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Affordable Care Act Will Expand Coverage and Cut Health Care Costs

I would like to respond directly to Richard Lorenc’s argument that the Affordable Care Act (ACA) is bad policy. The thrust of his case is that the ACA is anti-market and anti-individual liberty. But neither point withstands careful scrutiny.

First, the signature coverage expansion of the ACA will occur through market-based health benefit exchanges designed to promote open competition among insurance companies that will drive down prices for consumers, push up quality, and promote choice. The law maximizes the advantages of the free market, rather than limiting them. Second, requiring each person to take responsibility for his or her medical insurance is a step forward for individual liberty. Currently, free riders who go without coverage merely force the rest of us to foot the bill when they show up in an emergency room, hardly a situation that respects individual freedom.

With these ideas in mind, I will respond to each of Mr. Lorenc’s five major points in turn:

First, Mr. Lorenc laments the fact that insurance companies will have more customers due to the individual requirement to purchase coverage, suggesting people currently do not want to buy what insurance companies are selling. This mischaracterizes the problem. By in large, it is not that people do not want to buy insurance, it is that they cannot afford it. Over 70% of uninsured young adults in a national poll reported that they lacked coverage because of a lack of affordable options, not because they did not want it. 

Moreover, in exchange for the mandate, the ACA fixes a number of the worst insurance companies practices, ensuring a baseline level of quality for consumers. The law also ensures that companies provide consumers with easy-to-read explanations allowing purchasers to compare plans side by side. Contrary to Lorenc’s supposition, this will allow consumers more choice to find the plan that works best for them. In the aggregate, insurance companies may benefit with more people in the market, but, more importantly, consumers will receive an even bigger “win.”

Second and third, Lorenc attacks the ACA for further connecting health insurance with health care, obscuring the cost of medical services and thereby further driving up prices. Though I share his concern for rising prices, the suggestion to de-link health insurance with health care overlooks the realities of the market. Health insurance is the usual way of paying for medical services, because medical emergencies and serious health conditions are nearly impossible to predict and cost more than nearly everyone can afford. Spreading risk through insurance is the only way consumers can realistically pay for most medical care. We do need to control costs, but eliminating insurance from the equation is not a serious option. 

That is why the ACA encourages a number of innovative approaches to change the way government and insurance companies pay for medical care, including anything from grants for accountable care pilot projects to simplified billing procedures. There is surely more to be done, but the law moves us in the right direction.

On this matter, I look forward to hearing Mr. Lorenc's ideas in more detail. It is unclear exactly what he means by “letting the medical care market function” (it will not “function” better absent basic standards). Does he mean reducing insurance coverage rates so people pay directly for care or something else entirely?

Fourth, he warns that the ACA “brings 300 million Americans into your medical examination room.” This is difficult to sustain. I assume he is referring to the fact that all plans must now cover preventive services without co-pays, including contraception. The law does not require women or anyone else to use these services. Those decisions remain a private discussion between a doctor and patient – as it should be.

Finally, Lorenc argues that the ACA simply expands failed current policies rather than makes true change. I would dispute this on the grounds that we have gone from a health care system that leaves millions of Americans out to one where nearly everyone will soon be able to afford care. Consumers will have a vastly easier time comparing and choosing between insurance plans and insurance companies will no longer deny people coverage because they’re sick (among dozens of other changes). Yet I suspect our disagreement on this stems more from whether we support the ACA rather than the definition “reform.”

In closing, I want to address Lorenc's statement that “Our guiding principle should be personal liberty, not state control.” The problem with this view is not its support for individual freedom. In fact, I share his sentiment. The real problem is that the world is a complicated place where a belief in individual liberty and the free market does not offer straightforward counsel.

In fact, health insurance is a classic example of this. Economists assume free markets work well when consumers and producers have full information about all products and services available. But insurance companies don’t know how sick their enrollees will be, so they typically assume people who buy insurance are more likely to get sick. That drives up premiums and makes it more likely that only the sickest individuals buy coverage. Sometimes this can create a viscous “death spiral” where premium rises destroy the market entirely. People would prefer to contract freely for health insurance, but without sensible regulation, the market will not exist.

That is why the federal government requires people who live in flood plains to buy homeowners insurance and most states require drivers to buy care insurance. It creates a functioning market where everyone pays their fair share, and we better respect individuals’ desire to insure against the worst outcomes. That leaves us more autonomy to live our lives as we see fit than a world where market failures deny us the choice to insure against the greatest risks. In this way, the ACA takes a step away from the status quo and toward individual liberty.   

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