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Brother, can you spare 50 large?
Carter Bundy
I was terrified going into last week’s two debates with Cato Institute Health Policy Director Michael Cannon. Here’s a guy working at the premier libertarian think tank in America, maybe the world. And his major focus is health care. Yikes!
So I read as much of his writing as I could in a week, finished reading all of and re-reading parts of HR 3200, and talked with the best health care folks on the pro-reform side I could find about everything from cost containment to end-of-life issues to guaranteed issue and community rating.
But in addition to the sheer intellect and knowledge base I was up against, I was afraid of something deeper: that he might actually convince me that free-market reforms were more effective than regulation of insurance companies.
I couldn’t see how, but I had a nagging suspicion that he’d have some silver-bullet argument that would alter my worldview.
As I’ve posted here before, I’m a big fan of Adam Smith and the power of markets. But I’ve also been skeptical of markets in areas where there are intrinsic obstacles to achieving either efficiency or broader societal goals. Meeting one of the top health care libertarians in America presented a strong challenge to the concepts in my last few articles about how key market assumptions fail in the world of health care.
He had lots of smart — very smart — arguments. After all, he is a fellow University of Virginia Wahoo! (We even had at least one econ professor in common.)
But here’s the reassuring part for advocates of reform: None of the arguments to let markets alone take care of health will work if your goal is to make sure sick people get health care.
What’s the point of insurance?
One of the core features of congressional health-care reform proposals is that every person is guaranteed the issuance of health insurance regardless of pre-existing conditions, including an ironclad right of renewal of coverage and a ban on “rescission” (insurance companies kicking you off of coverage).
Of course, guaranteed issue is meaningless without some kind of “community rating.” For 99 percent or more of Americans, it means nothing to have insurance issued if you are billed $50,000 a year for the policy. So all of the congressional bills have some kind of cap on what insurance companies can charge for premiums — commonly something like twice the amount of the lowest premium charged in that geographic area (page 21, lines 5-9 in H.R. 3200 if anyone’s interested).
One thing Cannon and I agreed on is that markets probably can do a decent job of allocating true actuarial costs for individuals if left unfettered. And for the sick, or those likely to be sick, the actuarial value of insurance policies really can be at least $50,000 a year.
Cannon smartly pointed out that if insurance companies are forced to issue policies at twice the lowest rate to people whose actuarial value of insurance is $50,000 a year, they will stop offering comprehensive insurance, leaving the sick with no policy at all. Probably true. Told you he was smart.
But isn’t $50,000 a year the equivalent of no policy at all for almost all of us? Who can realistically afford that in premiums — and that’s before co-pays and other cost-sharing?
As Cannon made his point, I couldn’t help thinking he was making a solid case for single payer. If the insurance companies’ only reaction to guaranteed issue is either to charge sick people $50,000 a year or to drop that type of coverage if they’re not allowed to charge the real actuarial value, maybe they aren’t the quality middlemen our citizens deserve.
Market solutions
There’s no doubt that Cannon is right that insurers will change their offerings if they think they’re losing money on sick people, and that’s an important point for policy makers to account for. But in the absence of some kind of subsidy to the individual or even insurance company (both of which are anathema to true libertarians), what is the solution?
There are only three other solutions I can think of:
• Find a job that gives you a spare $50,000 a year just for premiums. Best of luck.
• Get no treatment and become even sicker or die far sooner than you would have with treatment.
• Try to get treatment in emergency rooms and other taxpayer and premium-subsidized settings.
Since the last is government intervention and hardly a market reform, the real libertarian answer is fork over $50,000 a year or die. I appreciate belief in general principles as much as the next guy, but talk about putting love of a theoretical ideology over the real world problems of regular people…
Having said that, I can’t write a column about Cato and the Rio Grande Foundation without adding that I think they genuinely believe a market approach will result in better access, better quality and lower costs. It just seems to me that despite the academic and theoretical brilliance of their advocates, they haven’t given much weight to the real-world consequences of having each of us pay the actuarial value of our health care.
Paying actuarial value is indeed a great deal if you’re young, healthy and invincible. But thousands of years of human experience tends to show that no one stays young forever, very few stay healthy forever, and none of us is ultimately invincible.
And oh yeah, most of us don’t have 50 large a year to blow on insurance premiums.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.
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Another option, if you are faced with a $50,000 a year insurance premium, is to put the $$ (that you theoretically have) in a savings account, or invest it. Pay for your own health care, and self-ration. This leads to the Hemlock Society’s “Common-Sense Suicide.” I wonder how many Libertarians support that idea.
Dr. J pushes the tired old theme that government can’t run anything. Gee, government just had to bail out Wall Street because they couldn’t run their investment business! And Bush II wanted to throw seniors to the Wall Street lions to feed their greed. I am sure glad I have Social Security. My investment income has shrunk to 30% of its previously stable value.
jivaroo99′s comments about Canadian health care are incoherent (and at least one number is incorrect–current US population estimate is 305 million). Here’s the results of a Gallup poll of Americans and Canadians taken in 2003:
“One-fourth [25%] of American respondents are either “very” or “somewhat” satisfied with “the availability of affordable healthcare in the nation,” (6% very satisfied and 19% somewhat satisfied). This level of satisfaction is significantly lower than in Canada, where 57% are satisfied with the availability of affordable healthcare, including 16% who are very satisfied. Roughly 4 in 10 Britons are satisfied (43%), but only 7% say they are very satisfied (similar to the percentage very satisfied in the United States).
Looking at the other side of the coin, 44% of Americans are very dissatisfied with the availability of affordable healthcare, and nearly three-fourths (72%) are either somewhat or very dissatisfied. The 44% in the United States who are very dissatisfied with healthcare availability is significantly higher than corresponding figures in either Canada (17%) or Great Britain (25%).”
Link: http://www.gallup.com/poll/8056/healthcare-system-ratings-us-great-britain-canada.aspx
A more recent study (2008) concludes that the US is ‘dead’ last among 19 industrialized nations in preventable deaths. France, Japan and Australia have the fewest.
Link: http://www.reuters.com/article/latestCrisis/idUSN07651650
Carter,
I was front row and center at your appearance with Michael Cannon and you acquitted yourself very well. Good on you!
Carter; I have to agree with Michael Swickard about the “will work if your goal is” part, but to further delve into this morass of garbage called HR3200 one finds that there is no way it will ever be acceptable to the people.
Since the 1800′s some of my people migrated to Canada. Many of them still stay in touch and keep me posted on what is happening there. Teh questions I put to them about government health care is that it doesn’t work half the time, especially when one is in need of immediate treatment. The waiting lists are so long that one would die if they waited for the government health care for treatment. One must also remember that Canada has only about 40,000,000 people as opposed to the U S with about 250,000,000 people and their government is in finacial trouble more so than we. Do the numbers from there.
Another factor to consider is that when this happens, most of them come into the U S for treatment, rather than take a chance on dying. What does this tell you? Any sane person knows that this country could not sustain a government health care program for more than one or two years, with the taxes the people pay now. That would mean a huge tax increase that would take this country into a purely socialistic era, At that point one would have to look at all the socialistice countries and ask: Does Socialism or Marxism work? I believe the resounding answer would be NO.
I and many other people in this great country fought for the freedoms we now have and I for one would not want to live under a totalitarian govenement system. Would you? Of course this may be what the government health bill is aiming for, the erradication of the aged public. What do you think?
What is being lost in this “debate” ( and I use that term loosely), is that: 1. How can thoughtful, intelligent, business oriented people believe the government can run a health insurance company competently and economically when they never have done that in the history of the world? And 2., how can the government add onerous and draconian rules and regulations to insurance policies (like no caps, accept everyone, total portability, etc.) and expect the insurance will cost LESS??? This is irrational andf unbelievable and contributes to a lack of trust in the used car salesman that want you to sign on the bottom line and ignore all the 1018 pages of details in the contract of HR 3200. This is about trsut, do you trsut the government to do things or do you trust private enterprise? I know who I trust.
Carter – I am glad you wrote **…will work if your goal is to… ** because that is the core issue not being addressed about healthcare reform. First and foremost, is the healthcare reform a continuation of our nation’s previous healthcare strategy of extending life and the quality of that extended life or at the core is this reform a change to a European healthcare model that does not have a priority for extend life?
And, since we have plenty of nations who have changed their healthcare, we should research what was said before the change and how the change has changed over the years.
The debates so far on healthcare reform are only about tactics which is useless without a clear understanding of the overarching national healthcare strategy.