Diamonds are Forever–A Health Reform is Not

One of the most bizarre memes floating around the health reform debate is the idea that any public option will destroy the US private insurance industry. Any plan currently on the table will be shaped by rulemakings for many years, and will also be subject to Congressional interventions. If people start flocking to the public option, private insurers will have plenty of chances to undercut whatever unfair advantages they’ll say it has.

To bring this home, consider the following anecdote in Timothy Noah’s superb article in Slate on the wisdom of learning from the Swiss health care system and Taiwanese reforms of the 1990s. Noah points out that the key Senate Finance Committee “could find no place in this year’s exhaustive health care hearings for a single expert on how other countries achieve better health outcomes for their populations while typically spending, on a per capita basis, half what we do.” Noah profiles the travails of T.R. Reid, who showed his brilliant Frontline Documentary Sick Around the World to members of the Finance Committee in private:

[A]fterward, Sen. Ken Salazar, D-Colo., who has since become interior secretary, noted that other countries saw a conflict between profits and health. How could the United States possibly persuade insurance companies to give up profits? Reid answered that Switzerland, home to many powerful insurance companies, had done it in 1994 when it adopted the Bismarck model [in which doctors, hospitals, and insurers are all private, and insurance is funded jointly by employers and employees . . . but the insurance companies are nonprofit, and coverage, fees, and medical services are all tightly regulated by the state].

The insurers fought it tooth and nail, of course, but now they compete energetically to sign up people for basic care on a nonprofit basis because they constitute a customer base for supplemental insurance that they’re allowed to sell on a for-profit basis. This answer didn’t satisfy [Senate Finance Committee Chair Max] Baucus. “Perhaps you don’t know how much money [U.S. insurers] have,” he told Reid. (Judging from his campaign contributions—since 2005, Aetna alone has given him $45,250—Baucus knows very well.)

In other words, private insurers are hardly powerless in the US. Reform will be codified in a statute, not in some sort of health care constitution. They will have ample opportunities to “fix” it if the public plan option gets out of hand.

Of course, I’m not arguing that they should have this influence–just recognizing that they do.

We might also do well to look to the Dutch model. Russell Shorto’s article on living in the Netherlands in the NYT Magazine is a must-read for several reasons. Against the caricatured vision of sclerotic socialism served up by too many US pundits, Shorto presents a nuanced and largely positive picture of the Dutch system. As he notes,

It is illegal in the current system for an insurance company to refuse to accept a client, or to charge more for a client based on age or health. Where in the United States insurance companies try to wriggle out of covering chronically ill patients, in the Dutch system the government oversees a fund from which insurers that take on more high-cost clients can be compensated. It seems to work. A study by the Commonwealth Fund found that 54 percent of chronically ill patients in the United States avoided some form of medical attention in 2008 because of costs, while only 7 percent of chronically ill people in the Netherlands did so for financial reasons.

The Dutch are free-marketers, but they also have a keen sense of fairness. As Hoogervorst noted, “The average Dutch person finds it completely unacceptable that people with more money would get better health care.”

That egalitarian spirit should be a bigger part of current reform discussions that seem to focus entirely on costs.

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