Markets, competition and health reform
President Barack Obama speaks after last week's historic Senate health reform vote.
Forget all the angry shouting about socialized medicine and government take-overs. Health care reform is really all about markets, competition and choice.
That’s probably not what you’ve heard. But as Congress pushes ahead after last week’s historic Senate vote, it will become increasingly clear.
Details vary in two competing bills being ironed out in the Senate and three in the House. But the general idea behind reform works like this:
Large markets, called insurance exchanges, would be created. They’d be open to small businesses and consumers who now buy insurance for themselves and their families, or those who are currently uninsured.
They would not be open to the majority of Americans who now get coverage through their jobs — more on that in a bit.
The exchanges would allow buyers to shop on the basis of price and quality. That would encourage competition among insurance companies, and that competition should hold down premiums.
Which brings us to the so-called public option. If it’s included in health reform — it’s not in the Senate bill approved in committee last week — it would be one of the insurance providers competing for business in the exchange.
People pushing a public option imagine that it would be among the lowest-cost insurance plans offered, and they may well be right. That would depend on ground rules that haven’t yet been set.
But nobody would be forced to enroll in the public option plan. That’s the way things work now; no one has to buy coverage from the company with the lowest premiums.
Unlike current markets, however, consumers would have choices in the exchange. In many parts of the country, insurance markets are controlled by just one or two big players. The more rural or sparsely populated the state, the fewer insurance companies that operate there.
Market concentration has increased in at least 24 states since 2002. In nine states, a single large insurer controls at least 70 percent of the market. Five big companies control 73 percent of the Missouri market; in Illinois, five companies control 82 percent.
Insurance exchanges aren’t just theory. Several states have established purchasing cooperatives.
Massachusetts created one in 2006. This year, it negotiated 6 percent lower premiums for its 180,000 customers. But cooperatives in Texas, North Carolina, Florida and California all failed. They had initial successes but lacked sufficient market share to keep rates low.
Meanwhile, insurance companies worked to keep small businesses with the youngest and healthiest workers outside the cooperatives, leaving the exchange to cover the sickest and most expensive customers.
As those problems demonstrate, national reforms are unlikely to succeed unless exchanges have the broadest possible enrollment. They should be open to everyone who wants in, not just the smallest employers and the chronically uninsured. They also should be regional or national in scope.
Exchanges must function as more than just a collection point for potential customers.
The Senate reform bills envision them as a kind of electronic Yellow Pages, where small businesses and consumers would shop for coverage on their own.
In Massachusetts, the exchange actively negotiates rates with insurance companies, then allows businesses and individuals to select from a menu of plans.
None of these reforms will work without competition. If it doesn’t exist or doesn’t materialize, a strong public option can and should provide it.
Insurance exchanges will provide a healthy dose of market competition to an industry that badly needs it. We all will benefit from the result.
Well I can put things a bit simple, public option = socialism. If you want competition, means that people have to work. Me paying for healh care for those that do not work is not competition.
My employer was unable to get a better health insurance rate for us by bidding out this year. We have had some luck with it in past fiscal years, and have changed insurance companies several times. This time no one would bid on our group, and we were told that it was because we we shopped around too much. Our group monthly premium rates increased 23% for this year, with a reduction of benefits as icing on the capitalist cake……I hope one of two things happens, either a good public plan becomes available or else I hope the current system collapses under its own bloated weight.
The case for reform is a good one. For one reason or another there are nearly 50 million Americans without health insurance. Few of these people can or will pay cash for medical services. One could attempt to justify denial of medical services to these folks but that would amount to a crime against humanity. Crimes against humanity is a serious charge that truly worries Republicans they are liable for such charges due to their positions regarding alcohol, tobacco, firearms, toxic pollution, crime, and the environment as well as healthcare. They cling to visions of religious reasons for their crimes yet they are guilty all the same. Some say that 18,000 Americans die yearly from denial of services a small number when one considers that 435,000 die yearly from tobacco, 100,000 die yearly from alcohol, several hundred thousand die yearly from preventable cancers caused by toxic pollution, thousands die each year from firearms crimes all of which is supported by the Republican party by its positions on the issues. The sad fact is that either the market has failed to issue affordable services to the American public or the people are at fault due to an assorted variety of reasons all of which involve personal liability as a means of determining fault. Claims of personal liability for a systems’ failure are draconian to say the least. The conservatives having benefitted from the system seek to defend said system even if it means killing those the system failed. This is common in conservative ideaology they blame the individual for the systems discriminatory actions. The answer is reform that includes affordable medical care for all.
We see a lot of mudslinging at insurance companies and their notorious CEO’s. As a former CEO, it always amuses me that people automatically believe these people are corpulent, cigar chomping money grubbers. You have to separate CEO’s, who are managers from Entrepreneurs, who generally aren’t and are usually thrown out of the companies they create when they get big. CEO’s are people are are charged by Boards, Shareholders and the law with squeezing every possible penny out of revenue. They are charged with creating business models that work within the law and right up to the edge of the law to maximize earnings. Folks, if a CEO refuses to have a strategy to exclude pre-existing conditions in the current legal environment, he would be fired by the Board and sued by the shareholders for not taking advantage of the situation. The shareholder lawsuit abuse of the last twenty years has ended the beneficent CEO, like Gussie Busch, Buck Persons, people who put their employees and community first. It isn’t that the current CEOs wouldn’t love to be the same way, the fact is they can’t. If they wasted money on charity, or compassionate policies, if they didn’t adopt these predatory strategies, they would be gone.
American business can adapt. If we changed the rules, the same example will apply. Rule change one is eliminate the pre-existing condition. Rule 2 is tell people who do not buy insurance they don’t have to buy it, but if they don’t their wages will be garnished to pay for their any care they can’t cover. Rule 3. allow interstate sales of coverage. Rule 4. Prohibit onerous pricing for people with pre-exisiting conditions or age. Give the companies these rules and it will take about a week before one of them comes up with a model that will make just as much as they were making before The rest will have to follow or go bankrupt. The free market can work. We have ourselves to blame for setting the rules we have set. Set these rules and get out of the way and free enterprise will work.
Those who continue to wish the destruction of the private health insurance industry should understand that they will be wishing a second stock market crash and another recession. There are 1500 insurance companies, most are public companies and the collective market capitalization is in the hundreds of billions. These stocks are in your 401k and pension funds. If they just all go bankrupt, it will be horrendous. Millions of people would be thrown out of jobs and the recession will deepen. You can’t just wipe out an industry this large without dire consequences.
Health Care reform won’t benefit the shiftless or the illegal immigrant! Look at your family, your friends, neighbors as well as millions of Americans who’ve worked hard all their lives. They lost their benefits after being laid off from jobs they expected to keep until retirement. The small businesses that are hiring can’t afford to offer health care coverage. Some employers who do don’t assign enough hours for workers to qualify. 80% of uninsured Missourians are employed. Those fortunate enough to get jobs with benefits discover that treatments for their hypertension or a child’s asthma are excluded as pre-existing conditions. Who doesn’t know at least one person who has been affected?
ALMON, public option = socialism to the uninformed who are allergic to fact-checking.
A more accurate equation would be –
Public Option = Expanding eligibility for Medicare
Medicare, even with waste and abuse, only spends three (3) cents of every dollar on overhead. Between squandering, inefficiency, advertising and executive bonuses, private insurers’ spend between 30 to 40 cents of every dollar of our premiums for their operations. Does anybody seriously believe the American Medical Association would endorse anything Socialist?
What qualifications does anyone on this editorial board have to attempt to influence major healthcare policy. Are any of you doctors? Have any of you ran health insurance companies or hospitals? Have you served in a senior management capacity in state or federal government?
The answers to all of the questions is no. None of you have any real world experience in anything other than writing snarky editorials based on information given to you from the extreme left.
Stop embarassing yourselves by writing this drivil and turn this part of the newspaper over to something like sports or columns from people who actually know what they’re talking about based on real life experience instead of the alternate universe you goofballs live in.
Oh please, Medicare? Do we really want them deciding what health care we should get? If I am 68 and need a by-pass they will say it cost too much.
E the AMA has not endorsed any bill. It is socialism if those who have pay for those that do not.
No I don’t want eeeeevil government medicare deciding, I’d rather have some fat-cat CEO on a his insurance company private jet deciding what healthcare I get.
In America we have the best healthcare in the world that can cure almost anything…with the exception a pre-existing condition.
So, when the government sets up the marketplace, determines which products can be sold, “negotiates” the price with those who sell, and offers a product provided directly by the government itself, that is what constitutes “markets and competition” in Mr. Carlton’s world. Try this one and see how it fits:
1. The federal government decides that newspapers are vital to an informed society.
2. The federal government determines that in many areas, there is insufficient competition - indeed, in some major metropolitan areas, there’s only one daily newspaper. This results in higher costs, and insufficient diversity of coverage.
3. In order to remedy this situation the federal government establishes “public newspapers” in each major metropolitan area.
4. Because existing newspapers have an established distribution network which would give them an unfair advantage, the feds establish a single distribution network for all newspapers in each area, and prohibit selling of newspapers outside of this network. We’ll call these networks the “newspaper exchange.”
5. In order to ensure that all newspapers provide quality content to their readers, the government will set standards to which all newspapers must adhere. Those who do not meet these standards (yes, we mean you, New York Post) can’t be sold in the newspaper exchange, or anywhere else.
Sound good to you, Mr. Carlton?
PS to crashtest - You’d rather have Russ Carnahan and Lacy Clay determine your benefits than Stephen Hemsley. I respectfully disagree. Mr. Hemsley’s company provided me with excellent, affordable health coverage for about half my life. When my first child was born prematurely, his company paid for weeks of NICU care, at a cost which probably exceeded all the premiums I’d ever paid them, without any dispute or difficulty. I’ve never had a single problem with United Healthcare, and would definitely trust them over Carnahan, Clay, and a building full of bureaucrats.
lol, well crash you make your point very well. The problem is that free market should decide, anytime the govenment gets into it just makes things worse. There are taxes on what you earn and what you spend. ” one for you and 19 for me, be thankful I don’t take it all, becaue I am the tax man ” The Beatles