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!

Connecticut AG Seeks to Obscure Cost of “Public Option”

We need open and strong competition in health care, no doubt. But is getting government into the act of providing insurance the way to do that? A look at Connecticut shows one state in which politicians speak about competition, but prefer to rig the game for government programs.

You might say that Connecticut has a “public option” program of its own, the Charter Oak health plan. Anthem Blue Cross and Blue Shield wants hospitals to give it the lowest prices they give to other insurers.

The lowest-paying insurer?

Charter Oak, whose rates are so low that hospitals would be foolish to take, especially if that meant extending those rates to a very large insurance company.

This logic doesn’t appeal to the state’s chief legal officer. According to the Hartford Courant, “Charter Oak should be an exception because publicly subsidized plans, notably Medicare and Medicaid, typically pay less than commercial insurers, [Attorney General Richard] Blumenthal said.”

So what Blumenthal wants, it appears, is a built-in advantage over Anthem and any other commercial insurer.

Charter Oak wants a 60% discount over what commercial insurance companies pay, and Blumenthal wants to make sure that it keeps that.

If Connecticut wants to subsidize insurance plans for some of its citizens, have at it. At the least, however, it ought to pay hospitals commercial rates. That way, the true cost of the state program would be made more obvious.

The Public Option is Dead, Bad Reforms Aren’t

Is the “public option” dead? Michael F. Cannon thinks so, but calls it a “sideshow that helpfully distracted the Left, the Right, and the mainstream” from the individual mandate. The mandate, he says,  “gives government more (and more immediate) control over Americans’ health care than even the so-called “public option” would.”

Is market power bad for insurance companies?

John Buntin at Governing.com compared health insurance premium increases in various states with the the market concentration among insurers and found … higher concentration meant lower premium increases.

The “Public Option” in Florida’s Homeowners Insurance

When a unit of government creates a business, the business is going to (surprise!) reveal its political roots.

When lawmakers didn’t want Citizens to compete with private companies, they required it to charge high rates. When lawmakers wanted to give relief to hurricane-addled homeowners, they suppressed its rates.But here’s something to think about the next time politicians or customers debate whether premiums are too high or too low: Citizens has never charged the proper rates to insure homes.

The story is about property insurance, but it holds some lessons for health insurance as well.

Skip the Trigger

The Wall Street Journal points out the gimmickry that is a “trigger” for a “public option.” It says, “A provision that would trigger a public plan in certain circumstances has the appealing political benefit of allowing one group to say those circumstances will never occur and the other to say they probably will; both can declare victory.”

The article has an interesting graph, a map of the United States that colors states according to how much competition they have in insurance companies. I’m not sure what the parameters of the map include, but anytime that New York and Kansas are both listed as having a “competitive” market, the words “choice and competition” are meaningless. Ask an insurance broker who deals in multiple states, and you’ll find out that insurance in New York is, for an individual, unaffordable, while for someone in Kansas, it can be quite affordable.

In other words, the important factor is not the number of companies in the market–the factoid that might be used in any “trigger” clause–but how affordable insurance is. And that, in turn, depends in large measure on the regulatory environment of the state. Unlike Kansas, New York has the kind of regulatory restrictions on insurance that congressional Democrats would like to place on the nation.

The Ref’s in the Game

What happens when government “competes” against businesses and gets to be the referee?

The “public option” is not the only poison in the health “reform” bills in Congress; it’s only the most obvious one.

Opt In, Opt Out: A Question for Gubernatorial Candidates

Harry Reid’s state “opt-out” provision for yet another government-run health insurance plan is a wave of the pinky finger to federalist concerns that will surely disappear in conference committee. But it is having political effects of forcing politicians at the state level to respond.

It’s not exactly a fair fight, for as the New York Times reminds us, “States would be given the right to opt out of only the public plan not from the tax increases needed to subsidize coverage for the uninsured” within the new plan.

There’s no surprise, then, that “several state officials said that if Mr. Reid’s proposal carries the day, many governors are likely to accept the new plan rather than incite an ideological battle mirroring the fight in Congress.” Take the money and run, and if it runs out in a few years, well, you’ll be running for the U.S. Senate then, or sitting comfortably on some corporate boards.

One gubernatorial candidate, Bill McCollum of Florida, has two positions in one on the question

[He] said he believed a public option would “put the viability of private health insurance in grave question.” But Mr. McCollum also said he was not prepared to support opting out. He said he feared that once insurers could not deny coverage based on pre-existing conditions — a centerpiece of the Democratic legislation — private insurers might not survive without a government plan to share the riskiest customers.

Collective Neurosis in Maine: Big Government Bad, We Need Gargantuan Government

Gardiner Harris of the New York Times has a balanced feature on Maine’s experience with so-called “universal” health care.  It even cites the Maine Heritage Policy Center’s Tarren R. Bragdon, whose research should have long convinced anybody that government attempts to impose “universal” health coverage are a sure-fire recipe for spiralling costs and reduced coverage.

Unfortunately, Mr. Gardiner gives more than equal time for those who blame Maine’s failures not on government control, but a sick and poor population.  Talk about blaming the victim!  These folks also blame the fact that Maine has a single, dominant, health insurer – without recognizing the government policies that created this dominance, and ignoring Mr. Bragdon’s proposal that the New England states form a compact to allow their residents greater choices.

Unfortunately, these folks don’t recognize their own neurosis (which means doing the same thing again and again, despite the fact that it no longer works).  Big Government in Maine can’t solve the health crisis.  Gargantuan Government from Washington, DC can’t solve it either.

Medicaid Managed Care Vs. The “Public Option”

Last month, Christina Romer, a renowned professor of economics at UC Berkeley, and Chairman of the Council of Economic Advisors, made a presentation at the Center for American Progress in Washington, DC. In response to a question about whether a so-called “public option” for health insurance would increase competition and reduce costs, Professor Romer replied that evidence from California’s Medi-Cal (Medicaid) program suggested that it would. She noted that so-called “Two-Plan” counties (with one commercial plan and one non-profit plan providing Medi-Cal benefits) had achieved this.

The so-called “public option” being considered in the current national debate refers to one or more government bureaucracies that would compete against private insurers to enroll Americans for health benefits. At the time of writing, the version in the latest bill in the House of Representatives (H.R. 3962) looks like Super Medicare: A national program with providers’ reimbursements fixed by the U.S. Secretary of Health & Human Services. The version mooted (but still not well described) by Senate majority leader Harry Reid, looks more like Super Medicaid: A partially federally funded program, which gives states the right to opt out (and presumably losing federal funds as a consequence).

Professor Romer was undoubtedly referring to research by Professor Mark Duggan of the University of Maryland, who examined the experience of Medi-Cal managed care versus traditional Medi-Cal in California’s counties from 1994 to 2000. After experiencing spiraling costs in the traditional Fee-For-Service (FFS) Medi-Cal program, whereby the government paid providers according to a fee schedule, California decided to increase the number of Medi-Cal beneficiaries enrolled in managed-care programs. This meant that the state paid managed-care plans a fixed fee per beneficiary, and the plan took responsibly for providing care.

Professor Romer must have been citing Professor Duggan’s finding that “Two-Plan” counties experienced annual Medi-Cal spending per beneficiary $203 lower than average. However, this is only one result of many specifications in Professor Duggan complex econometric model. Indeed, he concluded that the managed-care plans actually drove up Med-Cal costs, without demonstrating superior health outcomes. Furthermore, this analysis is dated: Recent Medicaid managed-care models are “light years” ahead of early ones.

In any case, using the example of “Two-Plan” counties in Medi-Cal to support a so-called “public option” to reduce peoples’ access to private health insurance is a purebred red herring. First, the “Two Plan” model was one of three managed-care models that were introduced to replace a traditional government monopoly – not to inject a government-favored competitor against private insurance. Thus, the “Two-Plan” model replaced a government monopoly with a duopoly! Second, none of the three Medi-Cal managed-care models really allowed Medi-Cal beneficiaries choice of health plan. Instead, the state and counties decided which managed-care plans were available to them. Third, the “Two-Plan” model does not simply refer to a private plan and a “public plan” dividing the spoils. Rather it refers to a commercial (for-profit) plan and a private non-profit plan replacing a county’s Medi-Cal “public plan.”

Fourth, the two types of managed-care plan that allowed beneficiaries some choice, “Two-Plan” and “Geographic Managed Care” (GMC, which awarded contracts to six or seven plans in those counties), were designed for low-income Medi-Cal beneficiaries, but not the blind, disabled, or aged. The latter categories, of course, have much higher medical costs and would benefit the most from effectively managed care. However, while 77 percent of low-income Medi-Cal beneficiaries were enrolled in managed-care plans, only 15 percent of the blind, disabled, or aged ones were. And most of these were enrolled in counties that had adopted a third model, which required mandatory enrolment of these least fortunate beneficiaries: “County-Organized Health System” (COHS), which replaces traditional Medi-Cal with a single commercial plan. Good grief: They replace a government monopoly with a government-contracted private monopoly and wonder why they don’t get a bang for their buck!

No wonder the literature on Medicaid managed care does not speak with one voice: There are far too many models being used in the different states and counties to come to a general conclusion. Nevertheless, there are enough positive examples to strongly support the idea that counties should be free to adopt managed-care models appropriate to their residents’ needs. That’s why the U.S. Index of Health Ownership, which ranks the states, has two variables measuring states’ initiatives in this direction: A measurement of their use of federal Medicaid waivers from the federal government, and the proportion of the Medicaid population enrolled in managed-care plans.

Although far from perfect, Medicaid managed-care plans are supposed to increase local control of health-care dollars, reduce the costs of government bureaucracy, and afford those Americans who are already dependent on taxpayer-funded medical services a margin of increased choice. The proposed “public option”, on the other hand, is supposed to increase the federal government’s control of health-care dollars, increase government bureaucracy, and reduce choices for Americans who are not already dependent on taxpayer-funded medical services.

It’s a shame that President Obama’s faction cannot, or will not, appreciate the difference.