James Suroweicki’s interesting new column sees community rating — the new law that will require health insurers to cover all comers at the same price regardless of their health risk — as the downfall of the private health insurance industry. Kevin Drum agrees. I don’t.
First, let’s hear James’ argument (via Daily Dish):
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….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.
OK, it’s true that community rating makes large-scale risk evaluation
— or underwriting — unnecessary, but the universal mandate to buy
health care quite obviously strengthens private insurers by adding
millions of subsidized customers. Even as health care reform makes these
companies “unnecessary” it’s also making them stronger. Here’s Kevin:
I agree [with James], and it’s one of the reasons that, warts and all, I support the
current healthcare reform legislation so strongly. My take is that
community rating at the national level can eventually lead to only two
outcomes: (a) the end of private health insurance completely1 or (b) the transformation of private insurers into regulated public utilities … It’s too bad we’ll have to wait so long for this to happen, but today’s
healthcare legislation puts it on the road to inevitability.
I’m not so sure. On the one hand, I similarly see this bill as first
step rather than a final edit of the health care system. On the other
hand, the private insurance industry is very clearly strengthened by
this health care bill. After all, the universal mandate gives them
millions of additional mandatory customers. The absence of any
guaranteed cost control provisions means that premiums aren’t going to
stop growing really really fast — even though the government will be
paying for much of the increase with subsidies to poorer families.
There is nothing in the Senate bill that guarantees a move away from
fee-for-service (although there are some limited efforts to find more
affordable means of providing care), which is the main driver of our
medical inflation.
One of the interesting things about the health care debate last year was
that the Right rallied against the bill on the grounds of radicalism
and socialism when in fact the bill’s principle weakness was its lack of
radicalism. The truly radical ideas where policy wonks on left and
right could get even close to holding hands — e.g.: moving away from employer coverage and
the soaring costs of fee-for-service toward a combination of health
savings accounts, public insurance and all-government coverage for the
poor, the old, and catastrophic care — is light-years away from where
Congress was willing to go.
A while back, I wrote that calling
socialism on this bill was like watching a construction company add a
fourth bedroom to your house and accusing them of arson. I still think that way. I support this
bill, this metaphorical room addition, but eventually we’re going to
have to revisit the fact that the home’s foundation remains flawed.
