In one of the more amusing dimensions of the Beltway death struggle over the massive transfers of wealth to be gained or sacrificed by various groups through health-care “reform,” the large health-industry players — honestly believing all this year that they could stay off the menu by buying a seat at the table — suddenly have discovered themselves in the frying pan nonetheless. And who’d a thunk it? After all, no way no how would people with decades of experience in Congress, on K Street, or simply reading a newspaper recognize that “deals” with the White House are unenforceable in Congress. Or that “deals” with one Congressional Rebbe might not appear kosher to another. Or that a certain Nobel-Peace-Prize-winning president might not in the final analysis actually veto a bill promising enormous political benefits merely because it violates some deal cut months earlier with interest groups whose political popularity might not be sterling, notwithstanding the incontrovertible fact that his word is his bond.
Nope. It’s all a surprise. Here’s another: Political pressures to weaken the individual mandate, supposedly the quid pro quo for nonexclusion of insurance applicants with pre-existing conditions, are and will remain irresistible, for two reasons. First, the individual mandate is necessary to preserve the private insurance sector if all applicants must be given coverage, because of the obvious problem of adverse selection. Who in their right mind will buy coverage before they get sick, given that the hospitals obviously will have an insurance sign-up desk immediately inside the emergency-room door? And why should the political left support effective enforcement of such a mandate? Their goal is maximum dependence upon government, and without real enforcement of an individual mandate, the private insurance market will collapse within months. Pay no attention to the purported “firewall” provisions of the Baucus markup; if those with access to employer coverage do not receive a large subsidy available to others, it is axiomatic that the labor market will evolve in such a way as to capture the subsidy for everyone. Employers will drop their coverage, give their employees raises sufficient to cover the (already-declining) fines for those without coverage, and then turn their people loose with the government subsidy.
Moreover, the fines for noncoverage status will quickly disappear; the reasons given will be “fairness,” and all the rest. More fundamentally, large numbers of voters — the young, the healthy, etc. — will not want to be forced to buy coverage not perceived to be worth the cost, and they will vote their pocketbooks. Subsidies sufficient to induce them to buy coverage will prove unaffordable compared with the purportedly “cheap” insurance that the government could offer by imposing price controls, exercising its monopsony power, regulating ever more intensely, and turning the plaintiff attorneys loose.
And that is why the industry groups were utterly silly — make that self-destructive — not to oppose this monstrosity from the very beginning, as its evolution was and remains easy to predict. That is why it is absolutely essential for the preservation of American liberty — not to mention health care — that no bill pass this year.
– Benjamin Zycher is a senior fellow at the Pacific Research Institute.