Insurance reform is OK but we don’t need health care reform.
Conservative opponents of health care reform repeat this refrain in the blogosphere and the news.
Single payer advocates, on the other hand, insist they want health care reform, not insurance reform.
What is the difference? Are they mutually exclusive?
Conservatives and liberals seem to agree on the need to eliminate what it is referred to as medical underwriting by insurance companies – denying health insurance to sick people. This is called guaranteed issue. Insurance companies must accept anyone who applies.
Conservatives, however, fall back on their knee jerk ideology when they resist the logical counterpart to guaranteed issue – coverage mandates.
If insurance is voluntary, consumers will weigh their decision to purchase health insurance against other sometimes more immediate economic needs. If they perceive that the cost of health insurance exceeds the likely return, they are more likely to defer the purchase. Those who will buy health insurance are those who think they are likely to need it – sick people.
It is a basic principle of insurance that the cost of claims is shared by those who incurred no lost. Fire damage to a home is paid by those who had no fire. The cost of an auto accident is absorbed by safe drivers. So in a voluntary market, why should any entity motivated by that driving force of the free market, self interest, sell insurance only to sick people?
Government has to intervene if health care for sick people is a societal objective. Our society agrees that health care for the aged and the indigent is a societal objective. They seem to have a harder time reaching the same conclusion for working age people and their children.
Mandate health insurance
If insurance is to be the mechanism for paying for health care (and that can be debated), then for insurance to achieve its goal of spreading risk, health insurance must be mandated. This is not a dramatic departure from current policy. There are a combination of market forces and mandates that require homeowners insurance, automobile insurance, workers’ compensation insurance.
In the health insurance market, most people are covered in group plans that require certain participation levels – a kind of mandate. But as the cost of health care escalates and insurance becomes more unaffordable, healthier people who have the option, elect no coverage. This is an unsustainable death spiral for health insurance.
Therefore, the most minimal health insurance reform is a mandate coupled with guaranteed issue.
There also appears to be consensus around the concept of an “insurance exchange”. This is a mechanism designed to facilitate the exchange of information about available health insurance options – one stop shopping for health insurance. Consumers could compare the price, benefit design, and networks of competing providers; learn what public subsidies might be available; and offer some mechanism for comparing health insurance plans.
Risk pooling can also help insurance companies. Currently states describe their mechanism to provide insurance for the “uninsurable” as risk pooling. But in a market with guaranteed issue, risk pooling becomes a mechanism for equalizing the risk exposure among insurance carriers – technically reinsurance.
Another concept is already in place in the market for Medigap insurance – standard benefit designs. Standardizing benefit designs would make comparisons among plans simpler. Non-standard benefit designs would be so designated.
Insurance reform would reform the way consumers access a mechanism to pay for health care.
Health care reform
Health care reform affects the way doctors, hospitals and others deliver care.
Health care reform is focused on the outcomes from the delivery of care; whereas insurance reform is focused on delivering patients and money into the system.
The United States does not rank in the top twenty for life expectancy or infant mortality. The current system places greater emphasis on expensive acute hospital care than on primary and preventive care. Health care reform proposals offer delivery models that balance curative and preventive care. The promise is a more rational and accountable system. The use words like community based care, medical homes, integrated care. They place greater emphasis on primary care, preventative care and chronic condition management.
In between insurance reform and delivery system reform is payment reform. The way to change the delivery of care is to change the way health care is paid for. The current fee for service reimbursement creates incentives to maximize revenue. Some argue that detracts from maximizing health care outcomes.
There are those who argue that one is more important than the other; that one can occur without the other. But changing the delivery of health care is necessary to “bend the long term cost curve”.
But without reform to the system for delivering patients and money to those who deliver health care, health care delivery system reform will not be possible.
But insurance reform is not the only way to reform the patient delivery and financing systems.