Mar 26, 2013 0
A common refrain of those who support greater government control of health care is that free market capitalism just does not work in health care policy. It is like saying that the fundamental laws of economics do not apply. But the central problem of health care policy is that the basic laws of economics work only too well.
When companies get tax breaks to buy health care for their employees that the employees do not get at an individual level then there is an incentive to push compensation towards more coverage, generally meaning lower deductibles. We end up being over insured filing claims for small amounts. This drives up administrative costs. Low deductibles isolate the consumer from the cost provided and reduce that pressure on costs.
When we buy insurance privately- such as auto, liability and home owner’s policy, we do just the opposite. We buy the highest deductibles we can afford and we know that if we filed claims for flat tires and oil changes our auto policies would skyrocket.
When the government becomes the biggest buyer of health care through Medicare and Medicate and then uses that position to dictate lower prices two logical outcomes occur: hospitals shift costs to the private paying patients raising health care costs, and fewer doctors choose to participate in the government programs.
When Obama Care mandated that even high deductible policies cover 100% of preventative care- a cost that I was previously willing to bear- then the costs of these policies went up. This is true with every mandate that has been push by both federal and state agencies.
Rules that prevent insurance companies from crossing state lines increases administrative overhead and reduce competition.
This is not to ignore that there are some facets of health care that propose a challenge. It is to say that the government policies have driven up costs, reduced accountability, and without increases in quality.
Government policies have been used effectively to facilitate a dynamic market. Our bankruptcy laws are designed to clear away the debris of failure to allow capital to be redeployed effectively and quickly. Anti-trust laws were designed to keep large single players from preventing new competitive player from emerging.
Our health care laws and many other laws governing large institutions have gone in the other direction; propping up the older players with dominant positions and making it much more difficult for new competitors to enter the field.
Our policy has created a right in the minds of many health care consumers that is synonymous with not having to pay for health care.
Health care costs and economics do not go away because the government enters the field. There is some need to create common underwriting standards to achieve desired policy objectives. A health insurance company should not be allowed to dropped an insured or substantially raise the rates if they develop a chronic disease after the policy is written. And there needs to be some mechanism for insuring those with some underwriting considerations.
But the cost issue is better addressed by subsidizing coverage for those unable to afford it- not by inserting control and mandates throughout the system based on an elitist construct and decimating consumer choice. The health insurance market it too large, too dynamic and too complex to dictate from a central bureaucracy without causing enormous dislocations, higher costs and lower quality.