PETER O. ZIERLEIN
Deregulation has worked so well for Wall Street, John McCain wrote recently, that we should use the same approach to fix our healthcare system. In the September/October issue of Contingencies, the magazine of the American Academy of Actuaries, the Republican presidential candidate asserts, “Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.”
McCain was writing just before Wall Street collapsed, and he obviously did not think Americans needed to be insured against the failure of a deregulated financial sector. Likewise, he was not concerned that the 53 percent of Americans who get insurance from their employers need protection from the risk of losing it. In fact, he’s hoping they will lose their employer coverage, betting they’ll be better off on their own in a deregulated market.
McCain’s healthcare plan replaces the tax incentives for employers to offer health insurance with a tax credit for people to buy insurance on their own. This proposal embraces a “consumer directed” approach to healthcare, a model that has become popular among free-market conservatives. The more directly people bear the costs of their care, the thinking goes, the more they will drive down costs by becoming better shoppers. Under this model, employees, not employers, should pay for their care.
Al Hubbard, a former White House economic adviser who devised a similar proposal unsuccessfully advanced by George W. Bush in 2007, explains this approach by suggesting we imagine a world in which employers offer “food insurance” instead of health insurance. If an insurance company paid for your groceries as it does your healthcare bills, he argues, “pretty soon you would start buying caviar, the most expensive steak, and you would start buying more than you needed.” The hope is that if we pay more of our costs, we will pass up “caviar care” for the equivalent of meat and potatoes, and the free market will offer more efficient care in order to lure customers. “When you’re paying for it yourself,” Hubbard says, “you don’t put the bells and whistles on there. You buy what you need.”
But critics who have watched the Bush administration implement many less ambitious consumer-directed reforms–from the creation of health savings accounts to state experiments in Medicaid–say they can work only in an idealized market, not the one we actually have. If the McCain plan were to go into effect as proposed, somewhere between 10 million and 28 million Americans insured through their employers would wind up in a market that, despite regulations, is already badly broken. Many would likely pay more for less coverage, and those with pre-existing health problems might be denied insurance altogether.