July 26, 2005

Opinion Journal Supports National Health Care…Market

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 5:47 pm

No, it’s not HillaryCare, or Canadian-style “single-payer,” and the people at OpinionJournal.com haven’t flipped. This idea is actually something very sensible a free market supporter can mostly get behind (link may require free registration):

The idea behind the legislation, sponsored by GOP Representative John Shadegg of Arizona, is disarmingly simple: Allow Americans to buy health insurance from vendors in any one of the 50 states.

Right now Americans who aren’t lucky enough to get insurance from large employers or poor enough to qualify for Medicaid find themselves at the mercy of the legislators and insurance commissioners of the state in which they happen to live. This can be OK in states that exercise this regulatory function judiciously. But in others, the young and working poor find themselves effectively priced out of the market by special-interest regulations dressed up as consumer protections.

New York requires every insurance policy sold there to cover podiatry. Acupuncture coverage is mandated in 11 states, massage therapy in four, osteopathy in 24, and chiropractors in 47. There are an estimated 1,800 or so such insurance “mandates” across the country, and the costs add up. “It is always the providers asking for the mandate; it is never the consumer,” says health policy guru John Goodman, who has testified before legislatures considering such rules.

What’s more, states like New Jersey and New York add two more ultra-expensive requirements: “Guaranteed issue” allows people to wait till they are sick and then buy insurance; “community rating” prevents insurers from charging different prices to people of different ages and health status. These may sound like compassionate ideas, until you realize they make insurance so expensive that millions of people are exposed to financial ruin because they aren’t allowed to buy basic policies focused on catastrophic costs.

….. The best analogy for what to expect here is probably our experience with interstate banking, which has indeed resulted in operators moving to friendly climes like Delaware and South Dakota but which has also proven nothing but a boon to consumers. A national market has allowed the growth of big, financially stable institutions that have earned consumer trust.

…. As a major side benefit, interstate commerce in health insurance would remove a huge barrier to the efficient allocation of human resources in our economy. Right now untold numbers of Americans fear moving, switching jobs or starting their own businesses for fear of losing their health insurance. That would change if they were able to shop nationwide for policies that would follow them wherever they go.

Note that I said “mostly.” The Journal’s ever-present blind spot, ignoring the ill effects of too much concentration, is on display. The industry it held up as the exemplar, interstate banking, worked out very well for for consumers for quite a while, but has been detrimental to conumers recently because of excessive concentration.

Proof: Assuming the recent Bank of America-MBNA merger and other deals go through (and there’s unfortunately little doubt that they will), the top three credit card issuers (Citi, Chase, and Bank of America, henceforth to be known as “The New Big Three”) will have 70% of charge volume and 58% of all card receivables, according to CardTrak.

The effect of the wave of consolidations has been to limit consumer choice. This has hit those who have fallen behind in their payments especially hard, because with fewer options, the big banks know they can charge their statospheric penalty rates of 25% or more and lose very few cardholders in the process.

I would be for national markets in health care if some kind of hard cap on what percentage of the total business any one company can have were built in to the legislation. We can’t afford to have monopolistic or oligopolistic health care, whether it comes from the government or just a few companies.