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rant

protection money and health insurance

Well, I was going to call it "protection money", but Robert Reich calls it "hush money" at this post about the way the Obama administration is dealing with health insurers, pharma companies, and doctors. Either way, it comes down to "we'll give you hundreds of billions of taxpayer dollars if you call off your lobbyists and don't shoot down our attempts to somewhat reduce the number of uninsured people."

After making that sweetheart deal, a bunch of insurance companies are still complaining that the Baucus bill doesn't give them quite as much profit growth at taxpayer expense as they were hoping: they've put out a bunch of ads in the past week claiming that the bill will increase individual premiums. (Well of course it will, because it doesn't include a public option or any other serious measures to contain costs.) But what they mean (see a previous Reich post) is that the proposal doesn't force young, healthy people into private insurance as fast as the insurance companies hoped, so they're going to throw a snit-fit and raise everybody's premiums. Which will of course stay high even after the young, healthy people are forced into private insurance, because in many regions there is no competitive health insurance marketplace and hence no reason to lower the premiums on customers who have to buy from you.

And why doesn't the proposal force young, healthy people into private insurance immediately? Because health insurance premiums are too expensive, and people will squawk if they're forced to pay them. Why are health insurance premiums too expensive? Because in many regions there is no competitive health insurance marketplace, and because the proposal doesn't have a public option to create competition and drive down costs. I think this is where we came in....

I sometimes wonder what would have happened if Obama had opened with single-payer. The insurance industry would have spent even more money killing it than (in our reality) they have spent killing the public option. Obama could then have shown his willingness to compromise by settling for "just" a public option. If the insurance and pharma industries continued to whine about this, they would have looked petty and greedy in the court of public opinion. Psychological research shows that when people are given a one-dimensional spectrum of non-trivial choices, they tend to favor a "moderate" one, i.e. one near the middle of the spectrum they were given (no matter how wacky or extreme that spectrum may be). Starting the discussion by taking single-payer off the table moved the spectrum in the wrong direction. You don't compromise to start a negotiation; you compromise to end a negotiation.

On the other hand, if he had started by taking a public option off the table, the insurance and pharma industries would have found something else to whine about, and the resulting "compromise" would be an even bigger taxpayer giveaway to them than we're headed for now.

Comments

Yeah, it's pretty much a disaster. I say socialized medicine for everyone. Thank god I'm not in charge though, as I have no actual idea how in hell to make it work.

One question: I see the argument that competition amongst plans would drive down premiums, but the NPR story I heard this weekend alleged that, in fact, too much competition drives up the costs of medical procedures to insurers. This is because insurers negotiate with hospitals and medical providers to set the amount that the insurer will pay for a given procedure. Large insurers that have thousands of subscribers that could use the hospital can negotiate cheap rates because the hospital needs that insurer's customers. If the market is fragmented into many small insurers, they have no bargaining leverage and thus pay the hospital more, which raises their costs and thus premiums. It seems to me that there are multiple forces acting on premiums, and possibly contradictory ones.
Yes, the point here is that small insurers, or insurers like Medicare that are legally forbidden to use their market clout in this way, have higher costs and therefore higher premiums. A "public option", however, would presumably not be small; whether it would be forbidden to use its market clout is still under intense debate.

One alternative some of the Republinsurancexecutives have suggested is insurance "co-ops", which would be not-for-profit but not run by the government. In fact, such "co-ops" have been tried, and they've never gotten very big, so they've always had this lack of negotiating leverage, which raises their premiums, which helps prevent them from getting very big, which....
"That's a nice health care system you got there. Shame if something happened to it."

Of course I feel like this is what we should be saying *to* the insurance and drug companies...


As you, I was very concerned when the President started out with 'public option' (whatever that meant), because it wasn't far enough in the weeds. Sigh. Don't start at $50 if you want to pay $50, especially if the other side has more money than you.

"Ya know, this is a dangerous neighborhood. Me an' my boys could help make sure nothing happens to it... for a reasonable price...."

health insurance monopoly

Did you know that the health insurance business is one of only two (the other being major league baseball) that are excluded from antitrust laws? That means companies can collude and divvy up the states so that each company has minimal competition within its territory. A senator is proposing legislation to end this exclusion. If any other business sector did what the health insurance sector does (legally) it would in be in big legal trouble. On the bright side, apparently significantly more Americans want the public option today than two months ago. Yah -- Obama, in his naive courtship of bipartisanship gave away too much too early. However, he learns -- so I doubt it will happen again.
Related: I strongly recommend Michael Moore's latest: "Capitalism: A Love Story" to show the frightening extent to which our country has been bought.