By Michael Kinsley
Friday, August 7, 2009
You've probably heard by now that Harry and Louise have changed their minds. This fictional couple dreamed up by the health insurance lobby to stop the last attempt at health-care reform -- led by Hillary Clinton in 1993-94 -- is back on the air, declaring that reform is essential. A news release from the insurance lobby tut-tuts skeptics: "Health care reform is far too important to be dragged down by divisive political rhetoric from Washington, D.C." Divisive political rhetoric. Can't have that! (Write and tell them you agree. They're at 601 Pennsylvania Ave. NW, South Building, Suite 500, Washington, D.C., 20004.)
It's almost enough to make you sympathize with House Speaker Nancy Pelosi, who has called the insurers "villains." But Pelosi was not referring to their agit-prop. She was referring to unpopular practices such as turning down customers with "preexisting conditions," charging people more based on their health prospects or refusing to renew them if they get sick. The insurers themselves seem to have decided that this kind of behavior is indeed villainous. In another ad they scold, as if describing some dreadful situation on the moon that they have nothing to do with: "Illness doesn't care where you live -- or if you're already sick -- or if you lose your job. Your health insurance shouldn't either." It shouldn't? So why does it? The industry lobby says, as part of health-care reform, that it will stop caring whether you're already sick. But why wait, now that the scales have fallen from their eyes?
To avoid extinction, and replacement by a single-payer, government-financed system, the insurers say they are now ready to change the rules. (In fact, they can't imagine where those silly old rules came from.) They propose a deal: They will insure all comers without discrimination, if everybody is required to sign up. They figure that the millions of young, healthy people who currently don't carry insurance will balance out the older, sicker people who currently can't get it. All the major variants on reform that Congress is weighing buy into this deal, more or less, with two exceptions: rates may vary based on smoking, because it's voluntary, and aging, because it isn't.
Put simply: These health insurers manage to be phonies even when they're telling the truth. The truth is that there is nothing villainous about a health insurance company preferring to enroll healthier people, as long as the rules allow it to do so. If your business is gambling against your customers -- charging each one a set amount and then paying out an amount that varies depending on how much medical care they need -- you'd be crazy to greet with equal enthusiasm the robust physical fitness freak who jogs into your office and the invalid carried in on a stretcher.
Speaking of your office, have you considered moving it to the second floor of a building with no elevator? That is just one of the less-subtle techniques -- as noted by Harvard health economist Joseph Newhouse during the Hillarycare debate -- for discouraging the wrong kind of customer. It's easier to declare a ban on discrimination against bad health bets than it is to enforce that ban. The regulations against this or that bit of behavior that might discriminate against "preexisting conditions" (or a genetic tendency toward some condition) will be fearsome.
Trying to stop insurance companies from behaving like insurance companies creates other perverse incentives. When people talk about "gold-plated" health care, they mean the insurance, not the care itself. There is only one level of care that everyone wants and that reform is supposed to provide: the best. But there can be differences in how much care insurance plans will pay for. You should not be surprised if people who expect to have more medical expenses are attracted to plans that pay more of your medical expenses.
If there are multiple plans (as some of the reform bills require), healthy customers will drift toward the cheaper plans and sick or potentially sick customers will drift toward expensive ones. This trend will feed on itself. The cheap plans with healthy customers will be able to get even cheaper, while expensive plans, burdened by hypochondriacs in the mood for an MRI body scan as well as with the truly sick, will get pricier. To prevent this "death spiral," some of the reform legislation calls for a sort of tax on lucky insurers, with the money going to the unlucky ones.
If the government requires insurers to accept all customers and charge all the same price, regulates all aspects of their marketing to make sure they aren't discriminating, and then redistributes the profits to make sure that no company gets penalized unfairly, in what sense is the industry still "private"? And as long as the forces inherent in medicine -- such as your natural reluctance to haggle over price with the doctor who will be conducting your brain surgery tomorrow -- haven't disappeared, in what way will health care resemble a "free market"?
But thank goodness we won't have socialized medicine. Thanks, Harry, and thanks, Louise.