Health Care Reform—the Charade of Regulation [View all]

[eridani]

Advocates of HCR claim that a fresh new regulatory regime will control costs to the point where imposing mandates on everyone to buy overpriced underinsurance would be justified. This claim rests mainly on four features—

• An end to refusing policies and price discrimination for people with pre-existing conditions
• An end to recissions of existing policies when people get expensively sick
• Immediate sunshine on price gouging to discourage excessive price increases by insurance companies through review and disclosure of insurance rate increases
• Requiring premium refunds if insurance companies exceed a specified medical loss ratio (MLR)

Unfortunately, none of these proposals, however helpful in and of themselves, will have any effect whatsoever on controlling health care costs.

Ending pre-existing condition discrimination

There is nothing in the legislation to restrict insurance companies from using this as a justification to jack their premiums sky-high for everybody. Older people can be charged 3 times more, and age certainly has to qualify as a pre-existing condition. Also, there is no mention of what recourse you have should you be turned down for, say, having a bad credit record.

Ending recissions

That would be nice, and I really wish that the legislation as written actually said that. What it does say is that recissions will be eliminated except in the case of fraud. Can somebody please explain why the insurance companies will not be able to drive a whole fleet of very large trucks through that loophole? And there is no mention of what happens when you get dropped because you are unable to afford the premium one month.

Another huge problem is that it leaves regulation to the states, which for all practical purposes is not regulation at all. California has a law against recissions already, but they are not enforcing it at the moment because they can’t afford to.

The sunshine provision

It’s astonishing that anyone could call this regulation and still keep a straight face. What it amounts to is a list of very naughty boys and girls. And they’d better watch out, because if they don’t straighten up and fly right, they’re going to wind up on that very same list again next year.

Medical loss ratio requirements

Unfortunately, 15 states either have these requirements now or have had them in the past(1), and they have not had even the slightest effect on escalating health care costs. Of course it’s helpful for some people to get premium rebates, but despite that, the cost of premiums keeps on skyrocketing, 45,000 a year keep dying for lack of the money to pay for health care, and 300,000+ keep going bankrupt due to medical bills (the majority of whom had insurance that was mostly better than the strictly catastrophic "bronze" underinsurance that will be mandated under “reform”).

Locking the barn door after the horse gets away is not regulation in any sense of the word, as demonstrated by the following real life example.

Dear Mr. and Mrs. Sarkisian:

We were sorry to hear that your daughter Nataline died because CIGNA denied your claim for her liver transplant. However, you will be glad to know that we have analyzed CIGNA’s medical loss ratio and that all of their customers are entitled to premium refunds. Isn’t that wonderful?

Yours truly,
Dr. Pangloss

Another possibility—allowing lawsuits against insurance companies for claims denial

HCR does not have any restrictions whatsoever against denials of particular claims, and it is this practice that is a major cause of so many deaths and bankruptcies. People are not allowed to sue companies for denying claims. Representative Jim McDermott (WA-07) is drafting an amendment which would allow such lawsuits. I think it’s a very good idea, but it suffers from the same problem as attempting regulation by mandating specific medical loss ratios—the remedy comes too late to do any good. Mr. and Mrs. Sarkisian would undoubtedly appreciate the money if they sued CIGNA and won, but they would surely prefer that their daughter had gotten the treatment she needed in the first place.

In addition, legal remedies generally increase health care costs. This is already true of medical malpractice lawsuits (even though the cost increases as a cause of our high per capita medical costs are vastly overrated by the tort reform crowd). In no other developed country do people constantly make use of the legal system to get the money needed to pay for the ongoing medical bills necessitated by poor medical outcomes. Note that this motivation to sue is exactly the same regardless of whether or not such outcomes were caused by actual malpractice. The reason for this is that those extra costs are automatically paid by societies which guarantee health care as a right, and therefore there is no need for anyone to initiate a tort lawsuit in order get the money to pay them.

(One of the reasons that we lead the developed world in medical error rates(2) is that private employer-based insurers are constantly forcing people to change providers with their endlessly mutating preferred provider lists. Nothing in the proposed legislation deals with this issue.)

Real regulation

Because the largest risk pools will always be the cheapest, health insurance will always trend toward being a monopoly. Wherever natural monopolies exist, society absolutely must regulate them so that citizens do not get ripped off for huge sums of money. We learned this more than a hundred years ago with respect to electrical power grids. At that time, many publicly owned utilities were established and the remainder were put under strict regulation by public utility commissions. When historical amnesia finally set in during the last years of the 20th century, deregulation insured that Enron and Reliant were able to rob energy consumers on the west coast of billions of dollars during a fake “energy crisis”. The corporate-controlled media rarely pointed out that cities with municipally owned utilities didn’t have any brownouts during the “crisis”. All American health insurance companies are Enron. Just as Enron withheld energy from the market to drive up prices and profits, so do insurance companies deny care in order to increase profits.

There is no such thing as health care reform without strict regulation of health care costs. It can be done by outright government ownership of the health care delivery system (Britain, Scandinavia), government monopoly of health insurance (Canada, Taiwan), or strict government regulation of private insurance (the Netherlands, France, Japan). The third method can certainly work as well as the first two in practice—too bad that nothing in current “reform” comes remotely close to that.

Real regulation of mandated private insurance in the Netherlands results in policies that cost 100 euros/month/adult ($95-$145 depending on exchange rates), with no deductibles, no co-pays and no age rating. In addition, many countries regulating private health insurance also directly control provider prices. In 1996, my husband got an emergency root canal in the Netherlands for 100 guilders, or $25 American. In Japan, an overnight hospital stay costs the equivalent of $20. And yes indeed, the number of zeros in those prices are perfectly correct, though they could probably stand to be raised and in fact may have been by now.


(1)http://www.familiesusa.org/assets/pdfs/medical-loss-ratio.pdf
(2) http://www.truthout.org/111908HA