Public option and the free market (Part I)
Posted 7/08/2009 10:00:00 AM
By Carter Bundy
If America is going to ever improve in the three big areas of health care (access, affordability and quality), we have to have a public insurance option.
There are dozens of major reforms that need to be implemented in American health care. Having a public insurance option won’t come close to solving all of our problems. A public insurance option is not sufficient for America to enter the 21st Century of health care, but it is necessary.
The problem
America is still the wealthiest country in the world. Yet we consistently rank near the bottom of developed nations by almost every measure of health. Even those of us with insurance pay far more than people in other countries, and there’s no sign that double-digit health care inflation is slowing down.
We all know the horror stories of the 45 million uninsured Americans and of the additional tens of millions of underinsured. Not only do those families live in constant fear of becoming ill, but they cost our system hundreds of billions of dollars in waste.
For many of the readers of this site, the bigger problem is that we may think we have good insurance but find out too late we really don’t. Or that we won’t be able to afford it in the future, whether we run a small business or have an employer who is facing a fiscal crisis in large part due to the rising cost of health care.
Obama’s plan
President Obama has already rejected single payer as the solution to America’s health care problems. His reasoning is that dramatically changing one-sixth of the economy is logistically too difficult. He isn’t asking for private insurers to be forced out as primary insurers.
Obama’s already compromised with private industry to let them continue to have their role in health care. If you like your insurer, Obama’s first principle is that you get to keep what you have.
Private insurance isn’t going anywhere. But for many reasons, a few of which are listed below, we can’t achieve access, affordability and quality without a public insurance option.
The opposition
The closest things to a public option we have in America are Medicare and Medicaid. Medicare and Medicaid are famous for being far leaner, more efficient operations than private insurers. There is a downside, however. Because they don’t hire the same batteries of attorneys and claims adjusters to deny claims, they’re more susceptible to fraud.
But did you ever notice how the abusers of public systems like Medicare and Medicaid are the big private health care insurers and providers like former U.S. Sen. Bill Frist’s HCA, which settled a $1.7 billion fraud claim?
Amazingly, HCA’s CEO for much of the period of fraud was Rick Scott, who has since moved on to be the spokesperson for Conservatives for Patients’ Rights, the leading group fighting against giving the public a choice.
The opposition to giving people a choice is essentially in two camps: the big private insurers trying to keep their incredibly profitable game going without accountability (the Rick Scotts and Bill Frists of the world), and people ideologically committed to having the market solve all our problems.
Billionaires like the Frist family are never going to embrace a public option. Hopefully, though, some of the folks normally committed to market solutions will realize there are some crucial factors inherent to health care that make market solutions alone an incomplete answer.
During the great health care debate of 2009, we’re going to hear a lot about how only the market can solve our national health care problems. Every time you hear that, give it consideration, but remember how sharply health care differs from almost any other sector of a market economy.
I’ll start with one timely assumption about market forces -- consumer information -- and continue with additional market assumptions over the next few columns.
Misfit assumptions
Assumption No. 1: Consumers have perfect information about themselves and their health needs.
A basic assumption economists make all the time is that for markets to work efficiently, consumers have perfect, or close to perfect information. When it comes to health issues, though, for most of us the timing and type of health issues we’ll face during our lives are tough to predict at best and random at worst.
Knowledge of family history can help us guess at our risks, and so can our actions with respect to controllable factors like exercise, diet, smoking, alcohol, sexual activity, etc. But how many of us have friends or family -- or even ourselves -- who suddenly became afflicted with an illness that no one saw coming?
The young woman who finds a lump. The young man who gets prostate cancer. Stroke, heart disease, almost every form of cancer, Lou Gehrig’s disease, Alzheimer’s -- these things are often a surprise, and certainly unpredictable as to timing and exact form.
In the news
Look at the celebrity deaths and events last week: Farrah Fawcett was relatively healthy until a few years ago, and died of cancer at a young 62. Michael Jackson, for whatever his prescription problems, was also an energetic and active 50 years old.
Governor Palin stepped down, in no small part (according to her) because of her family. Chief among those concerns had to be her beautiful child Trig with his Down’s syndrome.
Jackson, Fawcett, and Palin all underscore the impossibility of knowing what our -- and our families’ -- health care needs are.
I suppose Karl Malden, at 97, had to be somewhat predictable, but he’s the exception who proved the rule last week.
Private insurance markets sometimes fail in part due to the fact that the normal market assumption of consumer information doesn’t hold even for the aspect of the market the consumer knows best: her or himself.
Next column I’ll tackle a few more basic assumptions that go into supporting a market solution that don’t mesh with the realities of health care sector of the economy.
Bundy is the political and legislative director for AFSCME in New Mexico. The opinions in his column are personal and do not necessarily reflect any official AFSCME position. You can learn more about him by clicking here. Contact him at carterbundy@yahoo.com.
Labels: Bundy columns, Health-care reform
8 Comments:
Utopia has never worked.
No one arrives on earth free of risk to life -- be it from a monstrous bugger to the invisible beasts that munch on us all from conception till way after physical death.
Heathcare like any other form of insurance or shelter is a luxury and if one cannot afford it then that's life.
To force people to have insurance or to force others to provide for the so-called less fortunate will only result in more corruption/theft at all levels of humanity and ultimately lead to complete economic bankruptcy.
There should be no free health insurance for anyone -- period -- regardless of circumstances.
The primary solution is to create a favorable climate where jobs are plentiful and then the people can make discretionary choices.
In my opinion, and not shared by what appears to be the majority of politicians -- those that claim health care is a right and must be funded by everyone for everyone are either misguided, naive, parasites/socialists or thieves.
Finally, at what point or line in the sand is freedom COMPROMISED with utopian freebies?
Joseph Cummins must assume that everyone gets what they deserve. That tragedy is a consequence of our own doing. Therefore we should not worry about those that suffer because we would be tempering with the natural order of things. He must also not be aware that millions of Americans like my mother-in-law depend on their jobs for their healthcare, and that that even though she is gravely ill she cannot stop working if she wants to continue to be treated. Joseph Cummins must ignore reality to be so heartless. Perhaps soon, he will notice that he is blinded by his own ideology.
Nothing says "damning with faint praise" better than saying you'll do a better job than Bill Frist. Gee! do you think you can?
Carter, I often wonder why you bother to go to the effort of writing such thoughtful commentaries on this site each week, given the ridiculously dogmatic traffic here. But bravely, you forge ahead and do a terrific job in the process.
"Utopia" may not exist, but a morally superior, more economically sensible solution to finding a way to provide health care for human beings DOES exist--and is better than the pure "capitalist" model which ends up being merely a sad division between the haves and the have-nots.
Only those who lack ingenuity and courage would say that we cannot create the best and most effective health care system ever invented in the history of the planet.
Only cowards, the selfish or the greedy would propose the status quo.
So, as a healthcare provider, I would like to thank you for your thoughts, regardless of the lack of appreciation most people have for the severity of this problem. Every single day I see people suffering in ways they would not were they simply to change their residence to another country, and who deserve so much better than we are doing in America.
And I find myself feeling angry and ashamed.
Since Joseph Cummings seems to be business-oriented, I suggest he read the 2005 article "Toyota, Moving Northward" that economist Paul Krugman wrote in 2005.
The US is becoming less competive compared to other Western countries because we have a less healthy, therefore less productive, workforce AND the employer has to pay for employee healthcare benefits, which countries like Canada already provide to all citizens. The link is:
http://www.nytimes.com/2005/07/25/opinion/25krugman.html
Joseph, Ellen continues to refer to a FOUR YEAR OLD OpEd, but as we all know, economists are often wrong in their assumptions and predictions, as is Krugman in this case. In this OpEd, he forgets that the auto companies operate under a business model where they "build where they sell," mostly due to efficiencies in manufacturing supply chains - NOT because of government run health care.
In the 4 years since he wrote this, Toyota has opened a new plant in San Antonio, TX ('06), begun construction of a plant to build Prius Hybrids in Mississippi ('07), expanded production in Kentucky ('08) and the aforementioned retooling of existing plants in Indiana ('09).
New Toyota plants/investment in Canada since his OpEd = ZERO.
By the way, not only is Toyota investing in the U.S., but so to is Nissan (Mississippi), Hyundai (Alabama, '04), Kia (Georgia, '08), Honda (Indiana, '08) and Volkswagen (Tennessee, '08).
So while Wedum (and others) use the so-called "international competitiveness" argument to support her claim that international investment chases after countries that offer nationalized health care, it's simply not true...companies DO NOT make decisions on where to invest (e.g., locate plants) based on this. Even Christina Romer, who chairs Obama's Council of Economic Advisors has said this argument is "schlocky." Therefore, whatever side you're on of the heath care debate (and I'm on the side of market-based reform), it isn't useful to invoke this argument, particularly in the way that Wedum continues to do.
I had an interesting bill for a medical procedure - insurance paid for it all, but it was a ton of money for what seemed to me like a minor in-patient affair. Did the doctor charge so much because they knew insurance would pay for it? I have to wonder. . . I also have a friend who told a story of having cheaper medical bills by not having insurance: with insurance, it would pay up to a certain amount, but the provider would charge more; without, the provider worked out a price for the procedures which cost less than what the out-of-pocket expenses would've been with insurance. Coincidence? Random? I dunno, but supply and demand seem like they oughtta work here - with supply being the cash insurence will pony up and demand being what the providers charge. If supply is infinite - public insurance would make it so - then where will demand go?
I think the "horror" of 45 million uninsured is somewhere in the same category as the "horror" of minimum-wage earners. Sure, it's a problem, not as big as folks claim, but whatever. I just wonder if the solution would really make it better, or just cost all of us more with no meaningful advantage, but a lot more fraud.
Personally, I think we should just tax people for being fat.
Or have a carbon cap-and-trade arrangement where skinny guys can sell carbon vouchers to fat people.
:)
Well thought out responses all around. I want to address one point by Ben, though, because it rings so true. The current system is incredibly badly flawed, with exactly the kind of market distortions that he specifically raises.
Ironically, Medicare is criticized for being, if anything, too stingy in its reimbursement rates. That's empirical evidence that directly contradicts Ben's theory that a public option would result in unlimited payments.
Here's another example of how corrupt/inefficient our current system is: my mom went in for two small procedures requiring anesthetic. She only received one does of the anesthetic, one visit from the anesthesiologist, etc., as the two procedures were done almost simultaneously.
But her bill--covered by her work insurance at the time--listed two full sets of anesthetic costs (one for each procedure). Out of principle, SHE was the one who protested and got one removed finally, but her insurance was willing to pay it.
The entire health system and private insurance in particular is living proof that normal market mechanisms simply don't work. There's no real-world evidence that a public option would be worse; in fact, what we know so far is that it might be better.
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