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A Public Option, At Least
Jul. 30th, 2009 12:23 amI said I'd post more on the healthcare reform debate, so here goes:
The problem with health insurance is that people want insurance against catastrophes that involve a high level of ongoing expense. Which makes sense, it's not like car insurance where the solution if repairs become too expensive is "get a new car". In theory, that's not a problem. Even if such catastrophes cost more than an individual can pay in a lifetime of reasonable premiums, insurance can spread such risks over a large population. Everyone ends up paying slightly more than average, but the protection from being sick and suddenly impoverished is worth the extra cost.
In practice, the problem is that consistently expensive individuals are easily identifiable. And if such individuals are easy to identify, for-profit insurers are motivated to screw them at every possible opportunity (use delaying tactics, twist the contract to say their treatment isn't covered, kick them out because there was a typo in their initial paperwork... now they have to fight a lopsided legal battle while sick and broke and maybe they'll die while some crucial piece of expensive treatment is delayed). Now, some libertarians argue that allowing freer competition between insurers will solve this problem, but they're missing a crucial point. Competition works when businesses want customers and will lower margins to get them. Competition won't work for these customers because they're unprofitable, no one wants them.
(To be fair, maybe increased competition would mean that healthy people would choose the companies that don't go overboard in chasing down freeloaders and treat their customers well even after they develop a chronic illness. Maybe a denial-of-care horror story from an insurer would cause their healthy customers to switch providers en masse, removing the incentive for such shenanigans. Or maybe the healthy customers would act pretty much as they do today, pay their premiums, hunker down, and hope it doesn't happen to them.)
The alternative would be to put healthcare in the hands of an organization with non-economic motivations (perhaps one controlled by some sort of democratic process, the vote of a sick person is as good as that of a healthy one*). Possibly, this could take the form of universal health care, paid for by taxes (leaving individuals no choice of whether or not to pay for it, which is just too bad for would-be freeloaders or the super-rich). It could take the form of just another insurance organization, the so-called "public option". Non-profit insurance has some big advantages in terms of services provided, too, they get to take all that money that would be spent on executive bonuses and shareholder dividends and bureaucrats discovering clever ways to deny people care and spend it on doctors and nurses and medicine and so on.
My worry about the public option is this: It could turn into just another form of lemon socialism, private profits, socialized losses. When people are jettisoned from their health insurance plans for getting expensively sick, they'll turn to the public option instead of fighting their former insurers. Having effectively a two-tiered insurance system (one for the healthy, one for the chronically ill) prevents insurance from effectively doing its function of spreading the risk around.
Still, a public option would be meaningful reform, worth supporting for the following reasons:
1. Would be better for the chronically ill than the status quo.
2. If it was insufficient, that might be a good argument for replacing it with the more heavy-duty single-payer system.
3. If it was sufficiently popular, it might become a de facto single-payer system.
4. The previous point might scare health insurance companies into good behavior, maybe enough to avoid the problem cited above.
Of course, there is a question of whether our democracy is functional enough to pass something with broad popular support over corporate interests. Even the Democrats seem to have things in reverse, they seem to think that we should support them because they haven't passed healthcare reform yet, as opposed to making healthcare reform a prerequisite for supporting those politicians again, ever. (Seriously, a majority in both houses, the presidency, and vast popular support for reform. What more do they need?)
* Not quite true, but hopefully close enough. Unfortunately, electoral reform is even higher on the "won't happen" scale than healthcare reform.
The problem with health insurance is that people want insurance against catastrophes that involve a high level of ongoing expense. Which makes sense, it's not like car insurance where the solution if repairs become too expensive is "get a new car". In theory, that's not a problem. Even if such catastrophes cost more than an individual can pay in a lifetime of reasonable premiums, insurance can spread such risks over a large population. Everyone ends up paying slightly more than average, but the protection from being sick and suddenly impoverished is worth the extra cost.
In practice, the problem is that consistently expensive individuals are easily identifiable. And if such individuals are easy to identify, for-profit insurers are motivated to screw them at every possible opportunity (use delaying tactics, twist the contract to say their treatment isn't covered, kick them out because there was a typo in their initial paperwork... now they have to fight a lopsided legal battle while sick and broke and maybe they'll die while some crucial piece of expensive treatment is delayed). Now, some libertarians argue that allowing freer competition between insurers will solve this problem, but they're missing a crucial point. Competition works when businesses want customers and will lower margins to get them. Competition won't work for these customers because they're unprofitable, no one wants them.
(To be fair, maybe increased competition would mean that healthy people would choose the companies that don't go overboard in chasing down freeloaders and treat their customers well even after they develop a chronic illness. Maybe a denial-of-care horror story from an insurer would cause their healthy customers to switch providers en masse, removing the incentive for such shenanigans. Or maybe the healthy customers would act pretty much as they do today, pay their premiums, hunker down, and hope it doesn't happen to them.)
The alternative would be to put healthcare in the hands of an organization with non-economic motivations (perhaps one controlled by some sort of democratic process, the vote of a sick person is as good as that of a healthy one*). Possibly, this could take the form of universal health care, paid for by taxes (leaving individuals no choice of whether or not to pay for it, which is just too bad for would-be freeloaders or the super-rich). It could take the form of just another insurance organization, the so-called "public option". Non-profit insurance has some big advantages in terms of services provided, too, they get to take all that money that would be spent on executive bonuses and shareholder dividends and bureaucrats discovering clever ways to deny people care and spend it on doctors and nurses and medicine and so on.
My worry about the public option is this: It could turn into just another form of lemon socialism, private profits, socialized losses. When people are jettisoned from their health insurance plans for getting expensively sick, they'll turn to the public option instead of fighting their former insurers. Having effectively a two-tiered insurance system (one for the healthy, one for the chronically ill) prevents insurance from effectively doing its function of spreading the risk around.
Still, a public option would be meaningful reform, worth supporting for the following reasons:
1. Would be better for the chronically ill than the status quo.
2. If it was insufficient, that might be a good argument for replacing it with the more heavy-duty single-payer system.
3. If it was sufficiently popular, it might become a de facto single-payer system.
4. The previous point might scare health insurance companies into good behavior, maybe enough to avoid the problem cited above.
Of course, there is a question of whether our democracy is functional enough to pass something with broad popular support over corporate interests. Even the Democrats seem to have things in reverse, they seem to think that we should support them because they haven't passed healthcare reform yet, as opposed to making healthcare reform a prerequisite for supporting those politicians again, ever. (Seriously, a majority in both houses, the presidency, and vast popular support for reform. What more do they need?)
* Not quite true, but hopefully close enough. Unfortunately, electoral reform is even higher on the "won't happen" scale than healthcare reform.
