Do conservatives really want to repeal ObamaCare?

And if not, why not?

John C. Goodman of the Goodman Institute, and one of the first economists to promote Health Savings Accounts (HSA), asks, and answers, that question:

Probably not. Here’s why: virtually every conservative health policy analyst advising Republican candidates and Republican office holders believes in the same model Barack Obama believes in.

Then there is managed competition. Technically, this is a system in which enrollees can periodically choose to switch health plans (usually once year) and the plans must accept all comers and charge a community rated premium, irrespective of the expected costs for any enrollee.

Although the system might appear to be based on sound economic principles (after all, there is the word “competition”), in fact the restrictions create perverse incentives for everyone in the market. Buyers who are overcharged (mainly the healthy) have an incentive to under-insure. Buyers who are undercharged (mainly the sick) have an incentive to over-insure. On the seller side, health plans have an incentive to attract the healthy (on whom they make a profit) and avoid the sick (on whom they incur losses). After enrollment, health plans have an incentive to over-provide to the healthy (to keep the ones they have and attract more of them) and under-provide to the sick (to encourage the exodus of the ones they have and discourage enrollment by any more of them).

This is, of course, exactly what we are seeing in the exchanges – with a race to the bottom on the part of the insurers, reflected in high deductibles and narrow networks that omit the best doctors and the best facilities. Academic studies have borne out the analysis my colleagues and I initiated more than two decades ago. For example, a study by scholars at Harvard and the University of Texas found that insurers are using high out-of-pocket prescription drug costs to deter certain chronically-ill patients from joining their plans.

Read the whole thing here. (Note I don’t agree with all of Dr. Goodman’s policy recommendations, as he seems to accept the necessity and even benefits of a government role in health care, but I do think the article makes some important points).

So why do so many Republicans and conservatives favor a health care system based on (government-) managed competition? I believe there are several reasons.

First, most Republicans, and a surprising number of conservative intellectuals, are not interested in health care policy. This is reflected in the fact that, outside of a notable few politicians and policy wonks, Republican and conservative health care policy is reactive–Democrats propose HillaryCare or ObamaCare, Republicans come up with a response. Senior citizens demand prescription drug benefits, so Republicans come up with their own plan and add Health Savings Accounts to it as a sweetener to get conservative votes. So when presented with the conventional idea that managed competition is the only sustainable health care system, your typical Republican will shrug and say, “It must be good, it has the word competition in it.”

The second reason (and it is related to the first, but it also applies to issues besides health care) is that too many Republicans and conservatives lack the political courage or intellectual understanding to challenge the left’s claims that health care is a “right” that must be provided by government. This leads them to look for solutions involving government management of health care, especially ones that have the word “competition” in them.

The lack of understanding of economic principles also leads Republicans–just like Democrats– to misdiagnose the problem with health care. Instead of recognizing government interference as the major problem, too many Republicans join Democrats, resulting in too many people lacking quality, affordable healthcare.

But health insurance is a means to care, not the end. Government policies have caused the dysfunction we see in healthcare today by encouraging over-reliance on insurance for even routine medical expenses. Think about it, when you go get your oil changed you do not file a claim with your auto insurance company, so why should you file a claim with your health insurance company when you go for a routine check-up?

(The excessive reliance on insurance to cover routine expenses may be coming to an end, as more doctors are refusing to accept insurance. Once again we see the market being ahead of the politicians.)

Another way conservatives and republicans misdiagnosed health care policy is by assuming that the problem arises from America spending “too much.” But the problem is not that individuals overspend on consumer health care, but that their spending and consumption decisions are distorted by government policies.

Those who have generous insurance policies may spend more then they would in a  free-market, but those who cannot obtain health insurance, or whose insurance company  limits their consumption, may spend less than they would in a free-market. The question is not what is the “proper” level of spending, but whether the decisions on how much to spend, and on what type of health care, are made by individuals acting in a free-market. After all, in a prosperous free-market, why wouldn’t individuals spend generously on health care for themselves and their families–as well as generously give to charities to provide health care for the less fortunate?

The failure to understand or advocate for a free-market leads Republicans to advocate policies, such as “managed” competition or limits on health care tax cuts or credits, designed to limit how much individuals spend on health care. These policies are rooted in the same philosophical error that ObamaCare is: the idea that government bureaucrats are capable of determining the proper amount of health care spending and can design a system capable of providing exactly the right amount of health care at exactly the right price.

The good news is that politicians can be made to embrace free-market health care if enough people come to understand the economics of liberty and join the effort to force politicians to adopt true free-market polices. This is the mission of Campaign for Liberty. Please support our efforts.