Wisconsin Congressman Steve Kagen has what he thinks is a noble goal in mind: ending price discrimination in the medical insurance marketplace. Why? As Kagen writes at the Huffington Post, charging people different prices for health insurance is unconstitutional.

Kagen uses some strong rhetoric in attacking insurance companies:

That’s why I’ve introduced the No Discrimination in Health Insurance Act. This essential legislation will guarantee access to affordable care for every citizen in America by bringing an end to discriminatory practices employed by insurance companies who deny life-saving coverage to millions of Americans solely because of their pre-existing medical conditions.

The grim reality is our Constitution does protect you against discrimination, until you become ill. Well, my legislation puts discrimination where it belongs — in the past.

Insurance companies are easy targets and are an easy way to score points with voters because virtually everyone despises them, myself included. High-profile cases like that of Nataline Sarkisyan make that easy to do.

Speaking about insurance companies, Hilda Sarkisyan said: “They just like to collect. They don’t want to deliver.” Which is true of all insurance underwriters - they are in business to make money, not to pay claims. The way they do that is by cutting costs in two ways: by negotiating group prices from medical providers and denying benefits to their customers. It’s no surprise to anyone who’s ever been covered by an HMO that when an expensive procedure is needed, that’s when the barriers to service go up. We saw the same behavior from homeowners insurance companies after Katrina, as most of us will recall.

Kagen wonders:

Shouldn’t health insurance companies be made to openly disclose all their prices, so everyone sees the lowest price for insurance policies? Like prices for gas at the corner service station or food prices in your closest grocery store, every citizen should have the equal opportunity to pay the same price for the same product. It’s called competition — a uniquely American concept.

Go to your favorite restaurant and you’ll find a simple solution for solving our health care crisis. They’ll hand you a menu with a list of prices before you order.

Two things here. First, transparency in pricing would be a great idea from the consumer standpoint if we had any real choice as to their coverage. Everyone should know how much their medical expenses could be in a given situation. But medicine is a complex business and very few consumers are going to invest the effort to understand the minutiae of their health plan - unless they are already battling a particular condition. For most of us the question simply isn’t that important.

Why? Most insured Americans get their health coverage through my job. Our choices, if we want to get the employer contribution are limited to plans sanctioned by our employers. In many cases this amounts to virtually no choice at all, perhaps 2 or 3 options, take it or leave it. That’s the choice that most working and middle class families face - the very opposite of a free market.

Second, calling Kagen’s definition of competition “unique” would be overly kind. True competition tends to drive profits toward the cost of providing a service. Since competing companies’ costs are usually similar, competition does lead to uniformity in pricing goods and services. But this cost-plus pricing is a natural result of competition, not an input to the market processes.

For example, if an appendectomy is done on comparable patients at hospital X by physician Y, then it’s reasonable to assert that the bill for the operation should be the same in both cases. That far Kagen is correct. But no farther.

If we adjust any of the variables in the equation - patient health, location, hospital, surgeon - the price of the operation adjusts accordingly so long as the normal competitive process is allowed to run its course. A more difficult operation necessarily costs more, as in the case of a girl like Nataline, a patient already in poor health.

Better facilities and doctors also cost more. It’s simple supply and demand. The fact that this doesn’t necessarily happen in the medical industry is evidence of a lack of a competitive environment. The medical field is one of the most regulated in America; therefore, it should be no surprise that the normal forces of market pricing are unable to adjust in a logical manner.

Kagen’s assertion that competition means that “every citizen should have the equal opportunity to pay the same price for the same product” is completely false. Competition means the opposite because, in a free market, all factors that figure into delivering a product or service have a direct impact on the final price, including, in the case of the medical market, the health of a given patient and his/her ability to pay for the procedure after it is performed.

No two medical procedures are the same. So what exactly is the justification for uniform pricing? That lies in the alleged benefits of risk distribution and averaged cost, not in market competition.

In itself this type of system is not inherently bad so long as participation is voluntary. However, when individuals are forced into a mandatory medical welfare program like the one that Hillary Clinton has proposed - to the tune of $110B per year - it is clear that the system will take more away from many people than it gives back.

Steve Kagen calls the practice of pricing medical services at market rates discriminatory. On the contrary, it is entirely natural that the medical market, like all markets, attempts to set the prices of its product at a profitable level by charging higher prices in return for providing more and more difficult services.

Artificially lowering prices for one group of consumers results directly in other users of medical services not getting what they paid for because they must make up for the previous group’s underpayment. This is the real discrimination, for there is no net reduction in total dollars spent in the insurance/HMO shell game, only an averaging of premiums among participants. Attempts like Kagen’s to include the previously uninsurable in the pool can have only one effect: even higher average premiums and/or lower standards of care.

Thus it shall ever be until Americans learn to accept that some conditions simply are not curable, that medical expenses are real whether we pay the bill ourselves or not, that we are not entitled to unlimited use of medical services at the expense of our neighbors, and that we must allow truly free markets to determine medical costs by providing increased choices to patients if net costs are ever to go down. Having done so, who are we to complain that the price is too high? To do so would be to deny reality.