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Saving insurers

Speaking of Paul Ryan's health-care plan, Tyler Cowen voices a concern.

I am very interested in voucher plans but here is one source of my unease. Let's say you are given a voucher for a health insurance plan and there is no legal requirement that the plan cover Parkinson's. Many people buy plans which do not cover Parkinson's. Some of those people get Parkinson's. Are we pre-committing to ignore the woes of those people? If so, how exactly do we do this?

I'm not ruling this alternative out (there are plenty of cases where we let people die), I just want to know what are the surrounding institutional structures, what happens if these people show up at emergency rooms, and also whether this wouldn't, eventually, give rise to a new "second tier" of lower-quality public sector institutions to handle cases not covered by insurance.

This gets to the importance of regulations and subsidies, I think. Ryan got that in theory, even if his plan doesn't really put it into practice. "You need to define what insurance is," Ryan told me. "I agree with that." In his plan, the exchanges are forced to offer insurance plans "with the same standard health benefits available to members of Congress." And what if people can't afford those plans? Well, Ryan really doesn't say. Maybe they go outside of the exchanges and purchase insurance that is less comprehensive in ways they don't understand. Maybe they don't get insurance at all.

The Senate and, even more so, the House plans really do define what insurance is, and what it has to do. And the Senate and, again more so, the House plans use subsidies to try and make that insurance affordable. Some people see that as government intrusion, and it is. But the alternative is a whole lot worse, both for people in general and conservatives in particular. In the next few decades, cost pressures are going to require serious, structural reform of the system. If insurers are as hated then as they are now -- if their products are as mistrusted, and their motivations considered as malign -- I wouldn't bet on their industry surviving the upheaval. Conversely, if they become more like insurers in Netherlands -- which are heavily regulated and thus fairly trusted, and whose product is affordable because of subsidies -- they might make it out alive.

By Ezra Klein  |  February 4, 2010; 11:27 AM ET
Categories:  Health Reform  
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Cowen's concern about insurance's failure to cover certain illnesses points out the danger lurking in the proposals to allow interstate insurance sales, too. The states regulate a lot of the insurance business (the rest is governed under federal ERISA), and they have responded over the years to many of these gaps in coverage. State legislatures have enacted laws to mandate coverage of certain things that insurers have refused to cover. This can include things like mammograms, prescription contraceptives, mental health coverage, diabetes, autism, etc. Every state has its own list of mandates like this, based on the legislature's determination of the public interest in that state.

Insurers, of course, maintain that each mandate raises premium costs. What do you think insurers will do if allowed to sell insurance across state lines -- honor the coverage mandates in the state where they sell the policy? Or start selling from the state that has the least expensive list of mandates, so that it can sell lower-cost policies (that won't cover the same things as other policies in the insured's state)?

Not only do interstate sales raise the risk that even more people are going to find themselves without coverage when they need it, for something they likely thought they were covered for, but it raises the issue of what happens to these people when their coverage is denied. Are we really saving money in the system overall if these under-insureds simply keep going to the ER for treatment their policy doesn't cover?

Under-insurance is a huge lurking problem that no one has really addressed in the current debate (and extends far beyond the small instance here).

Posted by: reach4astar2 | February 4, 2010 11:58 AM | Report abuse

With respect to this problem of insurers not covering certain vital treatments and benefits, how does the Wyden Bennett bill prevent this?

With respect to the current bills in Congress, why can't insurers just offer cheap, less generous plans outside the exchange, skim off the healthy customers, and leave sick people for the exchange? Anything preventing them from doing that?

Posted by: nathanpunwani | February 4, 2010 12:18 PM | Report abuse

"In the next few decades, cost pressures are going to require serious, structural reform of the system."

Cost pressures already require serious, structural reform of the system. But the Democrats' bills do not deliver serious, stuctural reform. On the contrary, by failing to address the exclusion and by mandating high cost coverage and "making it affordable" by massive subsidies, they are perpetuating and expanding everything that's wrong with our current system.

You can't add millions of subsidized people into the same system with the same number of doctors, nurses, hospitals and clinics and bring costs down.

And "making insurance affordable" through subsidies may make it affordable for the individuals involved, but doesn't make it more affordable for society.

Posted by: bgmma50 | February 4, 2010 12:59 PM | Report abuse

I don't think its possible to cover everything- we can spend a virtually limitless amount of money in that situation. To me the government should cover a basic level of care and then facilitate people getting insurance above and beyond that. And for people who get something that is uncovered the government should be paying for hospice, pain meds, and whatever else it takes to minimize suffering. Because unless you are willing to cut a check for EVERYTHING this is the situation we eventually end up in- the next question is deciding how comprehensive (and affordable) that basic level of care would be.

The problem of course is that anytime someone falls outside of that there is no one in the system who benefits from holding the line on spending. The people want more covered, the politicians wnat to make their people happy, the providers want more covered. At some point someone somewhere has to care about what it all costs.

Posted by: spotatl | February 4, 2010 1:12 PM | Report abuse

The biggest FORK IN THE ROAD between these federal healthcare radicals and mainstream middle class Americans is the insistence by radicals that any doctors participating in their new federal system be banned from offering out-of-pocket services.

Only doctors who choose to make their entire living out of the new federal system can offer out-of-pocket services.

This means a powerfully connected politician like Barack Obama can buy hip surgery for his dying grandmother if he chooses, but all of us middle class schmucks will be dead-out-of-luck.


Posted by: FastEddieO007 | February 4, 2010 2:13 PM | Report abuse

That's an overly simplistic point. What happens with many diseases is that they are fundamentally incurable, yet many very expensive treatments that probably don't really work are made available. What ends up varying from plan to plan are the treatment options available. For Parkinson's, I can see value in the existence of a plan that doesn't cover Duodopa at $60k+ per year, but covers Sinemet at $1k per year.

Do people strongly dislike the idea that some people should be able to pay for a more expensive plan that covers higher cost treatments?

What congress needs to do is to create regulation allow the existence of plans that are within the price of the voucher. Of course, federal regulation of the market is key. We must get the states out of the business of mandating provisions.

The various riders that are available to our plan are simply absurd in the cost variance they cause. I wonder how much many of the things that the state forces into the plan are costing me?

If we decided to create a regulation ensuring ample living space for all people, and said that homes and apartments could not be built unless they offered 500 sq ft per person, we would undoubtedly see the price of homes rise and find more people homeless.

Posted by: staticvars | February 9, 2010 1:22 AM | Report abuse

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