How Not to Fix Obamacare: Part 2

What kind of choices do you want to have to make?

House Speaker Paul Ryan said, “What we’re proposing is a patient-centered system where patients get to decide what to do.”  He says the replacement bill for Obamacare would give consumers the power to choose their own health care plans in a more competitive marketplace.  We’ve been taught it’s always better to have choices, but what kind of choices do you really want to make with healthcare.  Choices are great when you’re buying a car or a house, because you know how you want to use it. 

But could you do a good job picking your own coverages?

You buy health insurance hoping you never have to use it, let alone how you might have to use it.  I’m 72 so my wife and I aren’t worried about the cost of an unexpected pregnancy.  If given the choice I probably wouldn’t choose to buy coverage for this.  Of course the insurance company isn’t worried either, so how much credit could they give me.  Now a 22 year old woman has a higher risk of pregnancy, perhaps even planning on it.  She probably has no worries about a heart attack because her risk is low.  Should she have the choice to reject the coverage?  The answer is “No.” The best criteria for an insurable risk are “low frequency and high severity.” Clearly allowing participants to choose among vital coverages is an invitation to disaster.

 Can you afford a lower deductible?

On the other hand, including “free” coverages in a package only encourages over-use of medical services, benefiting neither the insured nor the insurer.  This is true regardless of the financial ability of the insured to pay for insurance or to pay the medical bills.  A modest deductible is a crucial part of the formula, but does it make sense for the consumer to choose the deductible?  The insurance company has actuarial tables on their side.  They know how much any given deductible saves them and they will charge you accordingly.  If our goal is to provide insurance for everyone, then one deductible and co-pay formula should work for everyone provided it’s affordable to everyone. Perhaps you can afford to buy a lower deductible, but then you could probably afford to pay a higher deductible with little difference in expected out-of-pocket cost. 

 Would you do a good job picking your own doctor?

Everybody seems to agree that we should be able to choose our own doctors.  Insurance companies created networks to lock out competition, but in the process restricted your choices. Read more about this in How Not to Fix Obamacare:  Part 1.

 Should you have to buy health insurance?

Many in the GOP advocate a plan where people can choose not only what plan or coverage they want but whether or not they want to buy any coverage at all.  This poses some serious questions. Just how many people does the plan call for to be uninsured?  Who are these people?  Who will end up paying for their health care?  If I know that in a healthcare emergency I can get the minimal care I need for free, why should I pay for it?  We have to go back to the 1950’s to find a time when there were no incentives for Americans to buy health insurance.  The insurance was cheap but 86% were uninsured.  Can Congress keep us from making bad decisions today with incentives or penalties?  And if they do, does this really support the idea of a free market economy?