Harold Pollack is a public health policy researcher at the University of Chicago's School of Social Service Administration, where he is faculty chair of the Center for Health Administration Studies. He is a regular contributor to The Treatment.
I am writing this while listening to one of those 3-hour conferences with health policy experts who are brainstorming how to make private health insurance markets work as well as humanly possible, on the provisional assumption that there is no (or a very weak) public plan.
I admit that I'm going hypoxic on this marathon call. One thing does cut through the mental haze: Wow we need a public plan to have any prayer of making health reform work. Going down the list of options to control costs and to prevent discrimination based on health status, virtually every available policy lever is either constrained or has not been seriously road-tested in the management of 1/6 of the U.S. economy.
On the cost side, we had a lengthy conversation about the ticklish problem of controlling costs and reimbursement rates when specific hospitals and provider organizations have great market power in particular communities. Of course, some of these providers negotiate with payers that enjoy similar market concentration. Despite the incredible complication of the medical marketplace, it took maybe 30 seconds to realize that blunderbuss antitrust policies are inadequate to the task, and that the political economy that surrounds such things is not promising in constraining academic medical centers and other valued social institutions that sometimes overcharge
The conversation then shifted to issues of adverse selection and insurer cream-skimming. Again the issues went deeply eye-glazing pretty fast. Yet the upshot was another soundbite: Insurers and insurance agents have so many available tools to attract healthy consumers and to discourage sicker ones. Meanwhile, federal and state regulators have so few warm bodies to effectively monitor and to address these issues across thousands of insurance plans and millions of consumers. If policies were more standardized and transparent, Consumer Reports, AARP, and others would have an easier time advising people to make sensible choices, and public regulators would have a better shot at doing their job. I would still hate to count on this if I had a costly health condition.
Three ironies jump out.
First, a strong public plan would allow a more streamlined, less micro-managed health insurance industry than we are otherwise likely to get. A public plan has the market power for hard price bargaining in concentrated local markets that reduces the need for more awkward and uncertain cost-control measures. With or without such bargaining power, the availability of a (properly risk-adjusted) public plan reduces the need for intricate micromanagement to protect patients who most need help.
Second, if we want a healthy market for health insurance and care, we need a bureaucracy that can properly regulate, curb industry excesses, tackle complex issues such as risk-adjustment, support comparative effectiveness research, and more.
Perhaps the greatest irony of all: Strong government oversight is essential to give private insurers the public legitimacy they now so sorely lack. When one looks at the detailed mechanics of our existing health financing system, it is not politically or financially sustainable. So private insurers who want to avoid being swallowed by a single-payer system had better hope for successful health reform.