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.