By Steven Pearlstein
Wednesday, May 10, 2006
Here they go again.
Congress is in the throes of its biannual attempts to fix a broken health insurance system, a top-priority concern for just about everyone. But rather than actually get something done, legislators have opted again for stalemate and partisan acrimony.
Republicans are engaged in a largely cynical exercise to blame government regulation for everything that's wrong with the insurance market while offering to reward their friends in the small-business lobby with a lucrative new health insurance franchise. The proposal they back requires them to ignore everything they've ever said about federalism and states' rights.
Democrats, meanwhile, are up to their old tricks, pandering to special interests -- this time, the "disease" groups -- and relying on scare tactics meant to convince us we'll all end up with higher premiums for health insurance that covers nothing. And after a century of arguing for a strong federal government, liberal Democrats are suddenly horrified at the idea that the federal government might preempt state regulation.
We'll get to the details in a moment. But the tragedy is that there's actually a deal to be had, if only both sides would accept the idea that half a loaf is better than nothing. There is also a golden opportunity here for George Bush, who -- if he chose to broker such a deal -- could put some life back into his dying presidency.
The legislation, being debated this week in the Senate, is ostensibly designed to allow small-business groups to market nationally what presumably would be lower-cost health plans to member firms. It would override state laws that mandate which services must be covered and how rates must be set. The idea is to give small businesses -- too many of which don't offer employee health insurance because of the high cost -- some of the same advantages big businesses have.
The National Federation of Independent Businesses has been pushing this for years, in part because it sees an opportunity to make money selling insurance to an expanded membership base. The idea has attracted a number of strident opponents:
· State insurance regulators and legislators, whose power would be curtailed;
· Other insurers, who think it unfair that they would have to continue to abide by state mandates while competitors would not;
· Advocates for every disease, and every group of group of medical specialists, who have pushed through dozens of laws in most states requiring specific treatments to be covered by every health plan;
· Liberals, who have pushed through community-rating laws that limit how much more insurers can charge to cover older, sicker employee groups than younger, healthier ones.
None of these objections, however, is insurmountable.
All insurers, for example, could be offered the option of operating under the same federal rules as the business associations, with state regulators deputized to help write and enforce them. The rules could include a trimmed-down set of mandated benefits, including basic preventive care and any treatments required by at least 50 percent of states.
Those rules could also allow some premium variation based on age, gender, geography and past health experience, but only to the degree that the highest premium could be only three or four times more expensive than the lowest-priced one.
Beyond these obvious compromises, there are a number of fresh ideas that could make the small-business insurance market more vibrant and competitive.
Katherine Swartz of Harvard's School of Public Health has proposed a plan for a federal reinsurance program that, in effect, would insure health insurers against some of the risk that they could wind up with one of the 10 percent of Americans who each year account for 70 percent of health expenditures. This would equalize premiums and reduce the incentive for insurers to "cherry-pick" the healthiest employee groups. The reinsurance could be financed through a surtax on premiums.
Michael Porter of Harvard Business School and Elizabeth Olmsted Teisberg of the University of Virginia's Darden School of Business recently proposed a simple rule that would change the way doctors and hospitals compete on the basis of price by requiring them to charge the same to every patient and insurance company, regardless of size. That would eliminate the massive cost-shifting that favors big employers and big insurance companies.
Finally, there is the newly passed Massachusetts health plan, with its requirement that all individuals purchase at least a barebones health insurance policy, with subsidies for low-income workers and modest penalties for employers who don't offer coverage. By getting everyone in the "insurance pool," Massachusetts would eliminate the hidden cross-subsidy in which taxpayers and those with health insurance subsidize the care provided to the uninsured.
These reforms won't provide a cure for cancer, obesity or lumbago. Nor will they do much to slow the rise in prices for drugs and hospital stays. But they almost surely would shrink the unacceptably large number of uninsured Americans by improving the workings of the market for individual and small-business health insurance.
If Ted Kennedy and Republican Gov. Mitt Romney can hammer out a deal for Massachusetts, Ted Kennedy and George Bush could do one for the whole country. The only thing missing is the political will to get it done.
Steven Pearlstein can be reached email@example.com.