One big complaint circulating around the Republican’s healthcare proposal is the claim that millions will lose insurance coverage. Regardless of the final outcome of this bill, this not a particularly insightful view of healthcare reform. Coverage levels do tell us very little about the quality and affordability of healthcare and insurance. Additionally, the CBO’s report narrowly tailors the term in order to exclude a variety of health insurance options. Further, a large portion of those ‘losing’ healthcare will be Medicaid recipients, who are apparently only enrolled in the program due to the individual mandate. Backing up this idea, in the most extensive study on Medicaid, there were not a statistically noticeable difference in health outcomes. In short, the focus on health insurance coverage doesn’t actually give us any meaningful idea of the effects on actual healthcare.

To help illuminate the faulty economics of the entire exercise, let’s invent another ‘right’ through government coercion. In this hypothetical case, politicians declare that the ‘right to travel’ means the government must ensure that everyone owns a car. They then legislate that everyone must purchase and register a car in their name and the law offers subsidies to lower income individuals. The law also excludes ‘inferior’ types of transportation, such as motorcycles and scooters, while requiring certain features, such as a sunroof, that consumers don’t want or need. Further, each state has unique regulations that require producers to make different cars for each individual state. Obviously the metaphor runs into some problems when dealing with coverage pools, but let’s just imagine the world where this increases car ownership. Does that mean the quality of cars has improved? Not at all. In fact, it undermines market forces because producers will aim to maximize profits not on consumer desires, but on bureaucratic dictates. The consumer becomes a captive market, greatly diminishing their bargaining power. Instead, producers focus on providing that sunroof at the lowest cost possible, rather than responding to consumer demands for other desired features. Consumers who want that sun roof would of course benefit from the economies of scale bringing down the relative cost of cars with sunroofs, but it would be paid for by everyone else.

The key to bending down the cost curve and increasing quality is to allow price discovery. However, the CBO estimates are designed to undermine plans that would encourage informed consumer choices. According to the CBO ‘The definition excludes policies with limited insurance benefits (known as “mini-med” plans); “dread disease” policies that cover only specific diseases; supplemental plans that pay for medical expenses that another policy does not cover; fixed-dollar indemnity plans that pay a certain amount per day for illness or hospitalization; and single-service plans, such as dental-only or vision-only policies.’ In other words, insurance policies that offer a fixed amount and compel consumers to price differentiate are declared insufficient. Any law that encourages these would then result in a poor CBO score. These plans may be vastly different from current forms of insurance, but they and others like them would spur on price discrimination. Consumers would balance both price and quality, driving innovations such as computer analyzed X-Rays and MRIs. It’s not as if the market isn’t already trending this way, but it is hamstrung because the consumer has little financial incentive to demand cheaper services. Would you rather a highly trained doctor analyze your results or a more experimental computer driven process? Most would go for the former since there is no reason to sacrifice both real and perceived quality. In dictating what amounts to insurance, the CBO does a disservice to other market solutions and biases any reform coming out of DC, slowing down medical innovation and driving up costs.