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The Health Care Debate Going Forward

By W. James Antle, III on 5.1.09 @ 10:45AM

In my column on today's main site, I ding the Democrats -- even the "deficit hawks" among them -- for backing procedural maneuvers that would allow a national health care reform to be rammed through Congress along a straight party-line vote. This is not what reconciliation is intended for nor has it historically been how most durable pieces of sweeping reform legislation have been enacted. But as important as it is to criticize the Democrats for this naked power play, the substance of the reform legislation is even more important than the process by which it is passed.

That's where Republicans deserve some criticism. It has long been clear that the status quo won't hold in America's health care system. There are two options: moving toward a system where there is more government control and a larger federal role, or introducing truer free market in the delivery of health care. The first approach has since World War II had a consistent advocate in the Democratic Party. The second approach has had not been reliably advocated by the GOP, and the party has paid a price for it's lack of vision.

Don't get me wrong. Republican legislators sometimes introduce fine health care bills as alternatives to the Democrats'. Republican presidential candidates talk about free-market health care reform during their campaigns. Even John McCain had a decent, if easily demagogued, plan in 2008. But these proposals are only used as damage control when the Democrats make a serious health care push in Congress or when GOP candidates need to talk about health care on the campaign trail. They go nowhere legislatively and are immediately shelved the minute a Republican president takes office.

Republicans have succeeded in expanding health savings accounts, a modest free-market health care reform achievement. But the bulk of the Republican record on health care consists of half-measures like Kennedy-Kassebaum, SCHIP, and Medicare Part D, -- none of which satsified the public's desire for reform and most of which moved us closer to a federally run health care system. Broader free-market reforms have been left to the op-ed pages, white papers, and congressional backbenchers.

Process isn't everything. While many experts believe Hillarycare was doomed once Robert Byrd wouldn't support its inclusion in reconciliation, another factor in its defeat was that the public turned against it. Republicans made arguments against its likely effects that eventually sank in with the American people. Reconciliation or no, that's what needs to happen with Obama's health plan today. But arguments against Democratic policies aren't enough. Republicans have to have an alternative vision and argue for it as seriously as the Democrats contend for theirs.

View all comments (10) | Leave a comment

Bob| 5.1.09 @ 1:19PM

James, here is the problem with a "free market" solution to health care insurance and why you haven't seen consistent proposals from Republicans:

One of the basic principles of insurance is that you will have adverse selection. People who think they will need it will pay for it and people who don't won't. Yet, insurance is also based upon the principle of spreading the risk so that you need a pool large and diverse enough so that many people are paying for the problems of a few people.

Market solutions are based on the concept of segmentation, i.e., finding profitable niches. In health insurance, this means finding groups of people where their perceived need for coverage is significantly greater than the cost for that segment. If the perceived need is less, for example with young people, the price they will pay for coverage will not give much in terms of profits. Furthermore, older people with family histories will not be able to afford their coverages.

That's why employer sponsored plans work -- because most companies have a group census that includes both high risk and low risk groups. That spreads the risk and makes risk aversion difficult. McCain's plan had this problem.

Finding a truly free market solution to healthcare is virtually impossible. Now you could highly regulate insurance to force it to be non-discriminative, i.e., must accept people regardless of age and family history, zip codes, FICA scores, etc. But the more you do that, the less free market the solution.

This is precisely why you have not seen virtually any workable Republican free market solutions. Furthermore, many doctors and hospitals would not take insurance for high risk patients because they would have the highest bankruptcy rates (as we know a high percentage of bankruptcies come from medical bills).

In addition to this, given my experience with group insurance, I believe that free market solutions will actually raise the total cost of healthcare, not reduce it. This is because if you get a buy on your policy because you are healthy, you'll end up paying more for doctors and the hospitals because they have to cover people who cannot pay for coverage.

So I suggest you talk to a group actuary and learn something about the insurance business. That's why I would promote a tiered solution that would be a compromise between nationalized and free market solutions aimed at providing the lowest overall TOTAL cost to the country. In other words, spend less time on ideology and more time on spending reduction.

KevlarKevin| 5.1.09 @ 2:03PM

Bob is always condescending: "So I suggest you talk to a group actuary and learn something about the insurance business." Bob you are an ass and a troll.

Bob| 5.1.09 @ 2:48PM

Kevlar -- it is obvious that instead of trying to understand an issue, you'd rather pull things out of your ______ (fill in the blank). Antle is a good guy -- I like him, Philip Klein, and Jeffrey Lord. They all make good arguments based on some level of knowledge and logic. That said, I try to push their buttons when they make statements outside of their knowledge arenas. Those areas tend to be on business and economics. You, on the other hand, rarely add anything of value to a discussion other than ideological nonsense -- much like Hannity, Olberman, Matthews, Beck, and Limbaugh.

margaret| 5.1.09 @ 3:19PM

Bob,
In all the talk of healthcare reform, I would like to see more about tort reform. It seems that the primarycare doc is under the vise of higher and higher liability premiums from day one($100,000-1.2 Million) and the need to overuse medical procedures to cover their risk so the trial lawyers won't destroy them. When they order all those extra test and proceedures, the insurance companies say "WE can not pay for that" and thus raise the insurance premiums. Vicious cycle indeed. I think for some time we have had a redistribution of wealth from the doctors and patients to the legal profession and the insurance companies(health and malpractice). Enough already.
I see many primarycare docs leaving and going into research to get away from the mounting paperwork and headaches from insurance companies and legal eagles. Universal care will have more doctors leaving the profession. No?

Bob| 5.1.09 @ 3:32PM

Margaret -- I am absolutely with you on tort reform and have said so here. Lawsuits should not be a lottery. I am also in favor of losers pay legal costs (with some restrictions, of course). That said, I would also like to see some free market principles attached to that, i.e., you get low rates by agreeing not to sue and high rates if you want the option to sue.

normally bob| 5.1.09 @ 3:49PM

Health care is going to prove to be extremely difficult for a number of reasons.
The insured population has been conditioned over time to expect someone else to pay for their care. Such that paying 25 dollars for an office visit for which the insurance company is billed 75 dollars or worse yet paying 500 for a heart cath that the hospital bills the insurance company 26,000 dollars for is seen by the consumer as “expensive.”.They also complain that the increase in their contribution to an employer provided family plan into 500 to 800 per month range to be ‘outrageous’
Govern mandates have dictated in each state what must be covered.
The government has also had a hand in how and to whom ‘group policies’ can be sold..
.Government intrusion has also mandated delivery systems and attempted to set fees which has shifted cost from the public sector to the private as government programs pay an ever decreasing portion of the cost of providing the care.
Another factor is litigation and the high cost of defensive medicine.
Each sector has stake holders that have an interest.
The argument for public has been extremely dishonest giving the impression that somehow a large portion of the population is going to receive “free” healthcare. The whole SCHIP program and it recent expansion that now classify individuals up to 30 years old as children is a good example of the dishonesty.
In the not too distant past Senator Kennedy was instrumental in a healthcare reform that created the HMO/managed care model. Where given a choice most people choose a private practice network over an HMO because of the greater control and freedom of choice they have in their care even though the cost is higher.
One area that will create almost insurmountable problems is the shortage of trained professionals including doctors nurses and medical technicians, today in excess of 135,000 nursing positions are unfilled. Similar shortages exist throughout healthcare. .
As the implementation of national health insurance has more to do with politics and power than healthcare I do not expect an honest debate. It would appear that the Dems by their action are affirming my assumption.
The inclusion of illegal immigrants in the exaggerated 40,000,000 uninsured is another example of the dishonesty in the discussion. Try running a poll that asks ‘how much would you be willing to pay in additional taxes so that illegal immigrants can receive free health care’ I suspect the majority would be havily in faove of no additional taxes.
In an honest discussion we would seek to define areas of cost that can be better controlled, I think the high cost of defensive medicine is one area that could dramatically reduce cost.
That discussion would also honestly and accurately describe the treatment choices implied by the alternate systems. Nationalized Health care will be HMOs on steroids without the care or compassion.
Educating the population as to the actual cost of treatment and illumination of the myth of free care are essential to the debate and successfully reforming the system.
Market driven reforms are possible and by my belief and orientation preferable but given that we will not have an honest debate I really have no idea how best to construct the market option let alone promote it . How does one compete with the myth of ‘free health care or if not free at least paid for by someone else?
Bob in response to your adverse selection problem I think that if we could separate the pool from employment and create a wider more open method of defining a pool we could overcome the problem to a large extent. Linkage to the employer masks the cost of insurance because it is withdrawn as is the income tax before the employee sees the check and the employer contribution is usually not shown consequently there is little understanding of the actual cost. I think the current system that mandates employers as the pool actually creates or exacerbates adverse selection.

Bob| 5.1.09 @ 4:16PM

Normally, I agree with the majority of your points. However, after having managed group insurance for a number of years, I can't see how you can define a broad enough pool without huge government intervention. Once you intervene, even to the levels we have now for life insurance, there really isn't much difference between "free market" and "socialized" solutions. Remember, there are lots of ways for insurance companies to limit the pool. FICO scores, family histories, job category, age, sex, income level (zip codes), etc. I've used all of these to slice and dice segments. Even if there is regulation, all you have to do is limit by state or only advertise to profitable households. I know a thousand ways to beat the system -- and so do many other insurance people. Employers, on the other hand, are much more sophisticated buyers of plans and the market works on them quite well.

The reason insurance companies don't want their policyholders paying themselves is that they want to be able to negotiate directly with doctors and hospitals. They can achieve rate levels individuals cannot negotiate by themselves.

I'd much rather see a tiered system where you can choose the level of care/liability and pay for that level. So, if you just want basic care and life threatening emergencies while agreeing not to sue doctors and hospitals, you might get an ultra low rate. If you want the works and low deductibles, you can pay for it. That's the way I'd like to see the market implemented in theory.

normally bob| 5.1.09 @ 4:56PM

Not sure I understand what you mean "The reason insurance companies don't want their policyholders paying themselves is that they want to be able to negotiate directly with doctors and hospitals. They can achieve rate levels individuals cannot negotiate by themselves." are you referring to premiums or actual fees. for medical services?

I agree with yuo that the insurance company should negotiate the fee. I think that a systme of reimbursement would be better in the lng ahul in terms of getting the insured to see the cost of their treatment but that is impracticle. The heart cath fees above are actually from a recent experience and cutting that check would have been an inconvenience.

Insurance companies also 'manage' the speed at which they pay providers.

I am uncertain as to how exactly to implement some of thenecessary changes but am certain that the governement will not do it well, regardless of the alternative.

The problem also with the tiered approach will be that some insured individuals will switch to the government plan sckewing the risk pool again. Watch how SCHIP 'pulls insured children out of the private systems because of the redefined limits on income and age.

Bob| 5.2.09 @ 11:32AM

Normally -- any private approach to market segmentation will cause risk to move to government coverage. I don't see any way around that. If we allow the market to be tiered, that will minimize the effect because the free market will take all of the profitable segments first.