Republicans’ Refusal to Understand Insurance Still Matters

When attempting to repeal and not really replace Obamacare, various Republicans demonstrated opposition to the idea of insurance. They objected that healthy people shouldn’t subsidize the health care of sick people — that is their honest view of health insurance is that they are against it.

I didn’t keep track of recent examples, googled, and have old examples

Paul Ryan (paraphrased — listen to him if you must — I can’t force myself to listen)

“The conceit of Obamacare,” he said at his press conference on Trumpcare, is that “young and healthy people are going to go into the market and pay for the older, sicker people.” That’s why Obamacare is in a “death spiral,” he noted.

Mo Brooks (very blatantly)

Their immediate problem is to explain why they don’t think health insurance should be eliminated entirely. Their much more serious problem (which I hope will be fatal to their ideology) is that they have to explain why it is reasonable to want there to be health insurance, want there to be community rating and coverage of treatment of pre-existing conditions, and oppose equalitarian redistribution in general.

They ususally understand that they must carefully avoid trying to explain how they are for insurance but against community rating (or for community rating but against welfare) because people might decide to support community rating (and universal basic income and who knows what else) if they understood why Republicans oppose them.

Republican logic is that due to the will of the market or God (to the extent that they distinguish Them at all) people get what they deserve, so the poor deserve to be poor and so do the sick. Most grownups (hell most 4 year olds) have noticed that the world doesn’t work that way.

AFter the jump, I will try ot make an honest to God the market effort to make sense of Ryan et al. I hope this shows how dangerous the discussion is to them.

The logic must be that insurance should cover new conditions but not pre-existing conditions. That is, insurance against risk (uncertainty which is not yet resolved) is good, but ex ante redistribution is bad.

It is very easy to understand why unregulated insurance doesn’t cover treatment of pre-existing conditions (is medically underwritten). Any insurance company which paid to treat them would select the sick. This is the very classic case of adverse selection. Economists have understood for decades that this implies that the free market outcome can be Pareto inefficient. It is easy to write a model in which everyone is made better off by an individual mandate to buy insurance & regulation of insurance companies (in 2 words by Obamacare).

So the fact that the market selects medical underwriting doesn’t imply that it is efficient in even the weakest possible sense.

Opponents of Obamacare have to find some other justification for insurance against risk (uncertainty which is not yet resolved) but not ex ante redistribution based on bad outcomes which once were mere risks.

It is hard for them to convince people who know that bad things may have happened in their bodies, which don’t give symptoms and of which they have no clue but which can be detected if they try to get insurance.

One of two apparently healthy people can have a small malignant tumor. In this case the uncertainty is resolved (one is in deep deep trouble already) but no one knows. If an insurance company requires a diagnostic test (say look for CEA in the blood) which reveals the tumor, that person has an additional (less horrible but horrible) problem. Whether uncertainty has or hasn’t been resolved depends on how closely you look. There may be geniuinely random events (quantum mechanics say so) but most of what we perceive as chance is, in fact, events determined by things we don’t observe. The perception of a probability between 0 in 1 is due only to our ignorance. It can’t be central to what is right and what is wrong.

Brooks’s argument is that some differences in health are due to behavior, so equal access to care means helping people who have taken poor care of themselves. His logic is that sin can lead to bad outcomes and sin must be punished so bad outcomes must not be ameliorated. Many find this argument powerful. It is separate from the argument that amelioration will affect incnetives (no one has ever thought “hey I’ll smoke another pack — sure I’ll get cancer but my chemotherapy will be financed by Obamacare”). I can’t argue with people who think that human suffering is sometimes good (and that would include anyone who believes in hell, that God is good, and elementary logic). I can only hope that they are in the minority.

The point of this post (if any) is that support for community rating is deadly to the Republican ideology. It is redistribution from the currently healthy to the currently sick. It is not enforcing an insurance contract which people voluntarily signed. It is very hard to explain why health insurance premiums should be community rated yet all other misfortunes but pre-existing conditions should be just the sufferer’s tough luck.

It is very hard to accept any trace of the GOP’s ideology or policy program, once one accepts that insurance is good (and almost everyone does in that they want insurance) and that there is no profound moral difference between insuring against uncertainty which is unresolved, uncertainty which is resolved but we don’t know how, and uncertainty which is resolved & we do know what happened.

If we should insure people with pre-existing conditions, we should insure people born to poor parents. Once one understands that the distinction between insurance and ex ante transfers is operationally impossible and would be morally irrelevant even if it were possible, then the whole case for Laissez Faire collapses.