Thursday, August 20, 2009

You Cannot Keep If You Cannot Get...

...Them Honest
We are talking about the health insurance companies, of course.

Even the Republicans acknowledge that premiums for health insurance, denial of coverage for those covered, and the expansion of the cherry-picking out of people with pre-existing conditions are all out of control. Young people view health insurance as a simple rip-off, in which no care is purchased: you just pay and they take. That's why universal coverage cannot be attained until this mindset is altered, and it must be through a dramatic demonstration of People Power.

The American people are skeptical of the health care reform initiative because they are not convinced that Congress will tame the insurance companies' application of greed to the detriment of our health. That is why the "public option" is so critical: it is the test we require to see if the legislators are sincere about reform.

It is true that a system in which coverage could not be denied for any pre-existing condition, nor excessive premiums imposed, would be a very different situation than the current one, even without a competing public plan. It is difficult for us to believe, though, that such a condition could arise without there being loopholes, caveats, or fine print that would end up playing us for fools--bankrupted, or worse--once again. Our distrust is that deep.

Last Saturday The New York Times ran a fascinating editorial by Richard Thaler, a professor of economics and behavioral science at the University of Chicago. It was fascinating to me because it captured many of the key points I made in my previous posting on this subject: "Is the Public Option Negotiable?" but it got the conclusions terribly wrong.

Points that he correctly addressed include the following:

o) The public option must be required to break even (I'd go further and say it should be required to make a modest profit, thus helping with our future Medicare funding problems);
o) Subsidies for the poor to get insurance can not be given preferentially to the public option program over the private insurers;
o) The public option program can not use the same mandated discounts that Medicare uses (this was a provision the Blue Dogs in the House insisted upon before allowing the House bill to go forward, and its absence would be a deal-killer in trying to get many doctors to participate in the program); and
o) Given these limitations, many will choose to keep the insurance they have now, the conclusion being that the public option, thus limited, would not destroy the private health insurance industry, contrary to the claims of its opponents.

Thaler asks his readers to perform a thought experiment and try to come up with some area in which the government successfully competes with private industry. He discusses the Post Office vs. the private companies UPS and FedEx (not very originally, as Obama had made a similar argument, for reasons I will never quite understand) and concludes that the government can not compete on level terms.

First, I will admit most companies choose UPS or FedEx "when it absolutely, positively has to be there overnight", as the ads say. That's OK if you have a big enough budget, but most people can stand for the package to take a couple of days, and then the Post Office is much cheaper. (At least around here.) Proving what, exactly?

Or take another example, flood insurance for the home. There are actually two, non-competing types of flood insurance: the one for properties that will never be flooded--you can get private insurance for those--and the one for places that have a history of flooding, or are on barrier islands. That one you'll only get through the Federal program--the private guys won't touch it. I don't want to get into the policy implications, which are absolutely awful, but it just goes to show: private insurance is for those who don't need it, or will pay extra. When you're talking about health insurance, those rules don't apply. The flood is coming for all of us, and it's not just the rich who need protection.

OK, Thaler admits, there is Medicare, a Federal program that competes quite successfully, but that has different rules, and the public option will have marketing and administrative costs that are different. Actually, that's where the captive insurance company AIG should come into play, with its huge distribution resources, but I'm not sure the world is ready for that one--an insurance company so much in hock to the government it would betray its own industry lobbying strategy!?

Thaler draws the conclusion that the public option is "neither necessary nor sufficient" for health care reform. He has that half right: it really isn't sufficient, but it is necessary, even if he's correct that not that many will take it up. (Initially, anyway.) He advises Republicans to go along with it, if it is sufficiently limited, and Democrats to let it go: I'd say neither are going to take that advice, which is something he should know with his professed knowledge of economics and behavioral science.

It's the PUBLIC Option, Stupid
This can only be settled in one way: publicly. The six Finance Committee senators have to develop a "fair" framework for a public option to compete, that title of the bill has to come to a vote in the Senate, and we will take names: who's with us, and who's with the insurance companies? I don't think a single Democrat would dare to vote against it, and the sixty votes would be found: Ted Kennedy and Robert Byrd will somehow make it to the floor to vote for that one, and the public option will be renamed the Kennedy-Byrd Plan in honor of their fortitude. It will, eventually, be successful, and the Republicans will be despised, or ignored, for having opposed it so single-mindedly (or nearly so).

I think the Republicans among the Six probably have figured this out, so they have had to dig in their feet to keep anything like a public option coming out of committee. They must not be allowed to succeed.

Like it or not, Obamadmin, this will be the litmus test to see if there is still something that can be called Change We Can Believe In. Or even Change In Which We Can Believe!

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