What exactly is an “inadequate” health insurance policy? It turns out that the answer to a seemingly innocuous question is key to our health care future, to what happens when Obamacare goes down.
Obama’s folks claim that the millions of cancelled policies Americans suffered recently were inadequate anyway. Yet it has become obvious to most of us that Obamacare can’t possibly succeed.
It’s not just the technical failures of the exchanges nor the preposterous lies the President had to tell to get it passed. It’s not that Obamacare’s provisions have been manipulated three times now to prevent its unpopularity from upsetting an election cycle.
No, the fatal flaw of Obamacare is the same as it was from the start. It is based on the discredited notion that complex economic structures can be more productively ordered by bureaucratic fiat then by the countless interactions of free providers and consumers. As we used to say during the Cold War, if this stuff worked we would all be speaking Russian.
The designers of Obamacare seem to have been especially ham-handed in constructing their scheme. For example, the point of the individual mandate, a linchpin to the deal, is to force healthy young people to subsidize the elderly and the chronically ill. Of course, by separating risk from premium, this ignores the basic principle of insurance underwriting.
But the Obamacare architects made their own job harder by providing that individuals, until the age of 26, can stay on their parent’s policy, thus assuring that a large part of the target population has zero incentive to enter the individual market on their own.
Then, to make matters worse, Obamacare assures guaranteed issue for all comers. An insurance company can’t turn you down or charge you a higher premium based on a pre-existing health condition. This negates the one reason a healthy, young person might buy insurance — to protect against future calamity. If something unexpected comes up, you can always buy the insurance then.
Young people aren’t a good choice to do the financial heavy lifting anyway. The Obama economy has been particularly hard on them. High unemployment rates, difficult job markets and large student loan balances all make it hard for them to come up big to save Obamacare. They can’t and they won’t.
The impending demise of Obamacare is a great opportunity for us to redefine how we want to pay for our health care, to create a patient-centered system based on free-market principles. So here’s where the question about inadequate insurance kicks in.
We can agree that health insurance with low annual or lifetime limits that doesn’t protect you from bankruptcy is truly inadequate. But the Obama folks insist that insurance policies with high deductibles and co-pays are also inadequate. Unfortunately, others have unwittingly bought into the notion.
But if you, the consumer, get to keep the premium savings, insurance with high deductibles and co-pays is not only adequate, it’s smart. Why pay an insurance company to pay you back for services you know you will need anyway, like checkups, preventive services and minor illnesses? It’s like buying car insurance for oil changes.
The bigger point is that by paying for services directly, we can take charge of our own medical expenses. We can shop for value and bring down cost by working with our doctors on the most efficient way to avoid unnecessary expenses while still protecting our health.
A couple of caveats: this analysis assumes a free and open market for medical care. That’s why price transparency and buying insurance across state lines, avoiding costly state mandates, is important.
Also, if your employer or government is providing first dollar insurance coverage, your incentive to save is gone. But there is no good reason why your boss should get the tax break that’s not available to you for buying your medical insurance. Government could provide its subsidies through a market-based system where even program beneficiaries have “skin in the game.”
We could be on the verge of a patient-owned health insurance system that saves money and works for all of us. There is nothing “inadequate” about being in charge