Are all Democrats stupid or do you just have to be stupid to be a
Democrat? I haven’t figured that out yet.
The latest manifestation of the understanding-challenged comes
with a New York Times op-ed
last week by Oregon Democratic Senator Ron Wyden entitled:
“Health Reform’s Missing Ingredient.” The missing ingredient,
Wyden declares, is “choice.”
“My guiding principle is, and always has been that consumers do
better when there is a choice and competition,” said the Senator,
quoting no less an authority than President Barack Obama. Then
quoting himself, he went on: “Empowering Americans to choose from
a broad selection of health plans would turn the tables. Those
insurers that charged affordable rates and provided good coverage
would attract more customers.”
Well, isn’t that something? Newt Gingrich and the Republicans
have been saying that for a decade, but let’s take up the
challenge. Why not free up the insurance market from burdensome
state and federal regulations and let the companies sell whatever
kinds of plan they want. Consumers could make their own choices
and healthcare would be no more a “crisis” than cars or
television sets.
It isn’t so hard to imagine. Right here in New York I picked up a
flyer in the supermarket the other day that offered the following
health insurance policy:
• $5,000 per accident.
• $60,000 lifetime coverage for any of the following illness:
cancer, cardiovascular, respiratory, blood and lymphoid,
digestive, endocrine, musculoskelatal, nervous, skin, eyes, ears
and nose diseases, etc,.
• 70 percent coverage, $100 deductible.
Not bad, eh? The cost — $37.95 a month or $455 a year. The only
catch is you have to buy it for your dog. If you’re a human
being, you have to pay at least $5,000 a year to buy basic
protection.
Why? Because, like almost every other state, New York has
regulated insurance to death. When you buy health insurance in
New York, you can’t just buy a simple policy. You have to accept
coverage for mental health, psychiatry, psychologists,
chiropractors, alcoholism, drug abuse, midwives, podiatrists,
infertility clinics, occupational therapists, speech therapists,
social workers and on and on. Other states mandate everything
from massage therapists to acupuncturists to hair transplants.
According to the Council on Affordable Health Insurance, there
are close to 2,000 state mandates, which raise the price of
insurance anywhere from 20 to 50 percent. And it’s not
consumers who are demanding this kind of coverage. It’s
the providers who lobby the legislatures to be included
so they can get paid.
The result is insurance everywhere is overpriced. But that’s just
the beginning. As I
outlined at length last week, the reason we have a
“healthcare crisis” is precisely because so many people have
managed to get out from under these state mandates while
others remain stuck in them.
A long time ago, the Fortune 500 and their labor unions learned
they could circumvent state regulations by setting up
“self-insurance” pools for employees. Instead of buying insurance
from insurance companies, the companies form their own pools and
self-insure. All this is protected by the Federal Employee
Retirement Income Security Act of 1974 (ERISA), which trumps
state regulation. (States were granted regulation of the
insurance industry by the McCarran-Ferguson Act of 1945, which
has stifled competition and turned each state into a cartelized
fiefdom.) Then, thanks to the IRS, these benefit plans are also
tax-free. As a result, corporations and their employees loaded up
on first-dollar, no-deductible coverage. Benefits were even
extended to retirees so that — as we just learned recently —
every Cadillac comes loaded with $3,000 in healthcare costs.
It was a great deal for those it benefited. In Patient
Power, the best book I’ve ever read on the subject, John
Goodman and Robert Musgrave speculated that it is precisely these
“gold-plated” benefit plans that have driven up the costs of
medical care, since the system is flooded with people spending
other people’s money.
The downside falls on those who are left out. If you aren’t
employed in a big company or the government, or if you’re
self-employed or work for a start-up or a company like Wal-Mart
that’s skimping every penny, or if you lose your job with the big
company, then you’re out of luck. Instead, you have to look for
insurance in “the market,” which consists of people like yourself
plus those who are too sick to work or have been kicked out of
their ERISA plans for running up too many bills. (ERISA plans are
allowed to do this because they’re not “insurance” but only
“benefits.”) Meanwhile, your state insurance commission, in
classic stat-sponsored-monopoly fashion, has kept competitors out
of the market at the behest of other competitors so your choices
are limited. All you can buy is those Christmas-tree-laden
mandated policies approved by the state legislation. You’ll
probably pay $5,000-10,000 a year for coverage that is costing an
ERISA employee less than $1,000.
The “health insurance crisis,” then, only exists for people
outside ERISA’s charmed circle. (Call up the ERISA Industry
Committee — 202-789-1400 — if you don’t believe any of this.)
It’s a phenomenon called “rent-seeking” where people use the
government to institutionalize advantages at the expense of
everybody else.
What could be done about it? There are plenty of proposals. The
best is Health Savings Account (HSA), which extends the same
tax-free benefits to everyone and allows people to put aside
$3,000 of tax-free savings to pay their medical expenses.
Combined with high-deductible insurance, this can work pretty
well. Eight million people now have HSAs and it’s climbing all
the time (except the Democrats are always trying to abolish
them). Then there are proposals to make it easier for small
businesses or self-employed people to form their own
self-insurance pools. Another idea would be to repeal
McCarran-Ferguson and let people buy insurance across state
lines. Or maybe we could just let everybody buy pet policies.
But the Obama Administration and Congressional Democrats are
moving in a different direction. They want to pile on more
mandates upon mandates, require small businesses to insure their
employees, require everybody who isn’t insured to buy insurance,
fine everybody who doesn’t, etc. etc. It’s all in that 1,000-page
bill. We’ll find out after it’s passed.
So now here comes Senator Wyden with his proposal for “choice.”
Let’s hear what he has to say:
The various bills making their way through Congress would, as
the president explained, provide some consumer choice by
establishing large marketplaces where people could easily
compare insurance plans and pick the ones that best suits their
needs. Companies participating in these insurance exchanges
would be required to offer coverage to anyone who wants to buy
it, regardless of their age, gender or health status, and they
would be barred from charging someone more for having a
pre-existing condition.
The problem with these bills, however, is that they would
not make the exchanges available to all Americans. Only very
small companies and those individuals who can’t get insurance
outside of the exchange — 25 million people — would be
allowed to shop there. This would leave more than 200 million
Americans with no more options, private or public, than they
have today. [Emphasis added.]
Did you get that? The problem, according to Senator Wyden, is
that the 200 million people already in ERISA plans don’t have
enough choices. Here is his solution:
I am proposing… an amendment to the latest Senate health care
bill…called Free Choice.… It would impose only one requirement
on employers — that they offer their employees a choice of at
least two insurance plans, one of them a low-cost, high-value
plan.… Ultimately, by empowering people to select the health
insurance that makes the most sense for them and their family,
we could end up with a system that works better for everyone.
So for Senator Wyden, the big problem isn’t that 25 million
people have been locked out of ERISA and forced to pay sky-high
prices for meager coverage. The problem is that the 200
million Americans benefiting from ERISA only have one choice of
gold-plated benefit plans instead of two. (Actually, many
companies now offer a whole menu of options.) Besides that, it
isn’t fair that the 200 million people who are covered at work
won’t be able to shop in the dingy little market being rigged up
for those who are left out. So we will mandate that employers
offer a choice of two gold-plated plans instead of one.
How do people like this end up in public office? My only
explanation is that Democrats live in such a tight,
claustrophobic little circle of labor union politics, pressure
groups and victim-mongering constituencies (who ever heard of an
insurance company discriminated against customers “by gender”?)
that they’ve lost all touch with the real world.
And these people are running the country.
