September 29, 2009
A highly regulated insurance system - already starting

The Senate Finance committee voted again today to reject the public health option. In a prior post I predicted that the Senate Finance health care proposal, even without the public option, would of necessity devolve into a system where insurers will call for price controls and/or subsidies. Now Jonathan Cohn in the New Republic argues that, if the public option is off the table, the same objectives can be met by doing just that -- incorporating extensive price controls and regulations into the system. He would treat private insurers like private utilities. He cites as a favorable example the Netherlands, which has had a mandatory-purchase, insurance-based system in place for three years. The Dutch so far are purportedly pleased with their system, but I would recommend withholding judgment until it has been in place longer. It takes time for the defects of any system to build up. It has taken several decades for year-over-year premium increases in our system to become intolerable. Likewise, waiting lines and restriction or curtailment of services has resulted in growing dissatisfaction in Canada with its system. Time will tell whether the Dutch system turns out to be the best compromise or the worst of all worlds. Because there is little cost sharing in the Dutch system (low co-pays and deductibles), the only way it will be able to hold down costs is by imposing extensive top-down rationing of the kind practiced in Canada and the UK.

Posted by Carter Mackley at September 29, 2009 12:37 PM | Email This
Comments
1. price controls never work.

Posted by: blindman on September 29, 2009 03:24 PM
2. The year-over-year premium increases as well as the Medicare cost increases have been intolerable for decades. We have an institution called the US Senate which is ridiculously poor at passing nearly any major reform that has tough choices, which is why the last time we reformed Medicare we actually significantly added to its costs and gave money away to insurance and pharma companies though deficit spending.

The time to act as long ago -- perhaps as long ago as under Truman or Nixon. Certainly as long ago as Clinton. We're well past the time of sitting and seeing.

Your conclusion, however, is simply wrong: Because there is little cost sharing in the Dutch system (low co-pays and deductibles), the only way it will be able to hold down costs is by imposing extensive top-down rationing of the kind practiced in Canada and the UK.

First, I can't accept your premise that Canada has a rationing model anywhere approaching the UK. Not even close!

France, Switzerland, and Germany all have models with varying degrees of government regulations and private competition. Medicare here is also a government insurance plan. Not a single one of these scenarios has what we'd refer to as rationing.

The UK model of rationing health care may be too impersonal to want to admire or model, but they by far have the cheapest health care in the world. On contrast, the current individual market in the United States is one of the most expensive but past posts of yours have advocated for expanding that individual role.

It's also important to note that any rationing in the Dutch model would be done by private companies. Another insurance company would have a competitive advantage if it didn't ration -- perhaps at the expense of reduced administrative costs or a higher premium. In other words, with free market competition the government would have no role with rationing which is entirely dissimilar from the UK or Canada.

There is a ridiculous over-use of medicine in nearly all nations. This over-utilization does not make healthier people, it just makes countries poorer. We can reduce waste in our system and focus on how effective treatments are long before we even need to think about rationing care. However, when someone claims that linking effectiveness and outcomes to payments is a form of "rationing" then all bets of a rational discussion about health care are off. Some simply want everything -- excess and all -- for a significantly reduced price in the private market. It's not possible.

Posted by: John Jensen on September 29, 2009 04:00 PM
3. I shouldn't have said your conclusion is "wrong." I should have said I disagree with it. Sorry for the assertive language, it is inappropriate.

Posted by: John Jensen on September 29, 2009 04:02 PM
4. Obama admin wants a private system with a small regulatory body that caps provider ROI, similar to the way car insurance works. Even if the providers were allowed zero ROI, the IT middlemen are being positioned to game the system for fees and royalty payments on their intellectual property and services. I don't know how they deal with illegal immigrants with anchor babies, settlements of divorce, child support, alimony, and other legal permutations that mesh with health under a federal mandate.

This mandate thing was Bill Clintons bright idea of imposing involuntary servitude on America. Clinton also kept up the Selective Service System, and it's now becoming apparent why that was done. Clinton wanted to run this through before the public started noticing the immigration problem after NAFTA.

The provider firms will be granted leeway for doing case by case discrimination. For example, some might opt to pay the fine, but then sometime in the future when they do decide to buy coverage, the providers simply dump them into a high risk pool for failing to maintain concurrency.

If your car has GM Onstar, likely another up and coming federal mandate, it puts GM in the position of IT middleman and everything you do in that car can be examined by the provider firms, and GM will probably be empowered to collect fees for the data.

Posted by: donbless on September 29, 2009 07:17 PM
5. If you want a taste of government run healthcare look at this post by a Canadian:

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/10/02/blazing-cat-fur-hippocrates-in-the-hallway.aspx

Of equal interest look at the comment section that is also populated by Canadians'. My favorite in was:

"The system is under-resourced and over-administered. It has driven good doctors and nurses out of the country; but our politicians have always said that we can pick up the slack with foreign physicians and nurses, who cares? So we mine the third world for their human resources.

Unfortunately, the politicians that created this debacle have gone to their retirement with gold-plated pensions that allow them to travel to the US if they want medical care.

My fervent hope is that most of those politicians will die painfully on gurneys in an emergency room hallway of preventable causes while waiting to be admitted to a bed they caused to be cut. What goes around, comes around; the mills of God grind slowly, but they grind exceedingly fine.

What is unfortunate is the number of innocent citizens who will die alongside them."

Posted by: Terry Fowler on October 2, 2009 01:21 PM
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