Insurance Is No Answer

John Stossel

7/8/2009 12:01:00 AM - John Stossel

Health care "reformers" keep talking about getting us more health insurance. Then they talk about cutting costs. This is contradictory nonsense.

Insurance, whether private or a government Ponzi scheme like Medicare, means third parties pay the bills. When someone else pays, costs always go up.

Imagine if you had grocery insurance. You wouldn't care how much food cost. Why shop around? If someone else were paying 80 percent, you'd buy the most expensive cuts of meat. Prices would skyrocket.

That's what health insurance does to medical care. Patients rarely even ask what anything costs. Doctors often don't know. Often nobody even gives a damn. Patients rarely ask, "Is that MRI really necessary? Is there a cheaper place?" We consume without thinking.

By contrast, in areas of medicine where most patients pay their own way, service gets better, while prices fall.

Take plastic surgery and Lasik eye surgery: Because patients shop around and compare prices, doctors work hard to win their business. They often give customers their cell-phone numbers. Service keeps increasing, but prices don't. "In every other field of medicine, the price is going up faster than consumer prices in general," says John Goodman of the National Center for Policy Analysis. "But the price of Lasik surgery, on average, has gone down by 30 percent."

This shouldn't be a surprise. What holds costs down is patients acting like consumers, looking out for themselves in a competitive market. Providers fight to win business by keeping costs down and quality up.

Yet politicians keep telling us the solution is more insurance. And they mean insurance not just for catastrophic diseases that could bankrupt us but also for routine treatments.

The politicians are so oblivious to reality that they are on course to make things worse. Obama would force every business to either give workers health insurance or pay a fine into the public system. Why is that something we should want employers to do? Premiums come out of our salaries, but insurers are accountable to our bosses, not to us.

Why not just have a free market where people can buy whatever kind of health insurance they want? Competition would then bring prices down.

Obama and his Senate allies would limit competition by requiring insurers to cover everyone for the same "fair" price. No "cherry picking," the president says. No charging healthy people less.

They call this "community rating," and it sounds fair. No more cruel "discrimination" against people who have a preexisting condition, obese people or smokers. But such simple-minded one-size-fits-all rules take from insurance companies their best price-dampening tool: Risk-based pricing encourages people to take better care of themselves, just as car-insurance companies reward good drivers. With one-size pricing your car-insurance company must give the town drunk the same deal it gives you.

Insane, but the health-insurance industry is playing along. Insurers say that if government forces everyone to have insurance, they will accept all customers regardless of preexisting illnesses.

They also offered to stop charging higher premiums to sick people. They're even giving up on gender differences.

Sen. John Kerry huffed, "The disparity between women and men in the individual insurance market is just plain wrong, and it has to change." The president of the industry trade group, Karen M. Ignagni, agreed that disparities "should be eliminated."

Give me a break.

Women pay more than men for health insurance for good reason. Despite being healthier than men, they incur higher costs because they go to doctors more often, and they take more medicine. Kerry is pandering. I don't recall him demanding that men be protected from higher life-insurance and auto-insurance premiums.

"Community rating" hides the cost of health care. It's as destructive as ordering fire insurance companies to charge identical premiums for wood frame and stone houses. Universal health insurance with "no discrimination" pricing will make health care costs rise even faster.

When politicians interfere with free markets, unintended consequences harm everyone, except the companies that lobby hard enough to protect themselves.

Is it too much to expect our rulers to understand this?