Kevin Williams writes on health insurance The Private Option- Back to Square One in National Review.
We have written about the problem with cross subsidization driving up costs, the perverted incentives of third party payers and the tax incentives to over-insure. But the core problem is the perversion of insurance itself by the mere prepayment of predictable expenses and the perversion of the risk pool.
A large and diversified risk pool is the key to a healthy insurance market. If the majority are healthy it is relatively inexpensive to cover pre-existing conditions and the sick among us.
One could argue that the greatest benefit of single payer is the restoration of a normal risk pool; not as so many argue, the expulsion of the insurance industries’ costs and profits. Must this come, however, with the terrible incentives of a third party payer, the inevitable force of central planning, and the likelihood of special interests capturing the regulatory structure for their own gain. Our history of cost projections on such dramatic reforms has been worse than lousy.
One solution is the regulation of the risk pool. Insurance companies must consider the same risk pool in competing. They can not select the individuals and cases they wish to insure.If the high risk are excluded from a larger pool then this only raises the cost elsewhere.
Another is the single payer solution but only for catastrophic coverage. Private insurers will compete for the rest. Our history suggests that this catastrophic designation will immediately be lobbied to expand to more and more illnesses and cases . Poor people will still need help with non catastrophic expenses and the problems will resurface in that realm. The vote whores will continue to promise benefits without paying for them.
Single payer is no more a panacea that the free market. As long as the voters insist on getting a benefit they are not willing to pay for, the politicians will continue to accommodate them.
from Kevin’s great article:
Progressives would like to see the federal government create a kind of national mutual-insurance corporation, owned by policyholders and reinvesting any profits into better services or reduced premiums.
That’s the best case for the “public option,” progressives’ favored post-ACA health-care plan: It’s universal, so it creates a big and potentially efficient insurance pool; it takes profit and many business costs out of the equation; it takes care of the preexisting-conditions problem and simplifies the individual mandate with a much more forthright tax; it offers the possibility of consolidating many different health-care and disability benefits into a single entity with the market power to command lower prices. And advocates for the program will say that there is some appeal for conservatives: It involves the government in the financing of health care but leaves the delivery of actual services to the private sector, unlike in the United Kingdom’s National Health Service and other state-run monopolies; while the program would no doubt prove difficult for private-sector firms to compete with, it does leave open room for competition from independent insurers, for supplementary policies, and for other health-finance products, all of which would benefit from the expected lowering of medical prices and the presumptive movement of the sickest and most expensive patients onto the public plan; it would reduce health-insurance burdens on business and remove a source of financial and regulatory uncertainty for investors and business managers; it would mitigate a financial anxiety for American families that seems out of place in our prosperous and peaceful society.
Conservatives should not, and will not, support a public option, a “Medicare for All” initiative. There are good reasons not to, chief among them the actual cost of Medicare today as opposed to its projected costs and the sobering unfunded liabilities of the program that result from our habitual refusal to pay for it. Social Security, too, was sold as a kind of mutual-insurance program, rather than the straight-up welfare-transfer program it is.
Where our progressive friends go wrong is that they’ve taken their 19th-century notions about the utility of heavily regulated monopolies into the 21st century, ignoring the experience of the time in between, a period of undreamt-of economic growth and opportunity which should have taught us, among other things, that there isn’t a single solution for complex matters such as health care and health insurance, because people have different needs and desires. American society has real diversity, not the shallow diversity of the corporate cultural-sensitivity seminar. But there is no reason that conservatives cannot address progressives’ concerns about health care, from their risk-aversion to their genuine concern about health-care access for the poor, since those also are fairly broad and deep concerns of the general public—and rightly ought to be ours, too. We do not have very many good examples in Washington just now, but we can treat the other side’s concerns with the seriousness they deserve and develop policies that address them, especially where they coincide substantially with our own. It isn’t only a question of letting markets work — though we really should let markets work! — but of also liberating all of the relevant Burkean little platoons to work on improving health care the same way we worked out how to build better cars and develop the Internet: with lots of individuals and institutions, public and private, each working intensely on a little piece, and then working on it again, and then working on it again, rather than trying to pass one big law or create one big program that solves it all at once for all time, or at least for a generation or two. Nothing really works that way.