Faced with opposition among a few key Democrats to creating a new government health plan, the latest bright idea that Senate negotiators have come up with is to have the federal government’s Office of Personnel Management (OPM) run a new national health plan.
But it gets worse. OPM would negotiate terms with private insurers, and then create a network of new non-profit groups that don’t yet exist to run the program.
Presumably these new bureaucracies would replace state insurance commissioners who have decades of experience in regulating the health insurance industry.
And that’s the best of the several ideas taking shape in the Senate. The others would expand Medicare and Medicaid, programs that already are bankrupting the federal government and the states, to cover millions more people. The best doctors and health plans in the country already have said if that happens and they are faced with providing care to millions more patients at payment rates that don’t even cover their costs, they will close their doors.
So much for health reform. Virtually every idea being presented is simply an expansion of government-run health care in a different guise.
Let’s explore this OPM idea. Blue Cross and Blue Shield plans would surely be the dominant players, just as they are in the Federal Employees Health Benefits Program that OPM runs now.
The American Medical Association found in a 2007 study that 94 percent of insurance markets in the United States already are highly concentrated. The Blues have a dominant share of the market, and the latest Senate scheme would boost their monopoly power. Because most are non-profits, they would surely get favored treatment, leading to even less competition than we have today.
In a paper issued this May, the liberal advocacy group, Health Care for America Now (HCAN), argues that health-insurance industry consolidation is largely responsible for rising premium costs. “Contrary to industry assertions, these mergers have undermined market efficiency; premiums have skyrocketed, increasing more than 87 percent, on average, over the past six years.”
Limiting competition further is unlikely to go over well with liberals who already are upset about losing their “robust” public option. In fact, Majority Leader Harry Reid and his team might want to ask how allowing even fewer health-insurance companies is going to reduce costs.
“In Alabama, the biggest insurer holds 89 percent of the statewide market, the highest rate in the nation for a single company,” HCAN writes. “In Hawaii, Rhode Island, Alaska, Vermont, Alabama, Maine, Montana, Wyoming, Arkansas and Iowa, the two largest health insurers control at least 80 percent of the statewide market.”
Sounding like something straight out of a Heritage Foundation paper, HCAN writes, “Without competition among insurers, insurers have no reason to drive costs down, and without additional choices in the marketplace, consumers have no choice but to continue to pay inflated prices.”
We need more, not fewer, companies competing to sell policies. And the for-profit health-insurance companies have shown themselves to be most innovative in responding to consumer demands.
For example, Assurant Health was the first company to sell a Health Savings Account, minutes after the legislation creating the policies went into effect. And the company has created innovative ways to respond to consumer demand, including flexible benefit design and 24-hour response to applications for coverage.
Aetna invested heavily in creating sophisticated decision-support tools for consumers to help them get the best care and the best value for their health-care dollars, driving down premium costs in the process.
For-profit companies also have more of an incentive to watch their bottom lines and ferret out waste and fraud than monopoly players — or the government bureaucracies.
But it’s not only the lack of competition that sends prices up. It’s also the invisibility of the full costs of policies to consumers. Workers with job-based health insurance have no idea how big a bite their health-insurance policies are taking out of their wages.
Between 1999 and 2007, average health insurance premiums increased by 120 percent, while wages grew by only 29 percent.
Left-of-center columnist Ezra Klein writes in today’s Washington Post that rising health insurance costs is the real cause of wage stagnation, arguing that “health-care coverage is not a benefit. It's a wage deduction. When premium costs go up, wages go down.”
Maybe senators should listen to their own advisors in allowing more competition and more price transparency in their health reform plans.
Bottom line: The only way to get health costs down is when consumers are presented with a range of options in a truly competitive marketplace.
Published in National Review Online: Critical Condition, Dec. 8, 2009.