David Frum’s Outline For A Health Care Plan Looks An Awful Lot Like…ObamaCare
I found Frum’s piece via Matt Yglesias who says Frum, “seems to me like a man who’s slouching toward single payer”. To his credit, Matt knows a like minded fellow when he sees one.
Frum basically argues for less consumer choices and greater government regulation (sounds familiar, right?) while demonstrating a total lack of understanding about how the current system actually works.
The basic grammar of the American healthcare system is: sellers have market power, buyers don’t. Insurers, the middlemen, are stronger than buyers but weaker than sellers. So they respond to seller demands by squeezing the buyers: feeding costs through, raising premiums and copays, seizing upon opportunities to withdraw coverage altogether from patients who get sick.
But what if we could build a different marketplace, where the middlemen had more power. Could we induce them to squeeze the sellers instead, forcing costs down through the system?
In FrumWorld insurance companies don’t try and squeeze costs down on the provider side? This will surely comes as news to, well everyone.
First, it seems as if Frum has never heard of “Preferred Provider Organizations”
Perhaps after familiarizing himself with that concept, Frum could call the folks in Alabama and tell them insurance companies don’t “squeeze” providers.
When UAB Health System and UnitedHealthcare parted ways late last year, the split highlighted the ongoing tension between insurance carriers and healthcare providers over reimbursement rates.
Last fall, UAB gave the insurance company 90 days notice that without higher reimbursement rates, it was terminating its contract. Negotiations did not result in a compromise, and the contract terminated at the end of November.
His associate, Certified Coder Lisa Warren, explains that “a doctor can decide he wants to charge $100 for an office visit, but if [an insurance company] decides they’re going to pay $45, then that’s what you get, period. With inflation, the overhead is increasing dramatically, but the payers are not increasing what they’re paying the doctors — in fact, they’re cutting it quite frequently.”
Or maybe he could explain “reality” to doctors who think they need to learn how to effectively bargain with insurance companies.
Does Frum really think it never occurred to executives in the insurance industry to try and save money on payouts to providers? That somehow this potential source of savings and profit was some how just sitting in front of them until they read Frum’s piece and that as we speak they are slapping themselves on the forehead saying, “Why didn’t we think of this sooner?”
Here’s the gist of Frum’s basic ideas:
-“If we had 5 or 6 big insurers operating in a single united marketplace, we’d tilt the balance of market power away from providers.”
-“Instituting a more vigorous approach to regulation at the federal level. Once insurers get bigger and stronger, we need to break them of their current habit of relying on adverse selection to maximize profit. They have to be reoriented to a new mission: haggling with providers over prices.”
-“Generating and publicizing health outcomes quality data….Consumers need to see and know the truth of these claims: “75 year olds who sign up with ACME report greater satisfaction with their sex lives than people who sign with any other insurer.”
In other words, consolidate the industry and regulate the hell out of it at the federal level…in other words, turn health insurance into a federally administered public utility. Where have I heard that idea again? Oh right.
This is somehow supposed to spur innovations and gigantic cost savings. Of course nothing serves as an incentive to drive cost down than government regulations and a built in guarantee of corporate survival no matter what (7 insurance companies nation wide? The term to big to fail comes to mind).
How can anyone think a government created oligarchy that limits competition is going to create nimble and cost sensitive companies?
As for the idea of breaking insurance companies, “of their current habit of relying on adverse selection to maximize profit” what he means there is instituting universal coverage and an individual mandate. “Adverse selection” isn’t “a habit”, it’s the way insurance companies measure risk and charge customers accordingly. If we are going to break that “habit”, then we are going to fundamentally change how insurance companies do business. In order to treat all customers the same, you have to have a large enough pool of healthy people who pay premiums in but don’t pull money out of the system in the form of health care services. The only way to ensure a large enough pool is…a government mandate that forces everyone to buy insurance.
This is ObamaCare, unconstitutional mandate and all.
You would think a self professed conservative like Frum would at least mention consumer choice, increased competition, and personal responsibility which would include ensuring patients have an economic stake in their health care transactions. Yet none of the basic conservative principles make an appearance in Frum’s outline.
Frum rushes to his conclusion in a state of ecstasy over the possibilities of what could be if only people would listen to him! In reality he’s a cocky wide-receiver who thinks he’s home free and celebrates only be tackled short of the end-zone.
And we need a bonfire of all regulations and antitrust restrictions that impede insurers from discovering innovative ways to promote health. Health insurers might want to offer members free gym participation. They might want to offer frequent flyer points for members who lose weight.
Does Frum really not think this is already happening? I’ve seen more than a few commercial for local health insurance companies offering just these kinds of incentives. Are they in violation of some federal laws or is Frum as clueless about this as he is about so much of how the health insurance industry currently works?
Sadly Frum is not done. No he has one more kicker for us to savor.
Their [insurance company’s] job should be to keep us alive and well as long as possible – by any innovative means they can discover.
If Frum or anyone else thinks an insurance or any other company for that matter has any “job” beyond providing services at a price that generates a return on investment, they really haven’t a clue how the world works. And Frum thinks the key to getting a company to care about how long you live is a massive program of government regulation and bureaucracy, then he’s strayed far from conservatism and worse, reality. That’s not the kind of person we should be listening to about reforming health insurance or quite frankly anything.