Jeff Scialabba — 2/5 — VOICES for REASONVOICES for REASON

I discussed in Parts 1, 2, and 3 of this post how many of the problems in our health care system are the result of the dominance of third-party comprehensive insurance—a dominance which has arisen from decades of government interventions favoring this kind of insurance. But as these interventions are not new, neither are the problems we are presently facing. On the contrary, our government has been attempting to solve our health care problems for as long as it has been creating them—and time and again these “solutions” have left our health care system worse off.

In recent decades, for instance, state governments have increasingly looked at insurance mandates as a means of expanding coverage to groups that have difficulty obtaining it. Broadly, mandates are requirements—backed by government force—that insurers cover specific medical expenses (e.g., chiropractors, treatment for lyme disease) or patient populations (e.g., continuing coverage for laid-off employees). Mandates are an extremely myopic political tool: they force insurers into a money-losing endeavor, who respond by increasing insurance premiums or decreasing coverage in another area—creating another problem for politicians to solve by passing more mandates.

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A big source of the problems currently plaguing our health care system is the fact that most of us—as consumers of medical services—are completely cut off from any concern with (and often from knowledge of) their prices. All we ask, typically, is: “Is it covered?” As I discussed in part 1 and part 2, government intervention has led to a system where 95 percent of the insured population in America—some 240 million people—have comprehensive health insurance provided by a third party (either their employer or the government).

With insurance covering all kinds of medical services and the premiums paid by someone else, Americans have little financial incentive to curtail doctors’ visits for minor ailments, to question whether a test is worth its cost, or to seek out cost-effective care. Before we buy virtually anything else, we ask ourselves whether it is worth its price and whether there might be a better deal elsewhere. When we go to the doctor, we don’t even see the price until it shows up on the invoice—with all but a small co-pay or deductible (relative to the total bill) paid by the insurer. History has shown that this system increases demand for health care, encourages wasteful consumption and ultimately increases costs for third-party insurers.

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In Part 1 of this post I described how government tax policies dating back to World War II have led to more than half of Americans obtaining their health insurance as a benefit provided through their job. Another important feature of health insurance in the United States that has been fueled by government intervention is the fact that it is almost always comprehensive.

Contrary to other kinds of insurance, which typically cover only catastrophic expenses, our health plans cover routine care such as annual check-ups. Homeowners insurance covers fire damage but not your monthly electricity bill, car insurance protects us against the cost of an accident, not an oil change. Yet health insurance pays for our physicals and basic tests. How come?

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Americans have been increasingly hostile towards President Obama and his fellow health care reformers. It’s a sign that the frustration with Big Government that sparked the Tea Party movement hasn’t eased and may be spreading. There’s a certain irony in the protests, however: thousands of citizens are jamming town-hall meetings and clamoring that they don’t want Washington bureaucrats intervening in their health care—without realizing just how much the bureaucrats already interfere.

The U.S. government has its hands in every aspect of medicine—regulating and dictating everything from the insurance we receive to the drugs available to us. To explore the extent of government involvement already taking place, my next few posts will consider some of the ways in which government influences the quality, cost and availability of medical care in the United States.

To begin, let’s take a look at one of the prominent features of our health care system: employer-sponsored health insurance. Read the rest of this entry »