Examining the insurer-government bout
The House Judiciary Committee has voted to strip health insurance companies of their ability to get together and fix prices, and the Senate plans to do the same. Commentator Robert Reich examines the skirmish between government and private insurers.
Robert Reich (Robert Reich)
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TEXT OF COMMENTARY
Kai Ryssdal: There was big news on the health-care debate today out of an unlikely source. The House Judiciary Committee has voted to strip health insurance companies of their anti-trust exemption. That is, their ability to get together and fix prices. It's a luxury the industry has enjoyed since the end of the Second World War. There's a plan to do the same thing in the Senate. As commentator Robert Reich is about to explain, the president's been talking about it, too. Health insurance is the latest skirmish in the health-care fight.
ROBERT REICH: Suddenly, it seems, the White House is blasting away at private insurers. Why? Because the insurers broke the deal the White House thought they'd agreed to last January. That deal was simple. Private insurers would support new health-care legislation -- even requiring they take people with pre-existing conditions -- because the insurers would get 25 [million] to 30 million new paying customers, and the profits that go with all these new customers.
But in recent weeks private insurers have done an about-face. They've been running ads questioning the emerging legislation. They've even released a study claiming that a Senate version of health-care reform would cost middle-class consumers a bundle. The easiest explanation for the insurer's about-face is Congress's growing reluctance to require that all Americans buy insurance, and penalize them if they don't -- especially young, healthy adults.
The insurers are right to worry. If the young and healthy don't buy in, the insurers' costs are going to rise. That's because, with no limit on pre-existing conditions, a larger proportion of the insured will be older and sicker.
But if the insurers were in tough competition with each other, they'd have every incentive to find ways to keep prices down even though the population they serve may be older and sicker. They'd use new technologies, minimize unnecessary tests, pay physicians and hospitals for outcomes rather than inputs, and help prevent healthy people from becoming sick.
But the truth is they don't compete intensely in most markets. And they'd rather not, which is why their abrupt about-face on the deal they struck with the White House opens insurers to the biggest threat of all: as the president said a few days ago, removal of the exemption the industry has under federal anti-trust laws.
The president could have gone a step further and committed himself to a public insurance option. That would guarantee more competition, and give the private insurers a better run for their money -- and their profits.
RYSSDAL: Robert Reich is a professor of public policy at the University of California Berkeley.
Comments
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From Oakland, CA, 10/23/2009
Robert Reich's comments threatening the use of anti-trust regulations against the insurance industry may have been well intended, but they are misguided. Dr. Reich assumes that by having more insurance insurance companies in the marketplace, they will have more incentive to drive down health care prices. There simply no evidence to support this assumption.
Quite to the contrary, it is precisely because insurance companies lack pricing power that we are seeing such rapid inflation in health care prices today. As Princeton economics professor Ewe Reinhardt explained last week on “This American Life”, it is the hospital conglomerates and drug companies who have all the negotiating power in the health care industry. The insurance companies are our ombudsmen. They have every incentive today to drive down health care costs, because it means more profit for them. The reason why they haven't done so isn't because they are too big, it is because they are not big enough.
The real solution to the problem is exactly the opposite of what Dr. Reich is proposing. We should not be talking about breaking up insurance companies into smaller, less powerful negotiators, we ought to be talking about how we can give them more negotiating power to fight with health care suppliers. Specifically, we ought to be exempting health insurers from anti-trust regulation regarding collective bargaining. Why can't we have all health care insurers participate in a collective bargaining cooperative that is empowered to negotiate on behalf of all health insurers with health care suppliers – just like Medicare does today?
By creating such a negotiating monopoly on the behalf of US consumers, hospitals and drug companies would be forced to reduce prices, or walk away from the US market. Prices would drop like a rock. All health care consumers would benefit. The only losers would be big drug companies and hospital conglomerates.
And because there would only be one price that all insurers would pay for a specific procedure or drug, insurers would no longer compete on price, they would start competing on their quality of service. Isn't that a win for everyone?
From Buffalo, NY, 10/22/2009
Its plain and simple.
Lets become budget heroes
Cut defence budget and the useless wars, improve our image abroad and internally...
Offer ONE simple plan for all; like most -if not all- other industrial nations do.
No more confusion nor headaches.
Its erroneous to even think its right to profit from the health our people.
It obviously hasnt worked. And it is clear that this cautious flip-flopping blender made-up semi-free-market system (which can't even convince all negotiating parties) wont work either...
One for all!
From San Diego, CA, 10/21/2009
So it is the insurance industry that broke the deal, despite the fact that "The easiest explanation for the insurer's about-face is Congress's growing reluctance to require that all Americans buy insurance, and penalize them if they don't."
I'm sorry, who is it that broke that deal? Let's try it again, Professor Reich, this time with at least a fig-leaf of integrity.
From Chicago, IL, 10/21/2009
No wonder the marketplace fails to provide affordable health coverage to people, the market isn't free. A non-free market is a non-functional one.
Before government injects itself into this market, by creating it's own insurance company, it should try to fix the market and protect consumers from monopolies.
From Philly, PA, 10/21/2009
Where is the Labour Sec. that resigned over cutting welfare payments?
This R.B. Reich wants the poor penalized for not buying in-sham-ance.
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