Go get some coffee. Regular, not decaf. This is dry reading so if you're looking for something sensational go to the next item.
Largely ignored by the public debate about health care and insurance reform is how the proposed legislation will affect private insurance. (Medicare and Medicaid are examples of public insurance, although private insurance plans intersect with Medicare in a contest to see which can get the other to pay bills. As far as I can determine, Medicaid and private insurance are completely apart because Medicaid beneficiaries have asset restrictions that preclude health insurance.)
DIVISION A of H.R. 3200 -- AFFORDABLE HEALTH CARE CHOICES is not receiving the close scrutiny being directed at DIVISION B -- MEDICARE AND MEDICAID IMPROVEMENTS. This is unfortunate because that first portion of the bill can have a more far-reaching impact on the future of health care delivery and prices than the second.
Open Congress website has a searchable text of the bill with provision for anyone to leave comments a any section. At this writing there is a survey in the sidebar polling whether "I Support this Bill" or "I Oppose this Bill." Only twelve percent of those voting favor the bill, but looking at the actual numbers (160 favor against 1183 opposing) I'm reassured that the totals are so small but frustrated that the poorly informed majority (just read a few of the comments) are well-represented. If this bill fails it will be due to apathy on the part of people who should know better.
Alain C. Enthoven of Stanford University has published widely in the fields of the economics, organization, management, and public policy of health care in the United States and United Kingdom. His recent work is focused on the failings of employment-based health insurance and on proposals for market-based universal health insurance in the U.S. He has served numerous Presidents, including President Lyndon Johnson as Assistant Secretary of Defense for Systems Analysis. In 1977 he designed and proposed Consumer Choice Health Plan, a plan for universal health insurance based on managed competition in the private sector. [Gleaned from here, emphasis added]
Two of the dots that have not been connected in the public debate are how the expense of employer-based health insurance has a crippling impact on competition in the marketplace. Any discussion of the failures of domestic car makers inevitably mentions the horrendous costs of union benefits, much of which involve health care, especially the ongoing expense of employee-paid premiums not only for those working but for retirees and their survivors as well. There was a wry one-liner that said GM was a health care provider that also sold cars.
One of the little-known parts of George Bush's agenda was a proposal to tax the employer-paid portion of company insurance plans. This change in the tax code would make employers more cost conscious of a swelling expense and over time uncouple health insurance from employment altogether. The notion that unemployed people should not have access to health care is not just mean-spirited but economically stupid, as we are finding out the hard way.
The tax preferences for employment-based health insurance produced a higher level of costs, prices, and expenditures than we would have had otherwise. This created winners (and political supporters) among the majority of workers who received additional coverage and the providers who supplied the care. On the other hand, these policies have raised costs for everyone, including the uninsured....Changing the effects of the present tax exclusion can take two forms: eliminating the tax exclusion, or placing a limit on what can be excluded from the employee�s taxable income....The primary rationale for a tax cap is that it would remove the present open-ended incentive for employees, unions, and employers to keep adding tax-free health benefits relative to taxable wages. Primarily, this would give both firms and insurance companies stronger incentives to design more cost-effective policies.[Much more at the link, Tax Reform and Health Insurance by Robert B. Helms (2005), excellent and relevant to the discussion, but not likely to be read by many nor admitted to by any living Republican.]
All that said, here is the point of this post.
H.R. 3200 is being savaged by the insurance industry and other special interests in an attempt to preserve and protect unmolested an important revenue stream, namely the tax dollars received from Medicare. I know why they are fighting changes in Medicare but I haven't figured out why there is no more industry complaining about DIVISION A which targets the industry directly, establishing a network of "exchanges" about which we hear almost nothing. (Well actually they are attacking DIVISION A in a serious way, but not because of the insurance exchange concept. There is another dog in the fight called "Public Option" which they fear will spell the end of private health care insurance altogether. I seriously doubt that any "public option" will ever allow cosmetic surgery or dentistry, expensive elective procedures or keeping brain-dead patients alive indefinitely in a persistent vegetative state, but I could be wrong about that. In any case, it ain't gonna happen any time soon, so with liability insurance, auto, life, and workers comp the private sector retains a generous lot on its plate. )
A Health Insurance Exchange. The new Health Insurance Exchange creates a transparent and functional marketplace for individuals and small employers to comparison shop among private and public insurers. It works with state insurance departments to set and enforce insurance reforms and consumer protections, facilitates enrollment, and administers affordability credits to help low- and middle-income individuals and families purchase insurance. Over time, the Exchange will be opened to additional employers as another choice for covering their employees. States may opt to operate the Exchange in lieu of the national Exchange provided they follow the federal rules. [This is a summary from the above-mentioned Open Congress site. For a good overview of the proposals advanced by H.R. 3200 go there. The next item listed is the famous "Public Option" which is causing such a stir, but that is not the focus of this post.]
Go now to Alain Enthoven's Building a Health Marketplace that Works, an easy to understand explanation of how health insurance exchanges work and why they are needed. He is the dean of the whole health care debate and is held in high esteem by everyone on all sides.
An exchange is a managed marketplace in which individuals can choose among a variety of health plans. Why do we need an exchange? An exchange would help to remedy serious deficiencies in the current health care system:� Lack of consumer choice.
� High costs.
� Unstable premiums.
� Administrative hassle.
A well-designed health insurance exchange would:
� Improve the range of choices for employees of small employers.
� Lower premium costs for small businesses and individuals.
� Spread risks widely over thousands of people to make premium rates more stable and predictable.
� Reduce the burden on small employers of administering health benefits.
Most importantly, a well-designed exchange would be a catalyst for innovation and improvement in affordability, quality and customer service resulting from healthy competition among both insurers and providers.
In order for a health insurance exchange to produce these beneficial results its must have the following attributes:
� Critical mass.
� Protection against adverse selection into the exchange.
� Protection of insurers who enroll high-risk people in the exchange.
� An active role. Providing information to consumers about health plan choices is a basic function of an exchange, but it needs to take a more active role.
� Incentives to encourage healthy competition.
Each of these bullet points is explained more fully at the link.
If the reader gets nothing else from this post, I want him or her to realize that a lot of smart people from all sides of the political arena have been working for years to improve our broken system of health care. Between the Birth of the Blues in the Thirties and now the insurance industry has morphed from a valuable advance in the delivery of good health care into a bloated parasite slowly killing the host on which it feeds.