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Miscellaneous meanderings and philosophical ramblings. The title from a spiral notebook I used to jot down my thoughts on religion and other matters some years ago. I like to write, think and express my views on various issues. Robust discussion is welcome.

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"Lan astaslem."
I will not submit. I will not surrender.
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Saturday, August 08, 2009

A free market solution to pre-existing conditions

I’ve noticed a focus on the problem of pre-existing conditions in various discussion on health insurance reform. It seems both Republicans and Democrats in Congress favor mandating that health insurance must not reject covering patients with pre-existing conditions. Is there a better way?

I know President Obama has said talking time is over and he wants us to get out of the way, but some of us prefer open and free discussion before turning over a large segment of the economy to the government. It also doesn’t help that what is being proposed would necessarily reduce our freedoms even if many of the proponents do not intend this.

So back to the issue at hand. If government does not mandate this, does it mean that the market will not respond to provide a service of some sort? The general view seems to be that of course a free market will not as there is no profit in this. But not so fast, according to an analysis by the Cato Institute, the free market can meet the need and government involvement can be much less intrusive and avoid the damage contained in current proposals.

Patient Power has it’s own commentary on the Cato Institute policy analysis as well as a link to the original report.

An excerpt from that commentary which you can find here:

In short, health-status insurance addresses what worries people most about health insurance:  What if I get sick and become uninsurable?

Health status insurance protects people against the risk that their insurance premiums will increase should their health status change.  In addition to buying medical insurance each year, you could also buy health status insurance.  Should your premiums increase the next year because you get sick, the health-status insurance will deposit money into an account that can only be used to buy insurance.  The amount would make up the difference between what you were paying and the now increased premiums.

Be sure to read it all, as well as the the actual paper under discussion. One excerpt from the Cato Institute paper, as I’m sure this question will immediately come to mind for most readers.

What about People Who Are Already Sick?

Private insurance cannot cover events that have already happened. You can’t tell an insurance company, “My house just burned down. How about some insurance?” Many people feel that government should insure events that have already happened, especially when no insurance was available and the unfortunate are in some sense blameless. Health-status insurance accounts offer a good way to help people who are already sick. The government could simply deposit money in an individual’s health-status insurance account and then get out of the way. Private charities could help people in the same way. This is much more straightforward, flexible, and less distortionary of markets than directly running a government-sponsored health insurance plan, or forcing private insurers to take such patients and treat them well. […] (Health-Status Insurance How Markets Can Provide Health Security, pg. 5)

Unfortunately some will not like this proposal as it requires less regulation and government interference or control. When one claims, in complete contradiction to experience or common sense, that we will cover more people, do so through expanded government bureaucracy and mandates and have it cost less, without reducing the service you currently have, they are rather immune to facts. While utopian fantasies are comforting, they tend to fall apart in the harshness of the real world. That may be hard to explain to children, it’s rather sad and dangerous when it is impossible to explain to the President of the United States because he tells us we should just stop talking and get out of the way.


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