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The Creeping Takeover of Medical Care

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President Clinton favors barring health-insurance companies from using genetic testing to determine whom they will insure. If that position is enacted into law, it will be one more step toward what he has been aiming at since he came into office: a government takeover of medical care.

Why shouldn’t health underwriters use the results of genetic testing in making decisions about whom to insure? Medical insurance is a hedge against financial hardship due to health problems. Insurers, who are in business to make a profit (and who can’t stay in business without it), will naturally want to charge premiums according to the risk presented by their customers. To assess that risk properly, insurers need information. In recent years the science of genetics has made new information available about people’s risk of disease. To pass a law prohibiting insurers from using that information undermines the very function of insurance. Can it really be wise to mandate ignorance?

The president says people with risky genetic profiles will not be able to buy insurance. More likely, they will be charged higher premiums than those without such profiles. But that is how insurance is supposed to work. When Ben Franklin opened the first fire-insurance company, he charged higher premiums for wooden homes than for stone ones. Was he discriminating? Of course, and in a highly rational fashion, because it was based on objective risk.

Ever since Mr. Clinton’s (and the first lady’s) bid to nationalize health care met with resounding defeat, he and his congressional allies have been moving step by step toward the same objective. By tampering with the insurance rules, they make it nearly inevitable that the federal government will take over the health insurance industry, if not outright, then through comprehensive regulation. A facade of private enterprise may remain, but in fact it will be a government operation.

Here’s how it will work: by forcing insurance companies to guarantee portability when a worker takes a new job, by requiring full coverage for existing medical conditions, by mandating that mental-health benefits equal regular medical benefits, by doing all sorts of other nice-sounding things, the government makes health insurance more expensive than otherwise. If employers are to continue to provide it, they will have to reduce cash wages. If they can’t do that, they will stop providing insurance (or lay people off). Meanwhile, young healthy people will forgo insurance because they would rather have the cash. But that leaves the insurance pool with few people who don’t draw benefits. That’s bad for the remaining higher risk people.

Thus, as the health-insurance industry becomes more precarious, the government will have a strong pretext to intervene even more. Insurance might be made mandatory in order to ensure that low-risk people stay in the pool. Premiums might be controlled. Companies might be forced to charge high-risk and low-risk people identical premiums. All this could drive companies out of the marketplace, further hiking premiums. The final step would be the nationalization of health insurance, which has been the goal of Sen. Edward M. Kennedy and others for years.

This is not conspiracy. It is logic.

It is an old story. Government regulations cause problems. Then people point to those problems as reasons for more regulations. The spiral to comprehensive control is no stretch of the imagination.

The only alternative is to repeal the earlier regulations that caused the trouble in the first place. Politically, this is difficult. It requires understanding and courage. For example, one must grasp the difference between insurance and welfare. If insurance companies must cover people regardless of their risk of ill health at premiums unrelated to that risk, what we have is welfare not insurance. Facing that fact honestly would be a start on the road to medical freedom and better health. Repeal of all existing regulations on the medical and insurance industries would work the same wonders that free markets have worked in other parts of our society.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.