“Pre-existing Conditions”, it’s the new blue
And so it begins….the Obama administration is ready to venture into hostile territory, the land of health care reform. To be sure, this precocious administration has already seen the likes of financial calamity and rising unemployment and even cast their environmental policy line in the face of both. They have listened to the dying engine rumbles of Detroit and continue to push progressive tax policies in the face of stern opposition. For many presidencies, all of this would have sufficed to “call it a term”, if you will, but for the Obama team, these are all mere fire-starters. Now, they feel prepared to engage the 60 Years War (this one goes back to the FDR-Truman eras). Many have encroached upon this dynamite field before, armed with reasonable valor and intentions, but none came away with much less than a sound drubbing. So, will Obama prove more tactful, more disarming, or more of the same?
As the ballooning budget is becoming evermore disconcerting to the administration, the handful of Congressmen still identifying as Republican, and the general public, the actual “reform” might undergo a metamorphosis into a series of small concessions from all major stakeholders. Perhaps not, but for your weekly dose of skepticism, pick up the recent version of “cap-and-trade”. After its dilution, the only environmental impact that legislation will have is if they manage to send the bill to the paper-recycling bin. There is a critical mass of support (going well beyond the walls of the White House) for the premier element of the Obama plan, the government managed health insurance plan. However, this is also the most contentious reform proposal. I am not fully aware of how they intend to run this scheme (manage asset, equity, and risk portfolios like private insurance companies?), or most importantly, how they plan to garner the necessary marginal support (at least a few fence dwellers will have to take the decisive step). So, in these regards, I will be watching this particular drama in anticipation along with much of the rest of the country (and likely world). But I can make a recommendation for the near-term while they wage battles for the long-term (insurance companies will never go quietly into the night).
One of the strongest criticisms of the private insurance industry is its trepidation vis-a-vis “adverse selection” (the concept that the sickest are the most likely to seek health insurance…and are also the most likely to prove costly for the insurance company and its risk pool). To hedge against these folks, they actively pursue the statistically healthy and try to screen out those with significant pre-existing health problems. Part of the Obama plan’s mission is to offer a health insurance home to these otherwise beneficiary pariahs, as well as attract any others who are looking for a better deal. Assuming the government scheme desires a risk pool, like other insurance schemes, then I suspect they are hoping that enough relatively healthy, inexpensive shoppers cross the line to dilute the intrinsic risk baggage brought with the least healthy. Could certainly work, but there are some hang-ups. For one thing, there will be immense industry push-back (but that is a foregone conclusion, so no need to dwell upon it). But there may also be some financing issues. The private companies work the hardest to attract the most healthy, least risky clientele. Therefore, it might be quite difficult to win enough of this group over, in the near-term. What may happen is the least healthy are the first to join, followed closely by those able to get insurance but just barely due to their not-so-good statistical health (with a significantly marked up premium). This does not make for such a promising risk pool and may be quite expensive in the short run.
To avoid this (again in the near-term, the long-term is for the administration and the public to decide), they may decide to operate in the facet they know best: the Payables Department. If “pre-existing conditions” keep individuals out of private insurance schemes, then make it the ticket into government sponsorship. In this way, it would now be fashionable to divulge such health problems to demonstrate absolute exclusion from private insurance and then qualify for government protection. The government can then negotiate fees for their care with given institutions and providers and pick up the tab. Conversely, if they want such individuals under a traditional insurance plan, they could accept bids from private insurance companies for this group of patients and then top off the beneficiaries’ (the patients) contributions in order to cover the otherwise unaffordable premiums. Either way, the government will write checks, which is what they will ultimately do irrespective of their scheme’s details. This is just one modality that I think could prove useful and not too expensive in the coming few years. Additionally, the insurance industry may even be amenable to it since it does not make them redundant nor coerce them into accepting their least favorite customers. Furthermore, it could help those not-so-healthy individuals with coverage but also high premiums that I mentioned before. Their premiums could actually slide down a bit and/or more of these riskier customers could be offered attractive private plans due to dilution effects: If the riskiest people in the pool are not leaving the insurance company exposed because they are shielded by the government, then the ratio of least risky to risky (but not riskiest) goes up. Meaning the risky (“not-so-healthy”) could enjoy swimming around a safer pool with lower costing flotation devices (premiums).
As I said before, I offer this only in the interest of political expedience. The administration could use something like this, or something fancier if they so choose in the immediate future while still pushing climactic reform for down the road. However, if their fortitude is not in question and their sense of adventure intact, then good luck soldiers….the war is long and the battles many….but then again, perhaps like never before, the troops are in no short supply.
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Michael Richards
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everything obama says comes with an expiration date.
Not sure I completely follow you…..are you implying that he tends to renege on promises? If you are, I would say you have a fair point, but a bit more harsh than I would put it. Alas, the trouble with politicians is that they are politicians…even the good ones. But I (and perhaps other readers) would like it if you would qualify your statement, specifically what do you expect from the Obama team in the next 6-12 months?
We all know Obama is plenty smart, thoughtful, and quite methodical. He is also a politician, and a killer one at that. Instead of attacking his opponents or detractors directly, he somehow makes them self-destruct, with nary a fingerprint, and avoids everything that can be taken as an argument. Witness his team never mentioning “single payer” despite the fact his administration is keenly aware this is what the public wants.
In other words, we have no idea what he’ll do, not because he is without a plan – far from it – but rather he is playing it close to the vest.
Even if Obama were another politician, which he is, the crux of the argument is, as the author mentions, is cost. It does not matter if the government or the private sector writes the checks, the cost is still way too high and we do not have anything to show for it. Who says so? The new Medicare data says so. According to this new article from the New Yorker:
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?currentPage=all
“Nearly thirty per cent of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level in low-cost areas,” Peter Orszag, the President’s budget director, has stated. The Mayo Clinic has world class service, with one of the lowest costs in the country. If we bring costs down to Mayo Clinic levels, budget problems are fixed for 50 years – and promises by politicians would be a thing of the past.
I would agree that Obama is not only a good politician but perhaps one of the best we’ve seen in quite some time. And, to an extent, I can even buy the proposition that he may be sitting on a golden-health reform- egg, of sorts.
Meanwhile, we sit anxious, and he sits with a cool equanimity…just waiting for the optimal moment to unveil his masterpiece. Or….he still may be sifting through the eggs (when it comes to health plans and proposals, there’s no shortage of geese). He still intends to have Congress actively involved in the process. This gives him the addition of political points with the legislature, but will ultimately be a subtraction from whatever he desires as an optimal arrangement (i.e. each Congress man or woman will want and not want things that they feel they can sell to THEIR voters…not all voters). Hopefully, the plus signs are greater than the minus signs (making it the antithesis of the carbon-trade bill that’s been floating around lately). Time will surely tell.
Regarding the second point your bring up (cost), I agree…someone always has to pay the bill, which is the focus of this editorial, like you said. But the bigger question becomes, what EXACTLY is driving up the cost of health care at different places, different times? Some believe there are “efficiencies” to be had in various facets of our chimeric system, but when it comes to actually estimating how much money is to be saved through their elimination…they tend to agree to disagree. Another factor to consider is the American appetite for health care. In comparison to some other places, our health care meals certainly come with more courses (for some people, definitely not all). So, we have to throw “demand” somewhere in our calculation…and then account for a litany of variables (which I won’t list out of sympathy for the readers)….to ultimately lead us to some understanding of what we’re working with and what should be done. Not easy stuff (which is another reason I’m not impatient with the Obama team…out of courtesy we could at least give him the first year of his first term to rectify all of America’s outstanding issues). But yes, when the reform tires hit the pavement, cost will be on all the road signs.
I (and other readers I’m sure) appreciate your excellent comments and chance for more dialogue and learning. And I’m looking forward to taking a peek at the New Yorker link you provided.