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July 31, 2017

Nice Business To Be In

You’re in a business where the government requires Americans to buy your product. You’re only allowed to sell the blue-ribbon version of the product; you can’t legally sell an economy version. Many people can’t afford your product at the price you offer it; but that’s not a problem because the government will subsidize their purchase or just compensate you for selling at a “loss”. Competition is all but ruled out by laws which don’t allow a version of your product to be sold across state lines. Industry profits are setting records. What business are you in?

Health insurance, of course.

During last week’s fruitless debate on who pays for health care, Republicans threatened to repeal the individual mandate, the requirement that everybody buy or be offered health insurance. Not surprisingly the health insurance lobbyists were against letting people choose whether or not to buy their product. They pointed out, correctly, that many people wouldn’t buy at the prices they are charging. In Washington scorekeeping, people who choose not to buy insurance are people who will “lose their insurance coverage”.

Even worse, as the lobbyists pointed out, the people who would refuse to buy are young, healthy people who are very profitable. With the most profitable customers gone, rates would have to be even higher for everybody else. Unless Congress raised subsidies even higher, insurance as we’ve known it since the passage of the Affordable Care Act (aka ACA aka ObamaCare) would collapse. It’s hard to be sympathetic toward the insurance companies, which would have been hung in a noose of their own devising – costs going out of control because they can only offer plans no one can afford including coverage for pre-existing and politically expedient conditions and customers being unwilling and/or unable to buy. Strangely anti-corporate Sen. Elizabeth Warren was very concerned about the fate of the insurance companies. She quoted their dire predictions and neglected the attack I would have expected on their profits. Bernie Sanders lost no opportunity to criticize the Republican plan but was, at least in what I’ve read, uncharacteristically silent about profits. Warren and Sanders aren’t good long term allies for the insurance companies, however. They are honest that they want “single payer” health care. If we had that, insurance companies would be out of the loop entirely except perhaps for an opportunity to sell policies providing superior care to people with the money and willingness to buy them.

Although the ACA was passed with no Republican votes (sound familiar?), it was still a compromise between centrist Democrats who knew people wouldn’t like the mandatory coverage and weren’t ready to scrap private insurance and those who looked admiringly at government run and paid healthcare systems in much of the rest of the world.

 ACA has proved to be an unworkable compromise with some of the worst aspects of both public and private health; it’s a disaster financially even though less hospital bills go unpaid by patients. There hasn’t yet been a large-scale study showing improved health outcomes even though people who know their visits will be paid for are going to the doctor more. Costs are spiraling out of control. In my opinion keeping the private insurers in the loop has done nothing but pile on cost and complexity. Private solutions are beneficial when there is competition and a choice of both suppliers and product.  In many markets there are now one or only two providers; products must be gold-plated by government fiat.

Like many benefit programs, this one has proven to be a barbed hook. People are being subsidized by their own tax dollars (with a share subtracted for administration and insurance companies). They have no faith that they’ll be better off personally if cost of the “benefit” is done away with – and some won’t be. Even threatening to repeal the initially-hated personal mandate can’t pass Congress because the ACA (as well as insurance companies) will collapse without it.

So is it time to just give up the pretense and go to single payer? I think that would be a better alternative than trying to maintain the public-private monstrosity called ACA. I would prefer a truly competitive market both for health care insurance and for providing health care (with subsidies for the indigent as we do with food, fuel, and much else). Right now it doesn’t seem we have the political leadership to buck the insurance industry and get us either back to competition or to a government-run (ouch) system with no role for insurers who aren’t providing value.

Just to end on a happier note: Trump has tweeted a threat to make Congresspeople and their staffs buy their own health insurance on the exchanges. The ACA actually requires this but the Obama administration granted a waiver partially based on the fiction that each Congressional office is a small business with less than 50 employees on the average. That which can be waived can be unwaived. Might focus the congressional minds.

 

See also:

What if The Senate Really Debated Healthcare?

Freedom, Responsibility, and Preexisting Conditions

 

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