Tuesday, October 14, 2008

Open Dialog, Part 1

[Welcome Kaiser Network readers!]

One of the best things about blogging has been the exposure to so many different points of view, and one of the things I most appreciate is the opportunity for frank, honest, no-holds-barred but civil disagreement. Add to that the opportunity to make "blog buddies" with folks with whom I may often (okay, usually) disagree, and you have the makings of some fine thought-storms.
One of my favorite health wonk bloggers is Joe Paduda (who, not coincidentally, is the "father" of the Health Wonk Review). Joe wrote me recently, asking for my take on his post about potential solutions to what he characterizes as our "insurance crisis." In it, he posits that there are several changes that could be made without the expenditure of great political capital, to enhance our current system.
Please take a moment to read it.
The first thing you notice is the deliberate, intellectually honest way in which Joe frames the issues:
"Congress could pass and the President could sign legislation prohibiting medical underwriting in the individual market, requiring insurers to cover pre-existing conditions, mandating community rating, and establishing a basic benefits plan."
I have, as one might imagine, some issues with this: the first and third are VERY bad ideas, the second is potentially doable, and the last may be a very GOOD idea (presuming one means limiting or deleting mandates).
As to the first proposal, eliminating medical underwriting, the problem is risk assessment; that is, if everyone's treated the same, then healthy folks pay an undeserved penalty. To understand why, let's turn to the P&C world: a while back, it was proposed that the solution to the problem of uninsured motorists was an idea called "pay at the pump." The premise was that since everyone needs to fill up their car every once in a while, it made sense that there'd be a "small" tax assessed for each gallon, which would cover the insurance. The problem was that every car and every driver was different, so that BMW owners paid the same as those who drove a Chevy, and folks with nary a speeding ticket paid the same as those with 3 DUI's.
Needless to say, this never got any (ahem) traction.
The same holds true with health insurance: why would a perfectly healthy person pay the same as someone with high cholesterol? Joe's answer is "(t)hat’s the way health insurance should work: some subsidize others, with the understanding that when that ‘some’ (or when their kids break bones or they get hurt) someone else will help them out." Very noble, and yet very wrong: risk isn't just "spread," it's managed, and there's no way to manage risk if everyone's treated the same. This goes against the whole premise of insurance.
As to the third (I'll come back to the second in a moment), community rating, well, the less said about that abomination the better.
The second idea, covering pre-existing conditions, actually has some merit, and precedence: in group health insurance plans, as long as one has jumped through the appropriate hoops, pre-existing conditions are covered. I see no reason why the same principles shouldn't be applied to individual coverage (which, by the way, I believe should be the ultimate goal of any major reform). Just as HIPAA mitigated "job lock," I think that if an individual has appropriate prior coverage, pre-existing conditions should be covered. In fact, that already exists, to a limited extent, in the individual market; it doesn't seem to me to be an insurmountable challenge to broaden that to the industry as a whole.
In Part 2, we consider the fourth item on Joe's agenda, offer some conclusions, and explain how another rather simple solution may hold the key.
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