It’s Not Just Obamacare: Health Insurance Is Completely Screwed Up

It’s Not Just Obamacare: Health Insurance Is Completely Screwed Up

We cannot hope to have a rational, cheap, highly accessible health-care market unless we stop using health insurance as an automatic co-pay for every medical procedure possible.
Daniel Payne
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I am among the lucky millions of Americans whose health insurance plan was cancelled by Obamacare, a distinction I never asked for but received nonetheless: I liked my plan, but I cannot keep it. My $55-per-month coverage is dropping on January 1, and I am not renewing with them—so imagine my surprise when I got home last week and found a bill in the mail from my insurance company for a $202 premium for January. Having not signed up for any new plan, much less a plan four times the cost of my old one, I was a bit perturbed, so I called them up and was told that they send these kinds of bills out as a matter of course (apparently without explaining anything to their customers). If I wanted to go with another plan or provider, I was told, I could just ignore the bill; I would then receive several “late payment” notifications, after which the account would be cancelled.

That is to say, my health insurance company essentially signed me up for a vastly more expensive health care plan than the one I have now, more or less attempting to trick me into paying for it, and to top it off they can’t even un-sign me up for it when I ask: I don’t want the plan, I never asked for it, and I have told them so, but I have to sit through a bunch of late payment notices before they’ll cancel it.

Having dealt with that baffling situation, I was moved to check out my other options regarding health insurance. My employer’s insurance is just as expensive as my insurance company’s unasked-for plan, so I decided to see what the health insurance “exchange” had to offer. As it turns out, I qualify for a tax credit to help pay for insurance; the credit is for around $135 dollars per month. Given the prices on the health insurance exchange, I’ll likely need the tax credit just to help pay for my premium: whereas before I was able to meet my $55 premium just fine on my own, the new, Obamacare-created health insurance prices are much more expensive and all but require an indirect subsidy.

So, to recap, my options were as follows: I could pay $202 per month to a bunch of hucksters who can’t even roll back a scam once it’s been discovered, or I could buy health insurance with a $135 hand-out from the government—that is to say, the government would pay me nearly three times the price of my old premium because of the artificial price increases Obamacare has brought about. These are my choices under the “Affordable” “Care” Act; this is what it does, and what it will continue to do.

Insurance Is for Catastrophic Events, Not Regular Expenses

These personal vignettes are meant to illustrate the problem of not simply Obamacare but the broader health care debate: we have exhausted ourselves trying to figure out how to get everyone health insurance, while health insurance itself has largely been the problem all along. It is not that insurance is a bad thing, but that it is a grossly overused thing. We have missed this point to the great detriment of our health care system.

At one point in time, using insurance to pay for a premeditated event would have been considered fraud and would have been treated as such.

Health insurance, of course, is supposed to behave as any other insurance: it is supposed to protect against financial loss brought about from catastrophic events. It is not supposed to cover prescriptions, “wellness visits,” or substance addiction, although that is what Obamacare now demands of all plans in the marketplace. By definition you are not supposed to “insure” against a wellness visit, which is scheduled in advance: at one point in time, using insurance to pay for a premeditated event would have been considered fraud and would have been treated as such. Now that health insurance is expected to pay for everything, insurance costs have unsurprisingly skyrocketed—and Obamacare fixed this problem by doubling down on it.

Republicans do not appear to want to really fix this issue; the GOP seems committed to grumbling about Obamacare but unwilling to commit to the herculean deregulation that is required to put our health care economy back on track. The last Republican presidential nominee had every intention of keeping the focus on health insurance: Mitt Romney wanted to continue offering preferential tax treatment to both those who buy health insurance on the individual marketplace and those who get it through an employer—and of course Romney oversaw the implementation of Romneycare, the nearly-identical state-level forerunner of Obamacare. Virginia congressional upsetter Dave Brat proposed that we fix the health insurance market by…offering tax breaks to people who purchase individual health insurance plans. Senate candidate Ed Gillespie’s health insurance plan also relied extensively on tax credits. Even the conservative and libertarian pundit class seems to miss the point: John C. Goodman, for example, believes we should offer thousands of dollars of tax credits to individuals who obtain “credible private health insurance.” Republicans are supposed to be the smart people in the room, the ones who get it—and yet the conservative solution to government overreach in the health care sector is based largely on subsidizing health insurance through the tax code.

Less Health Insurance Equals Lower Prices

This is the wrong way to go about reforming our health care market; it is not the government’s job to subsidize insurance, and in any event it is bad policy. It is widely documented, for example, that the less a medical practice relies on insurance, the cheaper its prices are: one doctor, for instance, stopped taking insurance—and now she pays $1.50 for a bag of IV fluid where the insurance company used to pay $128. The famous Surgery Center of Oklahoma is a bargain-bin of medical pricing: if you pay without insurance, they’ll charge you dramatically less for a procedure than any nearby hospital. Overreliance on health insurance drives up the cost of everything in medicine, including health insurance itself. If more people paid out of pocket for both routine procedures and for larger operations when they could afford it, then the health insurance and the health care markets would be unrecognizable from what they are today. Both would be, in a word, affordable. It should be a source of deep shame for the Republican Party that it is so fixated on structuring our tax code to encourage insurance usage. This is plainly the incorrect approach.

It is widely documented that the less a medical practice relies on insurance, the cheaper its prices are.

There are things that Republicans could be doing to fix the health-care market, most of them at the state level and nearly all of them involving deregulation of some kind. Virginia Republicans, for example, should try and tackle Virginia’s ridiculous and onerous certificate of public need law, which restricts the supply of medical care based upon the government’s determining whether or not the “public” has a “need” for any given expansion of the health-care market. Under this law, for instance, a practice in Virginia can’t add an magnetic resonance imaging machine without the government’s say-so, a setup which will inevitably increase consumer prices. As far as insurance is concerned, there should be no “minimum essential coverage” laws at the federal or state level. Malpractice law reform couldn’t hurt, either.

There are plenty of other steps conservatives could take to counteract the deleterious government effect on the health care market. But we cannot hope to have a rational, cheap, highly accessible health care market unless we stop using health insurance as an automatic co-pay for every medical procedure and visit possible. Health insurance needs to be restored to its proper role in the medical economy. That means repealing Obamacare, and it also means that government needs to stop incentivizing the purchase and consumption of health insurance. Leave it to the market. This is anathema for Democrats, but something all Republicans should be able to support.

Daniel Payne is a senior contributor at The Federalist. He currently runs the blog Trial of the Century, and lives in Virginia.
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