This morning, the Department of Health and Human Services released a report headlined, “At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans: 129 Million Could Be Denied Affordable Coverage Without Health Reform.” Get the implication? Without Obamacare, half of America would be left without health insurance.
Well, admits the actual report, maybe not exactly. The HHS estimates that anywhere between 50 to 129 million non-elderly Americans have “some type of pre-existing condition.” Between 50 and 129 — I’ve gotten more reliable estimates of next year’s weather. But the real laugher is in how the HHS takes the term “pre-existing condition” and mutates it beyond all recognition, in order to prop up our benighted new health-care law.
Let’s understand first what the problem of preexisting conditions is.
Because our World War II–era tax system allows employers to buy health insurance tax-free, while making individuals buy it with after-tax dollars, the vast majority of those under 65 get health insurance from their employers. This, in turn, creates the phenomenon of job lock: Individuals who fall ill at one job (or have family members who fall ill under their health plan) are afraid to leave that job, because switching jobs means switching insurance plans, and a new insurance plan is likely charge more to cover someone who is already sick.
Note that the words “denied coverage” are not present in the preceding paragraph. Indeed, as Michael Cannon points out, a 2001 HHS survey found that only one percent of Americans had ever been denied health insurance for any reason. Cannon brings us to two other studies, one by a Wharton economist and one by the RAND Corporation, both of which echo the HHS data. As Cannon writes,
It is true that insurers charge higher premiums to many people with pre-existing conditions — and it is crucial that they have the freedom to do so. Risk-based premiums create virtuous incentives for people to buy insurance while they are healthy and to be cost-conscious consumers. They also encourage insurers to develop innovative products that protect against the risk of higher premiums. The real problem here is that the government has created an employment-based health insurance system that denies consumers the protections that unregulated markets already provide, as well as additional protections that insurers would develop absent this government intervention.
Our health-care system, pre-Obamacare, was far from perfect. But it’s exceptionally dishonest to say that half of Americans are at risk of losing their coverage without Obamacare’s blizzard of mandates and controls. Instead of creating two new entitlements and hundreds of thousands of pages of new regulations, we could have done something much simpler: equalize the tax treatment of individual and employer-sponsored health insurance.
There are lots of ways to do this, depending on if you want to increase or reduce taxes. You can eliminate the employer loophole altogether, raising taxes by over $300 billion a year, making a huge dent in the budget deficit. Or, you can extend the tax break to all individuals, whether employed, self-employed, or unemployed. Finally, you could split the difference: reducing the tax break for employers, but increasing it for individuals.
Once people are buying insurance for themselves, rather than depending upon their employer, their insurance stays with them. If you lose your job or change jobs, your insurance will still be yours, just as your auto insurance and your life insurance stays with you regardless of where you work. And if you have insurance, like most Americans do, the issue about preexisting conditions is irrelevant: If you are sick, your insurance provides the coverage it is meant to provide.
Sebelius and her HHS colleagues try to morph the definition of “preexisting conditions” into “conditions.” Take this random sample of Sebelius’ assault on the English language:
An analysis of a survey that follows people over time found that, among healthy people—reporting very good or excellent health with no chronic conditions—today, 15 to 30 percent (depending on their age) will develop a pre-existing condition within the next eight years.
So, let’s get this straight. Fifteen to 30 percent of Americans will, in the future, develop a preexisting condition. This only makes sense if the HHS has also invented time travel.
A person who has health insurance, and later becomes ill, does not have a preexisting condition. He has a condition of the plain old “existing” kind—one that his insurance will help pay for. This is exactly how insurance is supposed to work.
Millions of young, healthy people who can afford health insurance today choose not to buy it. Obamacare will allow them to buy it after they get sick — because, aha! They now have a “preexisting condition.” This is exactly the opposite of how insurance is supposed to work.
Obamacare’s advocates want you to believe that, without their 2,300-page, trillion-dollar extravagance, half of America would lose their health insurance. The reality is that preexisting conditions is a problem affecting a minute fraction of Americans, a problem that could be solved with a simple, one-page bill.
If Republicans repeal Obamacare and replace it with a straightforward law that equalized the tax treatment of employer-sponsored and individually-purchased health insurance, they will have done more for real health-care reform, and for people with real preexisting conditions, than the last forty Congresses put together. Let’s hope they get their chance.
— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co. in New York City. He blogs on health-care issues at The Apothecary.