Jonathan Chait

You Can't Just Reform Insurance

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Benjamin Zycher at National Review warns:

We are not out of the woods. It is wholly possible, and perhaps even likely, that the Dems will now turn to a limited version of health-care legislation designed and labeled as "insurance reform" that is, sharp limitations on underwriting combined with guaranteed-issue and no-cancellation regulations.

In other words, no denial of coverage based on medical condition. This would yield a massive adverse-selection problem: No one would sign up for coverage until they developed expensive medical conditions. Even accident victims would be invited to sign up for "insurance" shifting their known costs onto others as they were wheeled into the emergency rooms. This, of course, would destroy the private-insurance sector, leaving only government to fill the void. Voila! Single-payer by stealth.

On the policy, he's absolutely correct. If you just prohibit insurance companies from denying coverage to people with preexisting conditions, the system will collapse. That's why, if you want to force insurers to provide reasonably-priced plans that cover preexisting conditions, you need to require everybody to buy insurance, which in turns means you need to subsidize it for those who are too poor to get it.

The odd thing here is Zycher's political analysis. It's not Democrats who are proposing to just cover preexisting conditions. It's Republicans. This has been a mantra of Republican leaders and conservative pundits for months. It's their way of showing they, too, want to reform health care -- they just want to do the popular stuff in a simple way that doesn't impose any costs on anybody.

Now, should liberals root for this plan, because it will collapse the private insurance system and lead to single payer? I'm leery of any policy that imposes massive suffering on people in the supposition that the political system will step in and impose a better solution. Even if that plan could work, it won't 60 votes. I don't care how well it polls. How are 60 Senators going to vote for something that would destroy private insurance, when they wouldn't vote for a public plan that would just take a little nick out of private insurance?

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