Times economic columnist David Leonhardt writes an amazingly perceptive article today about how competition and choice could spark real reform by transforming the health insurance market. A few choice tidbits:
Consider the following health insurance plan.
It refuses to pay for certain medical care and then doesn't offer a clear explanation. It does pay for unhelpful care that ends up raising premiums. Its customer service can be hard to reach or unhelpful. And the people who are covered by this insurer have no choice but to remain with it — or, at best, to choose from one or two other insurers that are about as bad.
In all likelihood, I have just described your insurance plan.
Health insurers often act like monopolies — like a cable company or the Department of Motor Vehicles — because they resemble monopolies. Consumers, instead of being able to choose freely among insurers, are restricted to the plans their employer offers. So insurers are spared the rigors of true competition, and they end up with high costs and spotty service….
Americans give lower marks to their health insurer than they do to their life insurer, their auto insurer or their bank, according to the American Customer Satisfaction Index. Even the Postal Service gets better marks. (Cable companies, however, get worse ones.) No wonder President Obama's favorite villain is health insurers.
You might think, then, that a central goal of health reform would be to offer people more choice. But it isn't.
Leonhardt then points out that both the allegedly reform-minded Democrats and the corporate shill Republicans are protecting the health insurance monopolies. Indeed, Leonhardt adds:
On one hand, big interest groups are lobbying hard to keep some form of the status quo. Insurers don't want people to have more choice. Neither do employers and labor unions, which now control huge piles of money spent on health care. Nor do hospitals and drug makers, which benefit from all the waste now in the system.
So what to do? Leonhardt then looks at various proposals to increase choice and competition, including one by Sen. Ron Wyden (D-Ore.).
In the simplest version, families would receive a voucher worth as much as their employer spends on their health insurance. They would then buy an insurance plan on an "exchange" where insurers would compete for their business. The government would regulate this exchange. Insurers would be required to offer basic benefits, and insurers that attracted a sicker group of patients would be subsidized by those that attracted a healthier group.
The immediate advantage would be that people could choose a plan that fit their own preferences, rather than having to accept a plan chosen by human resources. You would be able to carry your plan from one job to the next — or hold onto it if you found yourself unemployed. You would never have to switch doctors because your employer switched insurance plans.
The longer-term advantage would be that health insurance would become fully subject to the brutal and wonderful forces of the market. Insurers that offered better plans — plans that drew on places like the Mayo Clinic to offer good, lower-cost care — would win more customers.
Can this really be in the New York Times, much less on its front page? Have I somehow entered an alternate universe in which economic sanity reigns? There's more:
Given all the problems with health care — the high costs and decidedly mixed results — how comfortable are you defending the status quo? Why force people into a system you think is better for them?
If people were instead allowed to choose, all but a small percentage might indeed stick with their employer plan. In that case, a Wyden-like proposal wouldn't amount to much. It certainly would not destabilize the employer-provided insurance system.
Then again, if lots of families did switch to a plan on the exchange, the impact would be quite different. With fewer employees signing up for on-the-job insurance, companies might shrink their benefits departments. The number of companies offering insurance would keep dropping. The employer insurance system could begin to crumble.
But wouldn't that be precisely the fate that the system deserved?
Yes. A million times, yes!
See my article "Markets, Not Mandates," for another version of how competition and choice could meet the needs of consumers and drive down health care costs. Leonhardt has redeemed himself from his earlier mangling of the concept of rationing.
Read whole Leonhardt article here.