The real significance of Oregon
Krugman is right. Fire insurance doesn’t prevent fires, and it isn’t meant to. The purpose of fire insurance is to protect the policyholder from the catastrophic financial loss that occurs when one’s home burns down. In every sector of the economy except health care that’s what insurance is for. We buy car insurance to protect ourselves from the financial cost of car accidents. Yet liberals expect health insurance to save lives and improve health, instead of expecting it merely to protect us from catastrophic medical bills. We could easily apply the lessons of car insurance and fire insurance to health insurance. But we don’t, because the Left has been persistently and ideologically opposed to treating health insurance this way.
Indiana, under then-governor Mitch Daniels, placed Medicaid patients on an inexpensive combination of high-deductible insurance and subsidized health-savings accounts. That combination is meant to protect beneficiaries from catastrophic medical bills while giving them control over their own health spending. The program enjoyed a 98 percent approval rating among its participants. But the Obama administration shut down the program, insisting that it be replaced by traditional Medicaid. Florida’s GOP-controlled house of representatives proposed replacing Obamacare’s Medicaid expansion with an entirely state-funded program for catastrophic insurance and health-savings accounts. It was blocked by Republicans in the state senate, who insisted on expanding Medicaid instead. (The house–senate stalemate meant that neither bill was adopted.)
Singapore, which has a universal system of catastrophic coverage and health-savings accounts, spends one-seventh of what we spend on health care, with comparable results. If we gradually replaced our $1.5 trillion–a–year health-care leviathan with this approach, we could wipe out our budget deficit and permanently solve our entitlement crisis.
Unfortunately, Obamacare goes in the other direction. It expands Medicaid and sets up subsidized insurance exchanges where many people will be forced to buy costly, comprehensive insurance products that they don’t need. A different kind of exchange, in which individuals shop for narrower, consumer-driven health plans, could form the core of a free-market health-care agenda.
This, indeed, is the bottom line from the Oregon study: that protecting people against bankruptcy from medical bills is a good thing, and that we have far less costly ways of doing so than expanding an already failed entitlement program. That finding will reverberate for years, and provide momentum to conservative efforts to offer a better solution.
— Avik Roy is a columnist for NRO and a senior fellow at the Manhattan Institute. You can follow him on Twitter at @avik.