Imagine you land a job at age 20, and immediately start having federal payroll taxes taken out of your paychecks to cover your contribution to Social Security.
Two decades go by, and you’re still at the same job. But at age 40, the federal government sends you a letter that ominously tells you that even though you’ve been paying into the Social Security system for 20 years, you’re no longer eligible to get those benefits when you retire. The reason, the government claims, is that over the past 20 years, you’ve been using too many government services, and you’re taking more from the feds than you send back to Washington in tax dollars.
Naturally, you’d be outraged. How dare the government tell you that you can’t collect Social Security when you’ve been paying into the system for years? You’ve never tolerate it.
So why, I wonder, so we tolerate it in the free market system?
Think about this: if you buy a home in Florida, your mortgage lender is going to insist that you have the home insured in the event of a natural disaster like a hurricane or flood. That makes sense, so you buy home insurance and pay for it out of your own pocket, for the entire time you own that home.
But just ask anybody who owned a home in Central Florida in the summer of 2004 how well the private insurance market worked. Take Haines City and Poinciana, for example, as two communities in the heart of Florida that probably assumed they were safely away from the risk of a major hurricane. As it turns out, they were wrong.
No fewer than three major storms – Hurricanes Charley, Frances and Jeanne – barreled across the region that summer, causing considerable damage to hundreds of once-sturdy homes.
And the much vaulted free market system responded in a curious way. All those years when people were paying homeowners insurance, and not filing a claim, they were fine. Once they actually did file a legitimate claim following those hurricanes, the insurance companies had a message: we’re done. Thousands of homeowners had their insurance policies dropped entirely. Some leading insurance companies, like Nationwide, got out of Florida altogether, or stopped selling homeowners insurance policies and offered auto insurance instead.
Although June 1 marked the start of hurricane season, which lasts until the end of November, memories of that treacherous storm season in 2004 have faded. Not a single storm has hit Central Florida in the past six years, mercifully. And if large national insurance companies like Nationwide wanted out of Florida, the gap has been filled by smaller start-up insurance companies, so everyone is happy, right?
Well, maybe not.
The hurricane season of 2004 demonstrated something eerily faulty about the private insurance market: namely, it may only be there for you in good times. If home insurance companies are in the market to make money and can’t do that when large-scale natural disasters hit, they drop us – even though we paid them for years. No wonder so many insurance firms in Florida dropped homeowners insurance coverage altogether but still offered to sell auto insurance here. How many cars got badly damaged by those storms, compared to homes?
This free-market dilemma has to do with more than just homeowners insurance. It says a lot about the national debate over health care as well.
Much of that debate in the past few years has focused on whether the federal government should provide universal coverage to all Americans – or whether those costs would not only be unsustainable, but highly inflationary. In other words, a guaranteed government reimbursement means health care providers could keep raising the cost of doing business. The sky is the limit if the federal government is flipping the bill.
But at the same time, that rising cost of health care has become a huge burden on the business community. Any large business that provides health coverage for its workers and their families has to know that the bottom line cost is only going in one direction – up – and is rapidly eating away at a larger and larger portion of the company’s profits.
So what’s the solution? Who should pay?
If this tab has become too costly for private businesses, and too expensive for the federal government to sustain, who, then, should pick up the tab?
Curiously, both of our presidential candidates have, in different ways, proposed having individuals take more responsibility for their health care costs. It’s kind of like the policy of your mortgage company that you must insure your home before you can get a mortgage, or the requirement by the state of Florida that you can’t put a car on the road unless you get auto insurance first – in other words, if you want the privilege of owning a home or driving a car, take the responsibility of insuring them.
But there’s no such requirement for health insurance – yet.
Republican nominee Mitt Romney, as governor of Massachusetts, signed into law a universal health care bill that requires all Bay State residents who can afford to buy health insurance, but haven’t done so, to get it or pay a fine.
President Barack Obama in 2010 signed into law a federal universal health care law that does the same thing.
In one way, that makes sense – why not have the individual take greater responsibility for their own health care costs, rather than look to their employer or their government – state or federal – to do it for them?
My big concern here is the same dilemma faced by the homeowners who endured those hurricanes in 2004: What if the private insurance market won’t play ball?
Republicans in Congress have suggested setting up medical savings accounts that people could pay into – but that doesn’t strike me as a realistic solution. How many Americans would set aside disposable income to go into a medical savings account rather than their home, car, vacations or kids’ college fund? And besides, how much could they realistically expect to save?
I have a friend who recently suffered a major medical condition when his appendix burst. His final bill for the surgery that saved his life was $40,000. How many people could set aside $40,000 for emergency surgery?
Likewise, I have two friends who have been treated for cancer. One gets his health insurance from his employer, but the other, who is self-employed as a Realtor, can’t get coverage at all because she has a “pre-existing condition.”
Again, if the private market says you’re only worthy as a customer if you’re 100 percent healthy and always have been, then the free market system is a failure.
So what’s the solution? More government subsidies for people like my Realtor friend? More individuals buying health insurance when they’re young and healthy?
The idea of the government picking up the cost of health care has plenty of critics, and not without good reason.
But if conservatives want to argue that the free market provides all the solutions, they have some very tough questions to answer as well.
Contact Mike Freeman at Freelineorlando@Gmail.com.