In this excellent article,
Steven Malanga of The Manhattan Institute highlights the exceptional
nature of health insurance as compared with other types of insurance.
When it comes to health services rendered, our culture sees paying the
bills out-of-pocket as the exception, not the norm. As Mr. Malanaga
points out, most of us carry other types of insurance policies that
protect us should a catastrophic event occur - like home insurance, car
insurance, life insurance, even insurance on our valuable, sentimental
items like jewelry. But, when repairs or updates to those insured items
become necessary, we don't call upon our insurance. We understand that
everyday repairs due to wear and tear or even renovations that may
improve or add value to the insured items are costs that we must bear.
Imagine
calling on your insurance when you need a new coat of paint. You
wouldn't get very far, would you? Take this one step further, and
imagine trying to purchase an insurance policy to cover an event that
has already happened. Your house burns down. Can you call and get an
insurance police to cover your home and your belongings after the fact?
Certainly not. If that were how the system worked, who would pay into
the system before the catastrophe occurred? And, where would the money
come from to pay for claims? And, imagine those premium rates for any
suckers who actually maintained insurance prior to making a claim?
(Assuming, of course, that there's anyone would who do this which is
highly unlikely.)
You might be thinking, but those are items or
goods you're talking about insuring and that they're different than
insuring people's health. But, the point is that while the item (or
person) that is insured may vary, the nature of insurance is all the
same. Despite what Congressman Weiner
might think, insurance is a good, just like other goods that are sold
in a marketplace. It is a essentially a contract, whose terms consumers
should be able to shop around for and negotiate just like
with other types of insurance. And, your insurance should be priced
according to the coverage that you choose. For example, if you want a
policy with more limited protection, then you will pay less for your
insurance. Makes sense. If, on the other hand, you want an insurance
policy that covers everything - including riskier treatments or
holistic medicine for example, then you should pay more.
Or at
least that's how the insurance industry should work. The option to
customize insurance like we customize or negotiate every other contract
we enter into does not exist because of the government placing itself
in between the provider and the consumer in what should be a completely
private, contractual relationship. As Mr. Malanga points out:
"There
are significant [] ways that government mandates treat health insurance
differently, at great cost to all of us. Consider this scenario: You
don't have home insurance and a big storm comes through and knocks over
a tree into your roof. You can't just phone up an insurer, buy coverage
and then submit a claim, even if you face financial ruin by not having
the coverage. But that's more or less what you can do in health
insurance under so-called guaranteed issue rules, in which someone who
hasn't purchased insurance and gets sick can't be turned down for
coverage. Needless to say, states that have guaranteed issued, like New
Jersey and New York, have the highest health insurance premiums in the
country because healthy people know they can run the risk of not buying
insurance until they get sick. Insanely, the health reform package now
on the table in Washington would create a federal version of guaranteed
issue.
In auto insurance, some states have given us our own private
version of tort reform to keep premium prices low. In these states, a
driver can opt out of the litigation lottery when he purchases auto
insurance by promising not to sue for pain and suffering if he's hit
and injured by another driver. By doing this a policy holder can save
hundreds of dollars a year on premiums. And yet for some reason the
same option, that is, allowing us to buy a health insurance policy
where we agree not to sue a health provider for pain and suffering if a
treatment goes wrong, is not available, even though I imagine the cost
savings would be enormous."
Government regulators also require us to
buy so much more health insurance. In auto coverage, for instance,
states will generally mandate that we have certain minimum coverage to
compensate anyone we may crash into, but otherwise regulators will
leave us alone to decide which options (towing, collision) we want to
buy. By contrast, states will require buyers of individual and small
group health policies to load up on mandatory coverage, including
options that many people don't want to pay for, like fertility
treatments. Politicians will often claim that they demand these
coverages because they are looking out for our own good, but that's a
difficult case to make persuasively when mandates help make insurance
unaffordable for many people."
Justifying these
regulations by saying the government is looking out for our own good is
paternalistic and offensive. People enter into the marketplace and make
decisions for themselves day in and day out without any help from the
government. Health insurance should not be the exception. I understand
that President Obama and many liberals find fault with insurance
companies because they believe that operating based on a motive to make
profits and fulfill your bottom line is evil. And so it follows that
they believe that those evil companies must be reigned in and
controlled in order to make the system more 'fair'.
But, this
comes at a cost to all of us. If you want to make something more
available to a larger group of people and to bring down cost, you don't
impose more regulations or restrictions on that item. It is competition
among private individuals and companies that brings costs down,
increases supply and makes markets more transparent. The federal
government has never and is incapable of producing these kinds of
effects in a market.
The only way to improve an inefficient and costly market is
to put the bargaining power back in the hands of the people and
eliminate restrictions - on everything from where the good (in this case, insurance)
can be bought from to what is or isn't included for the price. Until
then, as Mr. Malanga points out, "insurance costs will continue to
spiral."
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*This post originally appeared on http://despinakarras.blogspot.com/.