Republicans need schooling in both the economics and politics of health reform
Dr. Jennifer Kohn is a Republican from New Jersey, an Associate Professor of Economics and Business, a wife of 20+ years, and the mother of two teenage sons, one with Autism. Prior to entering academia, Jennifer was the Senior Administrator for the Division of Cardiology at New York Presbyterian Hospital-Cornell Medical Center and a Consumer Advocate for the New York City Department of Consumer Affairs and Department of the Public Advocate.
Last week at the International Health Economics Association biennial congress, I taught “The Health Insurance Game” to a room of over 100 health economists. Perhaps I should teach it to Senate Republicans next. The revised Senate health bill is counter to health economics 101, as well as the political lessons of Obamacare. Republicans should scrap the current effort and go back to economic and political basics to forge a new bill through an open process that engages all Americans.
A timely example is the recent Cruz Amendment to the Senate bill. An unprecedented joint statement by the health insurance industry is correct: the Cruz Amendment to allow insurers to offer bare bones insurance plans is unworkable. Why? Simple, in economics it is called adverse selection. Individuals know more about their health and likely future medical care needs than insurers — so-called “information asymmetry” — since individuals and insurers don’t have the same information. Only consumers who think (correctly or not) that they are healthy and unlikely to need much care will buy the stripped-down plans. If healthy consumers buy cheap plans, then insurers offering more coverage need to assume that only sicker people will buy those policies. Prices will skyrocket for individuals with pre-existing conditions because healthier people will not be part of their insurance pools. So-called “cream skimming” of healthy customers and “dumping” of sick ones was so profitable in health insurance because of the extreme skewness of medical care spending, where the top 5% of customers account for nearly 50% of spending.
Acknowledging adverse selection in insurance markets does not mean endorsing Obamacare. Similarly, opposing Obamacare does not mean endorsing the current Republican bills. It was bad enough that the election was a binary choice; policy should not be a binary choice. Republicans can and must do better both on policy and politics. Republicans were rightly enraged with the Democrats’ process on Obamacare without any Republican votes or adequate time to read the behemoth 2000+ page bill. Why do Congressional Republicans think it is right for them to behave the same way? At least the Democrats held hearings and President Obama spent time and political capital talking with the country about health care. The only thing we’ve heard from President Trump are tweeted threats that he’ll be angry if something doesn’t pass this bill. This is not what governing looks like. In addition to playing the Health Insurance Game, senators should watch the old School House Rock video “I’m Just a Bill.”
Americans everywhere should send their best wishes to Senator McCain for a speedy recovery. Despite Trump’s campaign comment implying that he doesn’t like people who get captured, McCain is a true American hero and role model for our children. Beyond that, Republicans should thank McCain for giving us the time to walk away from the political and policy brink. The current Senate Republican bill cannot and should not be passed. Rather, we should return to a more “normal” legislative process as the founders envisioned with open hearings and consensus building. No policy that affects every single American and nearly a fifth of our economy should be passed on a party-line vote.
