Commentary

Health Coverage Hysteria

This article was published in the Washington Times on October 6, 2002.
A new Census report estimates 41.2 million Americans have no health insurance. That annual update on old news offered another opportunity for Sen. Edward Kennedy, Massachusetts Democrat, to proclaim everyone must have “affordable” health insurance regardless what risks they take with their health, and regardless whether they would rather pay their doctors than an insurance company.

The Census study groups the uninsured by “selected characteristics,” noting that 8.8 million of the uninsured are not citizens — including many temporary or illegal immigrants. One characteristic left unmentioned is that the uninsured are often self-employed.

Economists Craig Perry and Harvey Rosen, in a study for the National Bureau of Economic Research, found that “the lack of health insurance among the self-employed does not affect their health. For virtually every subjective and objective measure of their health status, the self-employed and wage-earners are statistically indistinguishable for each other.” There is likewise no reason to assume those who choose not to participate in employer-provided plans suffer any adverse effects on health care, much less on health.

Most Americans today are grossly overinsured for minor medical expenses and underinsured for rare but staggering expenses. This is partly the consequence of laws in many states mandating that health policies cover every conceivable ailment and treatment — you must buy a Rolls Royce policy or nothing.

Health care can be usefully compared to car care. Car care is cheap. New cars can go 100,000 miles between tune-ups and 15,000 miles between oil changes. If you neglect basic car care, however, the cost of rebuilding complex modern engines and transmissions is far more expensive than in the past.

Health care is cheap: Eat less fat and more veggies, take a daily walk, quit smoking, and drink a little wine with some nuts. Fail to take care of yourself, and the long-term results can be costly — like the results of never changing the oil in your car and never replacing the tires. New diagnostic and surgical technologies involve expensive equipment and skills. Even so, insurance for gigantic medical expenses is also cheap. My policy pays nothing unless annual medical bills top $2,200. Most people call that “catastrophic” insurance. I call it real insurance.

Insurance for accidental damage to cars and homes is real insurance — something to protect against emergencies, not routine expenses. We do not expect an insurance company to pay for tires and gasoline, or to pay for home painting and termite inspections. When families make their own choices and pay for them, they choose insurance only for catastrophic expenses — the car becoming a total wreck, the house burnt to the ground or the breadwinner dropping dead. If we never collect a dime from such genuine insurance, we consider ourselves lucky.

With health insurance, by contrast, we all want somebody else to pay. Each of us expects to pay less for health insurance than the insurance companies pay to hospitals, doctors and pharmacies. Sadly, that does not add up.

When politicians promise “health insurance,” they mean subsidies. The two parties recently argued about whether young taxpayers should be taxed $35 billion or $60 billion every year so old guys like me can spend less on pills than we gladly spend on wine. These schemes were designed to buy the seniors’ votes and bolster sales for politically influential drug companies. That is politics, not insurance. Most of the elderly have insurance on their cars and homes, after all, but they are not asking young taxpayers to pay for that. At least not yet.

More than a fourth of the U.S. population already has federally subsidized health care through Medicare, Medicaid and military health benefits. If that percentage ever reached 100 percent, as some politicians promise, we might finally begin to wonder how it is possible for everybody to subsidize everybody else.

If you subsidize something, people want more of it. That increase in demand translates into a market in which prices can more easily be raised. HMOs and their tax-exempt foundations (e.g., the Kaiser Foundation) may want everyone to have hospital insurance so their customers will neither notice nor question the expenses. Drug companies and their tax-exempt foundations (the Robert Wood Johnson Foundation) may want everyone to have prescription drug insurance so they will not choose cheap Ibuprofen rather than costly Vioxx, niacin rather than Zocor, or over-the-counter Pepcid rather than the pricey prescription variety.

Reporters who normally think of themselves as sensitive to potential conflicts of interest were terribly quick to quote the Johnson and Kaiser Foundations’ anxieties about this “crisis” of people who opt out of the Foundations’ preferred payment system for all sorts of reasons. If reporters had instead asked a large number of the self-insured and self-employed about their supposedly tragic plight, they could have discovered what Mr. Perry and Mr. Rosen did — that having patients insured or uninsured may have a lot to do with how easy it is for providers to charge unreasonable fees, but it often has nothing at all to do with being healthy.

Alan Reynolds is a senior fellow with the Cato Institute and a nationally syndicated columnist.