On Friday, Paul Krugman highlighted an article by Sen. John McCain (R-AZ) in which the senator made the case for deregulating the health insurance industry by extolling the benefits of the last decade of deregulation in the banking sector.
After Sen. Barack Obama (D-IL) ran an ad attacking McCain’s untimely comparison, FactCheck.org falsely argued that the ad improperly conflated banking deregulation with McCain’s plan to allow health insurers to sell plans across state lines:
The ad relies on a single phrase from a journal article under McCain’s byline, in which he said he would reduce regulation of health insurance “as we have done over the last decade in banking.” But the full context reveals that McCain was referring narrowly to his proposal to allow people to purchase health insurance across state lines.
But allowing banks to flout state regulations and permitting insurance companies to sell policies across state lines would have the same negative consequences.
In 2002, “Georgia became the first state to tell players in the secondary mortgage market that they might be on the hook if they purchased loans deemed ‘predatory’ under state law…Before, downstream owners of mortgage-backed securities might see the value of their investments drop, but that was generally the worst that could happen”:
Under the Georgia Fair Lending Act, however, players in the secondary mortgage market could face serious liability if they so much as touched a predatory.
The Office of the Comptroller of the Currency (OCC) over-ruled the states and exempted national banks from the regulations. John D. Hawke Jr., the comptroller, said, ‘’We have no evidence that national banks are engaged in predatory lending practices.’’
Federal deregulation left the states to fill the regulatory void. And the same can be said for health care. Currently, states require companies to cover the most basic of services: cancer medications, cervical cancer/HPV screening, ovarian cancer screening and prostate cancer screening:
– 44 states: mandate emergency services
– 50 states: mandate mammograms
– 29 states: mandate cervical cancer/HPV screening
Under McCain’s plan, health insurance companies, like the banks before them, will be able to ignore consumer protections and sell bare-bones policies with high deductibles and even higher out of pocket expenses. Once sickness strikes, American families will face economic crisis (currently, fifty percent of bankruptcies are related to health care costs) but, unlike with the banks, the American government won’t be there to bail them out.
UPDATE: TNR’s Jonathan Cohn has more.