Pre-existing conditions

A few days I quoted a thoughtful analysis by Ramesh Ponnuru of the problem of pre-existing conditions. He pointed out that one cannot merely require that health insurance companies cover pre-existing conditions at no extra cost, because people would simply delay buying insurance until they got sick. To deal with that problem, you must require everyone to buy health insurance, and that sets in motion a whole chain of necessary government interventions that result in something akin to Obamacare.

Ponnuru is right, of course, but on further reflection, the problem is worse than he suggests. Even the individual mandate doesn’t address the wait-until-you’re-sick problem. Here’s the thing: When you get sick, the individual mandate may require you to have insurance already, but it doesn’t stop you from switching to a better insurance plan. The new plan can’t reject you because of the pre-existing condition, nor can it charge you more.

It’s not hard to see what happens. Whenever people get sick, they switch to better plans, and then switch back to cheaper plans when they get well. Consequently, good plans will serve a disproportionate number of sick people and lose money, while bad plans serve healthy people and make money. Obviously, this provides a strong disincentive to provide high-quality care. Pretty soon, all plans will become equally bad.

So requiring coverage of pre-existing conditions destroys the quality of care, even with an individual mandate. What happens next? Presumably a government takeover. (This might well have been the plan all along.)

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