There is much talk these days about the admittedly botched Affordable Care Act rollout by the Obama administration. It adds fuel to the fire of conservatives who want to say that Obamacare is another step down the road to “socialism.” As a friend of mine said, “we need to reduce government created mandates until the amazing free market that brought us affordable food, clothes and consumer products brings us affordable healthcare.” But when it comes to expanding health insurance coverage, basic principles of economics tell us the free market is not the solution.
There’s no question that market forces can help lower medical costs. However, today’s healthcare crisis has two separate but related parts. One is that the rate of increase in medical costs has exceeded the general rate of inflation for a long time. That can’t continue and we have to figure out how to fix it. Those who want to cut government regulation and rely on market forces to solve our medical costs problem have a point when they say that increased transparency of pricing, proactive consumers, and informed competition can slow the increase in medical costs.
However, it’s the second part of the problem where the market fails. A disturbingly large number of the people in this country have no healthcare coverage other than their own personal assets. The future economic health of both the country as a whole and each individual citizen depends on having access to quality healthcare coverage. Without it, unexpected medical costs due to illness, accident or age can destroy us financially. But a truly free market aggravates the problem of making good quality health insurance available to more people.
How could this be? Because health insurers, left to their own devices, will run as far and as fast as they can from the elderly, the disabled, the chronically ill and the host of other folks who are the largest consumers of medical services. Estimates are that end-of-life care consumes up to 30 percent of all healthcare costs in this country. Add to that the costs of dealing with chronic medical conditions and such things as the care for premature births and you have the majority of this country’s medical expenses. Insurers make no money covering the elderly, the disabled, those with chronic illnesses or those with other pre-existing conditions. Either the premium would be much too high for these individuals to afford (the premium, after all, must reflect the insurer’s risk) or a low, affordable premium from the consumer’s perspective would drive the insurer out of business in light of the likely medical costs of a high risk person.
Absent laws preventing insurers from excluding coverage for these “undesirable” consumers, the market will increase, not decrease, the number of people without insurance. This is because the insurance that exists would be affordable only for the healthiest individuals and leave unhealthy or higher risk people, those most in need of medical care, without coverage. It’s not the insurers’ fault they would act this way. It’s simply how an efficient, unregulated free market for health insurance would work. Without requiring insurers to provide coverage to people they wouldn’t otherwise cover and requiring people who wouldn’t otherwise choose to buy insurance — the young and the healthy — to get into the risk pool, we won’t be able to expand coverage to people who can’t currently afford it.
Those proposing to repeal and replace Obamacare must either admit they are content with current or higher numbers of individuals without health insurance in this country or, alternatively, explain how we can expand coverage without both prohibiting cherry picking by insurers and requiring everyone to be in the risk pool. The natural laws of markets and insurance can’t be ignored.
Rep. Brian S. King, D-District 28, is a member of the Utah State House of Representatives.
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