Which Way Should We Choose? A Closer Look at the ACA

After a very controversial ruling on Thursday, most Americans are either rejoicing or cursing the Supreme Court after its general approval of President Obama’s Affordable Care Act (ACA). Quite likely, most people from either side of the debate speak more out of ignorance and emotion than real intellect. I hope that this will serve as an intellectual and reasonable look at this historic legislation. <> I could come at this from many different angles: the (im)morality of the law, the (un)Constitutionality of it, the economic ramifications of it, etc. I’ll probably touch on each of these because they are all important. <> I think it is important to first understand that no healthcare system is perfect. No form of government can create a utopia. And while socialists need to realize that their central plans almost always fail, conservatives must realize that even the freest of markets has its problems, too. Healthcare is a great example of this. Health insurance, as with all insurance, with or without a grand central design, is filled with asymmetric information, moral hazards, and free-riders. <> The question is: Do we want to put up with the imperfections of a free market, or eventually face the ramifications of central design? My thesis is that a free market provides the most moral, economical, practical, honorable, and in the case of the United States, Constitutional approach to healthcare. <> The reason of this is that all government meddling has unintended ramifications. This is not to advocate anarchy. Anarchy eventually leads to socialism anyway because it is a form of social Darwinism, where the mighty end up ruling and espouse their own grand social plan. This is why the cries for anarchy and socialism quite often go hand in hand in cultural upheavals. It is also why most overthrows of government result in greater despotism (the U.S., at least so far, being an exception). Anarchy is not the answer to healthcare insurance, nor is it the point of this essay. <> Government exists to secure our rights and should be strong enough that no individual or group of individuals can exert force upon another or take over the populous. Therefore, from an economic point of view, we need government to secure contracts, property rights, and the like. If someone lies to pay lower insurance premiums or if a medical doctor or insurer of another sort engage in unethical behavior from which they benefit at the expense of another (such as a patient), then there should obviously be ramifications and government should be involved. <> However, when the government promises that individuals with this or that precondition or illness promise that it will have no consequence on their insurance premium, something is out of order. This does not mean that patients more prone to illness should not be looked after out of compassion; it simply means that a grand central design does not fix the problem. Simply put, insurers measure the actuarially fair premiums by measuring the potential of risk times the cost of the risk. Individuals with health conditions have higher risks and thus pay more, the same way that teenage drivers are charged more for auto insurance. If a poor individual has serious preconditions and cannot afford the premiums, there are a multitude of people who can help before the government must get involved. Saying that “Jesus would support the ACA” only demagogues the issue. Besides, most people who say this are the same ones crying against “separation of church and state.” <> There also represents a moral hazard when individuals know that their rates will not go up due to preconditions or something of the sort. Individuals may feel more inclined to be less healthy the same way drivers are less careful with automobile insurance. It may be something one does not think about, but we cannot assume that this moral hazard would not exist. If it does, it only exacerbates the problems until the system crashes. Lower premiums and higher costs cannot be sustained indefinitely. <> Some people feel that medical doctors or insurers who make good money should unjustly increase the social cost. This is an area where the left think out of emotion instead of intellect. The argument I always like to point out is that if these individuals make so much money so easily, then everyone should follow their line. Maybe if we all did, we’d all be better off. Some people simply make more than others, and this is true in both free markets and even more so in socialism, fascism, and other centrally designed forms of government. <> But even beyond this, insurance companies need to have a lot of money because they may suddenly have to pay out a lot of money. If property and casualty insurance companies had charged too low, they would not have been able to pay for the claims caused by the April 27, 2011 tornadoes in Alabama or even the ones that hit Alabama on January 25, 2012. Alabama Farmer’s Association (ALFA) is currently in financial stress because of the events hitting across their entire market base (the state of Alabama). Insurance companies should have a lot of money on hand and they must also compete with other insurances companies to have fair prices and good services, the same way every other industry must do. <> From this angle, insurance is often better done from some central agency, but it must be private. The same people who complain about the government being run like a business are the same ones who expect the government to provide services that should be provided by the free market. <> Another problem with insurance (and this goes for private as well as public insurance but is a problem caused by the state) is inflation. Inflation in this sense is not the rise in prices but the increase of the money supply and its subsequent devaluation of the dollar. If insurance companies are forced to keep so much liquid cash on hand to pay for future events, they would likely be wise to charge in a manner that balances out the future devaluation of the dollar. If an insurance company collected every penny it receives from its policy holders and does not invest it and the money draws interest less than the rate of inflation (or no interest at all), then the money will be worth less when the claims come than they were when they were paid. Insurance companies can act as a bank and invest the money, and some may, but they still must beat the rate of inflation and have enough liquid cash on hand to pay for any claims. Of course, if the government gets involved in insurance you can expect inflation to be a bigger issue in insurance anyway because inflation is most deadly where much money is spent, especially if it is coming from government activity (see education, housing, etc.). In other words, inflation causes insurance premiums to go up long before your “COLAs” do. <> Still, the ACA is not necessarily a socialist policy. And the most controversial piece of the legislation, the individual mandate, is probably the least damaging and may even help with the freerider problem (although I still do not agree with it). And the ACA is not entirely different than previous plans sought by previous administrations of both parties (such as Bush’s plan that Republicans supported several years ago). Now, however, it is receiving the most complaints from the Tea Party right. This may be a bad thing, in that those on the right are playing politics and would support a similar plan from Romney if he developed one. I am hoping, however, that it represents a real shift in the way people view government. In administrations past, the liberals leaned toward socialism while the Republicans leaned to fascism. One answers to those who want free rides and one to big corporations. Both are wrong forms of government and each stem from the same worldview. A truly humanitarian and, dare I say it, Christian worldview, teach individual liberty and responsibility. <> And this is not a Ron Paul fest, either. Rick Santorum was also correct in saying that a certain amount of our identity comes by what group we belong to. He was also correct in saying that our social and moral institutions have as much a hold on our economy as do free markets (though I do not think Paul would necessarily disagree with this). Even ailments of Obama’s rhetoric is appealing to me. As a nation, we are entrenched together in our struggles. One person’s struggle should be another’s struggle as well. But this should not interfere with politics or liberty. We can help people without government. And the best way to help people is to secure their freedom and entrust them with the forthcoming responsibility. <> Even if one disagrees with the above and concludes that the ACA is a positive step forward, we must still consider the Constitution. This is, after all, supposedly the reason the Supreme Court met in the first place. In reading my copy of the U.S. Constitution, I see nothing listed to give any branch of the federal government the power to have any input at all in our healthcare system. This means that healthcare is an issue left to the states. Not all roles of government should be given to the federal government. Few domestic issues at all are reserved to them. The Supreme Court can rule in certain inter-state disputes, Congress can issue patents to inventors, and the government could punish a state for doing one of the few things they are not permitted to do (issuing legal tender of something other than gold or silver and taking away the right to bear arms are a couple of examples). If the ACA is good policy, it is best left to the states. The rationalization of the Supreme Court about how it can fall under this clause or that one provides little to no justice to me. Fortunately, one area of state sovereignty was turned down, but it is of little value compared to that which was upheld. <> Obeying the Constitution is a very moral and important thing to do. A Christian and humanitarian form of government is limited, and the Constitution is the document that keeps our U.S. government in check. Without holds on government, it can turn despotic. Some power is legitimate and God-given, but it too can be abused. It matters not whether the leaders are men, women, black, white, rich, poor, educated, uneducated, Republican, or Democrat. Power still corrupts, and absolute power absolutely. Everyone has the innate desire to use power to make the world the way they want it. This is not a new thing for the U.S. A true supporter of liberty would support not just the separation of church and state or health and state, but also school and state, housing and state, charity and state, and the list could go on. This is simply one of our President’s ways of abusing his power, the same way that Bush and other administrations did as well. Now, it takes moral, economic, and Constitutional sense to let freedom win in the end.