Monday, November 16, 2009

"Pre-Existing Conditions", and the Solution

One of the problems that is bandied about as a justification for a massive expansion of government involvement in American medicine is the inability of people to get health insurance coverage for pre-existing medical conditions. I addressed this issue in a response to a letter published in the Readers Forum of the NJ Star-Ledger on 11/13/09. Here is the letter and my full comments.

Due to the importance the Democrats place on pre-existing conditions as a reason for their horrendous plans for healthcare, it is very important to understand the causes and the solution. So, I expand on this topic below and offer links to articles that give an excellent overview of this and other problems in the health insurance market.

From Health care reform needed

The argument that a public option in the health care bill will put the private insurance industry at a disadvantage is pure nonsense and runs counter to many American success stories. Neither Fidelity Investments nor Charles Schwab complains that Social Security unfairly competes for 401K business. Nor have FedEx or UPS complained that the U.S. Postal Service presents unfair competition for parcel delivery. Rather, they represent rapidly growing companies that have identified extremely profitable markets that are not being addressed by federal government. Like any successful, privately-held American company, insurance companies can, and will, identify new opportunities once they have addressed their inefficiencies.

The fact remains that catastrophic illness and injury are leading causes of personal bankruptcies in this country. Many hard-working, middle-class families avoid seeking life-saving screening for genetic illnesses out of fear of losing their coverage due to a pre-existing condition. American families are already paying dearly for medical bankruptcies and for delays in diagnosis and treatment.

Health care reform without an affordable public option is no reform at all, and reform without the elimination of pre-existing conditions is just plain criminal.

Enough with the rhetoric. Pass comprehensive health care reform now. America can’t afford the status quo.

Frank J. Rodino, South Orange

Here are my posted comments:

Posted by zemack
November 13, 2009, 7:42PM

Frank J. Rodino of South Orange demands an end to “the rhetoric”. He demands that we “Pass comprehensive health care reform now. America can’t afford the status quo.” But the “rhetoric” boils down to a monumentally important debate – freedom vs. tyranny. He comes down on the side of tyranny. Here’s why. He says:

“Health care reform without an affordable public option is no reform at all, and reform without the elimination of pre-existing conditions is just plain criminal.”

The public option: This is a vehicle for totalitarian control of American medicine, and nothing else. Mr. Rodino’s U.S. Postal Service analogy proves the point. FedEx and UPS are forbidden to compete with the Post Office on most mail delivery. They can only enter the business segment that they are allowed to enter, and that is the aim and the intended end result of a government-run health insurance “option”. With the state plan as a wedge, the government will eventually control all aspects of healthcare, and private insurers will be allowed to operate only around the fringes – just like with Medicare. This can be the only result. No “competition” can possibly exist when one of the “competitors” is literally armed. The public “option” plan can subsidize its premiums by collecting whatever revenues it needs at the point of a gun (taxes) and can impose price controls on providers, all the while regulating its private “competition” to death. To believe that there can be competition between a government plan and private business is to see no difference between an armed mugger and his victims. To support a public option is to support the end of a big chunk of our freedom.

Pre-Existing Conditions: What’s criminal is for the government of a supposedly free country to force insurance companies to sell policies to people with pre-existing conditions. The purpose of insurance is to protect the insured against unforeseen financial hazards. To say that a person should be able to simply walk into an insurance company office and demand that they pay his medical expenses after having failed to protect himself with a prior insurance contract is legalized looting. Freedom of association is a basic unalienable human right and is integral to American principles, and freedom of contract is a part of that. A contractual agreement such as health insurance must be mutually voluntary, or no contract takes place. No one should lose their rights and equal protection under the law by having contractual terms imposed on him, simply because he is in the insurance business. A health insurance company has a moral right to exclude pre-existing conditions in its policies, or charge higher rates for that coverage. Legally forcing insurers to cover pre-existing conditions is to use private companies as a conduit for government welfare-state policies, which is socialism through the back door of fascism.

Having said that, we must acknowledge that there are many people who, through no fault of their own, are left without health insurance and unable to purchase new policies because of pre-existing conditions, despite having had prior insurance. They are victims, but not of insurance companies. They are victims of a government that, through regulatory and tax policies, imposed a system that tied our health insurance to our jobs (the third-party-payer system). This should end, and people should be free to use their healthcare dollars to buy insurance directly. In short, we need a free health insurance market with no government-imposed mandates. There is a reason why you don’t lose your auto, home, life, umbrella liability, or other types of insurance when you lose or change jobs: You own your policy.

In a free market, to use Mr. Rodino’s own phrase: “Like any successful, privately-held American company, insurance companies can, and will, identify new opportunities once they have addressed their inefficiencies.” The problem of pre-existing conditions, like all of the others problems in healthcare, is mostly a government-created problem that can be ended through free market, rights upholding reforms. Freed of oppressive government tax distortions, mandates, and barriers to interstate competition, the health insurance industry can and will develop solutions to the problems we now have as they compete directly for the healthcare consumers’ dollar in the rough and tumble individual market. For example, health insurance policies would be sold with guaranteed renewable riders, just like term life insurance. You could see other innovations, such as right-to-future-insurance coverage, which would guarantee future coverage for pre-existing conditions should you require a change in policies (UnitedHealth already does this. (See John H. Cochrane, professor of finance at the University of Chicago Booth School of Business.)
Where there are problems, and entrepreneurial businessmen and individuals are free to act upon their own judgement in their own self-interest, solutions can (and do) come from unforeseen ideas and sources.

Don’t buy the political statists’ scare talk about being “at the mercy of insurance companies”. Every advancing dictatorship needs scapegoats and villains, and the insurance industry currently fills that role for those who seek totalitarian powers over our healthcare. Instead, be very scared about sacrificing our basic American individual rights and personal responsibility to government control.

And don’t buy the claptrap about the current congressional bills being “reform”. They are no such thing. They are nothing more than an attempt to “fix” the problems caused by government, with more government. The current “reform” efforts are just another step on the road to totalitarian socialism that began with Social Security. We need the freedom of contract between providers, healthcare consumers, patients, and insurers that only a free market can provide. We need a return to individual rights and a government that protects, rather than violates, our rights.

Another reason why some people can't buy health insurance if they have pre-existing conditions is because some states, like New Jersey, forbid insurers from selling policies that exclude them. So, instead of being able to buy a policy that excludes the pre-existing condition (or places a grace period after which the condition becomes coverable) but that covers everything else, a person ends up unable to buy any insurance!

But as I mentioned in my Forum response to Mr. Rodino, a free market frees up people to seek solutions. All unfilled needs and desires represent market opportunities, but people need the freedom of capitalism to act upon them. Central planning government bureaucracies in effect represent a moratorium on private brains, forbiding the free market's intellectual division of labor from functioning. Profit-seeking private companies seek customers, from which profits come. But they need the freedom to act upon their own judgement, as do the customers they compete for. This is not an iron-clad guarantee that everyone will be able to get insured. People must take personal responsibility, and buy insurance protection before they need it. But even here, the option to buy coverage, at a price high enough to make it worthwhile for the insurer, would likely make even that person insurable.

But as I said above, the problem of pre-existing conditions is a government-created problem. We needn't sacrifice our freedom to solve it. Here are two more articles, in addition to Mr. Cochrane's, that address this issue:

Restore Free Market to Address Pre-existing Conditions, by Linn and Ari Armstrong

In a wide-ranging article in The Objective Standard entitled How the Freedom to Contract Protects Insurability, Dr. Paul Hsieh shows how freedom can produce the most unlikely and original solutions:

"In a free market, profit-seeking businessmen would likely sell insurance coverage to individuals with preexisting conditions for an appropriate price, just as they would seek to meet substantial demand for any service if profitable. However, in the unlikely event that some individuals sought to purchase a policy that covered preexisting conditions, and no insurer would sell them such a policy, they would still have a viable alternative. They would be free to form their own risk pool with other like-minded individuals willing to share those risks. They would be free to create their own insurance company.

"In fact, many Americans have already formed private pools in which members voluntarily share each other’s health-care costs. For instance, more than 100,000 American Christians are members of “health-care sharing ministries”—arrangements whereby members pay a monthly fee to the ministries, which in turn distribute that money to other members facing expensive medical bills. Such groups typically accept members who meet certain religious and lifestyle requirements regardless of preexisting medical conditions.4

"Unfortunately, these health-care sharing ministries currently cannot guarantee payments to their members, because the government would then treat them as insurance companies5 and subject them to myriad onerous state and federal regulations that specify what prices they may charge, what benefits they must offer, and which customers they must accept.6 The only thing preventing individuals from creating their own contractually binding risk pools today is the government."
(Emphasis added.)

Once again, the government. Everywhere one looks, one sees government interference causing problems, yet the politicians will not be honest enough to question their own policies. They simply will not relinquish the power they have already accumulated. Instead, they seek to build on that power as a solution to the problems they already caused.

But as Ronald Reagan famously said:

In this present crisis, government is not the solution to our problem; government is the problem.

And freedom is the solution.

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