Unintended consequences of health care reform bill

The House passed the Health Care reform bill, but with an anti-abortion amendment that would prevent the public option or insurance companies that get federal subsidies from paying for abortions. Now the bill goes to the Senate, which can also make changes, whereupon wheeling and dealing will take place to reconcile the bills.

Harvard economist Martin Feldstein explains that the health care bill may well do the opposite of what it was intended to do, sending insurance costs soaring while actually cutting down the number of people with health insurance:

Obamacare could have the unintended consequence of raising health insurance premiums and causing a decline in the number of people with insurance.

Here's why: A key feature of the House and Senate health bills would prevent insurance companies from denying coverage to anyone with preexisting conditions. The new coverage would start immediately, and the premium could not reflect the individual's health condition.

This well-intentioned feature would provide a strong incentive for someone who is healthy to drop his or her health insurance, saving the substantial premium costs. After all, if serious illness hit this person or a family member, he could immediately obtain coverage. As healthy individuals decline coverage in this way, insurance companies would come to have a sicker population. The higher cost of insuring that group would force insurers to raise their premiums. (Separate accident policies might develop to deal with the risk of high-cost care after accidents when there is insufficient time to buy insurance.)

The higher premium level would cause others who are currently insured to drop coverage, pushing premiums even higher. The result would be a spiral of rising premiums and shrinking numbers of insured.

Yes, the bill includes financial penalties for not getting health insurance, but Dr. Feldstein shows how the amount is so small that a rational person would be way ahead just paying the fine and not buying insurance until actually getting sick.

The other detail here surprised me: Not only may an insurance company not deny anyone coverage for a pre-existing condition, but “the premium cannot reflect the individual’s health condition”? How can that be financially feasible?

UPDATE: Well, here is one way around this problem that Democrats are proposing, the way of Dracon, the Greek lawmaker and patron of harsh punishment. Maybe throwing people who don’t buy insurance into prison for five years
will get them to buy health insurance:

Today, Ranking Member of the House Ways and Means Committee Dave Camp (R-MI) released a letter from the non-partisan Joint Committee on Taxation (JCT) confirming that the failure to comply with the individual mandate to buy health insurance contained in the Pelosi health care bill (H.R. 3962, as amended) could land people in jail. The JCT letter makes clear that Americans who do not maintain “acceptable health insurance coverage” and who choose not to pay the bill’s new individual mandate tax (generally 2.5% of income), are subject to numerous civil and criminal penalties, including criminal fines of up to $250,000 and imprisonment of up to five years.

I’m not sure if these penalties made it into the bill that passed. Does anyone know?

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • Jack Kilcrease

    Yes, they did.

    Here’s the deal though, I think that the economist still has a point. Now, if they have to take everyone and the “public option” is paid for partially be an increase in “fees” (i.e. taxes) on insurance companies, then everyone else’s insurance rates go up. The fear with many was then, that the all companies would dump their workers on the public option and then health rationing would ensue. But here’s the deal: the CBO has now said that the public option would technically still be more expensive for companies, so people would probably still stay on private healthcare and pay for it through the nose.

    Now, this is the irony: When the Democrats did national polls they found a pretty large percentage of people wanted healthcare reform, which they took to be socialized medicine. But, they failed to look at other surveys which said that 80% of everyone is happy with their insurance. Why people actually wanted healthcare reform was because it was too expensive. So, ironically, the house bill is giving them precisely more of what they do not want, higher healthcare costs.

    What people wanted was lower cost- they didn’t have some abstract commitment the way that the President does to simply making certain that absolutely everyone has healthcare insurance. Those two thing aren’t incompatible though. Tort reform, allowing competition between health insurer across state lines and private health savings account could make healthcare more affordable and in the end insure more people with better coverage. Mark Steyn is I think correct that the whole point isn’t healthcare, but to make the government an intimate part of everyone’s every days existence and thereby driving the political culture left of center.

  • Jack Kilcrease

    Yes, they did.

    Here’s the deal though, I think that the economist still has a point. Now, if they have to take everyone and the “public option” is paid for partially be an increase in “fees” (i.e. taxes) on insurance companies, then everyone else’s insurance rates go up. The fear with many was then, that the all companies would dump their workers on the public option and then health rationing would ensue. But here’s the deal: the CBO has now said that the public option would technically still be more expensive for companies, so people would probably still stay on private healthcare and pay for it through the nose.

    Now, this is the irony: When the Democrats did national polls they found a pretty large percentage of people wanted healthcare reform, which they took to be socialized medicine. But, they failed to look at other surveys which said that 80% of everyone is happy with their insurance. Why people actually wanted healthcare reform was because it was too expensive. So, ironically, the house bill is giving them precisely more of what they do not want, higher healthcare costs.

    What people wanted was lower cost- they didn’t have some abstract commitment the way that the President does to simply making certain that absolutely everyone has healthcare insurance. Those two thing aren’t incompatible though. Tort reform, allowing competition between health insurer across state lines and private health savings account could make healthcare more affordable and in the end insure more people with better coverage. Mark Steyn is I think correct that the whole point isn’t healthcare, but to make the government an intimate part of everyone’s every days existence and thereby driving the political culture left of center.

  • DonS

    Well stated Jack.

    Yes, the jail provisions are still in there, crazy as that sounds. Of course, that whole jail concept is nonsensical. We gave up debtors’ prisons centuries ago, which essentially is what such a concept would entail. And exactly where would the prosecutorial resources come from to convict and jail potentially tens or hundreds of millions for not purchasing a health care policy?

    This was all about the power play. Pelosi’s objective was to prove that she was powerful enough to arm twist a sufficient number of so-called “Blue Dog” Democrats to pass a bill. Her creds with her far left wing supporters are now intact. The bill is DOA in the Senate, as it should be.

  • DonS

    Well stated Jack.

    Yes, the jail provisions are still in there, crazy as that sounds. Of course, that whole jail concept is nonsensical. We gave up debtors’ prisons centuries ago, which essentially is what such a concept would entail. And exactly where would the prosecutorial resources come from to convict and jail potentially tens or hundreds of millions for not purchasing a health care policy?

    This was all about the power play. Pelosi’s objective was to prove that she was powerful enough to arm twist a sufficient number of so-called “Blue Dog” Democrats to pass a bill. Her creds with her far left wing supporters are now intact. The bill is DOA in the Senate, as it should be.

  • DrJoan

    If those who don’t comply with buying insurance are thrown into prison, won’t they get health care anyway? Prisoners here in the Northwest can even have sex-change operations on the public dime!

  • DrJoan

    If those who don’t comply with buying insurance are thrown into prison, won’t they get health care anyway? Prisoners here in the Northwest can even have sex-change operations on the public dime!

  • Bruce Gee

    I have a more general concern. It seems the larger the impact (of any given piece of legislation–and this is the MOTHER of all legislation), the more unintended consequences there are going to be.

    Which means: I don’t think we’ve even begun to imagine how far reaching and…unintended…this thing will be. It will be a process of gradually–starting in 2013?–waking up to “what we have done”. Right now, we’re all just guessing.

    I did, however, read an interesting quote this morning. A senator was commenting on how he wouldn’t be able to support the current legislation. He mentioned, however, that no one would ever vote to support “what we have now.” Everyone agrees something has to be done to reform health care. No one agrees on what that is.

    Hey! Let’s take a look at some of the Republican legislation!

  • Bruce Gee

    I have a more general concern. It seems the larger the impact (of any given piece of legislation–and this is the MOTHER of all legislation), the more unintended consequences there are going to be.

    Which means: I don’t think we’ve even begun to imagine how far reaching and…unintended…this thing will be. It will be a process of gradually–starting in 2013?–waking up to “what we have done”. Right now, we’re all just guessing.

    I did, however, read an interesting quote this morning. A senator was commenting on how he wouldn’t be able to support the current legislation. He mentioned, however, that no one would ever vote to support “what we have now.” Everyone agrees something has to be done to reform health care. No one agrees on what that is.

    Hey! Let’s take a look at some of the Republican legislation!

  • DonS

    Interesting point, Bruce. Of course, that brings to mind that “what we have now” was the unintended result of World War II regulations imposing emergency wage and price controls and thus prohibiting companies from increasing worker salaries. So, they instituted benefits such as health insurance instead.

    Unintended consequences. Something government interventionists never want to consider when they pass complex transformative 2000 plus page bills in the middle of a Saturday night after mere hours of pseudo debate, where only one amendment is permitted for consideration.

  • DonS

    Interesting point, Bruce. Of course, that brings to mind that “what we have now” was the unintended result of World War II regulations imposing emergency wage and price controls and thus prohibiting companies from increasing worker salaries. So, they instituted benefits such as health insurance instead.

    Unintended consequences. Something government interventionists never want to consider when they pass complex transformative 2000 plus page bills in the middle of a Saturday night after mere hours of pseudo debate, where only one amendment is permitted for consideration.

  • DonS

    Here’s a Wall Street Journal piece on the contents of the PelosiCare bill: http://online.wsj.com/article/SB10001424052748704795604574519671055918380.html#printMode

    Three questions:

    1) What happened to Obama’s promise that we can keep our existing insurance?

    2) A family making $102,000 per year is required to pay a minimum health insurance premium of $15,000, and would also incur up to $5,300 in out-of-pocket medical expenses. That’s a pretty steep hit.

    3) Have seniors been told that the bill converts MediCare to an HMO program?

  • DonS

    Here’s a Wall Street Journal piece on the contents of the PelosiCare bill: http://online.wsj.com/article/SB10001424052748704795604574519671055918380.html#printMode

    Three questions:

    1) What happened to Obama’s promise that we can keep our existing insurance?

    2) A family making $102,000 per year is required to pay a minimum health insurance premium of $15,000, and would also incur up to $5,300 in out-of-pocket medical expenses. That’s a pretty steep hit.

    3) Have seniors been told that the bill converts MediCare to an HMO program?

  • Bruce Gee

    BTW, if they passed it last Saturday night, then it was of course posted on the internet last Tuesday night, right?

    Right?

  • Bruce Gee

    BTW, if they passed it last Saturday night, then it was of course posted on the internet last Tuesday night, right?

    Right?


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