Sep 15 2009

Mailed Fist in Lizard-Skin Glove: Lizardian Alternative to Individual Health-Insurance Mandate

Posted by Jacquita in All Post
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The more I mull the arguments against the individual health-insurance mandate (hence, I-HIM), the more merit I see in them: It’s inevitable that any such mandate, no matter how light the requirement begins, will eventually become a rigid rule that everyone must buy gold-plated ObamaPlans… which themselves are unsustainable and will quickly dissolve into full-blown, United Kingdom style National Health Service, with all the insane medical rationing and treatment denial that entails.

Even if the original mandate is merely for an HSA plus catastrophic care, Big Insurance will push and push, lobby and lobby for mandated coverage for this, required coverage for that; and soon you have the NHS. (The NHS as currently constituted didn’t arise overnight either.)

So I bent my mighty reptilian brain — about the size of a pomegranate seed — and came up with an alternative that seems more free market, less statist than the I-HIM.

My sticking point in the past has always been the free-rider problem, which I explicated in a previous post. Here’s how I described it:

In economics, [we have something] called the “free rider” problem; the classic example is a streetcar with a single driver who is also the ticket-taker, so he really has no ability to extract fares from riders not honest enough to pay voluntarily. These moochers start hopping on the streetcar without buying a ticket; eventually, as more and more people see others riding for free, even ordinarily honest riders start feeling like suckers. When they, too, begin doing the same, the streetcar line goes bankrupt. Then nobody gets the service.

In this case, if we have an unenforced system of health insurance, what happens when somebody without any insurance gets terribly sick or injured — or worse, his child does. Given that Americans will not stand by and watch someone die from an easily treated disease or injury, the reality is that those free riders will, in fact, be treated. Maybe they’ll be billed afterwards, but they can declare bankruptcy and weasel out of even that small bit of personal responsibility.

Similarly, Americans will never countenance senior citizens living on the streets or children growing up illiterate or otherwise uneducated: We have no stomach for willfully forcing people to pay a draconian, perhaps even fatal, price for stupidity… even less for making children pay the price of their parents’ stupidity.

Without some solution to the free-rider problem, we cannot move to a system of full liberty. (I’m not saying it’s insoluble, only that I personally don’t know any solution.) But we can at least significantly pare back government intrusion to the least extent required to still leave nearly everyone covered for old-age health care, retirement, and some standard minimum level of education.

All right; I think I may have, if not a complete solution the free-rider problem (which I believe to be insoluble as a general paradox), then at least something that may mitigate it considerably — perhaps desisively. I call it the mailed fist in the lizard-skin glove approach:

The problem is in one clause of one sentence above. “Given that Americans will not stand by and watch someone die from an easily treated disease or injury, the reality is that those free riders will, in fact, be treated. Maybe they’ll be billed afterwards, but they can declare bankruptcy and weasel out of even that small bit of personal responsibility.”

So here’s the suggestion:

Amend the bankruptcy rules so that only a certain dollar value of health-care debt, X dollars, can be eliminated via bankruptcy;

Set X high enough to cover the deductable of any reasonable insurance;

But also set X far too low to allow an uninsured patient to shield himself from the consequences of health-care debt by using bankruptcy to wipe it away.

For example, if a typical catastrophic health-care insurance policy had a $5,000 deductable — normally paid by your health savings account (HSA) — then X, the dollars of health-care debt you can discharge via bankruptcy, could be set to $5,000. If you have insurance, you’re covered; if you only have catastrophic care, but your HSA is depleted (or non-existent), you can declare bankruptcy and discharge $5,000… which is your deductable. That way you won’t be socked with life-altering bills, if you’re at least somewhat responsible.

But if you’ve taken no insurance at all — you’re a smart-ass kid who thought he would never need it — then you may end up with $90,000 of treatment debt, of which only $5,000 can be discharged under bankruptcy. That means you’re going to have to agree to some payment plan for the other $85,000, or be taken to court and lose everything you own.

When word got around that you could be absolutely wiped out if you don’t get health insurance, perhaps that would get through enough young, thick skulls that most of the free-rider problem would solve itself. As always, the deserving poor who literally cannot pay for health insurance could get federal, state, and local health-insurance subsidies (maybe a Medicaid Advantage program similar to the Medicare Advantage program that Democrats want to destroy).

At least it’s something we can offer in place of the I-HIM, to be added to the other market-oriented reforms to produce a solid plan, which we can call the Health Reform Contract With America:

Attaching health insurance to the individual, not the employer, so it will be fully portable (and encouraging employers to offer defined contributions towards paying the premiums, if they want);

Removing all barriers to insurance companies selling policies of any kind to anybody anywhere;

Requiring insurance companies to accept people with pre-existing conditions from an “assigned-risk” pool — perhaps they don’t cover the pre-existing condition for the first six months after coverage begins, and thereafter they do, as with many group plans;

Allowing groups to be formed in many different creative ways, from members of a professional guild to subscribers to a particular magazine to membership in a service organization to being active-duty military, in the reserves, in the National Guard, or in the Merchant Marine, and so forth;

Allowing tax deductions for much larger HSAs than currently;

Allowing all individuals to deduct their health-insurance payments from their taxable income, even if they take the standard deduction (and allowing companies to deduct any payments they make to their employees’ personal health-insurance plans);

Offering subsidies for the deserving poor to buy health insurance;

Amending the bankruptcy law to prevent free-riders from deliberately not buying insurance, gambling that even if they get sick, they’ll be treated anyway… then declare bankruptcy to avoid paying for it even after the fact.