Private markets for health
insurance pose a structural problem, and Obamacare can’t fix it.
BY Robert Reich
This story first appeared at RoberReich.org
The best argument for a
single-payer health plan is the recent decision by giant health insurer Aetna
to bail out next year from 11 of the 15 states where it sells Obamacare plans.
Aetna’s decision follows similar moves by UnitedHealth Group, the nation’s
largest health insurer, and by Humana, another one of the giants.
All claim they’re not making
enough money because too many people with serious health problems are using the
Obamacare exchanges, and not enough healthy people are signing up.
The problem isn’t Obamacare per
se. It lies in the structure of private markets for health insurance—which
creates powerful incentives to avoid sick people and attract healthy ones.
Obamacare is just making this structural problem more obvious.
In a nutshell, the more sick
people and the fewer healthy people a private for-profit insurer attracts, the
less competitive that insurer becomes relative to other insurers that don’t
attract as high a percentage of the sick but a higher percentage of the
healthy.
Eventually, insurers that take
in too many sick and too few healthy people are driven out of business.
If insurers had no idea who’d
be sick and who’d be healthy when they sign up for insurance (and keep them
insured at the same price even after they become sick), this wouldn’t be a
problem. But they do know—and they’re developing more and more sophisticated
ways of finding out.
Health insurers spend lots of
time, effort, and money trying to attract people who have high odds of staying
healthy (the young and the fit) while doing whatever they can to fend off those
who have high odds of getting sick (the older, infirm, and the unfit).
As a result we end up with the
most bizarre health-insurance system imaginable: one ever better designed to
avoid sick people.
If this weren’t enough to
convince rational people to do what most other advanced nations have
done—create a single-payer system that insures everyone, funded by
taxpayers—consider that America’s giant health insurers are now busily
consolidating into ever-larger behemoths.
UnitedHealth is already
humongous.
Aetna, meanwhile, is trying to
buy Humana in a deal that will create the second-largest
health insurer in the nation, with
33 million members. The Justice Department has so far blocked the deal.
Insurers say they’re
consolidating in order to reap economies of scale. But there’s little evidence
that large size generates cost savings.
In reality, they’re becoming
huge to get more bargaining leverage over everyone they do business
with—hospitals, doctors, employers, the government, and consumers. That way
they make even bigger profits.
But these bigger profits come
at the expense of hospitals, doctors, employers, the government, and,
ultimately, taxpayers and consumers.
There’s abundant evidence, for
example, that when health insurers merge, premiums rise. Researchers found,
for example, that after Aetna merged with Prudential HealthCare in 1999,
premiums rose 7 percent higher than had the merger not occurred.
What to do? In the short term,
Obamacare can be patched up by enlarging government subsidies for purchasing
insurance, and ensuring that healthy Americans buy insurance, as the law
requires.
But these are band aids. The
real choice in the future is either a hugely expensive for-profit oligopoly
with the market power to charge high prices even to healthy people and stop
insuring sick people.
Or else a government-run
single payer system—such as is in place in almost every other advanced
economy—dedicated to lower premiums and better care for everyone.
We’re going to have to choose
eventually.
Robert B. Reich, Chancellor’s
Professor of Public Policy at the University of California at Berkeley, was
Secretary of Labor in the Clinton administration. Time magazine named him one
of the ten most effective cabinet secretaries of the 20th century. He has
written thirteen books, including the bestsellers Aftershock and The Work of
Nations. His latest, Beyond Outrage, is now out in paperback. He is also a
founding editor of the American Prospect and chairman of Common Cause. His new
film, Inequality for All, is now available on Netflix, iTunes, DVD and On
Demand.
No comments:
Post a Comment