How To Destroy An Entire Industry – The Healthcare Edition

So this is something I’ve been wondering if my “progressive” healthcare-reform-loving friends would be able to answer: What are you going to do when the healthcare reform bill destroys the healthcare industry? And it will, and it’s not hard to sort out how… Here’s how it works:
The healthcare reform package bills, currently awaiting conference committee, both include provisions which require insurance companies to take on high-risk customers, and customers with pre-existing conditions. In other words, customers who will cost the insurance companies billions of dollars in outflow, but only generate minimal income (in relation to their expenses anyway).
Now, anyone can see that this situation isn’t tenable for the insurance companies, taken by itself. If I can force any company to sell things to customers, at a loss that’s measured in several orders of magnitude, per customer, then even a child can understand how they’ll go broke. (To demonstrate with a child, have a child buy a bunch of toys at $10 each and then be forced to sell those toys to “kids who really need toys” at $1 each. Require that the kid go buy more toys when they run out, and keep selling toys to any other kid who asks to buy one… they’ll understand it really quick).
Now, the healthcare reform bills’ answer to this dilemma is to force everyone to get healthcare coverage from some provider, regardless of how little you might need it.
There’s an absolutely sick number of young adults who, every day, have done the math to realize that their healthcare expenses, per annum, cost FAR less than their healthcare PREMIUMS would cost, and so they ride the “risk train” and pay as they go for services they need. (Some of these folks will hedge their bets by buying less-expensive healthcare insurance with high deductibles just in case something million-dollars-heinous happens in their lives).
With those folks, who will generate far more income than outflow on the insurance-providers’ books, the insurance companies will in effect subsidize the losses they are forced to take on the aforementioned high-risk customers.
But, you see, here’s the trick, and the part where “progressives” miss the boat. Congress’ ability to write laws is based on the Constitution, and the powers enumerated to it in that document. In the absence of a specific grant of power, their authority falls to the Interstate Commerce Clause, a wholly overused bit of legal art which says that Congress has the right to regulate commerce between the states.
However, refusing to participate in commerce (e.g., refusing to buy insurance) isn’t something that Congress can regulate. If you were participating in some sort of interstate commerce, then certainly Congress would be within its legal jurisdiction, but there’s nothing in the Constitution which says that they can force you to participate in commerce, which will then be regulated.
So, as soon as something passes which requires John Doe #s 1…500 to participate in commerce they don’t want to, you will see it go to the courts. And the Courts, having more than a First Grade understanding of ConLaw, will throw out the part requiring people to buy insurance, because it doesn’t have a constitutional leg to stand on.
But the trick is — the part of the law requiring insurance companies to cover people, since they are interstate entities for the most part, will stick. The insurance companies will be forced to carry people who will cost them far more than they bring in, and they won’t have the people who bring in far more than they cost to cover the losses. They’ll eventually start to go belly-up, and you’ll have a crisis far worse than the banking crisis ever looked.
So, my questions for my Democrat friends are:
(a) How do you intend to get around the clear-cut Constitutionality issue, and
(b) What do you intend to do for healthcare when there’s nobody left around to cover you at all?

3 thoughts on “How To Destroy An Entire Industry – The Healthcare Edition

  1. The problem is that congress screwed up. There should be national health care, available to all at little or no cost depending on ability to pay. That program should allow pre-existing conditions. That system should be something like a typical HMO – a lot of restrictions on where you can get treatment, but adequate coverage. The existing health plans should be able to continue providing additional coverage, at more facilities and charge you for it.
    In short: There ought to be national health care that is better than nothing, but not as good as what you pay extra for

  2. I agree with DanB — the problem is that congress didn’t do this right. Health care should not be a for profit industry the way it is. It should be a fundamental service like law enforcement or fire fighting. Either a Canada system (single payer) or a Britain system (doctors are government workers) is preferable to the mess we have now. Lack of health care is a bigger threat to more people in this country than terrorists, but for some reason that gets glossed over… I wish the left would do a better job of picking its talking points.
    Worth noting that this half-ass solution is the result of intense lobbying by the health insurance industry, so they made their own bed, however, to answer your questions:
    a) Congress has the power to tax. Congress can legally levy a tax, and then exempt people who have health insurance, which is actually what they’ve done as I understand it. This is the same sort of thing as exempting mortgage interest from taxable income to encourage home ownership.
    b) maybe if the health “insurance” industry crumbles, congress won’t have the lobby pressure from them against doing it right and providing health care as a fundamental service. Besides, since doctors already can’t refuse care, we all pay for the uninsured now in our premiums as it is. Bob who has no job or insurance and gets shot in the “hood” doesn’t magically come up with $500k to pay for 3 operations, and a 2 month hospital stay. Joe who has cancer but no coverage because it’s a pre-existing condition doesn’t magically pay for his ER visit before he dies of the disease… it gets eaten by the hospital, which gets passed on in higher costs to those who pay, which is usually the insurance industry. And last, see the answer to (a) above… the individual mandate will pass the courts if presented as a tax, so if it gets briefly tossed it’ll make it’s way back in a form that will survive judicial review.
    I’ll grant you that doing this right is going to be expensive (initially) and painful, but fundamentally, everyone should have access to health care when they are sick. And if they actually did it right, it wouldn’t be more expensive… if you carve out lawyers (tort reform) and the insurance industry, then yes, they don’t like that, but it makes health care costs go down on the whole rather than up.

Comments are closed.