Now that the Senate and House health care bills appear to be dead, there is much discussion in DC about the possibility of a compromise with the Republicans that will produce a “scaled-down” health care reform bill. NCPA’s John Goodman addresses that prospect here.
Suppose, for example, that Congress took the advice of those who want to ban insurance discrimination on the basis of medical history, and stopped there. What would happen next? The answer, as any health care economist will tell you, is that if Congress didn’t simultaneously require that healthy people buy insurance, there would be a “death spiral”: healthier Americans would choose not to buy insurance, leading to high premiums for those who remain, driving out more people, and so on.
And if Congress tried to avoid the death spiral by requiring that healthy Americans buy insurance, it would have to offer financial aid to lower-income families to make that insurance affordable — aid at least as generous as that in the Senate bill. There just isn’t any way to do reform on a smaller scale.
Alert readers will recall that I made a similar point here and Uwe Reinhardt agreed with me. But I wasn’t arguing for ObamaCare. I was arguing against divorcing health insurance premiums from risk.
In a complex system — especially one that is hugely dysfunctional because of regulation, tradition and bureaucracy — there are basically two ways to go:
We can liberate people, giving them new opportunities to solve problems; or we can further constrain them, making problem-solving more difficult than ever before.
We can give people new tools to solve problems; or we can take away tools they already have.
We can unshackle the price system, allowing competition and choice to solve problems the way problems are solved in other markets; or we can suppress prices even more than they are already suppressed.
The former choices are the path to real problem-solving; the latter are not workable, not desirable and not real reform
