Pre-existing conditions: My house is on fire!

Congress and the national media are discussing the Republican attempts to repeal and replace Obamacare.  One of the thorniest issues is how to care for people with pre-existing conditions.  The media portray this as clearly a humanitarian crisis brought on by the heartless conservatives.  They put on camera a woman with cancer who begins to cry talking about what will happen to her entire family if she cannot get health insurance now that she has been diagnosed with cancer.  Cancer treatments are so expensive that a family faces financial ruin if they don’t have medical insurance.  Taking away coverage for pre-existing conditions is so mean spirited, even President Trump can’t stomach it.  There’s a huge problem with it, however.

Requiring that health insurance companies sell insurance to cover a catastrophic event, such as cancer, after it has occurred is the same as asking insurance companies to sell you fire insurance after your house is on fire!  It defeats the whole purpose and intent of insurance.  The idea of insurance is that all sensible people buy it, most of whom won’t need it.  Lots of people pay for it for years and years and all of those pooled premiums are enough to cover the cost of the catastrophic event, for the unlucky person it happens to.   No one likes paying premiums year after year for something that only might happen, but prudence says it’s better to be covered for those catastrophes than to be facing them without insurance.  If you could wait to buy “insurance” until after your house is on fire, or after you’ve had a car accident, or after you’ve been diagnosed with cancer, then everybody would.  But then everyone who took out a policy would be getting a huge payout, and the premiums would have to reflect that.  Eventually, homeowners insurance would be as expensive as a house, car insurance would be as expensive as a car, and so on.  Not everyone is waiting to buy health insurance until after they are diagnosed with a pre-existing condition, but many people have pre-existing conditions and so under the wonderfully generous Obamacare system premiums are going through the roof, and insurance companies are dropping out of the business.

Interestingly enough, in a single-payer, socialist system of health care everyone has to pay in taxes for the healthcare so the costs are distributed evenly over the healthy and unhealthy evenly.  So that system is more economically viable than Obamacare.   The question is, can a free market take care of people, of everybody, as well as socialism?  Getting back to a free market from where we are now would be difficult and tricky, even if we were behaving in a smart way and understanding economics correctly–which our congressmen apparently do not.

In a free economy, health insurance, like life insurance, is something everyone should buy early in life so it is affordable and to be prudent about protecting yourself and your family from financial ruin should you get cancer (or some other expensive medical condition) later in life.  The deal between you and the insurance company should be that you carry the policy your whole life and maybe they have to pay out if you have a catastrophe.  That means you have one policy your whole life and the fact that you’ve kept it in force means the insurance company has to pay if something terrible happens to you.  That’s a fair bet and lots of insurance companies would be willing to cover you.

Health insurance should not be provided by your employer, because you need to keep the policy if you change jobs or your employer goes out of business.  You might end up looking for coverage after you have an expensive health condition and now you’d have to pay excessively high premiums.  It should not be provided by the government as a benefit for being poor because if you get a job you’ll lose that benefit and that insurance and you might end up having to get coverage when you can’t.  It really shouldn’t be provided by the government when you’re old, because you were paying into a policy all your life and the insurance company should be on the hook as you age, not taxpayers.

But that is not the world we live in.  We have ruined the health care insurance market in many ways.  So what do we do now, particularly about the people with pre-existing conditions?  We should look at ways to 1) pare that problem down as much as possible and 2) incentivize everyone else to prudently acquire health insurance before they get pre-existing conditions.

Allow insurance companies to cover everything but the pre-existing condition, so everyone can afford the rest of their insurance.  Maybe have the government and/or charities pay for the care (not the insurance, but the actual care) for people with pre-existing conditions.  Make it like Medicare, which isn’t that generous, so everyone could see that they would be better off if they buy coverage for themselves early before pre-existing conditions.  End the employer and government provided health coverage and have everyone buy private insurance.  Give vouchers or cash assistance to those who can’t afford insurance, but get them out into the same private market as everyone else.  More people in the pool, the lower the premiums will be.  The earlier you buy health coverage, the cheaper it will be.  The healthier you are, the cheaper it will be.  We will have to take care of the people for whom it is too late to be prudent–the people whose houses caught fire before they bought insurance.  However, we should work to decrease the number of those people, not set up the rules to reward people who wait to buy coverage with pre-existing conditions.  That’s a recipe to bankrupt the entire private health insurance system.  Maybe that’s what Obama really wanted?




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Researching the answers to today's problems I found the best answers among writers who identify as libertarian. Maximize freedom, rely on the free market to solve most of our issues, rely on personal responsibility, promote more voluntary charity.

Civil comments and discussion questions welcome