A Truly Captive Market

September 17th, 2009 by Phil Mattera

parasitesThe House of Representatives, in a rare embrace of de-privatization, has just passed legislation that would put an industry out of business. If approved by the Senate, the Student Aid and Fiscal Responsibility Act will eliminate the heavily subsidized business of bank origination of federal student loans. Students would get their loans directly from the federal government and would see a huge increase in the Pell Grant program, thanks to the tens of billions of dollars saved by eliminating the subsidies.

Unfortunately, the impulse to abolish a parasitic form of private enterprise has been missing from the official debate on healthcare reform ever since Democratic leaders and the Obama Administration shunned the idea of expanding Medicare eligibility to non-seniors. Now, given the uncertain prospects for a public insurance option (a weak substitute for single payer), we are faced with the possibility that the parasites of the private health insurance industry will not only survive but will be empowered as never before.

While support for the public option has waned, the powers that be in both major parties have never wavered from their endorsement of the individual mandate—the bizarre idea that the solution to the problem of the uninsured is to force them purchase insurance. This implies that being without insurance is a personal shortcoming rather than a social problem. It makes as much sense as saying that the way to help the homeless is to compel them to buy a house.

It is true that the proposals for an individual mandate come with provisions for subsidies, yet as the plan just issued by Senate Finance Committee Chairman Max Baucus illustrates, those subsidies would not extend to many middle-income families, who might find themselves in the absurd position of having to pay penalties to the federal government for failing to buy coverage they cannot afford.

What’s wrong with the imposition of an individual mandate without a public option is more than that of inadequate subsidies. It would amount to an unprecedented move by government to compel residents to become customers of a particular set of corporations. States currently require drivers to obtain insurance for their vehicles from private carriers, but automobile ownership is not compulsory. Adoption of an individual mandate sans public option would make it a condition of being alive for the uninsured to start paying premiums to a private insurance company.

What next? Will the federal government allow the likes of WellPoint and Cigna to put private bill collectors to work harassing “deadbeats” who don’t make their mandatory payments? Since the carriers could not drop these non-paying customers, would the companies be allowed to lock them up in healthcare debtor prisons until a relative takes care of the bill?

Maybe not. But there’s a strong possibility that the furor over unaffordable mandatory coverage would prompt Congress to bring down rates by allowing insurers to offer lower-quality plans. If the public option is jettisoned along with single payer, “reform” may turn out to be nothing more than a way of making millions of Americans pay for the dubious privilege of shifting from the ranks of the uninsured into a captive market of the woefully underinsured.

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