Obamacare: Treating the symptoms, ignoring the disease 

Our healthcare system has significant problems. No one - right or left - doubts that. Coverage and care are frankly just too expensive. On this we can all agree.

But why? Cost, after all, is a merely a symptom of what ails American healthcare.

The Diseases

There are five major healthcare pathologies in this country:

1. Overconsumption - We spend too much on things we don’t need because - beyond the $15 copay - someone else is paying the bill. Paying for Nexium with a PPO is a huge part of the problem. Why? (Some is coming from your premium, I know...)  But the rest of all of this cost shifting adds up.

2. Border Disorder - Competition is quite limited because we aren’t allowed - by law - to buy a policy in a interstate health insurance market. In-state regulatory monopolies form -- and monopolies are rarely good for prices. What’s the monopoly in your state?

3. Employer’s Choice - The tax code creates an incentive for job-based insurance. If someone else is choosing your policy (and paying for it), why should you be cost conscious? Privileging employer-based insurance represents one of the largest - and most unjust (pdf) - distortions of healthcare in America via the tax code. (Remember, progressives did this in the 1940s during war time wage freezes.)

4. Entitlement Tsunami - Entitlement spending is fast becoming a fiscal tsumami. Not only does socialized healthcare for the poor (Medicaid) and old (Medicare) create distortions like over-consumption, it traps the poor at dead-end wages and creates a system where wealthy older people sap resources from struggling young people. (Oh, and it’s a massive unfunded liability.)

5. Mandate Mania - You may not want chiropractic coverage, but you’re going to get it whether you like it or not. And you’re going to pay for it. Coverage mandates like these vary by state, but they could add anywhere from 5-20 percent to the cost of your coverage, according to CAHI estimates in 2008.

The foregoing are the five major cost-drivers of U.S. healthcare. Higher costs limit access for everyone--especially the working poor. How many of these five cost drivers were addressed in the 2009 Obamacare legislation? Precisely none.

What is the result - already - of Obamacare, according to the Wall Street Journal?

Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats' efforts to trumpet their signature achievement before the midterm elections. Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.


Not only did the Obamacare legislation fail to address any of the major pathologies, but actually compounded them--which means premiums will continue to soar ever higher.

So how does Congress propose to help with the cost problems? A) Ignore them?; B) Force you to buy health insurance anyway?; or C) Leave the door open to price controls carried out by central bureaucrats in Washington?

The answer is D) All of the above. You think people are mad about Obamacare now. Wait till they’re forced to pay these premiums whether they like or not.

Obamanomics or Nixonomics?


Remember price controls? Ah yes, the Nixon Administration. They didn’t work then and they won’t work now.  Not only are price controls a terrible idea from a purely economic standpoint -- that is, they seek to remedy a distorted market with more distortion -- they are a terrible idea for the kind of entrepreneurship that has made the U.S. the healthcare innovators of the world. Take away the profit motive and introduce the favor-seeking motive? You’ve got a recipe for stifled innovation and a special-interest bonanza--all at already distorted prices!

The processes of “disruptive innovation” are far less likely to take place in what amounts to a regulated state utility. Healthcare will begin to bog down. Like education and energy, the prices will go up and the quality will start to taper of quickly. The more the government meddles, the more innovation is muddled.

The Cure

There are all sorts of market-friendly ways to fix healthcare--and we need most of them. We could already have lowered premiums and helped the poor all at the same time with five simple fixes... But a covey of “progressive” politicians in the grip of special interest groups have tightened the vice -- giving us just what we didn’t need.

Simple fixes? Yes, indeed. (I’m citing myself):

 

Let people buy health insurance across state lines. I live in North Carolina. If folks in my state could buy insurance in Idaho, we would cut our premium almost in half. New Yorkers could reduce premiums by about 2/3 buying in other states. Everyone would have access to the lowest rates in the country. Competition would bring costs way down. Why won’t the government let us?

 

Give poor and working class people tax credits (vouchers) to buy insurance. It’s not hard. Help the poor. Keep the competitive market, too. But for goodness sake, don’t make us pay for rich people’s healthcare and bankrupt private insurance all at once. (A high-risk pool [could have helped] people with pre-existing conditions, by the way.)

 

De-couple health insurance from our jobs. (Change the tax code.) This coupling is an artifact of WWII wage controls. [Again] When your company chooses your insurance, it limits competition and choices. It's very costly, but you don't see the cost. And under the current system, you lose your insurance if you lose your job. Wealthier, employed people get subsidized to get insurance. Unemployed or independent contractors get nothing. [De-couple healthcare from jobs and wages/salaries will start rising again, too.]

 

Give greater access to health savings accounts for use on the small stuff. They can save money for old age, or purchase out-of-pocket healthcare. They’ll be more careful with their spending. We’ll eliminate much of the “split-the-check” effect where people over-consume and cost-shift. ...

Stop driving up costs with regs and mandates. In some states, the government forces insurance companies to charge everyone the same rate whether they’re young and healthy, or sick and old. This is terribly costly. High rates mean young people go uninsured. Also, forcing companies to insure people after the fact is not “insurance” and drive up costs even more. Again, carrots for consumers to get insurance are far better than sticks against insurance companies and employers. Of course, consumers pay for those sticks, anyway.

I feel like it’s almost too late to bother with all of this. The parasites of Washington are already settling in around this monstrous bill to feed -- and they will guard their bounty fiercely. I am doubtful that a full repeal is possible. Perhaps the way forward is just the kind of piecemeal strategy that got us to this state--except in reverse. A bill here, a bill there. Hopefully we can roll it back. But really: what in Washington ever goes away? Not much.

It’s a sad day for healthcare innovation in America thanks to Nancy Pelosi, Harry Reid and Barack Obama. And it’s a sadder day still for the American healthcare consumer.

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Max Borders

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