The American Spectator

S.L. Toddard| 10.9.09 @ 2:29PM

I disagree with you often and emphatically, Mr. Klein, but I couldn't agree with your diagnosis of and prescription for what ails the healthcare system. We have a government-mandated monopoly system, not a free healthcare market. We need to free up the market, set up Health Savings Accounts, and the states should implement state-run low-cost healthcare options for the poor.

S.L. Toddard| 10.9.09 @ 2:34PM

Sorry! That should read "I couldn't agree *more* with your diagnosis of and prescription for what ails the healthcare system"

S.L. Toddard| 10.9.09 @ 2:41PM

I would ask, Mr Klein, whether you believe it's true - as I've read - that a number of the larger health insurance companies were behind (supported and lobbied for) the legislation that led to further consolidation. It seems to me that it is often powerful forces in the industries being legislated that push for - and often have a hand in writing - the legislation that "regulates" them. I believe corporate ownership of Washington guarantees that "regulations" passed in Congress often have the effect of further empowering and enriching the most powerful corporations at the expense of those less powerful, further concentrating power and wealth in few and fewer companies and thus hampering the natural process of the free market. Is this something with which you'd agree?

Philip Klein| 10.9.09 @ 3:43PM

Yes, I agree. If you look at the state level, regulations have driven a lot of smaller competitors out of business, while preserving larger companies who can afford the heavy compliance costs. Thus, government has accelerated the consolidation of the insurance industry and now liberals cite evidence of that consolidation in arguing that we need a government plan to provide more competition.

Check out this Howard Dean interview in which he boasts about imposing insurance regulations in Vermont:

"It’s worth doing the guaranteed issue and community rating. We did it [in Vermont] 15 years ago -it really does work, and it does drive a lot of fly-by-nights out of the insurance industry."

http://www.tnr.com/blog/the-tr.....harry-reid

Bob| 10.9.09 @ 4:39PM

Philip, your arguments make sense ideologically and sound good, but include a fundamental flaw in logic. The purpose of private enterprise is to make profits for its shareholders -- and NOTHING else. Management thus has the incentive to bolster short term profits at the expense of longer term strategy. Private companies have no incentive to benefit consumers -- their purpose is to acquire customers.

Thus for health insurance companies, they want to provide the least costly services that will provide the best sales incentive. They clearly would like to be totally deregulated so that they can segment the customer base to get the healthiest customers. Policy limits, including pre-existing conditions, redlining, genetic testing, etc., are all excellent tools to accomplish this.

State regulation has expanded because health insurance companies would not include these types of coverages on their own. If they were allowed to totally segment the population, instead of 40 million uninsured, we would have at least 100 million uninsured because the worst health is among those who can afford this least.

In order to reduce financial risk, insurance companies will always push for compensation based upon services run rather than outcomes. Furthermore, it is to their benefit to make claims harder to get. When people are sick, they tend to fight the bureaucracy less. So this works out just fine.

I know all of this is true because I was an insurance executive who developed these policies on a state by state basis and served on a number of claims committees.

The fundamental nature of capitalism is in conflict with the health needs of a nation. That is why deregulation, as you have described, makes little sense. Competition will not lower costs substantially and deregulation will raise costs for a majority of policy holders.

The only way to accomplish less regulation is to align profits with consumer health needs. That would mean paying for results rather than procedures. That would mean forcing insurance companies to cover preventative health care. But that is not less regulation, it is more regulation.

If you believe that deregulation is the answer, then you are, indeed, naive. As I've proposed on several occasions, I believe the solution is to have emergency and catastrophic events plus an annual physical covered by the government. Then private insurance companies could compete on the breadth and depth of their plans since you've taken away the items that cause the strategic inconsistencies.

As a libertarian on the issue, you must realize that, on this basis, if you didn't pay for a specific coverage -- let's say a new, expensive, cancer drug -- you don't get it unless you come up with the money yourself. Will some people die? Yes. But if we allow individual liberties, then those people must be able to take the consequences of their actions.

S.L. Toddard| 10.9.09 @ 5:47PM

These are all good points. I haven't read all of Mr. Klein's pieces yet, but I wonder what he has to say about the tendency of insurance companies to bend over backwards to find any excuse to cancel a policy whenever a client becomes gravely ill. It will always be in the best financial interest of an insurance provider to cancel the policy of a very sick person.

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