Sunday, August 23, 2009

The Trade Offs in Health Care Reform

After a month of town hall discontent, some pundits are beginning to write post-mortems on Obamacare, with some health care experts blaming the worst of the fear-mongering for the death of health care reform. Not only do these rumors of the death of Obamacare seem greatly exaggerated, but the credit being given to those fulminating about the mythical death panels gives too much credit to the congressional proposals. With price tags of $1 trillion or more, those proposals should have been thought of as dead on arrival, and congressional Democrats do not seem to have either the political capital or will to do anything serious to bring health care inflation under control.

Frankly, neither party or neither end of the political spectrum has acquitted itself well in this debate. Conservatives, some of them pretenders that a little tort reform and the end of the preference for employer based coverage will sufficiently tweak "the greatest health care system in the world," have mostly ignored the enormous medical and administrative inefficiencies plaguing the system. On the other hand, those on the left have pretended that universal access without any effective cost controls can result in an affordable plan. Neither side has seriously addressed the trade offs inherent in the policy choices that they contemplate in non-serious soundbites. Such trade offs include, among others, the following:

Coverage for pre-existing conditions versus the problem of anti-selection. President Obama has repeatedly demonized health insurers for their refusal to cover pre-existing conditions. While health insurers may be evil, the President devilishly over-simplifies a problem that is, in fact, considerably more complicated. First, it should be noted that this problem is less prevalent than it once was due to the portability provisions of HIPAA impacting coverage for pre-existing conditions under ERISA plans. As to the portion of the problem that remains, requiring insurers to do away with medical underwriting and to cover pre-existing coverage is problematic in that it makes more difficult the issue of anti-selection -- the tendency of people not to buy health insurance until they are sick. The only way to require coverage for pre-existing conditions without making worse the problem of anti-selection is to create a universal mandate to purchase coverage -- an option acceptable to the health insurance industry, but unacceptable to many of the physically healthy young adults who voted for Obama and prefer the freedom to spend their money on something other than health insurance.

Rationing versus unlimited utilization. While talk of "death panels" is clearly over the top (see Charles Krauthammer for an excellent discussion of what this proposal does and doesn't do), the fear of many Americans that the government, even more than private insurers, will make coverage decisions based on financial rather than medical concerns is reasonable. On the other hand, many conservatives have ignored indisputable and voluminous research showing tremendous variation in medical treatment resulting in much unnecessary and ineffective care. People do not trust their private insurers when they deny preauthorization of services -- even on occasions when the insurers are making decisions on a sound medical basis -- and they will not trust government with the same decisions. In addition, creating a public option in which government would be the first and last resort for approval of medical coverage ought to be problematic for many reasons noticed not just by conservatives -- see Nat Hentoff for someone on the left who is concerned.

Liberals consider a public option to be essential to acceptable reform, but one wonders if they are fabricating or merely being foolish when they pretend that a public option would not decimate the private insurance marketplace. While health care reform is likely not dead, one might hope that proposals that would overturn the current system at an unprecedented and unpredictable cost are.


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