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Policy: Economy

Washington Post misses distinction between economics and free market economics

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Beltway Confidential,Opinion,Philip Klein,Barack Obama,Obamacare,The Washington Post,Economy,Free Market

In an editorial titled, "The Affordable Care Act's free market economics," the Washington Post has attempted to defend President Obama's health care law from Republican attacks that the law will make it difficult for some Americans to keep their doctors. But in the process of doing so, the editorial board failed to draw an important distinction between economics and free market economics.

As the editorial explained, the reason why people may lose their doctors is that in order to meet the new requirements of Obamacare and keep premiums down, many insurers responded by narrowing their networks to include fewer providers.

This is merely a matter of insurers responding to market forces, the Post argued, because people who want a greater choice of doctors could always pay more.

"No one can expect low premiums and near-unlimited service, particularly in a system designed to spread costs around so that the sick and the old can finally obtain decent health coverage from private insurers," the Post concluded. "That's not a mistake. It's economics."

On this, the Post is correct. It is economics. But it's economics in the same way that if the government institutes price control on a good or service, there is likely to be a reduction in supply for that good or service; in the same way that dramatically raising taxes on a specific good is likely to reduce consumption of that good; or in the same way that subsidizing certain actions is likely to generate more of those actions.

There are, in fact, plenty of examples in which government intervention distorts the marketplace and the marketplace responds to that distortion. But, though this is economics, it isn't free market economics.

Though it's true that private companies are responding naturally to changes ushered in by Obamacare, that doesn't mean that Obamacare is a free market.

In reality, the health care law expands the government-run program, Medicaid forces individuals to purchase government-approved insurance policies or pay a tax, and provides subsidies for individuals to purchase government-designed plans on government-run exchanges. Because insurers are required to offer a specific set of benefits and to offer coverage to all those who apply -- regardless of age and health status -- it naturally drives up the cost of insurance for those with otherwise lower medical costs. As a result, they may end up paying more for insurance plans that have a more limited network of doctors and hospitals while offering benefits of which they are unlikely to take advantage.

One can argue that this sort of government intervention is justifiable in the name of social responsibility, equality, or a number of other ideological principles. But it cannot be described as a free market policy.

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