masthead-highres

Tuesday, January 23, 2007

'The Big Ripoff' Comes To Health Insurance

After seeing the Washington Post's "Universal Health Coverage Attracts New Support; Onetime Foes Become Unlikely Advocates, Citing Rising Costs and Tougher Access" by Christopher Lee in Monday's Washington Post, I asked the National Center for Public Policy Research's health care guru, David Hogberg, to critique the Post's story for publication. He did so.

Says David:
In a very poorly written article in the Washington Post, reporter Christopher Lee seems to find it remarkable that a lot of the health insurance groups that opposed Hillary Clinton-Care back in the early 1990s are now on board with a number of the new efforts at health insurance reform (and I use that last term loosely).

Lee notes:
Many are not willing to wait. Karen Ignagni, president of America's Health Insurance Plans -- the same industry association that once funded the "Harry and Louise" ads -- was among representatives of 16 business, medical and consumer groups that last week called for Congress to spend $45 billion over five years to extend health coverage to most of the nation's uninsured children. After that, the groups said, lawmakers should direct billions more toward covering uninsured adults, mostly through a mixture of tax breaks and expanded federal programs.
What Lee fails to report is that the left-wing group Families USA is the one organizing the 16 groups calling for more spending. Dubbed the Health Coverage Coalition for the Uninsured (HCCU), its members include insurance heavyweights like America's Health Insurance Plans (AHIP), Blue Cross Blue Shield Association, Kaiser Permanente and United Health Group. Apparently Lee is at a loss to explain why these groups are getting on board, so he simply goes on to describe various new health insurance proposals, such as those of Senator Ron Wyden (D-OR) and Governors Arnold Schwarzenegger (R-CA) and Ed Rendell (D-PA).

Perhaps Lee should read Tim Carney's book, The Big Ripoff, where Carney chronicles why big business loves big government. One reason is that big business often gets loads of subsidies from big government, and that would surely be the case with these new health insurance proposals. Wyden's, Schwarzenegger's and Rendell's proposals are much like the Governor Romney's plan that ultimately prevailed in Massachusetts in that they provide subsidies for people to buy health insurance. That, of course, means lots of new business for Blue Cross Blue Shield Association, Kaiser Permanente, United Health Group and other health insurance companies that are members of AHIP. Wyden's, Schwarzenegger's and Rendell's proposals also mirror Romney's in that they have an "individual mandate" -- that is, they force people to buy health insurance. Well, if everyone has to purchase health insurance, that means even more business for big insurance companies.

These health insurance companies opposed Hillary Clinton-Care because it threatened their existence. The reason they embrace more recent proposals is because they are a potential boon for their bottom lines.

It is not surprising that big health insurance would line up so eagerly to suckle from the government teat. Thanks to government policy, they are already one of the most coddled industries in the U.S., leading health insurance companies to be, as a friend of mine puts it, "big, dumb and slow." Government tax policy ensures that insurance companies only have to compete for the business of a few million employers instead of many million more employees. Federal and state laws prevent people from purchasing health insurance out-of-state, thereby further insulating big health insurance companies from competition. Indeed, when Congress tries to let people buy insurance out-of-state, it is big health insurance that opposes it.

There are a lot of innovative ideas that could make health insurance less costly. Professor Regina Herzlinger notes that in Switzerland, which has a very competitive health insurance market, there are policies that give people back some of their money. A consumer signs signs up for a five or ten-year policy, and when he signs up, he has his health measured by the health insurance company. Based on his health status, the company and the consumer decide on certain five-year goals for that consumer's health. If the consumer meets those goals at the end of five or ten years, he gets back a percentage of the money he paid in premiums.

Writing for Consumers for Health Care Choices, Dr. James Pendleton offers another innovative idea. Called "Market Driven Insurance," it entails bringing some competition to catastrophic costs. Under Pendleton's proposal, a person who needs non-emergency catastrophic care, say bypass surgery or cancer treatment, would be given a list of places where he could receive the treatment, the price of treatment at each of those places and the average price of the treatment. If he chose a place that was less than the average price, he would receive a percentage of difference between the price of the treatment and the average price. If he chose a place that cost more than the average price, he would have to pay an additional charge.

No one in the health insurance industry is, to my knowledge, at present pursuing these innovative ideas. Why? Because government policy protects Big insurance from the competition that leads to such innovation. Health insurance companies are, as my friend said, "big, dumb and slow."

Look at the insurance markets -- like auto insurance -- where government policy does not protect carriers from competition. The innovation is relentless. Progressive Insurance lets people use its website to compare prices of many difference auto insurance companies. It also provides a "concierge" service if you are in an accident. AllState Insurance now offers "accident forgiveness" and a deductible that goes lower the longer one has no accident. Lesson: fierce competition leads to innovation.

Unfortunately, neither Wyden's, Schwarzenegger's, Rendell's nor Romney's plans do anything to increase competition. Indeed, they do exactly the opposite by guaranteeing big health insurance companies new streams of revenue. They will only make those companies bigger, dumber and slower.
Something David did not note, but which I believe is significant, is that Hillary Clinton's "Clinton Care" plan from her husband's first term was not primarily defeated by the Harry and Louise ads.

Christopher Lee begins his piece with:
Harry and Louise have had a change of heart.

Thirteen years after television ads from the insurance industry featuring the fictional middle-class couple helped kill the Clinton health care plan and make universal coverage politically radioactive, comprehensive proposals for expanding coverage to millions of uninsured Americans are flowering again inside the Beltway and around the country...
Lee is technically correct when he writes that the ads "helped" defeat Hillary Clinton's version of universal care, but the massive grassroots revolt against Mrs. Clinton's plan was a much bigger "help." I also believe Lee errs in attempting to equate Mrs. Clinton's circa 1993-94 version of "universal coverage" with current "comprehensive proposals for expanding coverage to millions of uninsured Americans" through sleight of hand. The proposals under consideration today are nothing like Mrs. Clinton's late and unlamented plan. Even Senator Ted Kennedy's "Medicare-for-All" plan, which would force every American into Medicare (never mind that Medicare already is insolvent) differs markedly from what Mrs. Clinton tried to impose upon the American people thirteen years ago.

"Universal" health care is radioactive not because actors playing "Harry" and "Louise" sat on a sofa and fretted about Mrs. Clinton's plan, but because single-payer medicine inevitably leads to shortages, suffering and death. To say that "universal" coverage is opposed because of the insurance industry's Harry and Louise ads and not because Americans fear the long lines for cancer treatments and heart procedures their Canadian and British friends endure may make for a nice irony in opening paragraphs, but this meme misses, as David notes, a large portion of the story.

Furthermore, regardless of whatever may be going on in the heads of insurance executives, the genuine Harrys and Louises of this nation are far from having a change of heart about the workability and safety of "universal" Big Government Medicine.

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Posted by Amy Ridenour at 2:36 AM

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