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Pick and Lose

Has any word done more to cloak the modern conservative agenda than "choice"? As President Bush and Republican congressional leaders regularly remind us, Social Security privatization would give workers investment choices, school vouchers would give parents education choices, and Medicare privatization would give retirees health care choices.

All of this is technically true: Social Security privatization, for example, really would present new opportunities for investing retirement savings. But what conservatives in this country never mention is that giving us these new choices also means taking something away--typically, programs that make us more secure. That's certainly true of their plans for Social Security, since privatization would mean an end to the guaranteed pensions upon which most seniors depend. It's probably true for education, as well, given how easily school vouchers could undermine funding for the public schools that most Americans use.

Health care, though, may be the most vivid example of this. And a new bill quietly moving through Congress this summer shows why. It is called--what else?- -the Health Care Choice Act. Sponsored by Representative John Shadegg of Arizona and endorsed by everybody from The Wall Street Journal editorial page to the Cato Institute, it was voted out of committee late last month. With both Speaker Dennis Hastert and Bush now embracing it, it seems destined for approval by the full House soon, though its fate in the Senate remains uncertain.

At first blush, Shadegg's proposal seems utterly sensible. Today, if you are trying to buy an insurance policy for yourself or your family on the open market--i.e., if you don't get coverage through your employer--you can buy only policies sold within your state. Your state, in turn, has set minimum standards for everything from the services insurers cover to the way insurers set their prices.

Shadegg's bill would obliterate that system: You would be allowed to buy any policy sold anywhere in the country, even if it doesn't conform to your home state's rules. So, if you live in Massachusetts, where policies tend to be relatively expensive in part because they have strict regulations, you could buy your coverage from Missouri, where they are generally cheaper thanks to looser guidelines. Ideally, the bill's supporters say, people would shop for insurance the same way they shop for consumer goods: online, comparing products and prices, and then deciding on the package that best suits their needs.

Lovely--except that health insurance isn't just another sweater you can return to L.L. Bean if it arrives with holes in it. In the wide open insurance market that Shadegg proposes creating, consumers won't have somebody to warn them if they are about to purchase a defective policy. Just ask the people left owing $250 million in unpaid medical bills because they had purchased fraudulent insurance policies in the small-business market (which is prone to the same problems as the individual market). Among the well-publicized cases were a man in Georgia who had to declare bankruptcy and a former race-car driver in Florida who died after he couldn't afford a bone-marrow transplant. In both cases, the beneficiaries had been duped into buying insurance from unlicensed carriers that seemed completely legitimate.

Lately states have tried to clamp down on fraud; Florida, in particular, became aggressive about monitoring health insurance after the race-car driver's story made headlines. But allowing companies to market policies out of state would flood consumers with new options, overwhelming the regulators, many of whom already feel undermanned in the fight against scam artists. There would also be a "race to the bottom," as even the legitimate insurers would flock to the states with the most lax regulations about solvency and marketing practices, much as credit card companies now flock to Delaware because of its minimal oversight and taxes. Even in those states determined to be vigilant, this move would render local rules on health insurance irrelevant.

Getting rid of those regulations, of course, is precisely what Shadegg and his allies have in mind, since they think needless state regulations are responsible for making health insurance so expensive in the first place. As proof, they cite some state rules that really do seem dubious--or, at least, suspiciously likely to benefit certain well-connected groups of health care providers. But along with regulations guaranteeing coverage of podiatry or acupuncture are mandates to cover cancer screening, psychiatric treatment, and other services that most Americans rightly deem essential. Other regulations are designed to prohibit insurance companies from discriminating among customers based on age or propensity for illness.

Do all of these rules drive up insurance rates, particularly for healthy people relatively unlikely to consume expensive medical services? Absolutely. But they do so in order to make insurance more affordable for people who need intensive medical services--the ones who arguably need insurance coverage most of all. Get rid of the rules, and some of these people will have no choices at all. (Shadegg and others would theoretically address this need by supporting "high-risk" pools. But such pools, which exist in about two-thirds of the states, have proved woefully inadequate, typically offering skimpy coverage and charging higher premiums.)

That's not to say the market for individual health insurance works particularly well. Large companies can spread the cost of insurance among all of their workers, thus securing relatively affordable coverage for them without restrictions on medical conditions. Individuals cannot do this, which is why their coverage is so ludicrously expensive and hard to obtain, even with the regulations.

But the best way to fix this isn't to gut existing regulations. It's to create one big pool of beneficiaries through some kind of universal health insurance system--whether it's one that allows people to pick from among well- regulated private health plans (like President Clinton once proposed) or one that simply bypasses insurance companies altogether, giving consumers direct, affordable access to the doctors and hospitals they like best (like many European nations already do). Those aren't the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they're the kind of choices Americans would appreciate most.