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Removing Insurance Anti-trust Exemption is Misguided

The Denver Business Journal reports:

A recent salvo against the insurance industry came in a missive from U.S. Rep. Betsy Markey, D-Colorado. From an email her office sent out Monday:

“For too many years the health insurance industry has been allowed to fix prices, collude with each other and wield monopoly control over us without fear of investigation.

“This week I’m introducing a piece of legislation removing the anti-trust exemption from the insurance industry. I’m proud to stand up for the patients against the kind of profiteering the insurance industry has so long enjoyed.”

The Denver Post reported this last week, and I submitted the following letter to the editor:

Instead of scapegoating a narrow antitrust exemption for paltry insurance competition, Representative Betsy Markey should confess to how she and her political allies have prevented competitive insurance markets in the first place.

The Post reports that Markey’s bill would “remove the antitrust exemption now enjoyed by health-insurance companies” (Feb. 5). This is misleading. The exemption, codified by the McCarran-Ferguson Act, applies only to practices constituting “the business of insurance,” that are “regulated by State law” and lack “an agreement to boycott, coerce, or intimidate.” The federal government can already restrict allegedly anti-competitive insurance company practices such as mergers and group boycotts.

Blame politicians for protecting insurers from competition. Because the tax code chains you to our employer’s plans, changing your insurance provider entails changing jobs or paying a stiff tax penalty. Further, politicians forbid consumers from buying more affordable policies available in other states. Repealing these controls would greatly benefit consumers.

For more, see:

Government Accountability Office, Legal Principles Defining the Scope of the Federal Antitrust Exemption for Insurance, March 4, 2005.

Eliminating Antitrust Exemption Will Kill Health Care Competition, Gregory Conko & Kevin Hilferty, Investors Business Daily, Novemer 4 2009,
and a well-referenced report by the same authors: Congressional Misdiagnosis: Why Repealing McCarran-Ferguson Will Harm Competition in Health Insurance Markets.

Health insurers’ ’sins’ don’t justify phony reform

Pajamas Media published my article today:

Health Insurers’ ‘Sins’ Don’t Justify Reform

Are health insurance companies evil? A web search for the phrase turns up almost a million hits. The common reasons for this passionate indictment are insurance company profits, denial of claims, and rescission of policies. But these do not justify the Democrats’ goal of expanding political control of health insurance. Rather, they call attention to existing controls that unfairly advantage insurers and limit competition that would keep insurers honest. They also suggest government’s failure to enforce contracts.

Read the rest of this article at Pajamas Media.

Thanks to Ari Armstrong and Paul Hsieh for their edits and suggestions!

Colorado Legislature Helps Insurers by Mandating Wasteful Preventive Care Coverage

From the Denver Post:

A new state law makes some forms of preventative health care more affordable to people who are insured in Colorado.

The law, which took effect Friday, assures that services such as screenings for breast and cervical cancer, cholesterol levels andcolorectal cancer; childhood immunizations and flu vaccines; and programs to help manage alcohol misuse and quit smoking are available at low cost to clients, even when the insured have not met their deductibles. …

State Rep. Tom Massey, R-Poncha Springs, co- sponsored the bill with Sen. Betty Boyd, D-Lakewood.

“It’s amazing that it went so smoothly,” Massey said. “I’ll credit the fact that the insurers were all very proactive in working through this.”

They realized “the long-term benefits and savings” of catching health problems in the early stages, he said.

Rep. Tom Massey marvels at how “smoothly” the process was, and that the insurers were “proactive.”  Duh!  Insurers benefit from this mandate, as it forces people to buy more expensive policies, whether they want it or not.

The Post’s Colleen O’Connor does not mention that this will likely increase insurance premiums.  It will also increase demand for such services, as they will appear “free” to the patient.  Hence, providers won’t compete much on price and patients will have tests they may not be necessary.

Speaking of which, how useful is preventive care?  Does it have “long-term savings”?  An article in the New England Journal of Medicine concludes:

Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not. Careful analysis of the costs and benefits of specific interventions, rather than broad generalizations, is critical. Such analysis could identify not only cost-saving preventive measures but also preventive measures that deliver substantial health benefits relative to their net costs; this analysis could also identify treatments that are cost-saving or highly efficient (i.e., cost-effective).

Also, as John Goodman notes, an article last year in Health Affairs says:

Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. Medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save. Careful choices about frequency, groups to target, and component costs can increase the likelihood that interventions will be highly cost-effective or even cost-saving.

I bet that if patients are paying for the preventative care, or even non-trivial fraction of it, they will make sure the treatment or test is necessary.  But so long as they’ve prepaid for it through “insurance”, there’s sure to be over-consumption.

Challenging Mandatory Insurance in Court

From the AP:

Opponents of the health care reform bill are not giving up the fight, and some think their last, best hope to halt the legislation lies not in the Capitol but in the court across the street.

A small but vocal contingent of legal scholars and many Republican lawmakers argues the measures passed by both chambers are unconstitutional and will be ruled so by the Supreme Court. Their primary target: the individual mandate, which requires people to get health insurance or pay a financial penalty of at least 2 percent of their income to the government.

Job openings for aspiring health care bureaucrats!

Jim Riemersma of Boulder wrote a clever and disturbingly accurate letter to the editor published in the Daily Camera (Boulder, CO):

For recent University of Colorado graduates seeking employment opportunities, I would urge them to consider a career in health and medical administration. As currently drafted, the 2,000 page health care reform legislation creates more than 25 new agencies, departments and service centers. This represents tens of thousands of new jobs and employment possibilities for those currently seeking meaningful new careers. The bill is actually a more powerful job creation tool than the new $50 billion stimulus package presently being considered by Congress.

Graduates would have an opportunity to train and advance in areas such as oversight, control, intervention and bureaucracy building. Advancement will be unlimited and the opportunity to become a czar, joining several dozen recent appointees, is not out of the question. Our federal government is already the nation’s single largest employer and the newly hired will have a chance to join this cohesive team. In addition to competitive salaries, successful applicants will enjoy lifetime job security, full medical benefits and well-funded retirement plans. Fringe benefits may include international travel for observation and scrutiny of best practices in the European Union government-run plans.

An added attraction is that relocation and a move to the Washington, D.C., area may not be required. Members of Congress are quietly and eagerly vying to have these new offices and facilities located in their districts. CU graduates may have to look no further than Eldorado Springs for a job location. Think of it, pure water, open space, hiking trails, climbing and a Senator’s home right out of your office door. Graduates, opportunity knocks.

For details on the bureaucracy, see the Organizational Chart of the House Democrats’ Health Plan by by Rep. Kevin Brady (R-Texas) and Republican staff of the Joint Economic Committee.  GOP.gov has “a list of all the new boards, bureaucracies, commissions, and programs created in H.R. 3962.”

Also check out the recent USA Today article on government jobs, which reports that

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

Note: Just because I link to a couple of Republican sources does not mean I am a Republican (whatever that actually could mean), or endorse the party.  If they had not done such a dismal job (and supporting big government) when in power, they could not have lost so many seats in Congress and allowed the Democrats to have enough votes to pass their so-called health care “reform” that is really an entrenchment of the status quo’s problems.

(Thanks to Chuck Wright for posting the letter to the editor on the  Colorado Free-Marketers group.)

Colorado Legislators Call for Timeout on New Mandates

Remember, mandated benefits in insurance plans are hidden taxes. They force you to pay for benefits that you may not want or need, and effectively force you to subsidize other people’s insurance. From the Denver Business Journal:

State governments ration “free” cancer screenings

When you empower government to provide “free” health care (paid by others through taxes), government gets to decide when it’s appropriate for you to receive it.  Here’s yet another example from the Associated Press:

…low-income women in at least 20 states are being turned away or put on long waiting lists for free cancer screenings, according to the American Cancer Society’s Cancer Action Network. In the unofficial survey of programs for July 2008 through April 2009, the organization found that state budget strains are forcing some programs to reject people who would otherwise qualify for free mammograms and Pap smears.

…

New York used to screen women of all ages, but this year the budget crunch has forced them to focus on those considered at highest risk and exclude women under 50….

At least 14 states cut budgets for free cancer screenings this year: Colorado, Montana, Illinois, Alabama, Minnesota, Connecticut, South Carolina, Utah, Missouri, Washington, Ohio, Massachusetts, Pennsylvania and Arkansas.

HR 3962 limits competition for dental benefits

Bob Mook of the Denver Business Journal describes how the House Bill (HR3962) would limit competition and force patients to give up their children’ speciality dental plans:

Kate Paul, president and CEO of Delta Dental of Colorado, said that the House’s health care reform proposal would disrupt dental coverage for more than 815,000 Colorado children, limit competition for dental benefits and splinter patient-dentist relationships all over the state.

Paul said while she applauds Congress for tackling health care reform, she takes issue with a provision in the House bill that forces families receiving government subsidies for insurance to purchase children’s dental insurance from medical insurers, not specialty dental insurers like Delta Dental.

Essentially, politicians are saying that they know what’s best for parents when it comes to how they pay for their own children’s dental care.

Why to condemn insurance companies. No, not their profits.

Is the for-profit insurance industry a “predator” that “prevent[s] us from having a decent health care system”?  Letter writer Bruce Robinson says so (Boulder Daily Camera, December 1). He’s partially right. The real predators are politicians who inhibit needed health policy reform.  But insurers are guilty for concealing how they benefit from Congress’s predatory practices, which shield them from competition and accountability to patients.

Predators gain value by using force or threats of force. Politicians prey upon patients who prefer to finance their own medical care in “politically incorrect” ways. As a result, insurers need not compete for your business. Politicians punch you with a tax penalty for buying insurance directly from an insurer instead of through your employer. They prohibit you from buying affordable policies available in other states. They tax you more for paying cash for routine medical expenses rather than buying an expensive health plan with tax-deductible premiums.

Like a true predator, politicians support legislation that backs you into a corner — where as the patient, you are the consumer but not the customer. Hence, neither insurers nor doctors aim to please you. They cater to who pays them. Employers pay the insurers and insurers pay the doctors.

So don’t condemn for-profit insurance.  The profits are “anemic,” reports the AP.  Condemn insurers for supporting an un-free market, where profit is disconnected from pleasing consumers. Only in a free market insurers’ profits would depend on satisfying you, the patient, rather than satisfying employers and politicians.

The above was published in the Daily Camera (Boulder, CO) on December 5, 2009.

I should thank Ari Armstrong for this observation that influenced this article:

In a free market, profit means that customers happily pay for some good or service. It is only outside of that market context that profit is bad. For example, a Mafia boss might “profit” by killing people, or a politician might “profit” by doing favors for special interests.

Also, the title of a recent article by Jacob Sullum’s is an excellent phrase that we should become a meme: The Consumer Is Not the Customer.  It’s a great distinction, as we often use “consumer” and “customer” interchangeably.

See also “Down with the health insurers,” by Tim Carney (author of the just released book Obamanomics)and my blog post from a couple days earlier, How insurance companies can gain credibility.

House Health Care Punishes Medical Device Innovation

Jeff Scialabba at the Ayn Rand Institute has written a two-part blog post on how HR 3962 would punish medical innovation. Part one is about the benefits of medical devices and the cost of bringing them to market. It begins:

America is the world leader in medical device innovation, producing more new medical devices annually than any other nation. Its medical technology industry is responsible for nearly two million jobs and is one bright spot in a health-care system with many flaws. Yet, as I’ll discuss here and in my next post, if the health-care reforms presently advancing through Congress are enacted, the medical technology industry as we know it may be severely cut down.

Read the whole post: Punishing health-care innovation – part 1.  Here’s an excerpt from part 2 on how the legislation would stifle innovation:

The Max Baucus legislation introduced by the Senate Finance Committee would fund the expansion of government health care in part by an imposing industry-wide $40 billion tax on all medical devices costing more than $100 (and a similar tax on insurers, drug manufacturers and medical labs). That would be ruinous to medical progress. At $4 billion per year, that exceeds what the medical technology industry received in venture capital funding in 2007 and represents nearly half of what the entire industry spent on research and development that same year.

To make matters worse, the tax is apportioned on device manufacturers not according to their profits, which would be bad enough, but according to their market share. This would be devastating to companies creating products with a large market share but small margins, such as businesses breaking ground in completely new areas of medicine. By the very nature of what the most innovative companies are doing—creating novel, never-before-imagined products—they have a large if not complete share of an undeveloped, and therefore still unprofitable, market. The tax would crush them. Would we be reaping the benefits of MRI machines and CT scanners today if the reward awaiting their inventors had been a massive tax hit?

Read the whole piece: Punishing health care innovation, part 2.