I’m so glad the market is taking such good care of us.
Set this Health Insurance Garbage on Fire
Sonya Huber
3011

The ‘market’ never had a chance… the government has mandated that we all must have it, and therefore we can’t use any of the usual levers to influence price and availability of care: we can’t refuse to participate (lowering demand, which lowers price) and we can’t shop elsewhere (raising competition, which lowers price). This post presents quite the straw-man of free-markets, since 12 years ago we still had state-level regulations on who could and couldn’t sell insurance in particular states…which drives down competition and increases costs.

I resonate with your complaints, and your observations that the industry obfuscates the issues and costs. I agree that all of this is a messy, crony-riddled, money-grubbing, exploitative system we’ve arrived at. But, I don’t think just “more regulation” is the right recommendation.

Instead I’d suggest that regulation that actually enforces an open, fair market rather than the back-room dealings we have now, that’d probably get us further:

If the government ensured that any insurer could could offer a plan to anyone in the US as long as it met certain standards of level-of-care provided — with an accrediting agency with teeth that can do audits and review patient complaints to ensure that’s happening — that’d get us somewhere, raising competition.

If the government required that all care providers (doctors/hospitals etc) present all patients and recipients of care with the same publicly available pricing, and cannot negotiate special prices to create the “preferred provider” networks and other rackets we have, then costs of care would stabilize around what the market actually is willing to bear. It would be up to the insurance company and their policy holders to negotiate how much the insurer must pay for the procedure vs. the patient, and that percentage paid, maximum out-of-pocket ceiling, etc… would be based on the policy the patient is enrolled in. Those would all be predetermined by the policy agreed upon, not wrangled about in the actual event of a claim.

If pharmaceuticals were similarly prohibited from negotiating with care providers OR insurers, or offering incentives to either group of ANY kind — other than just giving the stuff away for free — then their products would have to stand on their clinical merits and efficacy, and the degree to which they promote awareness of the drug through avenues of medical knowledge dissemination. They could try to persuade the end consumer to buy their drug over a competitors; and where their drug or device is the only appropriate treatment, they could enjoy a monopoly for a time (because patents run out and new drugs get developed) but market forces would still put a limit on what people (and their insurers) are willing to pay for any treatment. This would keep both insurers and pharmaceuticals from bending and polluting doctor’s influence and relationship with patients in the attempt to hawk their plans and pills.

Then, lastly, if we’re going to mandate healthcare at the governmental level for everyone, then let’s treat it like the tax it actually is. Let it be a percentage of your annual income, which is pooled and then re-allocated by a weighted average. This is then given back to you as a voucher to allocate to the provider of your choice every year based on what they’re willing to guarantee you in exchange for your allocation. Your allocation updates once per year, and you can change provider once per year, which reflects their need to have stability in their policy-holder pool from which to draw claims.

The weighted voucher would be democratizing because really rich people’s voucher might be big, but it wouldn’t be orders of magnitude more than a poor person’s voucher, perhaps from the richest to poorest we would strive for no more than a 100x gap. The voice of each individual would be less polluted by the influence of their money alone.

The caveat to insurers’ participation and receiving anyone’s allocation is that all plans they offer must meet certain minimum criteria for services provided, and providers must also accept everyone who applies for their most basic service level. They’ve got to ensure that for the lowest voucher level, they can still run their business sufficiently profitably. This would require insurers to compete not to increase how much they can charge in premiums, but instead to woo the patients who are going to more substantially support their profitability with better coverage options and service than their competitors.

Also, by having the government be the agent of allocation, the overall pool available would be income-dependent, country-wide. This would tie the success of the insurance industry to the success of the country as a whole. They should want ALL people to be healthy contributors because they’re all going to require coverage, and the insurers will be required to provide it. The higher the median income is, the more money would be available for them in the allocations, and the higher the median allocation would be.

That’s the specific kind of regulation I’d like to see, which would actually push toward a functioning market, rather than toward a state-facilitated oligopoly on healthcare. Ask any economist and they’ll tell you what monopolies and their ilk do in practice to the quality of good or service provided.

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