Conclusion: Why Not Real Competition?

Moreover, the only reason to have community-rated premiums is to subsidize people who would otherwise be charged exorbitant premiums because of preexisting illnesses. Yet only about 1 percent of the population under 65 years of age is uninsurable, and health economist Mark Pauly estimates that their health conditions would expose no more than 5 percent of the population to pay 50 percent above normal premiums in a competitive insurance market.169 These problems are easily dealt with by such reforms as risk pools and government subsidies for health insurance premiums, without subjecting the other 99 percent of the population to price controls.170

What is needed is real competition. We should allow individuals rather than bureaucrats to choose health insurance benefits in the face of market prices and to make their own decisions about the desirability of managed care. Competitive markets can perform quite well without the heavy hand of government. In another context we have already outlined the public policies needed to unleash the power of markets to solve our most important health policy problems.171

"Instead of deciding how medicine should be practiced, government should level the playing field and encourage competition."

The most important role for government is to level the playing field so markets can determine what works and what doesn’t. The last thing we need is for government to select a winner before the competition begins.