So what should be done? Barack Obama offers incremental reform: regulation of insurers to prevent discrimination against the less healthy, subsidies to help lower-income families buy insurance, and public insurance plans that compete with the private sector.There are two definitions of discrimination:
- The unjust or prejudicial treatment of different categories of people or things.
- Recognition and understanding of the difference between one thing and another.
In the case of mortgages, the Clinton administration put pressure on banks to lend to low-income households through the Office of Fair Housing and Equal Opportunity and the Community Reinvestment Act (for more on this see Dennis Sewell's article in The Spectator). On the face of it, the intervention seemed to be successful: banks dramatically expanded their lending to the poor. However, the world economy is now paying the price as subprime defaults soar and taxpayers are having to bail out insolvent banks.
As Sewell points out, very little evidence was found of banks engaging in type 1 discrimination. There was in fact a very good reason for not lending large sums to people with very low incomes: they were much more likely to default. Mortgage lenders understood the difference between those who were creditworthy and those who were not; the US government taught them to ignore this distinction, with disastrous consequences.
When you legislate to give people things regardless of their ability to pay, you have to find someone else to pay for them. It seems the Left in America are determined to try and hide this cost by imposing it on particular industries rather than the taxpayer. It's an attractive proposition: why raise taxes on "hard-working families" when you can make the greedy capitalists pay instead? The trouble with this strategy is that it doesn't work. They tried to make the financial industry pay for houses people couldn't afford by themselves, but the taxpayer has had to pay in the end.
Healthcare is a difficult and emotionally-charged issue, but the facts are simple. Through no fault of their own, some people suffer health problems that are very expensive to treat. In many cases, they are not be able to afford the treatments that will greatly extend or improve their lives. If their condition is hereditary or has already been diagnosed, they may be unable to get health insurance at any price. It simply does not make sense for an insurance firm to offer someone a policy if they know that they are likely to require millions of dollars' worth of medical care.
Most people believe that nobody should be denied access to healthcare simply because they cannot afford it. This is a laudable principle, but it leaves open the question of who should pay instead. If the government tries to make insurers bear the cost, they will have to raise premiums or receive taxpayer subsidies in order to avoid making losses, and so ordinary people will still end up paying.
Paul Krugman is "terrified" that, "[T]he McCain plan would do for health care what deregulation has done for banking." My fear is that Obama would do for healthcare what the Clinton administration did for mortgages: hide the true costs while giving the impression of a free lunch. If the Left want to provide healthcare regardless of ability to pay, they should be upfront about who will be paying instead.
[The Oxford Libertarian Society's healthcare forum is currently scheduled for 4th Week. The motion for discussion is "Socialised medicine does more harm than good".]