NCPA - National Center for Policy Analysis


March 22, 2010

A simple comparison between auto insurance and health insurance illustrates why healthcare "reform," as Congress has just adopted it, will probably bankrupt the country, says William Tucker in the American Spectator.

  • Two weeks ago we smashed the side view mirror on our car and had to take it to the shop. A replacement was $250.
  • This week at the dermatologist the doctor took a biopsy on one spot and sent if off to the lab. If it's malignant, I'll have to go back and have a bigger chunk of my cheek removed. The cost of all this? Zero.

As far as auto insurance is concerned, we have it like almost everyone else. It covers major damage.  Several years ago, we bought my son a car and -- typically -- he nearly totaled it within a week. The insurance company paid an astounding $8,000 in repairs but our premiums tripled. That's what "underwriting" is about. After one accident you get moved into a higher risk category. It's what you might call a "pre-existing condition."

As John Goodman and Robert Musgrave wrote in their brilliant analysis, Patient Power, what we are calling "health insurance" is not insurance at all. It is prepaid medical benefits.  Insurance is a way of pooling the risk for major expenses. Prepaid benefit plans try to cover all medical expenses, no matter how small.

Instead of getting a grip on benefits and substituting a policy of health insurance, the Democrats have decided to extend the same unrealistic benefits to everybody.

The Wall Street Journal recently informed us that once Obamacare passed, three big changes would materialize within six months:

  • Insurers wouldn't be allowed to cancel policies just because a person became sick or to place lifetime caps on care.
  • New insurance plans would have to pay full cost of certain preventive care and exempt such care from deductibles.
  • Children could stay on their parents' insurance policies until their 26th birthday.

The last may help the insurance companies since young people are generally healthier -- except that people probably won't sign up until their children get sick. The first two items, however, are a recipe for insurance company disaster. The first will encourage people to wait until they're sick before buying insurance. The second will encourage extraordinary overuse.

The results will be insurance company bankruptcies. At that point we'll have to have a "public option." There will be no one left selling health insurance.

The only way to avoid this road to bankruptcy for the entire country is to restore individual responsibility in the system.  Allow everyone $3,000 tax-free savings account to pay for their basic medical costs. Then let them buy so-called "catastrophic insurance" -- which is really just ordinary insurance - to cover serious medical expenses, says Tucker.

Source:  "Why Healthcare Reform Can't Work," American Spectator, March 22, 2010.

For text:


Browse more articles on Health Issues