Market Based Health Care

Congress can redeem itself with a simple and cost-free cure rather than an elaborate and expensive complication. The Health Care Choice Act, sponsored by Rep. John Shadegg (R., Ariz.) and Sen. Jim DeMint (R., S.C.), would let American consumers purchase health insurance across state lines, just as they now may shop coast to coast for mortgages.
Shadegg-DeMint would let insurers licensed in one state sell to individuals in the other 49. As such, Congress would use its constitutionally enumerated powers to liberate interstate commerce and transform 50 separate, closed markets for medical coverage into one open, national market for health insurance.
“Two-thirds of the uninsured have incomes below 200 percent of the federal poverty level, and most cite unaffordability as the top reason for why they are uninsured,” said Shadegg, who hopes to succeed Rep. Tom DeLay as House majority leader. “Until consumers can purchase their health care like their auto, homeowners, or life insurance, we won’t reform health care; we will only re-regulate it.”
“Just as Delaware became a magnet for banking, some states will become magnets for health insurance,” predicts Dr. David Gratzer, a physician and Manhattan Institute senior fellow, and one of this idea’s earliest proponents. “People seem to understand intuitively that it doesn’t matter whether their checks come from Delaware or New York or California. Likewise, the issues around health insurance are cost and availability rather than state of origin.”
Location matters. A health policy for a single Pennsylvanian costs roughly $1,500 annually. Cross the Delaware into New Jersey, as George Washington did in 1776, and a similar health plan costs about $4,000, thanks to government regulations.
“When doctors worsen a patient’s condition, we call it an iatrogenic ailment,” Dr. Gratzer notes. “We lack an equivalent term for when politicians aggravate a problem.”
By mandating benefits, legislators have swelled the standing army of the uninsured. As Victoria Craig Bunce and J. P. Wieske explained in their January 2005 report for the Council for Affordable Health Insurance: “Mandating benefits is like saying to someone in the market for a new car, if you can’t afford a Lexus loaded with options, you have to walk.” Making every health policy cover acupuncturists, marriage therapists, or in vitro fertilization, as some states do, looks less compassionate when such adornments drive the humble from the market. CAHI estimates that state mandates can hike insurance prices 20 to 45 percent.
“Guaranteed issue” rules, which let people wait until they ail to purchase coverage, also boost prices. Ditto “community rating.” It slaps the same government-controlled price on insurance for everyone — young or old, fit or fat — in a given jurisdiction. This is as idiotic as charging 16-year-old boys and 60-year-old widows the same amount for auto insurance.
Economics aside, Dr. Gratzer praises Shadegg-DeMint’s clinical potential. “The more people who are covered the better,” he says. “That means fewer people hesitate to get tests or follow up with physicians. Eventually, that will lead to a healthier population.”
Critics argue that letting consumers shop for health insurance will launch a dreaded “race to the bottom” as Americans buy inexpensive plans from unscrupulous insurers in unregulated states. But which states, precisely, let health insurers operate like numbers rackets? Of course, consumers could avoid questionable plans in clueless jurisdictions by patronizing reputable, sensibly supervised providers.
So, what will this cost? Nothing. Unlike nearly every action by this Republican Congress, this legislation expends no tax dollars. Your wallet is safe. For now.
Democrats routinely complain that 45 million Americans lack health insurance. Many are between jobs, young, or more prosperous, and decide to forgo insurance. Still, Democrats correctly call this a serious concern for many Americans. The Shadegg-DeMint proposal could be a key solution to this problem. Democrats should embrace this Republican idea. If they rather would deny the uninsured an expanding array of lower-cost health-coverage options, let them stand up this election year and say so.

— Deroy Murdock is a columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Arlington, Va.