Saturday, October 31, 2009

WSJ: Republicans Hit Democrats' Health-Care Plan

The Wall Street Journal has coverage of Republican criticism of the House healthcare plan.

The top House Republican, Rep. John Boehner of Ohio, outlined his party's alternative in the GOP's weekly radio and Internet address Saturday. Democratic proposals are gaining momentum in Congress and Republicans are scrambling for support to try to block them.


Mr. Boehner said there is a choice to be made. "We can come together to implement smart, fiscally responsible reforms to improve Americans' health care," he said, "or we can recklessly pursue this government takeover that creates far more problems than it solves.''

Mr. Boehner said a number of steps could be taken, such as letting people buy health insurance across state lines, allowing people and organizations to pool together to buy insurance for lower prices and reining in malpractice lawsuits.

The first of Mr. Boehner's points, allowing cross-state purchase of insurance, has been a Republican obsession for some time. In the U.S., health insurance must conform to the regulations imposed by each state.

First, states may mandate that certain procedures be covered in the individual insurance market, like mammographies or infertility treatments. The Kaiser Foundation tabulates the states that require coverage of infertility treatment here. It's important to note that many of these procedures are covered in group insurance. Health reform will develop a minimum set of benefits that must be covered. Without a well-designed minimum set of benefits, insurance companies would start excluding treatments in a race to the bottom. It is true that requiring coverage of rarely-used benefits will raise prices for everyone else. However, the cost may not be all that high.

Second, states may mandate rating rules. Some states require community rating (everyone pays the same price) and guaranteed issue. In the absence of a mandate to buy insurance, people are likely to wait until they get sick before buying insurance, thus driving up the cost in the individual market. This is probably the issue that the Republicans are more concerned about. However, in the absence of other reforms, allowing cross-state purchase of insurance could kick off a race to the bottom in terms of rating rules. Delaware has very low corporate taxes and less stringent regulation, and companies flock to incorporate there. Allowing the same thing to happen in health insurance would be a disaster. Massachusetts requires community rating and guaranteed issue, and it mandates that insurance plans cover at least 65% (I think) of expected expenses. If residents there could purchase policies elsewhere, the ones most likely to do so are young and healthy people who figure they need only catastrophic coverage. That would take healthy people out of their individual market, and it would drive costs up for everyone.

In addition, when an insurer sells policies in a state, it prices them according to local costs and the practice patterns of local physicians. Physicians in the Midwest and the mountain states tend to have more conservative practice patterns. California, I think, has relatively conservative practice patterns but the state is quite expensive to live in. If an insurer in Montana could sell to people in New Jersey (which is an expensive state to live in and has too many hospitals), it would have to price its policies according to local costs. In the end, they wouldn't be as cheap as Mr. Boehner thinks.

Last, state insurance regulators oversee the behavior of all insurance companies doing business in the state. If you think your health insurer has unfairly denied a treatment, you can appeal to your insurance commissioner. If you allowed cross-state purchase, it could be harder for consumers to appeal to a regulator in another state. The Republicans don't seem to have addressed that point yet.

The second and third of Mr. Boehner's points are not without validity. However, malpractice reform cannot undermine consumers' ability to seek redress from doctors; the unfortunate reality is that clinicians today have generally covered up their mistakes. Allowing association health plans is probably not worth Congress' energy. The reality in today's market is that the most sticky 'glue' in health insurance is working at a (preferably large) company. People attempt to get insurance through membership associations (e.g. University of Michigan Alumni) more as a last resort, so these groups are a much less sticky 'glue', and so there is more adverse selection than if you were purchasing insurance through an employer. Insurance purchased through membership associations is either less comprehensive, more expensive for the same coverage, or both.

The Republicans in Congress seem to think that removing regulations will somehow solve the U.S.' health care problems. They are completely and totally wrong on that score. In contrast, the recommendation of the Bipartisan Policy Center, which is a non-Congressional organization staffed by several former Senators and other policy makers, has the same insurance regulation reforms as the Democratic health reform bills. The minority of conservatives who are not willing to acknowledge reality make it much harder for everyone to cooperate. I would urge the Republicans in Congress to use the Bipartisan Policy Center's recommendations as their position on health reform; their current prescriptions completely lack credibility and will either make no difference or will actually make things worse.

No comments: