Speaking about Obamacare last week, President Obama once again expressed his view that only comprehensive health insurance policies, which cover a large share of routine medical expenses, count as real insurance. Conservatives generally believe instead that much of the value of health insurance comes from its protection of policyholders from the risk of catastrophically large expenses. At Bloomberg View, I argue that this disagreement underlies a lot of the policy debates about Obamacare—and that Obama’s rhetoric on the issue consistently ignores that disagreement.
Supporters of Obamacare sometimes respond that the law allows for high-deductible plans and that this feature of the law is one of the reasons conservatives should like it. They also sometimes charge conservatives with hypocrisy because they have sometimes blamed Obamacare for high deductibles rather than celebrated them.
What this kind of response misses is that conservatives do not regard high deductibles as good for their own sake. They favor letting people trade higher deductibles for lower premiums. Obamacare, by requiring all policies to cover preventive services and imposing other regulations on them, means that for any deductible level the (pre-subsidy) premium will be higher. Some policies may therefore have both high premiums and high deductibles. Some of them may even have deductibles so high that they frustrate rather than serve the goal of protecting people from major financial trouble related to health expenses.
The point about letting people make this trade-off rather than imposing a particular trade-off deserves some emphasis. In a report last year on replacing Obamacare, several right-of-center analysts included the recommendation that the minimum deductible requirement for a health savings account be eliminated. In a more market-oriented health-care system, policies would probably be significantly closer to the model of catastrophic insurance and further from that of comprehensive insurance than they are now. But that’s because moving to that system involves getting rid of policies that bias people’s choices toward, or just mandate, comprehensive coverage. There’s no need for the government to put its hand on the other side of the scale.
Update: Speaking of high premiums. . .