Published September 27, 2017 in The Hill

Linda Gorman, director of the Independence Institute’s Health Care Policy Center, recently argued on these pages for a repeal of ObamaCare. Gorman claims that the movement toward a more European-style health care system, such as Obamacare steers us toward, leads us in the wrong direction.  For support, she compares our health care system with Switzerland’s.

I’ll address that comparison toward the end of this article.  Before getting there, though, I want to engage Gorman’s broader argument, both because it draws for support on my research comparing health care financing in the US with other countries, and because it misses basic health care economics.

To tackle the essence of Gorman’s argument that Americans are better off with a health care system leaving some uninsured, let’s step back from the specifics of Switzerland’s health care system.  Let’s instead examine the “European (or Asian)” model of health care. 

A great deal of variation exists among nations’ health care systems, which makes generalizations among them a bit tough.  But the core feature of all health care systems in developed countries, with the exception of our own, is that nearly everyone has health insurance.  When this occurs, we refer to the country as having “universal health care.”  In other words, health insurance in these countries is like our K-12 educational system:  everyone participates.

Countries achieve universal health care through three interrelated sets of policies.  First, health insurance is either required or made available to all.  Second, if insurance is purchased in private markets, regulations limit the degree to which premiums may reflect individual characteristics or past medical history.  Third, targeted subsidies or income-based payments ensure that insurance is affordable.

Take away any of these three policies, and like a three-legged stool, your universal health care system topples.  Without mandates, the healthy will not buy into it.  Without targeted subsidies, the poor cannot.  Without regulations on premiums, those with high medical bills can’t afford insurance.  In short, you’ll wind up with a health system containing both the insured and uninsured.

By introducing insurance mandates, regulating private insurance, and providing insurance subsidies, ObamaCare inches us away from a country with 15 percent of Americans uninsured, toward a universal health care system.

If Gorman has her way and we repeal ObamaCare, however, we retreat back to a health system with many more uninsured.  Gorman both knows this and argues that having uninsured among us is better.

“Too much coverage [e.g, too many people with insurance] adds insurer overhead to the basic cost of producing medical care,” she argues.

True, paying for medical care via insurance rather than your check book or credit card drives up costs because insurance introduces administrative costs via its third party payers.  But this is true of all insurance, whether it is paying for your rear-ended car, your roof which a tree smashed, or your broken leg.  Buying insurance means you buy the service of having a third party pay unexpected bills.  Yes this drives up cost a bit, but health insurance provides a very valuable service:  peace of mind from such unanticipated expenses.

Gorman sees another problem with having too many insured people in our country.  She writes that “forcing everyone to have coverage encourages wasteful utilization.”  Here Gorman claims that when people have insurance, they overuse the health care system (“wasteful utilization”), which drives up costs for all.  One wonders if she wishes to rid the nation entirely of health insurance?  Surely if no American had health insurance, our nation’s medical bills would be much lower.

But can you imagine the gut-wrenching choices we’d all face without health insurance?  More likely Gorman is saying that it’s OK if only some are faced with these choices, because then all of our health care bills would be lower.  But then who are these “some”?  Is Gorman willing to be among them?

In the end, health insurance is an exceptionally valuable product that we all want.  If we back down from Obamacare, the poor, the sick, and the unlucky among us will be left without.  Meanwhile the rest of us with insurance will enjoy the peace of mind that health insurance provides, along with affordable access to our health care system.

And what about Switzerland, the country Gorman says we don’t want to emulate?  First, despite Gorman’s claims to the contrary, Switzerland’s health care system is significantly cheaper than our own.

And quite coincidentally, this week the New York Times published the results of a “tournament” to choose the best health care system among eight contenders, including the US and Switzerland.  Five well-regarded American experts on health care policy formed the voting panel.

This panel selected Switzerland as the winner, with France coming in a close second.  On the US’s health care system, one of the panelists, Princeton health economist Uwe Reinhard, quipped:  “It’s hard to defend the messy American health system, with its mixture of unbridled compassion and unbridled cruelty.”

Indeed it is.  But that’s what happens when you allow a health care system to persist with both insured and uninsured people in it.