Democrats, such as Sen. Dick Durbin (D., Ill.), say they are eager to campaign against Republicans who seek to repeal their health-care legislation. “The Republicans will have to stand up and say we want to repeal those things and I think that will be hard, because people will begin to realize these are commonsense changes,” said Durbin.
Indeed, as Grace-Marie Turner mentioned on these pages, Democrats have posted a list of the “Top Ten Immediate Benefits” that they argue that individuals will gain from the legislation.
But there is no such thing as a free lunch, and many of these “benefits” are accompanied by unmentioned costs. If you require that every restaurant serve Kobe beef instead of USDA Choice, diners might see that as a “benefit” — until their waiter gives them the check.
Let’s go through the Democrats’ top ten, point-by-point:
- Prohibit pre-existing condition exclusions for children in all new plans. This will increase the cost of insurance for everyone else. Net negative.
- Provide immediate access to insurance for uninsured Americans who are uninsured because of a pre-existing condition through a temporary high-risk pool. High-risk pools are a good way to improve coverage of those with pre-existing conditions, which is why John McCain advocated them in the 2008 Presidential campaign. Unfortunately, the Democratic bill doesn’t do enough to make them feasible. Net neutral to positive.
- Prohibit dropping people from coverage when they get sick in all individual plans. Insurers shouldn’t drop people when they get sick, unless they have an extremely good reason, such as misrepresentation of a pre-existing condition. The onus should be on insurance companies, therefore, to investigate these things up front before taking consumers’ money. This mandate will have the side effect of making applications for insurance more onerous. Net positive.
- Lower seniors’ prescription-drug prices by beginning to close the donut hole. As a flat-out subsidy, yes, this will appear to seniors to be a straightforward benefit. But it is accompanied by a far larger cut: the obliteration of Medicare Advantage. Net negative.
- Offer tax credits to small businesses to purchase coverage. The tax credits will not be enough to compensate for two things: (1) an Obamacare-driven acceleration in the rise of the cost of health insurance; (2) the employer mandate, which requires that any small business with more than 50 employees provide health insurance to every employee or pay a fine equal to $2,000 multiplied by the entire number of employees in that company. Net negative.
- Eliminate lifetime limits and restrictive annual limits on benefits in all plans. Yet another mandated “benefit” that will drive up the cost of health insurance. Net negative.
- Require plans to cover an enrollee’s dependent children until age 26. See #6, though if this provision increases the number of young people with health insurance, it could improve the risk pool and have a salutary effect on insurance costs. Net neutral to positive.
- Require new plans to cover preventive services and immunizations without cost-sharing. See #6. Another clumsy mandate that will drive up the cost of insurance. Most plans already encourage prevention — but prevention has no impact on long-term health care costs, since we all have to eventually die of something. Net negative.
- Ensure consumers have access to an effective internal and external appeals process to appeal new insurance plan decisions. Yeah, except that a new government agency, the Independent Medicare Advisory Board, is now empowered to bar reimbursement for any insurance claims it deems fit. And its decisions, enacted by unelected bureaucrats, can’t even be appealed by Congress, let alone consumers. We know from experience that once Medicare stops reimbursing for something, private insurers usually follow. Net negative.
- Require premium rebates to enrollees from insurers with high administrative expenditures and require public disclosure of the percent of premiums applied to overhead costs. Once again, this is a mandate that will only drive up insurance costs. If an insurer is required to spend 85 percent (say $850 of every $1,000) of premiums on patient care (hence $150 in “overhead”), but the company needs to spend $200 on administrative costs to ensure that its plans run effectively, they will simply raise premiums by $333 in order to ensure that the percentage of premiums spent on overhead remains the same. Net negative.
So, of the Democrats’ top ten “benefits,” seven have direct, opposing costs of an even greater magnitude. The remaining three provisions, if we’re lucky, might work out. But we haven’t even gotten started with all of the other mandates and tax increases in the law for which there are no upsides.
The Democrats’ list demonstrates that we have a long way to go before our political class understands the very basics of how insurance works. One of the projects of conservatism over the next few years must be to rectify this problem.