“Choice and Competition” Are Stupid

The most disappointing part about Obama's willingness to abandon the public option is that he doesn't even seem to understand why progressives think it is so important. A Politico story reports:

Aides said Obama does not plan to make a public option, or government plan, a make-or-break issue when he spells out his specifics. “We have been saying all along that the most important part of this debate is not the public option, but rather ensuring choice and competition,” an aide said. “There are lots of different ways to get there.”

I don't care about “choice and competition” in health care insurance. The American people don't care about more “choice and competition.” What they want is better quality and value in their health insurance. The public option would have guaranteed that everyone at least had the choice of one decent health care plan that was a good value. I think everyone would prefer the choice of only 2-3 great insurance plans rather than the choice of a dozen crappy over-priced plans.

More choice and competition is not a goal in and of itself. It might hopefully one day lead to better quality insurance at a more affordable price. However, the evidence is fairly damning that more competition from private insurance companies will lead to a market dominated by the companies most adept at denying claims, weaseling out of paying providers, and avoiding sicker costumers.

There are some ways (ways that will probably be less successful and less politically stable) to increase quality and/or value without a public option. The government could mandate a minimum medical loss ratio of 92%. The nation could adopt the Swiss system of making all basic health insurance not for profit. Insurance companies could be treated like utilities with yearly audits and regulator pre-approval of all rate increases. A regulator could be given the power to fine an insurance company out of business if it is caught trying to game the system.

If Obama was prepared to abandon the public option in exchange for a combination of these proposals it would be highly disappointing but it would at least be understandable. But abandoning the public option for just more “choice and competition” is just plain stupid. If Obama thinks helping to create new private insurance companies and working to expanding the reach, territory, and power of current for-profit insurance corporations will be an acceptable “compromise” for progressives, he is on a collision course with political disaster. We want better health insurance not more bad options.

The Swiss Amendment

The Swiss Amendment as I define it would force every insurance company to sell “basic qualified” health insurance on a non-profit basis. Premiums collected for basic minimum insurance can't be used for profit or executive pay. At minimum 90% of the premiums collected for basic insurance must be paid out in claims. Insurance companies could sell for-profit “complimentary coverage” (this would cover dental, optics, non-generic non-life saving medication, etc...) only to costumers that it already provides non-profit basic insurance for. Only funds from complimentary coverage could be used for profits or executive pay.

Background

Switzerland has a universal health care system. It uses something similar to a regulated health insurance exchange for people to select a private plan. Insurance is sold using community rates. There is an individual mandate that people must buy basic health insurance (In Switzerland this is called, “social health insurance”). The government provides people with subsidies to help buy private insurance. There is not a government run public option for people to choose. But Switzerland has a very important law that makes their private health insurance system some whate workable. All social health insurance plans must be not profit-making. Additional "complimentary coverage" can be sold to costumer for profit.

Ideally, I do not think the Swiss health care system is one that we should replicate. While Switzerland does have a universal system and pays less than us per capita on health care, it is still one of the most expensive systems in the world. If we are trying to reduce health care spending, copying another very expensive (but much less expensive) system does not seem like a smart move.

I do think that if we are going to have a health care system that relies heavily on private health insurance we do need the copy the Swiss amendment. If the government is going to provide some people money to help afford health insurance, it should subsidize health care, not corporate profits.

If there is a public option the Swiss amendment would be very important but not critical. There would at least be a comparison to help Americans determine if the for-profit insurance companies are ripping off costumers and the government.

Without a public option the Swiss amendment is essential to avoid a complete fiscal disaster. An individual mandate and subsidies based on the average price of the cheapest plans offered in an area would create a perverse incentive for private insurance companies to increase premiums, gauge costumers, and rip off the American taxpayer. Competition would be insufficient to control cost for many years.

Most health insurance markets are highly concentrated and it is very difficult for new insurance companies to expand into new markets. Creating provider networks requires a large costumer base, but costumers won't sign up for a plan unless there is significant provider network. Doctors also won't sign up with insurance plans that don't have customers. It is a classic catch-22. That is why a government backed public option is so important.

If there is not a public option at minimum there must be the Swiss amendment to avoid disaster. There is no ideological reason that Republicans or conservative Democrats should oppose the Swiss amendment. It is unconscionable to force everyone to buy insurance and provide government money to help people afford minimum insurance without at least the Swiss amendment. Without it, health care reform is a massive transfer of money from the taxpayers to health insurance profits and their millionaire executives.