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31 IRET Congressional Advisory 1 (1994)

handle is hein.taxfoundation/iretcgadv0030 and id is 1 raw text is: June 21, 1994 No. 31 FREE MARKET IMPOSTORS IN THE HEALTH CARE POLICY FORUM Many of the health care reform proposals floating around in the Congress are labeled free market by their sponsors. Even the Clintons characterize their proposal as providing a free- market health insurance system. Health care reformers obviously recognize leery about government's taking over the health care business and are playing to the legitimate popular desire for a government-free health care market. Before signing on to a reform plan dubbed free market by its author, policy makers label is that the public is If the butyer- is r-equt the seller- is r equi sp~ecified pr-oduct o most essential attn m arket is absent. should apply a few simple tests to see if the warranted. The essence of a free market is voluntary exchange between the buyer and seller of a product or service on terms that are freely negotiated between them. If the buyer is required to buy or the seller is required to sell a specified product or service, the most essential attribute of a free market is absent. If something other than the producer's perception of what best satisfies buyers' demands dictates the design or specification of the product or service, the market is not free. If the price of the product or service is determined in any way other than by unconstrained offers by buyers to purchase and by producers to sell, there is no free market for that product or service. Applying these tests, the policy maker should ask whether a proposed health care reform plan requires people to have health insurance. President Clinton has made universal coverage the core objective of his reform proposal, and all but a few of the plans offered by Congressmen and Senators are promoted as doing the same. Most of these proposals, following the Clintons' lead, would make coverage mandatory. By its very nature, any such mandate, no matter how it is to be implemented, is at odds with the free-market requirement of a willing buyer engaging in a voluntary purchase. Does the plan specify the benefits that the health insurance policy must cover? If it does, the insurer would not be free to design the policy to meet the perceived demands of different buyers. In view of the enormous variety of the relevant circumstances o oi of the population to be insured, iredtosella no single one-size-fits-all t se ll a policy would satisfy bto r ie te everybody's preferences. If the plan is to merit the free market label, insurers must be free to tailor their policy offerings to the differing circumstances and demands of their diverse groups of customers, who must be free to purchase the kind of policy they - not the government - believe will best meet their needs. A plan that lays out the benefits that the insurance policy must provide is in the spirit of government command and control, not that of a free market. Does the proposed plan specify the terms of the sale of the health insurance coverage? Would the insurer be free to charge differing premiums for any given coverage, based on actuarial assessments of the health risks of the differing groups of people to be insured? A health insurance plan that insists on Institute for Research on the Economics of Taxation IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www.iret.org

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