health care reform: scattered, smothered, covered, chopped, and screwed

Timothy Noah of Slate writes that the public option as it stands now — open to anyone who needs it, but without adequate price controls — will either not pass or will fast become a money-losing boondoggle if it does:

Private insurers would engage in aggressive “management of utilization by its enrollees,” i.e., dumping or avoiding the people most likely to need the services of doctors and hospitals, leaving them no place to go except the public option. This would drive down private insurers’ costs and drive up the public option’s. The CBO acknowledges that Pelosi’s public option would have lower administrative expenses than private plans. But because its ability to drive down doctor and hospital fees would be somewhat inhibited by its level-playing-field structure, its cost advantages would be outweighed by its cost disadvantage in serving a disproportionately unwell population….

The logical solution is to revert to a “robust” public option that would align doctor and hospital payments with Medicare, thereby re-establishing the public option’s price advantage. But Pelosi doesn’t have the votes for that, and neither does Reid.

Read the full article here.


Meanwhile, just for fun, here are some links debating who, exactly, is to blame for the ballooning costs of healthcare.

David Goldhill, writing in the Atlantic Monthly, claims it’s simple economics. We don’t know how much health care costs, because the actual prices are hidden from view when you go to the doctor. So consumers tend to overspend. Writing in the same magazine, however, Atul Gawande claims it’s the profit motive: doctors simply make more money prescribing more tests and procedures.

Republicans (and, for that matter, Barack Obama) have made a strong case that it’s malpractice lawsuits that drive up the cost by forcing doctors to overprescribe and overtest in order to cover their asses. But not so fast. Rahul K. Parikh, writing for Salon, says that malpractice insurance and defensive medicine are a negligible portion of health care costs, though he also admits to handing out Tamiflu like candy to appease nervous patients.

Of course, surely a great percentage of the problem lies with insurers, right? They’re greedy bastards who tack huge amounts onto our bill to make obscene profits. That’s not quite right, either, according to Rick Newman of U.S. News and World Report; he makes a fairly convincing case that insurance companies don’t have very large profit margins. On the other hand, he fails to note that insurers have vastly greater overhead than government-run programs like Medicare, in part because they’ve got large and complicated claims departments dedicated, ironically, to keeping costs down. He also doesn’t address the exemption from anti-trust regulations that health insurers have benefited from since 1945.

That loophole will be closed if the House of Representatives gets its way. (Not that that’s easy — Timothy Noah, like many before him, grumbles about the disproportionate influence of the Senate in contentious legislation.) On the other hand, the New York Times reports that when it comes to health care, trust-busting often hurts more than it helps:

In 1993, when President Bill Clinton made the last major effort to overhaul the health care system, the lobby for the drug industry, then known as the Pharmaceutical Manufacturers Association, devised a voluntary cost-control plan. Under it, each drug company offered to limit the annual increase in the average price of its prescription drug products to the increase in the Consumer Price Index.

The Justice Department rejected the proposal, saying it would violate antitrust laws. In blocking the proposal, the department said the Supreme Court had made clear that agreements setting maximum prices were just as illegal as agreements that set minimum ones.

More than ever, I’m glad I’m not in Congress. Good luck, guys!

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