Auto-Topia - Why Universal Health Care Will Not Work

The intent of forming a new Territory is to increase individual freedom, which will expand as government cedes control over Citizens’ lives. What issues might we anticipate from creating a smaller government than our existing one?  

The natural tendency of all governments is to expand their own power. So wrestling any power away from government may require a stronger quantum of force than is currently available to be harnessed by mankind. But lets assume that we can overcome the gravitational pull of government power for a moment and look at one of the most controversial issues in governance today.


We Cannot Buy Actual Health Insurance Any More?

Some of the most strident objections to reducing the size of government surround health insurance regulation. Some big-government apologists foretell people dying in the streets if we eliminate a single one of the thousands of pages of government controls over our relationship with our physician, much less actually letting people manage their own health and the relationship with their own doctor.

In this posting we look at the impact of unwinding a small sub-set of the complex web of health insurance regulations that make it all but impossible to buy actual health insurance. A high-deductible plan, like true insurance, covers you in case of serious illness, but leaves you to pay for the ordinary costs of health care – routine doctor visits, a checkup for a sore throat, and the like. 

Today, most insurance, due to complex regulations, operates more like “pre-paid health care”, with a low set maximum on “out-of-pocket” costs; the result is that in most states people can’t buy true insurance, but instead have to buy plans that cap their out-of-insurance spending at a number like $2,200 in any given year. The result is that nearly all US health care costs must be funneled through insurance, rather than being part of the patient-doctor relationship, managed by the patient as part of taking care of their health and that of their family.

It sounds wonderful- the poor aren’t burdened by high health care costs (according to this theory), and everyone can go to the doctor when they are sick. But shoving health care costs under the health insurance blanket doesn’t really make them go away…

[Harps play, fog rolls in, the scene shimmers and we are in a different world…]

Autotopia - The Land Where Cars and Driving Are "Free"

In this wonderful world we’ll call Autotopia, “Auto Insurance” would cover all expenses for our cars.  Once drivers had spent $2,200 in a given year, everything would be “covered”, including gasoline, regular check-ups, repairs, accidents, perhaps even quarters for vacuuming at those car wash places. Since most everyone would spend at least the minimum, the perception would be that gas, maintenance, and repairs would essentially be “free”.  

Doesn’t that sound great? It would ensure that everyone could drive. Even the poor could buy this kind of Auto “Insurance”, since state “Insurance Commissioners” and the federal automotive insurance regulators would be there to control the price, the coverage, and generally manage everything an individual might buy for his car.  Since there would be no additional costs to drivers, cars would always be safely maintained, and it would reduce accidents on the road since no one would drive a “junker”.

But once we all were on that plan, things would start to change in the now “free” world of transportation. Since driving costs nothing, once the minimum is met, we would all drive anywhere, everywhere.  Why not, since every nickel spent over $2,200 would be someone else’s? Gas stations would start charging more for gas, and why not? Since no one would stop buying gas as the price went up, oil companies would raise prices by large percentages every year. Gas would hit $6, $8, $12 a gallon; there would be no ceiling. But who cares? It's free!

Repair and maintenance costs would rise, as would fraud and abuse, since car owners buying the repairs would not benefit by negotiating or even by picking a lower cost source. Repair stations would sport espresso machines, comfortable chairs, and current magazines, covered of course by the ordinary cost of repairs. In fact, we would all want to go to the best, most expensive repair places, since it’s our car after all, and our health and safety are involved.

The makers of specialty automotive devices such as additional airbags, filtration systems, and sun roofs (for safe exit in an emergency, don’t you see) would petition the government (and make campaign donations) to enact legislation requiring that all insurance include coverage for purchase of their particular products.

Insurance companies wouldn’t mind, since more requirements mean higher premiums, more profits and bigger bonuses.  

All Is Not Well In Autotopia

But soon, problems would start to surface in Autotopia. Pushing essentially all transportation costs through insurance companies would force up costs. Even at its most basic, all costs would be marked up for administering the relationship with our gas station, our repair shops, etc. While this job COULD be done by each of us according to our own preferences, paying the insurance company to handle this does much more than just force us to pay for administering something we could do for ourselves- it changes our behavior as consumers of automotive services.

The system separates the people who buy and consume the stuff – us citizens – from those who make the billing decisions; buying would be made by individuals, on the basis of "no additional cost", while prices for insurance would be set by the combined behavior of all consumers using LOTS of transportation. Individuals would not care about the particular cost to us, so there would be no real price pressure at the pump or the repair shop, no natural price damping mechanism – people would just continue to consume more and more transportation, while costs rose without limit.

Over time, America would be spending an ever larger and growing fraction of her wealth on getting from here to there, with nothing to stop the rise in costs. Our competitive economic status would weaken, as more of our economy went to pay for transportation than in other industrialized countries. Soon transportation would become a major drag on the economy, pulling funds away from other urgent needs.

Prices, predicted to fall by legislators (see Massachusetts), would rise, surprising the pro-auto-insurance community organizers. While the road infrastructure expanded, traffic jams would increase, and cars would become less, not more, reliable. Think-tanks would complain that European countries had better transportation at less cost than the U.S., with numbers and graphs to back it up.

All this time, the cost of car insurance would rise much faster than inflation, and politicians would scream about the evil auto, oil, and insurance companies, about how they were hurting the “working poor”, how the rich were getting richer. They would demand laws to limit the profits of these companies, or add special taxes to their income.

Socialist Congressman Bernie Sanders would filibuster, demanding a government take-over of the insurance companies, accusing the evil Republicans of rewarding the rich by de-regulating the auto insurance industry, further punishing the downtrodden.

[Harps again – we return to today, to our world, where health insurance premiums have been rising faster than inflation for 2 decades, and no one can figure out why…]




How To Realistically Get Control of Health Care Costs Here and in the Territory

Today, health care costs continue to soar, and it is no coincidence that the most regulated industry in America – health care – delivers the most the most expensive health care in the world, and sports the fastest growing costs of anything Americans buy. 

(Note to Mitt Romney, former governor of Massachusetts: Your state universal health care program, which was the model for ObamaCare, which you predicted would lower costs, has resulted in the highest health care costs of any state.)

With a simple modification – shifting from “pre-paid health care” to true insurance- Americans would change from mere “Patients Without a Say” into “Health Care Customers.” They would care about costs as well as about quality, would decide on health care purchases carefully, would check prices, options, and a personal budget, rather than just saying “YES” to everything because it is free.

In the end, America will spend less on health care, because individuals will be spending their own money. Health care will take its rightful place among the many important goods and services we buy as Americans, because WE will be managing it, not remote bureaucrats who decide how to spend our money.

We estimate that this single change could drive down health care costs by 15-20% in the short term, and substantially slow the rate of cost increases in the near future.  Prices decrease over time for every good or service which is driven by the free market, whereas they increase when government substantially controls the parameters of the industry. Think about the difference between the price trajectories on computers and telephones versus those on mail and medical care.  

In other words, we citizens will behave like normal, rational, everyday consumers that have, through our individual concerted actions, created the most vibrant and dynamic marketplace in the world. We will behave like free Americans.

Conclusion

We need to make the purchase of medical care work as well as the rest of America.  We can do that by getting the government out of our relationships with our doctors.  With this change, health care costs will stop their reach for the stratosphere, and return to their appropriate place as decided by ordinary Americans, for themselves. In the end that will help all Americans be healthier and more able to afford medical care.