The House health care overhaul bill passed not because Democrats prepared a good proposal but because Republicans showed an amazing inability to present a viable alternative.
In particular, young and healthy people tend to not buy health insurance. However, without their contributions, any health insurance system cannot work. Democrats address this issue, yet none of the Republican proposals do. Democrats believe that the government, in its wisdom, should command asocial citizens to purchase health insurance and severely punish those who do not obey. Republicans claim that they have alternative proposals of health care reform, but none of them even touch the subject of creating a system in which the majority of the young and healthy would buy health insurance out of their own will.
Health insurance policies, as we have them now, largely cover routine medical care. We pay a high monthly premium so that when, once a year we see a doctor due to a bad flu, we pay a small co-payment instead of the full charge of around $100 per visit. This is not insurance at all: it is a health maintenance plan, something similar to the extended warranty plans offered for cars, TVs, refrigerators, etc. Most people do not buy these plans, as it is better to put some money aside and spend it when a major repair is needed than to pay for it in advance. Only a small portion of our current health insurance plans are true insurance, in that they cover the high cost of our major health problems. However, these plans last for only one year. If we acquire a chronic illness, at contract renewal it is considered a pre-existing condition. We cannot buy insurance for it; similarly, we cannot buy insurance for the repair of a roof that is already leaking.
For people buying health insurance as individuals, the currently offered plans offer practically no insurance in the case of serious sickness. About 18 percent of the uninsured make more than $75,000 per year. They can afford to buy health insurance, but did not do so since they gain little or no advantage from it. Regardless of whether they buy health insurance or not, in the case of a major chronic illness, they quickly would be priced out of the insurance plan, and end up using government-sponsored programs anyway. Staying uninsured is a rational choice.
Individuals acting rationally in their best personal interest cause a malfunction of the current health care system. We can address this problem in two ways. We can use the government apparatus of compulsion to force the young and healthy to buy health insurance, which they would not buy otherwise. This is what the Democrats are proposing. On the other hand, we can change the system in such a way that rationally acting, young and healthy consumers would buy health insurance without any compulsion. This is what the Republicans have failed to propose.
What we really need is life-cycle health risk insurance covering only expensive medical care. It should be common, but not mandatory. This could easily be obtained by giving a hefty tax break to people buying this basic insurance. For example, a two or three dollar tax break for each dollar spent, within certain limits.
This health risk insurance, in essence, would be a catastrophic health insurance, but designed to last for the lifespan of a person. It would step in and cover expenses above some predetermined per-year limits, cumulative limits for consecutive years, and cumulative limits over the person's lifetime. For minor medical care and for preventive care people could pay as they do now. Some would pay out of pocket as needed. Some would sign up for health maintenance plans. Many would use Health Saving Accounts, which gained popularity in recent years, and would perfectly complement health risk insurance. The poor would continue using Medicaid.
Yearly health insurance contracts, as we have them now, are convenient for accountants at health insurance companies. This approach makes no sense for an individual who is interested in health care for the length of his or her life. The real choice we are facing is: should we use the government's powers of compulsion to force individuals to comply with solutions well-suited to health care industry bookkeepers, or should we spur competition within the health industry so they would provide products suiting the needs of the individuals they serve? Do U.S. citizens exist for the good of the health insurance industry, or is the health insurance industry here for the good of U.S. citizens? This is the question for our politicians.
One might notice that the life cycle health risk insurance, as outlined here, can evolve naturally into market-driven health care for seniors, which could eventually compete with Medicare. Democrats want to constrain the rising costs of government-run health care programs by even greater government involvement in the health care industry. Although rightfully criticizing this approach, Republicans have failed to produce proposals introducing private industry products competing with Medicare.
Life-cycle health insurance, as presented here, is just one possible market driven solution. Prof. John H. Cochrane from the University of Chicago in his op-ed in the Wall Street Journal proposed Health Status Insurance as an umbrella insurance securing lifetime insurability in the event one develops a pre-existing conditions. Prof. Uwe E. Reinhardt in his Economix Blog mentioned the need of the life cycle health insurance. Without a doubt, one could find more ideas on how market-driven solutions could bring affordable health care for most Americans. However, this is not what the Republicans are looking for. Despite the fact that almost every voice opposing the public option is asking for more free market in health care, there is no beef behind it.
One should not be surprised, judging by the Republican stance on other issues. In immigration reform, a topic lingering around the corner, many of those same Republicans are for more government involvement in controlling the labor market, a clearly socialistic concept. They decidedly oppose free market driven immigration policy. In their approach to the free market concept, most Republicans are like most Catholics on the official Church doctrine on sexuality: when convenient, they give some lips service to it, but in their hearts, they do not believe in it and do not practice it. Hence, it is very unlikely that Republicans will ever produce any health care reform proposal bringing free market ideas that worked so well, for example, in transforming the telecommunication industry. I hope, however, that I am wrong on this prediction.
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