Saturday, May 25, 2013
As best as I can tell, the recent arguments at the Supreme Court did not touch on a critical part of the discussion about government's role in health care: the broken market for private insurance. And I think I know why.
A key assumption underlying the arguments, questions and answers was that all uninsured people are uninsured by choice.
Sure, some very ill people with pre-existing conditions do not qualify. But the implication was clear: Most uninsured people either do not want to pay for insurance or cannot afford it.
Justice Samuel Alito said, "You can get health insurance." Justice Ruth Bader Ginsburg made the point that people who don't participate are making it more expensive for others, that their "free choice" affects others.
It was as if the court forgot that the private insurance market does not function as a normal market.
If you are not employed and you want to purchase insurance in the private market, you cannot unilaterally decide to do so. An insurer has to accept you as a customer. And quite often, they don't.
Insurers prefer group plans, with lots of people enrolled to spread the risk. Can you blame them? The individual consumer is a lot of work, is a higher risk and produces relatively little revenue.
The Government Accountability Office studied this problem last year and found a range of denial rates that vary by state and by insurer. On average, 19 percent of applications nationwide are denied. One-quarter of insurers denied more than 40 percent of the applications they considered.
These denials are not limited to deadly illnesses but include many minor reasons.
Expect to be denied if you have asthma, if you take just about any prescription medication, if you are more than 15 percent overweight. Expect to be denied if a doctor has recommended any procedure for you, no matter how insignificant. Basically, expect to be denied.
I'm astonished that this information was not laid out in oral argument and that no questions were asked about it. I believe that lawyers on both sides of this argument, and the justices hearing the case, have always been employed and always been covered by employer-provided health insurance. Perhaps it simply does not occur to them that if they were to try to purchase insurance, they might not be able to.
The justices repeatedly asked: If the government can require you to purchase insurance, what else could it require you to do?
What are the limiting conditions to this breadth of control?
The government muffed its response. To me, the answer is obvious. There are two simple limiting conditions, both of which must be present:
* It must be a service or product that everybody must have at some point in their lives.
* The market for that service or product does not function, meaning that sellers turn away buyers. In other words, you need something, but you may not be able to buy it.
Let's test the examples presented to the high court: Can the government force you to eat broccoli? This proposition fails on both counts. Nobody must eat broccoli during their lives, and the market for broccoli is normal. If you want broccoli, go buy it. Nothing stops you.
Can the government force you to join a health club? Again, double failure. You don't need to join a health club. Maybe you should, but you don't have to. And, if you want to join one, plenty of clubs would be happy to admit you. Indeed, can you imagine a health club turning people down because they are too fat, the way insurers turn people down because they are too sick?
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