Author Archive

Fixing Health Insurance Will Improve Medical Innovation

In John Goodman’s latest book, Priceless: Curing the Healthcare Crisis, he describes “ideal health insurance.” One of the characteristics of such insurance is that it is owned by the individual, not his employer. This is something which the current tax code effectively prohibits. As a result, employers contract on an annual basis with health plans to buy group insurance for their employees.

We usually discuss this government failure in the context of its harm to beneficiaries — that we are trapped in health plans of our employers’ choice, and laws designed to prevent us from falling through the cracks if we lose their jobs or choose self-employment are inadequate. In a market unburdened by this government failure, people would choose to buy guaranteed-renewable health insurance, like we buy life insurance today. Nobody would buy a 20-year term life-insurance policy if the insurer was able to re-price the premiums according to future annual changes in the policy-holder’s health status.

There is also a more dynamic harm caused by the government’s flawed design of health insurance: It impedes medical innovation. Here is a video of an interview with David Pyott, CEO of Allergan, discussing his company’s decision to sell its lap-band technology, after having failed to secure its adoption by third-party payers.

Who Should Control the ObamaCare Exchanges?

After ObamaCare was passed, one path of resistance was to encourage states to resist establishing Health Benefit Exchanges. By the end of 2011, this approach had become settled conservative orthodoxy. Republican governors like Wisconsin’s Scott Walker returned federal grants; and those who wavered on exchanges, like Virginia’s Bob McDonnell, faced attacks from the right flank.

After President Obama’s re-election, this approach has not changed. Florida’s Rick Scott suggested that it was time buy into a state-based exchange, but Tea Party activists appear to have beaten him back (according to the Tampa Bay Times). Even The Wall Street Journal editorial board has come down solidly against states establishing exchanges. This position made sense before President Obama’s re-election. Holding onto it today risks dooming states to irrelevance as ObamaCare evolves. Republican governors’ failure to adapt to the fact that ObamaCare will not be repealed will hinder, not help, any future patient-centered reforms.