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The Snare of Incremental Health Care

Sheldon Richman
Campaign For Liberty
Wednesday, January 27th, 2010

Opponents of (more) government control of health care and health insurance are breathing a sigh of relief after Tuesday’s upset senatorial election in Massachusetts. But now that the celebrations are subsiding, I feel compelled to warn that the most perilous days may lie ahead.

How can that be, when Sen. Edward Kennedy’s seat is about to be assumed by a man who campaigned on a promise to vote against Obamacare, depriving the ruling majority of its critical 60th vote?

It’s simple: In place of 2,000-page omnibus monstrosities, we are likely to see a series of micro “reforms” — that is, government interventions — that may well garner bipartisan support. The new buzzword on Capitol Hill is “incrementalism.” This is a strategy to break the big House and Senate bills into several small ones — to slice the salami into manageable portions. Instead of one 2,000-page piece of legislation, we might see ten 200-pagers, or perhaps 100 20-pagers.

Will that make a difference substantively? Most likely not, because those micro bills are unlikely to be the needed repeals of the government’s impediments to free competition, such as the ban on interstate insurance commerce, the Food and Drug Administration, the patent system, and the tax-code bias toward employer-purchased insurance.

Instead we’ll probably see bills that embody most of the elements of President Obama’s, Speaker Pelosi’s, and Majority Leader Reid’s proposals. But since the series of small bills won’t look like an overambitious program to reinvent 16 percent of the U.S. economy in one unreadable fell swoop, much of the congressional opposition could be defused. Its previous talking points and photo ops regarding legislation that stacks three feet high will be useless.

Furthermore, individual elements in Obamacare have populist appeal. Many people (rightly) feel abused by big insurance companies, and being ignorant of both economics and the intricacies of current policy, they could be attracted to what appear to be modest consumer protections. (See this.) With the House of Representatives and a third of the Senate up for election this year, a preponderance of members may fear alienating those voters.

In other words, the incremental approach may be to the omnibus approach what (as the old folk warning has it) slowly cooking a frog is to tossing it into boiling water. (For the record, frogs will jump out of gradually heated water if they can.)

The majority party may kick itself for not thinking of this strategy sooner. One big bill is easy to scare people with — a bunch of smaller, less intimidating bills is not.

What might the series consist of? It seems certain that a bill will be introduced to require insurance companies to cover people who are already sick; that is, an end to the preexisting condition exclusion. Other bills will require guaranteed renewal, community rating (uniform premiums for all members of a group regardless of health status), and a limit on the difference between premiums for younger and older policyholders. (Today the premium for an older person can be six or seven times that of a young person, which is not surprising because older people tend to consume more medical services. Yet the pending legislation would permit only a two- or threefold difference. See Prateik Dalmia’s analysis here.)

Will members of the minority party go for the proposals? All indications up to now say yes. For example, as Sam Stein of the Huffington Post pointed out last November, “Many of the most respected health care voices in the GOP have historically treated the idea of eliminating pre-existing condition exclusions as an obvious plank in any reform effort… . Even deeply conservative figures like Senator Tom Coburn (R-Okl) insisted as recently as August that ‘everyone agrees’ that legislation should ‘eliminate pre-existing conditions’ as an excuse for denying coverage… . Another Senate Republican who was heavily involved in negotiating health care reform, Chuck Grassley of Iowa, has unequivocally declared that the government has ‘to prohibit insurers from denying coverage to people with preexisting medical conditions and charging higher premiums to people who are sick.’”

This, to say the least, is ominous. (And see Sen.-elect Scott Brown’s comments here.) For one thing, it won’t be enough to compel insurers to accept people who are already sick. In all likelihood, insurers would also be prohibited from charging sick customers more than well ones. (There’s no political point otherwise.) If the minority party will go for this, what won’t they go for? New taxes perhaps?

As I’ve pointed out before, coverage for an existing illness at someone else’s expense is not insurance. It is charity, or if forced through the state, subsidy and welfare. Once that intervention is enacted, others will follow.

Which brings us to the individual insurance mandate. Proponents justify the mandate on grounds that, to protect the viability of the insurance market, young healthy people must be forced to buy insurance when the companies are obliged to cover sick people at actuarially unsound premiums. From the beginning of the discussion in 2009, the majority party has insisted on the mandate (and one on employers too). It’s is an obvious violation of individual liberty, but where was the minority party’s protest? If one of the incremental bills calls for a mandate, as is most likely, will it pass the Senate? Let’s hope not, but we’ll have to wait and see.

It’s not time to breathe easy yet.

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