Thursday, January 11, 2007
Community rating for health insurance
Kevin Drum writes: One of the arguments in favor of limited universal health care proposals -- like the one Arnold Schwarzenegger unveiled on Tuesday for California -- is that it's the best we can realistically hope for. Sure, an honest-to-goodness single-payer system might be superior, but special interests will never allow it to happen. Better to mollify the special interests and take what we can get.
Over at TNR, Jonathan Cohn suggests that it's not that simple. In fact, his guess is that special interests will fight just as hard to kill any plan, no matter what we do to try to get them on board:
This is one reason that, paradoxically, plans like Schwarzenegger's -- which seek to graft universal coverage onto the existing private insurance system, rather than create a single-payer plan that would supplant private insurance altogether -- may actually be as hard, if not harder, to accomplish politically. Any plan for universal health care is bound to offend at least some special interests. And these special interests will fight hard. So while trying to soften their opposition with a less radical plan helps, it may be more important to craft an alternative that captures voters' imaginations and rallies support behind it -- even if that means proposing even more sweeping changes.
The same thing is true nationally. Although Schwarzenegger would surely resist the comparison, his plan has more than a few elements in common with the Clinton health-care plan. The architects of that scheme tried very hard to come up with something that would please various stakeholders. That's a big reason that they, like Schwarzenegger, rejected calls for a single-payer system and settled instead on a proposal in which most people would continue to get insurance through the private sector. Yet, to their dismay, few of those stakeholders became enthusiastic supporters of the Clinton health-care plan. In fact, quite a few attacked it, pretty much sealing its defeat. It's easy to imagine a similar scenario playing out here.
This is the reason I swing back and forth on whether it's worth supporting half-hearted plans like Schwarzenegger's.
On the pro side: (1) It's better than nothing. If it helps people even a little bit, that's better than letting them suffer while we all wait for nirvana. (2) Liberals have gotten burned more times than I can count by not accepting half measures when they were offered. Inevitably, a decade later, we wish we'd accepted the compromise and then worked to improve it. (3) It might work. Stranger things have happened.
On the con side: (1) Cohn is right. You need public support to overcome special interest inertia, and the only way to get that is with a simple plan that people understand. Compromises just don't generate the requisite enthusiasm. (2) Compromise plans sometimes lock weird incentives into place forever. Just take a look at how the United States ended up with employer-based health care in the first place. (3) One of the whole points of single-payer health care is that it saves a lot of money by reducing administrative costs. Compromise plans don't. Without the cost savings, it's possible that we'll end up with a system that's even worse than what we have now.
In the end, the reason I support Schwarzenegger's plan is because it includes insurance company regulation, and in particular because it enforces community rating (i.e., a requirement that insurers accept all comers at the same price, regardless of age, occupation, or medical history). And while I can't back this up with a solid argument, my gut tells me that community rating will eventually put private health care insurers out of business. Even with universal coverage, there are just too many contradictions in trying to run a profit-making insurance company while being forced to insure even people that you know for an absolute fact you're going to lose money on.
I might be wrong about that. Insurance company managers are clever folks, after all, and might very well figure out how to game the system just well enough to stay around. But there's at least a chance that Schwarzenegger's plan will lead to their eventual demise, and thence to a more efficient, more rational health care system. For now, that prospect is enough to get me on board.
