Monday, May 18, 2009

Autism Mandates Vs. a Free Market

Treatment expenses for Autism was the subject for my post of March 23, 2009, in which the subject of a Virginia government mandate law forcing insurance companies to pay for it was discussed.

A similar Colorado law was recently the subject of a letter-to-the-editor at the Denver Post. In support of the Colorado law, Jill Tappert of Boulder inadvertantly exposes the nature of the problem of mandates;

"A neighbor thinks he shouldn’t pay part of his insurance premium for autism treatment. That’s curious — I wonder just how much I pay for his heart disease or cancer."

Expanding on the points I made in March, I published comments in response to the letter as well as what other correspondents had to say.

Paul Hsieh, MD, co-founder of Freedom and Individual Rights in Medicine (FIRM) writes;

The state legislature should indeed do the right thing, but right thing is to OPPOSE, not support SB244. It is precisely the proliferation of mandated benefits (such as alcoholism treatment, autism therapy, etc.) that drives up insurance costs.

Mandated benefits force insurance companies to sell (and patients to buy) services they neither want nor need. These laws violates the rights of individuals and insurers to contract for desired services free market without government interference. Plus they raise costs for everyone in order to suit special interest groups with political clout.

Dr. Hsieh is right, I wrote. But the same arguments used against autism insurance mandates points to a genuine injustice suffered by parents of autistic children. While they struggle to pay the cost of their own children’s treatment, they themselves are victims of a myriad of other government mandates, programs, and policies.

For example, they are forced to pay the cost of similar insurance mandates such as New Jersey’s soon to be (or already) enacted Senate bill S1940, which requires insurance companies to cover mental healthcare expenses relating to eating disorders. In addition, that same unfortunate couple that is unable to afford treatment for their own autistic child is paying, through their taxes, the healthcare expenditures of: the elderly (Medicare), the poor (Medicaid), other peoples’ children (SCHIP), etc.

The answer is obvious; end the immoral government-imposed policy of forcing everyone to pay for the healthcare of everyone else.

Steve Tappert argues in favor of the mandate, but from a curious perspective. He writes, in part;

I am an advocate of capitalism including health care, having lived in a country with socialized medicine and understanding what government bureacracy brings to the party. However, the structure of healthcare is in no way an efficient market, and power is extremely consolidated. The incentive structure is not aligned in a way that allows the invisibe hand of the marketplace to reward providers with the best product, and there is virtually no open market from which to choose amongst competing product offerings. In such a structure, it is absolutely the role of government to mandate minimum levels of service. This is the least expensive and least intrusive way of ensuring that decent healthcare is available to as many people as possible.

Steve Tappert, I wrote, does a good job describing our current system of health insurance, correctly observing that it is not a free market. Unfortunately, this “advocate of capitalism” doesn’t come to the obvious conclusion…get rid of it in favor of a free market. He simply takes what we have as a given. Well, from that perspective, the autism mandate makes sense as a matter of basic fairness. So do mandates requiring coverage for allergies or tattoo removal. So does complete socialized medicine, which he claims to oppose based upon personal experience but which we are inevitably heading for.

But what we now call “insurance” is not insurance at all. It is semi-socialized medicine imposed by government, with a quasi-private, government manipulated insurance cartel as the conduit. The “power” of the insurance companies is derived not from market forces (i.e., the free, uncoerced choices of private individuals), but from government controls and interference. Political power, in other words. Steve’s first paragraph describes the third-party-payer system imposed through tax code distortions. The mandates are nothing more than wealth redistribution masquerading as insurance.

Today the insurer, perversely, works not for the consumer but for the employer or union that hires it…even though the consumer is actually paying the premiums indirectly. The “power” of insurers would disappear in a free market where “insurers would need to sell their wares directly to the patients.” It’s important to note that the purpose of insurance is to protect against unforeseen, catastrophic financial expenses. Today’s system is pre-paid healthcare, which creates an artificial middleman resulting in the destruction of normal market incentives, a massive layer of unnecessary administrative expenses, the subordination of medical decisions to the dictates of government or insurance company bean-counters, and the undermining of the doctor-patient relationship.

When a consumer buys insurance on a free market, he is buying protection against financial calamity. The insurer uses the money it earns from the sale of that protection to build the pool of assets from which to draw on to pay claims. Coverage options and the price offered by competing insurers would be determined by the market. If enough people demand a particular type of coverage to allow an insurer to offer it profitably at an affordable price, it would likely become available. If not, not. There is no inherent right to any particular type of coverage, and in a free market no one may impose his or her medical expenses on others through government force.

But remember what I said in my previous comment above. Government interference works both ways. Freed from the burden of supporting others’ medical expenses, plenty of money would be available for us to pay most of our medical expenses directly. This would mean that healthcare providers, like insurers, would have to compete directly for the consumers business rather than bill some disconnected third party. Market incentives and discipline would result in falling prices and rising quality, as always happens when markets are free. In a free market, it is highly likely that the current model of all-encompassing, pre-paid health “insurance” would disappear in favor of high deductible, low cost catastrophic policies. Government’s role in a free market is limited but crucial…the protection of individual rights through laws against fraud and breech of contract, mediation of disputes, and protecting the sanctity of contracts.

The only just and moral course to take on healthcare reform is to rid the industry of government interference. America currently spends some $7500 per capita per year ($30,000 per family of four and rising) on healthcare. Almost that entire amount represents third parties spending other people’s money. This is a fundamental part of the problem. That money comes from all of us in a myriad of ways, yet leaves us with little control over how it is spent. Leave that money in the hands of the people that earned it through some vehicle like HSAs, end government insurance mandates and the third-party-payer system, phase out existing “public” plans like Medicare, Medicaid, and SCHIP, and let people take personal responsibility for their own healthcare.

Today’s healthcare “crisis”, if you want to call it that, is a political creation. Adding more layers of socialist yoke, such as Colorado Senate Bill 244 or New Jersey Senate Bill s1940, won’t do. The entire mountain of government intrusions built up over the past 75 years or so should be opened up to scrutiny, rather than allow another lurch toward total government control to take place under the cover of “reform”. If Steve Tappert is truly an “advocate of capitalism”, he would…well…advocate capitalism.

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