(Note: the following Guest Opinion was written by a member of the board of scholars for the Idaho Freedom Foundation who is also an economics professor at the College of Idaho in Caldwell. IdahoReporter.com is published by the foundation).
By Steve Ackerman
Some 20 years ago, former President George H.W. Bush got himself into trouble when he expressed his dislike for broccoli. “I do not like broccoli,” exclaimed the president. “And I haven't liked it since I was a little kid and my mother made me eat it.”
Idahoans are showing a similar distaste for the products being pushed by the Affordable Care Act and the state health exchange. Despite claims that some 200,000 Idahoans are uninsured, the state health exchange is boasting a paltry 1,730 enrollments—or a take-up rate of less than 1 percent. Supporters try to justify the weak performance of the state exchange (and the Affordable Care Act) by pointing to the problems of Medicaid or Social Security, claiming that when they first got off the ground, it took time.
OK, so how does that justify a 1 percent enrollment rate of this program? Moreover, we’re more than 40 percent through the enrollment period (October 2013 to March 2014) and the performance remains this poor. Shouldn’t that call the idea into question? It would in a free market.
State exchange harms many
Such a weak performance is one thing in the private sector, where only the private investor faces a loss. But the state health exchange got $20 million in startup money from federal taxpayers. That means Idahoans and their fellow citizens around the country are paying to keep afloat an organization that is not measuring up. Given it can only show 1,730 enrollments from a $20 million federal grant, the state health exchange is spending $11,560 to enroll a single person for health insurance. This is not a satisfactory performance.
In a free market, a company bleeding this much money every month would do the obvious: Cut its costs to lower its price; adjust marketing tactics; change advertising methods; and so on. If that didn’t work, people would conclude the obvious: Consumers don’t want the product. The company would then go out of business. All of that loss would be borne by the owners (and/or investors) and employees of the company. But, employees who don’t work at the company would not be harmed.
But instead of following the pattern of a company in a free market, the state health exchange is pursuing more federal taxpayer dollars—another $50 million to be exact. It relies on the fact that the ACA is forcing people to “buy that broccoli” whether they want it or not.
Unpopularity of products
It is fair to ask why so few people want to purchase the products being offered. A big reason is that people cannot choose what they want; they must accept what is given. Every health plan sold on the state exchange must include 10 “essential health benefits.” These federal minimum requirements mean, for example, that men must pay for maternity care, that childless married couples must pay for children’s dental services and that every adult has to pay for substance abuse treatments, and so on.
In other words, instead of being able to pick and choose what you need, you have to buy the health plan the government tells you to buy. So while the state exchange claims it offers Idahoans choice, every plan must include those “essential health benefits.” Beyond that, the coverage levels are uniform for all policies. This is partly why deductibles on plans sold through the state exchange are now hitting $10,000. Government rules have added costs to products. Not many people have $10,000 lying around.
Supporters can’t address the high-deductible problem, so they focus on the price, claiming it is actually cheaper when you factor in the tax subsidies. The problem is those tax subsidies have to come from somewhere, and that place is other taxpayers. So, to make insurance “affordable” for Person A, Persons B, C and D must pay higher taxes. The ACA and the state exchange thus make several people poorer. Like minimum wage and other price controls, we end up dividing society. If you get the tax subsidy, you support the state exchange because you can get insurance at a lower price. If you don’t, then you are against the state exchange because you can’t get insurance and you are poorer because more of your money goes to taxes to support the state exchange.
Goodbye free market; hello government controls
What do we conclude from the failed performance of the state exchange and the lack of accountability it has compared to ventures in the free market?
First, the state health exchange appears very inefficient. It is taking taxpayer dollars to spend $11,560 in administrative costs just to get a person enrolled. People can get enrolled in health insurance in the free market for a lot less and at no cost to taxpayers. It is simply a waste of money.
Second, the one-size-fits-all products require people spend much more to buy products they don’t really want. In a free market, companies tailor their products to meet the tastes and preferences of customers. Customers buy only if they derive some utility from the product. If not, they don’t part with their money. Consumer choice is paramount because individual freedom allows the person to express their tastes and preferences.
Under government, tastes and preferences don’t matter because individual freedom is less important than some “social good.” Thus, choice by free people must give way to control by government. Those products being pushed by the Affordable Care Act and their “government franchises,” i.e., the state exchanges, may not be what people want, but it doesn’t matter—it is mandated. In this environment, the state health exchange has little incentive to care about the tastes and preferences of the “buyer.”
Third, to make the state exchange (and thus an important part of the Affordable Care Act) successful, some people get to pay less than the market rate, while others will pay more. Such differences are acceptable in a free market where people make tradeoffs based on the utility they derive from their choice against the opportunity cost of the alternative. But because there is no choice in government controlled situations, as is the case under the ACA, differences become acts of discrimination based on decisions of government policymakers and elected officials. What they believe different people “should pay” becomes favoritism for some and harm to others. Free markets foster cooperation; government controls create division.
At the end of the day, the state exchange furthers the ACA’s government mandates over individual choice, favoritism for some and harm for others, and administrative costs that are difficult to justify. This makes people poorer and more dependent on government; not on themselves. Such is not a recipe for either prosperity or progress. It is a meal one should send back.