http://www.newyorker.com/talk/financial/2010/01/04/100104ta_talk_surowieckiFifth Wheel
by James Surowiecki January 4, 2010
Reforming America’s health-insurance system was never going to be an easy task, given people’s natural aversion to change (not to mention Republicans’ aversion to doing anything that might help Barack Obama). But what’s made the task even more difficult is that American politicians—as well as American voters—have a confused, and often contradictory, set of beliefs about how health insurance should work. The wayward, patchwork plan that we seem likely to end up with is probably a good reflection of the wayward, patchwork opinions that most legislators have on the subject.
Consider the Genetic Information Nondiscrimination Act, which went into effect in November. The law prohibits health insurers from using genetic information to set rates or deny coverage. At the moment, genetic testing for disease is still relatively crude and uncommon. That will change in the future. People who know that they are much more likely to get sick, and therefore much more likely to run up huge medical bills, will be able to get insurance at the same price as those with less risky genetic profiles. Everyone, it turns out, supports this: the bill passed unanimously in the Senate, and nearly so in the House.
Politicians on both sides of the aisle overwhelmingly believe, likewise, that insurance companies should be prohibited from taking preëxisting conditions into account when setting prices or extending coverage. Both the House and the Senate reform bills include language banning this. Even Republicans have been vehement on the subject: Senator Tom Coburn, of Oklahoma, has said that “everyone agrees” that we need to eliminate the use of preëxisting conditions, while Senator Chuck Grassley, of Iowa, declared that insurers have to be barred from “charging higher premiums to people who are sick.” The insurance companies themselves have accepted that the only factors they’ll be allowed to take into account in setting prices will be age, region, and whether or not someone smokes. The general consensus, then, is that even if you’re already sick, and guaranteed to run up huge medical bills in the future, you should be able to get health insurance at the same price as someone your age who’s perfectly healthy. Economists have a name for this: “community rating.” And the fact that it has such strong backing in Washington is heartening. Americans, and American politicians, have decided that people should have guaranteed access to insurance, and that they shouldn’t have to worry about losing it just because they get laid off or fall ill.
So where’s the contradiction? Well, Congress’s support for community rating and universal access doesn’t fit well with its insistence that health-care reform must rely on private insurance companies. After all, measuring risk, and setting prices accordingly, is the raison d’être of a health-insurance company.
The way individual insurance works now, risk and price are linked. If you’re a triathlete with no history of cancer in your family, you’re a reasonably good risk, and so you can get an affordable policy that will protect you against unforeseen disaster; if you’re overweight with high blood pressure and a history of heart problems, your risk of becoming seriously ill is substantial, and therefore private insurers will either charge you high premiums or not offer you coverage at all. This kind of risk evaluation—what’s called “medical underwriting”—is fundamental to the insurance business. But it is precisely what all the new reform plans will ban. Congress is effectively making private insurers unnecessary, yet continuing to insist that we can’t do without them.The truth is that we could do just fine without them: an insurance system with community rating and universal access has no need of private insurers. In fact, the U.S. already has such a system: it’s known as Medicare. In most areas, it’s true, private companies do a better job of managing costs and providing services than the government does. But not when it comes to health care: over the past decade, Medicare’s spending has risen more slowly than that of private insurers. A single-payer system also has the advantage of spreading risk across the biggest patient pool possible. So if you want to make health insurance available to everyone, regardless of risk, the most sensible solution would be to expand Medicare to everyone. That’s not going to happen.
The fear of government-run health care, the power of vested interests, and the difficulty of completely overhauling the system have made the single-payer solution a bridge too far for Washington, and for much of the public as well. (Support for a single-payer system hovers around fifty per cent.) That’s why the current reform plans rely instead on a mishmash of regulations, national exchanges, and subsidies. Instead of replacing private insurance companies, the proposed reforms would, in theory, turn them into something like public utilities. That’s how it works in the Netherlands and Switzerland, with reasonably good results.One could recoil in disgust at the inefficiency and incoherence of the process—at the fact that private insurers will continue to make billions a year providing services the government has shown, via Medicare, that it can provide on its own. But, messy as the reform plans are, they can still dramatically transform the system for the good.
Reform would guarantee that tens of millions of people who don’t have insurance will get it, and that people who have insurance now won’t have to worry about losing it. And, by writing community rating and universal access into law, Congress will effectively be committing itself to the idea that health care, regardless of risk, is a right. If a little incoherence is the price of that deal, it’s worth paying. ♦Read more:
http://www.newyorker.com/talk/financial/2010/01/04/100104ta_talk_surowiecki#ixzz0b1uY70wf
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