Paved with good intentions and “reform”
If the road to hell is paved with good intentions, then the “no denial for pre-existing conditions” clause in the current healthcare bill is sufficient to pave a 12-lane superhighway.
Prohibiting insurers from denying coverage based on a pre-existing medical condition is a very noble-sounding idea. But it’s as naive and myopic as the idea of eliminating poverty by giving everyone a million dollars and a pony.
To understand why, we need to think about how insurance actually works. Let’s look at auto insurance. For example, Crissy and I pay around $100 per month to have $500,000 of coverage per incident. It’s very unlikely that either one of us will ever cause that much damage in an accident, but if we did, it would financially catastrophic. So, we voluntarily buy insurance even though we don’t really expect to ever collect.
The insurance company collects $100 premiums from lots of people and pools the money so that a large sum of money is available if the low-probability event happens to one of us.
The system works since people pay small sums to protect against a low probability event.
If you wrecked your car yesterday and bought insurance today, would the insurance replace your car? Of course not. You would be asking them, “How about I give you $100 and you give me $25,000 to replace my car?”
Basically, you’re asking them to charge you the small premium of low probability event, even though the event already happened. You’re just asking for free money.
The same holds true for healthcare. If we pass a law that says you can’t be denied for pre-existing conditions, then people will just wait until they are sick and then buy insurance. The latest proposal from Congress has a penalty if you don’t hold insurance, but the penalty is a measly $750/year. So healthy individuals would still wait to buy insurance until they need it.
In this world, every policy holder will be filing claims. Which means every customer will be saying, “How about I give you $100 and you give me $25,000 to replace my car?” and the company will be required by law to say yes. The law essentially dictates that private companies have to give you free money to pay for your medical expenses.
In this system, all the companies will either go out of business or raise their rates drastically. And the whole private sector of insurance providers would collapse.
And though the government will claim this is a “market failure”, it should be clear that the cause is government meddling.
Once the private sector is gone, all we’ll have left is a government “single payer” system. And despite the touted theoretical benefits of a “single payer” system, does anyone actually believe that the same bureaucrats that brought us the the TSA, FEMA, the DMV, and the IRS can run a nationalized healthcare system that is cost-effective and also provides high quality care?
The sad thing is that politicians are using the “pre-existing condition” issue to distract people from the real problems: government bans of insurance competition, out of control malpractice lawsuits, and government subsidies that forced us to have a “3rd party payer system”.
Remember, a single-payer nationalized system has rationing by definition. Anytime something is provided for free, it is rationed. Every existing single payer system in the world and every single US government program is rationed. This includes Social Security, Medicare, Cash for Clunkers, $40 vouchers for digital to analog converter boxes, welfare, subsidized CFLs, tax credits for hybrids, and so on.
There’s no way anyone can claim that healthcare would be any different.
Finally, while I shouldn’t have to say it, I’m all for fixing healthcare. I’m just against the ideas coming from Washington. Those plans won’t make things better; they will make things much, much worse. If you’re interested in learned why and how to really fix healthcare, check out my earlier posts on this topic:
- The root causes of our healthcare problems
- How to fix healthcare
- Some closing thoughts on healthcare – I guess these didn’t turn out to be “closing” thoughts :-)
- Healthcare reform and Corporatism
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