Wednesday, September 02, 2009

What is Bill Nelson's "Lever"?

Florida senator Bill Nelson, who courts the reputation of being a blue dog, told the Lakeland Register the other day that "Health care reform will pass Congress this year, but without many of the provisions in the House bill and without a public option."

Strictly speaking, Nelson's comment reads like a prediction, not a prescription. Still, what he said sounds a lot like predicting "the surgery will be successful, but the patient will die." And that may be the reality, particularly if Nelson and his fellow blue dogs desert their constituents to vote in favor of the insurance industry lobby.

Don't mistake it: There can be no realistic "health care reform" without a public option, or a government-run alternative to private health insurance. Doubt it? Read the detailed study by the Commonwealth Fund (click on "Issue Brief").
From the perspectives of efficiency and equity, the advantages of group insurance such as large-employer-based coverage, Medicare, Medicaid, and CHIP are considerable. There are economies of scale inherent in selling plans to sizeable groups as opposed to individuals.

In addition, employer coverage forms a natural risk pool: people of all ages and health status enroll when they take a job rather than when they are sick, thereby reducing the potential for adverse selection and the associated costs of underwriting. The lack of underwriting in the large-employer-group market also ensures that workers are not excluded from coverage, or charged different premiums, on the basis of health status or age. Premiums in the group markets are more in line with actual medical expenditures than are those in the individual market.

Indeed, while it has largely been the sole option for people who lose employer-based coverage and do not qualify for Medicaid, the individual market has in fact provided coverage to less than 10 percent of the under-65 population, even as employer coverage has declined in recent years. The Commonwealth Fund Biennial Health Insurance Survey found that of people who ever thought about purchasing a plan on the individual insurance market during 2005–2007, a majority never wound up with a plan. They either could not find a plan that met their needs, could not afford the plan, or were turned down or charged a higher price because of a preexisting condition.
As the Commonwealth Fund analysis shows, and everyone who knows anything about health care reform privately acknowledges, a public option is the key to substantial savings in health care delivery as well as health insurance reform. As Real Clear Politics points out:
The public option is designed to control health care costs -- essential to the profitability of American business and workers' raises. It would compel private insurers to spend more premium dollars on actually delivering health care. (And private competitors would force the public option to keep up on benefits.)
Last week, economist Simon Johnson offered an intriguing thought experiment. Imagine, he said, a health reform bill without a public option -- exactly the kind of health reform bill Senator Nelson is predicting:
Insurers have to charge the same price regardless of customers' medical history; everyone has to buy insurance; and poor people get subsidies to help them afford it. From the insurers' perspective, they get more than 40 million new customers, they subsidize the old and sick by overcharging the young and healthy (who have to overpay because of the mandate), and the government even pays people to buy their product. There are no new competitors (additional choices for customers), and there is no pressure to reduce costs.
Such an outcome is entirely unsustainable, as Johnson makes clear. It could be "only a temporary solution because rising costs would force the government to go back to the drawing board (to pay both for Medicare/Medicaid and for those subsidies)."

Johnson ends his thought experiment with a trenchant question, one that should be asked of every blue dog Democrat: If there is an alternative to the public option, he points out, "It has to be some other lever to force private insurers to reduce costs. Saying that people can get all the care they want and private insurers will simply pass on the costs as higher premiums is not a solution."

So, Senator Nelson, what is the "other lever" you have in mind "to force private insurers to reduce costs?" Without a credible answer to that question, Nelson and his fellow blue dogs have no business voting against the public option.

1 comment:

Malagodi said...

Good Work.