Health care and insurance are service-oriented, retail businesses. There is only one way to reduce costs in such a business: intense competition for every customer. The idea that the federal government can reduce costs by negotiating harder or telling businesses what to do is a triumph of hope over centuries of experience.He identifies the "pre-existing condition" catch-22 as the biggest failure in the lousy current system, and proposes a fix:
A truly effective insurance policy would combine coverage for this year's expenses with the right to buy insurance in the future at a set price. Today, employer-based group coverage provides the former but, crucially, not the latter. A "guaranteed renewable" individual insurance contract is the simplest way to deliver both. Once you sign up, you can keep insurance for life, and your premiums do not rise if you get sicker... And insurers are getting more creative. UnitedHealth now lets you buy the right to future insurance—insurance against developing a pre-existing condition.But what about the big, evil corporations?
How do we know insurers will honor such contracts? What about the stories of insurers who drop customers when they get sick? A competitive market is the best consumer protection. A car insurer that doesn't pay claims quickly loses customers and goes out of business. And courts do still enforce contracts.What the anti-Obamacare movement needs is a clear, well-stated alternative. House Republicans should use the break to distill ideas like Cochrane's into a digestible proposal that makes a serious effort to reform the system. In a time when voters need to see their alternatives clearly, a clear alternative has yet to arrive in Washington. The time for that would be now.