The Cato interns had a public speaking workshop today. Each intern was asked to give a four minute speech on a non-frivolous topic. I chose to speak on the difficulty of moderate health care reform:
People often accuse libertarians of being radical idealogues, of abstracting a generally appropriate principle of freedom to unacceptable extremes. Hayek complained in the Road to Serfdom that, “Probably nothing has done so much harm to the liberal cause as the wooden insistence of some liberals on certain rules of thumb, above all the principle of laissez faire.” Practical, reasonable people will shy away from extremes. But often there is no middle ground between defending ones principles and abandoning them completely
This, I suggest, is what many people discover when they try to compromise in health care policy. The Patient Protection and Affordable Care Act, otherwise known as “Obamacare” contains 5 important provisions
- Subsidies for the poor
- An individual mandate to buy insurance
- Community Rating for premiums
- Guaranteed Issue of insurance
- The pre-existing conditions fix
To many practical, reasonable people, this program all together looks like a serious government invasion of the health care sector. The individual mandate is an obvious affront to freedom and subsidies may seem to unjustly redistribute wealth. But many people would like to compromise and pick the most carefully targeted of the five previous reforms. They will likely pick the pre-existing conditions fix.
Insurers usually refuse to cover illnesses that began before a person purchased his insurance – so called pre-existing conditions. This creates a serious problem for the uninsured sick. Many illnesses, such as cancer, require extremely expensive treatment. Most people cannot pay for treatment on their own, and if they are not treated, the illness will kill them. The fix, forcing insurers to cover pre-existing conditions, seems like a narrowly targeted reform that will help the neediest people without significantly infringing on the liberties of others.
But once insurers are forced to cover pre-existing conditions they will change their behavior. Instead of selling sick people insurance only for future illnesses, they will refuse to sell them insurance at all. So a reasonable legislator trying to pass a targeted fix must pass a second reform – Guaranteed Issue. This reform forces insurers to “guarantee” that they will offer to sell insurance to anyone who asks for it.
This still does not fix the problem. Insurers may simply offer sick people insurance at premiums they can’t afford – say, $10 million dollars a year. If legislators are unwilling to allow the uninsured sick to simply remain uninsured, they must lower prices. So they must support community rating, which forces insurers to sell insurance to all comers at the same price.
Now, legislators have passed drastic reforms that will affect all people – this is not merely targeted legislation affecting only the uninsured sick. But they still cannot stop here. There is a new problem that must be solved. If the community rating is passed, healthy people know they will be able to purchase insurance at the average rate of the insurance. They will drop out of the market, and only sick people will remain. The price of insurance will rise.
To prevent people from “gaming the system” legislators must pass the individual mandate – which forces the healthy back into the market with everyone else. Although each of the previous reforms limited freedom, an individual mandate does so in a much more conspicuous way. And it isn’t the end.
If you order people to buy insurance, you must decide how to treat the poor. It is unreasonable to order people with no income to pay premiums of thousands of dollars a year. The health care of poor people must be paid for, either by programs like Medicaid, or by subsidies of private insurance purchases.
The reasonable person who insists on helping the uninsured sick finds himself forced to embrace the whole set of reforms. This has been hard to understand for people as highly placed as Barack Obama, who attacked Hillary Clinton for including an individual mandate in her health care plan in the Presidential primary campaign before adopting it himself. And it was probably hard to understand for Mitt Romney and The Heritage Foundation when they tried to craft a middle ground in Massachusetts and ended up with a nearly identical bill. And it may still be hard for Republicans to understand, some of whom have already promised not to overturn the pre-existing conditions fix, and I predict therefore, will not – and cannot – overturn any of the legislation. Sometimes, there is no middle ground, and compromise is more harmful than a radical defense of principle in extreme circumstances.