Sunday, August 2, 2009

HEALTHCARE REFORM, ALPHA VERSION

The public may not have noticed, but recently, there was an interesting change in verbiage, coming from the Administration. “Healthcare reform” became “health insurance reform”. Apparently, the center of gravity is now squarely on the demand side of healthcare economics. As much as I want everybody covered, it seems increasingly unlikely that the reform, as it stands now, is going to effectively address runaway costs in care delivery. My guess is that, according to CBO, there is no “shovel-ready” solution, which would guarantee immediate savings and/or does not make quite a few stakeholders upset.

So, whatever bill comes out of Congress, its main focus will be on getting most (ideally, all) Americans insured. There is no serious opposition to an individual mandate, sometimes disguised as “shared responsibility”. Insurance companies welcome it. Any mandate is likely to bring in more young and relatively healthy people to their pools, basically, providing insurers with additional stream of income and lowering their medical loss ratio. What they would not like is:

  • A public option, which may be a strong competitor, applying downward pressure on premiums
  • Legislation, preventing from denying coverage of pre-existing conditions, unless it allows adjusting premiums on a case-by-case basis
Of course, those young and healthy uninsured are not going to be very happy about this. Luckily for the legislators, this group is a minority among voters. Besides, they will almost certainly be given a choice of high-deductible, low-premium plans. Taxing the wealthy to partially offset insurance subsidies for the less fortunate also does not meet a lot of resistance on the Capitol Hill, especially, in the wake of public outcry against “excessive executive compensations" at bailed out companies.

Healthcare providers look very much on board with this kind of reform, as long as it has no negative effect on their revenue, which seems unlikely, as I mentioned earlier. Moreover, fewer uninsured means less hassle getting reimbursed by the Government for uncompensated care.

Next few months, I expect more push against the public option from “free marketeers”, who claim that it will destroy the health insurance industry, eliminate choices, and result in government run healthcare and higher taxes. Since most Americans, insured through their employer, are satisfied with their plans, this may prove effective, unless the proponents will come up with a convincing response, showing what is going to happen to our premiums and benefits, should we stay on the same trajectory with or without a public option.