POV: Have Gun, Will Nudge
by Ayn Rand | March 1962
It's Not the Unions — It's the Labor Laws
by Doug Altner | March 19, 2014
Regulatory Strangulation
by Steve Simpson | March 13, 2014
Obamacare creates a new class of free riders
by Rituparna Basu | January 23, 2014
Obamacare Is Suffocating An Already Sick Health Insurance Patient
by Rituparna Basu | January 22, 2014
The Broken State of American Health Insurance Prior to the Affordable Care Act: A Market Rife with Government Distortion
by Rituparna Basu | January 21, 2014
Obamacare is Really, Really Bad for You, Especially If You're Young
by Rituparna Basu | August 21, 2013
Justice Department should let US Airways & American Airlines merger proceed
by Tom Bowden | August 16, 2013
Why Is Apple Inc. On Trial? For Good Behavior, It Turns Out
by Tom Bowden | June 20, 2013
The Forgotten Man of the Minimum-Wage Debate
by Doug Altner | June 19, 2013
Why Delivering Beer Isn’t Easy
by Doug Altner | June 11, 2013
What Explains GM’s Problems With The UAW?
by Doug Altner | May 20, 2013
What Are The Search Results When You Google ‘Antitrust’?
by Tom Bowden | April 18, 2013
To Protect the Defenseless, We Must Abolish the Minimum Wage
by Don Watkins | March 27, 2013
I’ll Buy My Own Contraception, Thanks
by Rituparna Basu | November 13, 2012
Why The Glass-Steagall Myth Persists
by Yaron Brook | November 12, 2012
Why Ayn Rand’s Absence From Last Thursday’s Debate Benefits Big Government
by Yaron Brook | October 15, 2012
Changing the Debate: How to Move from an Entitlement State to a Free Market
by Don Watkins | July 02, 2012
3 Things Everyone Needs to Know About the Apple Antitrust Case
by Don Watkins | April 10, 2012
What's Really Wrong with Entitlements
by Don Watkins | February 21, 2012
The Entitlement State Is Morally Bankrupt
by Don Watkins | September 13, 2011
How Important Is the Obamacare Litigation?
by Tom Bowden | August 12, 2011
Atlas Shrugged: With America on the Brink, Should You “Go Galt” and Strike?
by Onkar Ghate | April 29, 2011
The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)
by Yaron Brook | April 06, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions (Part 2)
by Yaron Brook | March 10, 2011
In Defense of Finance
by Yaron Brook | February 15, 2011
The Road to Socialized Medicine Is Paved with Pre-existing Conditions
by Yaron Brook | February 10, 2011
The Avastin Travesty
by Tom Bowden | December 12, 2010
Apple Now Targeted for Success Like Microsoft Was in the 1990s
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The Un-American Dream
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by Don Watkins | March 26, 2010
Anti-Smoking Paternalism: A Cancer on American Liberty
by Don Watkins | March 06, 2010
Apple vs. GM: Ayn Rand Knew the Difference. Do You?
by Don Watkins | March 02, 2010
Smash the Labor Monopolies!
by Tom Bowden | September 15, 2009
America’s Unfree Market
by Yaron Brook | May 2009
Atlas Shrugged and the Housing Crisis that Government Built
by Yaron Brook | March 2009
The Green Energy Fantasy
by Keith Lockitch | February 25, 2009
Stop Blaming Capitalism for Government Failures
by Yaron Brook | November 13, 2008
The Resurgence of Big Government
by Yaron Brook | Fall 2008
The Government Did It
by Yaron Brook | July 18, 2008
From Flat World To Free World
by Yaron Brook | June 26, 2008
How Government Makes Disasters More Disastrous
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Life And Taxes
by Yaron Brook | April 17, 2008
War On Free Political Speech
by Yaron Brook | March 21, 2008
To Stimulate The Economy, Liberate It
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Exploiters vs. Victims in the Grocery Strike
by Elan Journo | January 30, 2004
Prescription Drug Benefits Violate the Rights of Drug Companies
by Onkar Ghate | July 24, 2002
Drop the Antitrust Case Against Microsoft
by Onkar Ghate | March 17, 2002


Government And Business in Voice for Reason
Government & BusinessRegulations

The Road to Socialized Medicine Is Paved With Pre-existing Conditions (Part 3)

by Yaron Brook and Don Watkins | April 06, 2011 |

In the legal wrangling over Obamacare, the Obama administration candidly admitted that the individual mandate, which forces Americans to buy health insurance, is the only thing preventing the new health law from eviscerating private health insurance.

The problem, the government said, is that Obamacare requires health insurers to cover individuals with preexisting conditions at the same premiums they charge other customers. Unless everyone is forced to carry health insurance, healthy people will refuse to buy it until they get sick, precipitating a free rider crisis that would ruin insurers.

That strikes us, not so much as an argument for the individual mandate, as an argument against Obamacare’s preexisting condition rule. But whether the mandate lives or dies, the preexisting condition rule is paving the way for socialized medicine.

The preexisting condition rule places crippling limits on the ability of insurers to create policies based on their best assessment of risk. It will turn them into essentially passive middlemen, who no longer appraise and control risk, but who merely perform the administrative function of doling out health care benefits. It’s only a matter of time before people start to ask: Why not save money by cutting out the middleman? (That, indeed, is what happened with student loans. After decades of subsidies and regulations, the government shoved the banks aside and took over the student loan market.)

This could play out in any number of ways, but here are two possible scenarios. If the mandate survives, Washington will denounce the insurance industry for charging premiums that “gouge” customers who have no choice but to buy the industry’s products. If the individual mandate is struck down or otherwise killed, insurers will be forced either to go out of business or jack up their rates. Those that do the latter will face a public outcry. Either way, the public will be told that the “free market” has failed and that the only solution is a complete government takeover of the health insurance market.

That certainly has been the historical pattern. Government has been amassing control over the health insurance market for decades. At every step, the proponents of regulation point to some alleged set of problems in health care, blame them on the market, and call on government to solve them.

But without exception, the actual problems they point to are not caused by the market, but by government intervention — and the outcomes they denounce which are a product of the market are not really problems at all.

Take the preexisting condition “crisis.” On the one hand, there is something wrong when people who are pushed into buying health insurance through their employer and then lose their job, lose their insurance and are unable to buy a new policy thanks to preexisting conditions. But as we’ve argued, that’s a situation created by government intervention, and would not arise in a free market.

On the other hand, is it really a problem that sick people have to pay more for insurance than healthy people?

Well, it’s definitely true that a free market does not promise people unearned health care. In a free market, health care is a good that you have to earn through voluntary trade. Even though there are endless ways that people — including the poorest of the poor — can find innovative solutions to their needs, and even though a free society has always had abundant charity, the basic rule of a free market is that you are responsible for your own life. It’s your job to figure out what your life requires — whether it’s food, a car, a house, or health insurance — and then to go out and earn it through your own productive action.

What’s true of the preexisting condition “crisis” is true of the “health care crisis” more broadly. The market is condemned for producing spiraling health care costs and for failing to achieve “universal coverage.” But in reality, those spiraling costs are the result of government’s relentless intervention in the health care market. Meanwhile, the market’s failure to generate “universal coverage” for Americans, including those who seek a free ride, is a problem only to those who believe that the mere fact of being born entitles you to the wealth and labor of others.

If unearned health care is what the pushers of Obamacare and its preexisting condition rule want, let them argue for it openly — and stop pretending they are trying to solve problems created by the market. And let those who criticize Obamacare for leading America down the road to socialized medicine stop pretending that the preexisting condition scheme is anything but a step down that road.

About The Authors

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute