A Public Health Care Substitute?

Exchanges and Inter-state Competition Aim to Bring Down the Cost of Health Care

Cartoon of Patient telling his doctor that he can't afford his diagnosis.

ONE MAJOR element of President Obama’s plan for health care reform is the “public option”, and it has become a lightning-rod for the accumulated angst of many Americans.

For those who oppose it, the public option can represent one or more of an array of evils about to beset the U.S.A., including Fascism, Socialism (two opposite political systems by the way), government take-over (I guess that would be Socialism), Hitlerism (that’s Fascism), or killing Granny (anti-family for sure!).

The push-back has been so vehement that even though the strident voices come from a minority of Americans, Mr. Obama and company have signaled that they would step back from the pubic option if something was created in its stead that would have a similar effect without the tag line of “Government Takeover”.

That “something” is two things — establishing “exchanges” and allowing inter-state competition among private, for-profit health care insurers.

In his recent speech before Congress, the president floated both of these ideas as a back-up to the public plan.

Inter-State Competition

Given our competition-based capitalist system, along with perhaps 1,000 health insurers hawking their goods across the land, why would we need something to promote competition into the health care system?

Enter stage right, a report by the University of California, Berkeley called Consolidation and the Transformation of Competition in Health Insurance, which demonstrates that state insurance markets are dominated by a small number of companies:

“In thirty-eight states the largest firm controls one-third or more of the market; in sixteen states the largest firm controls more than half the market. In all states except California and Nevada the largest insurer is a Blue Cross or Blue Shield plan, or both. The role of leading firms is underestimated in these figures, as some states have distinct geographic markets, with a dominant firm in each. For example, if the four regional Blue Cross plans in Pennsylvania were added together, the resulting firm would control 63 percent of the statewide “market” rather than the 33 percent.”

Well, what would you expect from that Socialist enclave, Berkeley?  Let’s dig deeper.  How ’bout the Government Accounting Office (“GAO”), that impartial number-crunching group that both Repubs and Dems like to tout when a GAO pronouncement is a political fit?

The GAO data collected for a 2008 update for the publication Competition in Health Insurance: A Comprehensive Study of US Markets, shows that:

“In all of the 42 states we examined, the combined market share of the five insurers with the largest shares is at least 75 percent.” (Emphasis mine.)

What an amazing thing.  It seems that facts are facts — it’s clear that despite the total number of health care insurers, a few completely dominate the markets they supply.  So, eliminate the barriers to inter-state competition and the result, one would hope, would be more insurers competing for your health care dollar.

Next Step — Exchanges

In addition to injecting private, for-profit competition into the mix by enabling inter-state competition, Obamacare envisions setting up “exchanges” throughout the land.

An “exchange” would use the buying power of large groups of exchange “members” to achieve competitive rates and comprehensive coverage.

Would it work to foment price and coverage competition?

Mr. Ron Wyden, a Democratic senator from Oregon, thinks not, as he argues here.  His argument distills down to this:

Since the exchange would not be available to all Americans, they would not have the strength in numbers to properly influence the private, for-profit insures.

It comes down to numbers.  Only very small companies and those individuals who can’t get insurance outside of the exchange — 25 million people — would be allowed into an exchange. This would leave more than 200 million Americans with no more options, private or public, than they have today.

The solution, says Senator Wyden, is to open up access to the exchanges by providing “Free Choice”, which in this context means allowing everyone to choose his health insurance plan, including those now in employer-based plans.

In this scenario, there’s no government mandate — Americans could select the health insurance that makes the most sense for them and their family; hopefully, one that costs less and provides more due to the competitive forces of inter-state competition and health care exchanges.

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Joe Garma
 

I help people live with more vitality and strength. I'm a big believer in sustainability, and am a bit nutty about optimizing my diet, supplements, hormones and exercise. To get exclusive Updates, tips and be on your way to a stronger, more youthful body, join my weekly Newsletter. You can also find me on LinkedIn, Twitter and Instagram.

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