Free Market Health Care

I think it’s a little bit strange that this week House Republicans will voluntarily cast a vote that can be characterized, 100 percent accurately, as authorizing insurance companies to refuse coverage to people on the grounds that they’re in less-than-perfect health. Tough votes happen in congress all the time, but you don’t normally ask people to walk the plank over something that has no chance of passing. After all, as Amy Goldstein notes the pre-existing condition problem is quite widespread:

As many as 129 million Americans under age 65 have medical problems that are red flags for health insurers, according to an analysis that marks the government’s first attempt to quantify the number of people at risk of being rejected by insurance companies or paying more for coverage. The secretary of health and human services released the study on Tuesday, hours before the House plans to begin considering a Republican bill that would repeal the new law to overhaul the health-care system.

Something this helps highlight is the odd two-step that conservative opponents of the Affordable Care Act tend to do on the subject of what it is they want from the health care system. On the one hand, they take advantage of people loss-aversion and status-quo bias which works because most voters already have health insurance. On the other hand, to avoid simply defending an untenable status quo they assert that they have in their back pocket some free market solutions to our problems.

Unnoticed in this is that the only reason most people are insured today has to do with the non-market elements of the system. First, the tax code provides an enormous subsidy for employer-provided health insurance that ends up putting the majority of employed Americans into large risk pools at the expense of everyone who doesn’t work full-time for a big company. Second, Medicare mops up the largest pool of non-employed people by giving single-payer health care to everyone over 65. Third, a regulation bans discrimination against people with pre-existing conditions as long as they maintain “continuity of coverage” as they shift from one employer to another. Fourth, COBRA allows people to maintain continuity of coverage even if they experience transient spells of unemployment. Fifth, Medicaid and SCHIP give coverage to many classes of poor people who’d otherwise be unable to afford it.

An actual free market approach to health care would require unraveling all of this and subjecting everyone to a world in which you can’t get coverage if you’re sick. Which is exactly how you would expect a free market to work. A pyromaniac is going to have a hard time getting fire insurance; if you say “give me some car insurance so I can polish off this bottle of vodka and go drive home” you’re going to have a problem. There’s no reason the market should provide health insurance to people with health problems, and there’s every reason for the market to suspect that anyone who’s asking for health insurance has a secret health problem.