely turn people away;
Medicaid and charities pay for care; some individuals pay cash; some doctors
forgive bills. I wish people would stop conflating the terms "health
care," "health insurance" and "Obamacare." Reporters
ask guests things like: "Should Congress repeal health care?" I sure
don't want anyone's health care repealed.
Reporters also routinely called Obamacare health
"reform." But the definition of reform is: making something better.
More government control won't do that. We should call politicians' insurance
demands "big intrusive complex government micromanagement."
Let the private sector work. Let it discriminate.
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