Government caused the pre-existing condition problem

In this post I explained why I think the tax advantage to employer-provided health insurance, over individually purchases health insurance, is the government-induced cause of the pre-existing condition problem that most folks prefer to solve by introducing even more government, rather than addressing the root cause.

In John Cochrane’s health care essay, he agrees.

Before ACA, the elephant in the room was the tax deduction and regulatory pressure for employer‐based group plans. This distortion killed the long‐term individual market and thus directly caused the pre‐existing conditions mess.  Anyone who might get a job in the future will not buy long‐term insurance. Mandated coverage, tax deductibility of regular expenses if cloaked as “insurance,” prohibition of full rating, barriers to insurance across state lines – why buy long term insurance if you might move? – and a string of other regulations did the rest.

 

“Why I Support Obama”: Point 1

This my response to the first point made by the Facebook Obama Supporter.  Let’s first review her point:

For 30 years I’ve heard politicians talk about health care reform, and he’s the first one to do something about it.  The Affordable Care Act removes conditions on pre-existing conditions, makes health care more affordable for small businesses, raises the age at which children can be on their parents’ policies, removes lifetime caps, and more. With the possible exception of insurance execs, who would not want these changes?

First, politicians have been reforming health care for a long time.

Second, the Obama supporter doesn’t realize those reforms are why we have the problems that she wants the government to solve, like pre-existing conditions.

I wrote about how government created the pre-existing condition problem here.  John Cochrane, finance professor at the University of Chicago, agrees with me.  So does economist Steven Levitt.

Next, the Obama supporter believes Obamacare will make health care affordable for small  businesses. First, intentions of government programs are rarely realized. Usually it’s the opposite — the government programs make things worse. Second, affordability is partly caused by the government tax treatment of health insurance (see links in previous paragraph).  If we purchased health insurance like we do auto and home insurance, small business — or any business — could get out of the health insurance business and focus on whatever they do best.

Next, it’s not clear to me what problem raising the age for children to remain on their parents’ policy solves that wouldn’t be solved by decoupling insurance and employers as discussed in the previous two paragraphs.

Next, lifetime caps?  I haven’t heard of these caps being a problem.  And, in a freer market of health insurance, if people wanted protection over and above the lifetime cap, they could probably get it.

I’m not an insurance exec and I don’t want these changes.  I believe they will have negative unintended consequences that will slow progress and innovation in health care and lower quality and availability.

Plus, I bet insurance execs are not as upset by this as the Obama supporter thinks.  They are now politician’s cronies and as long as they keep their political cronies happy, the political cronies will keep directing our money to them.  That’s easier than developing innovative products that individuals choose over the competition.