This Idea Does Not Resemble German, Swiss, Or Belgian Health Care

The White House/Olympia Snowe/Joe Lieberman/ConservaDem apologists are starting to rally around this new “alternative” to the public option. This “alternative” is nothing at all even like a public option. It is an OPM run exchanges for current, private, non-profit insurance companies.

I suspect we will soon see apologists claiming this idea would resemble the all-payer German, Swiss, Belgian, etc., health care system (much like Conrad tried to do with his co-op proposal). This idea would resemble those systems only in the way a new Porsche Boxster resembles a broken, rusted out, 1984 Toyota Corolla. . . when seen from an airplane. They are roughly the same length and general shape; they both have four wheels and glass windows. The difference is that one is an excellent drive and the other is a rusted pile of metal that just sits there.

The problem is that this OPM exchange compared to other countries health care systems is like a car without an engine, drive shaft, or transmission. It would technically also be a system where people select among several non-profit insurance companies. The problem is that it will lack the tools the make the systems cost effective. As a cost control mechanism, the OPM run FEHB is a failure.

These other countries have much lower health care costs because they have critical components that this OPM exchange plan would lack. To name only a few, there is the issue of captive market, precise plan design, and single reimbursement provider negotiator. Insurance plans will not be forced to only sell plans within the state-based exchanges or the new OPM exchange. There would also not be a large captive market of individuals who would use the OPM exchange. It does not matter what regulations are in the new OPM exchange if the people and insurers in the program end up just bleeding out into other, less-well-regulated markets.

In these other systems, the government very preciously defines what plans most cover, what co-pays can be charged, deductibles, etc. This OPM exchange will probably allow for an extremely confusing array of plan designs that people likely won't understand and are structured to drive away sicker customers. It makes it impossible for regular people to properly shop for the best value with apple-to-apple comparisons; it creates a lot of administrative waste, and encourages insurance plans to do risk selection.

Most importantly, the OPM exchange will lack a single-provider reimbursement rate negotiator. It could be that the OPM directly negotiates all provider reimbursement rates (like Belgium), or the OPM could oversee a regulated cabal of the involved non-profit insurance providers to collectively negotiate a single reimbursement rate for providers and pharmaceuticals (like Switzerland). Only fully integrated, completely owned, in-network HMO plans would be exempt.

Most non-profit insurers lack the clout to get the best rate possible. The current system, with each insurer secretly negotiating with different sets of providers, creates unbelievable administrative waste. Insurers are encouraged to negotiate not for the best rate, but for the best deal to cripple their competition. The system also causes the natural gravitation to insurance monopolies. The bigger the insurance company, the better the rates they can negotiate, which in turn means more customers, that cause the insurer to then get better rates and more customers.

If you truly want competition among non-profit insurance companies that drives down cost, you must create precisely defined benefit packages and have standard reimbursement rates. Only then will you force the insurers to compete on reducing administrative waste and customer service. This set up not only greatly reduces administrative waste, but forces the private, non-profit insurers to slash overhead and run on very tight margins.

Don't be tricked. What they are proposing is only an idea that vaguely resembles a working health insurance system that could rein in cost. This idea is nothing more than a car without an engine. It lacks the serious steps needed to replicate the sickness funds systems in Europe. This is only some slightly better regulations for a small subset of the existing private, non-profit insurance market. From a distance, it looks good, but it will not get the job done. It does not negate the need for a public option, nor will it rein in our out-of-control health care costs.

1 comment:

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