The Health Care Myths We Must Confront
July 19, 2012
While the Supreme Court's decision on the Affordable Care Act (ACA) endorsed the constitutionality of the law, it never said anything about whether or not it stands as good policy. To this end, discourse must continue as the nation seeks novel solutions to its massive health care debacle, says Cliff Asness, managing and founding principal of AQR Capital Management.
To this end, it immediately becomes clear that much of this debate is muddled by health care myths that misinform policy positions and lend credence to inappropriate prescriptions. These myths must be struck down for real solutions to come to light, and the first such myth deals with the supposed health crisis as a whole.
- Part of the national debate for radical health care reform stems from the oft-cited belief that health care costs are skyrocketing, thereby necessitating government action.
- In reality, this is a half-truth: while people may spend much more on health care than before, this says more about consumer behavior than health care prices.
- A more honest depiction explains that people spend more on health care because quality has increased dramatically over the past few decades with advances in technology.
- Additionally, general increases in prosperity allow for more money to be spent on health care.
The second crucial myth is that the pre-ACA health care sector abided by insurance principles.
- In reality, health insurance is very different from other, real kinds of insurance.
- Home, life and auto insurance are purchased to protect the consumer from catastrophic events that could spell financial turmoil.
- Health insurance, on the other hand, provides even the most basic health services and is a vehicle for all of one's health needs.
- This is because of the tax code provisions allowing for health insurance to be purchased tax-free through employers, distorting incentives and encouraging customers to over-consume.
The final myth deals with the belief that mandating coverage for preexisting conditions is a good idea. In reality, prohibiting conditions-based exclusion undermines the purpose of insurance markets and does nothing more than transfer wealth from those with good conditions to those with bad ones. Insofar as individuals can afford it, everyone should be responsible for their own, often self-imposed conditions.
Source: Cliff Asness, "The Health Care Myths We Must Confront," The American, June 29, 2012.
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