Q&A on Obamacare
By Robert Higgs • Tuesday March 30, 2010 9:39 AM PDT • 19 Comments
A few days ago, via e-mail correspondence, I answered some queries about the new health-care-insurance law put to me by Marina Galisova, a reporter for the Slovak weekly magazine Tyzden. It seems that this interview has formed the topic of an article in the magazine, although I cannot be sure because I cannot read Slovak. In any event, on the assumption that not many readers of The Beacon can read Slovak, either, I reproduce here the questions Galisova put to me and my answers.
1. Under the passed legislation, what does it mean that “every American having health insurance”? How much shall be paid by the federal government and how much by the states to gain this objective?
The new law forces everyone to buy health-care insurance. Many people already have such insurance, most of them as part of the compensation they receive from their employer. In general, these people will be able to keep their current coverage. People who do not buy health-care insurance acceptable to the government will be fined heavily, so besides having no health-care insurance, they will be punished by the government!
2. It looks unlikely that this “reform” will result in a better health care for Americans. However, can you think of at least one example where it might actually help someone?
In general, the new system will make health care worse in the United States, for many reasons. However, some persons will benefit. The major beneficiaries will be those with pre-existing conditions who are currently rejected by insurance companies (the companies do not wish to sell fire insurance to people whose houses are already on fire). The new law forbids insurance companies from rejecting any applicant because of a pre-existing condition. Owing to this new legal requirement, health-care insurance will no longer be true insurance, but merely a third-party payment system for health-care expenses.
3. Will the price of health insurance be kept down by state force? Will Americans be forced to buy health insurance—subsidized by the state? Will Americans be forced to pay premiums, as, if I remember correctly, Dr. Ron Paul has once indicated?
Premiums and benefits of health-care insurance plans are already heavily regulated by the state and federal governments. The new law places many new requirements and restrictions on the companies. It also regulates the difference between the amount they may charge older people and the amount they may charge younger people. The result will be that younger people will have to pay greater premiums than they would pay under a fair insurance scheme in a free market; that is, younger people will be forced to subsidize the health-care expenses of older people (who demand much greater amounts of health care).
4. What, in your opinion, will be the long term effects for American health care? Do you expect deterioration in the quality of services, as is often the case in Canada and in Europe?
This system will almost certainly prove to be much more costly than now projected. Pressure will be created to increase the prices of care and the amount of insurance premiums needed to cover the costs of care. The government will respond by measures that amount to price controls and by selective subsidies to lower-income people and to those with the most political clout. Shortages will increase; waiting times for care will increase; the quality of services will decrease. The overall health care system will cost more and more while delivering worse and worse care. Ultimately, the government will probably throw up its hands and nationalize the entire system because it will have become such a terrible mess.
5. Could you say that the Americans are, as a majority, in favor of this legislation? Not even all Democrats supported the bill...
Polls show that a majority of Americans oppose the law just enacted. These poll results seem plausible to me. In truth, however, few Americans have much real knowledge about the present law, which occupies more than 2,000 pages, and even less understanding of the economics and political science required to understand its likely consequences. The law is not simply a shot in the dark, it is a barrage in the dark.