HEALTH CARE SEPTEMBER 29, 2009
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"You can’t really have reform without a public option," former governor Howard Dean, a prominent public-option advocate, said recently. "If you really want to fix the health care system, you’ve got to give the public the choice of having such an option." Promising as this sounds, it seems increasingly likely that the public option will be a liberal dream deferred. Republicans and conservative Democrats, panicked that the government plan will squash competition and the medical industry as we know it, are slowly killing the idea. Even President Obama, who has endorsed the idea unambiguously, has indicated a willingness to compromise on the issue.
Liberals, understandably, are in agony. But they can take at least some comfort in looking overseas--where one tiny country has managed to build a popular and successful universal health care program based entirely on private insurance. That country is the Netherlands, which several years ago overhauled its health care system and achieved most of the goals the liberal reform movement holds dear: near-universal coverage, affordable insurance, and quality health care.
Under the new system, the Dutch government has required that everybody gets insurance; in return, it makes sure insurance is available to everybody, regardless of pre-existing medical conditions or income. Although the government finances long-term care through a public program, it has turned over the job of providing basic medical coverage exclusively to private insurers, including some for-profit companies. Surveys show that the Dutch are happier with their health care than are Americans--or the people of any other developed country, for that matter. There are even signs, albeit faint ones, that the insurers are achieving what’s become the Holy Grail of health reform: using their leverage to improve the quality of care that doctors and hospitals provide--by improving the coordination of treatments for the chronically ill or steering patients to providers that get the best outcomes.
Still, there’s a catch. A big catch. Private insurance in the Netherlands works because it operates more or less like a public utility. The Dutch government regulates industry practices tightly--more tightly than the reforms now moving through Congress propose to do in the United States. The public insurance option was supposed to make up for that deficiency, at least in part, by setting a standard for service and affordability that the private industry would have to meet--and by offering a fail-safe option in case the private plans simply couldn’t keep up. If Congress ends up gutting the public plan, in part or in whole, then it needs to work even harder on making private insurance work. And it’s an open question whether that will happen.
What makes private insurance work in the Netherlands? It starts with tradition. The Netherlands first extended insurance coverage to everybody during Germany’s occupation of World War II. (It is, the Dutch like to say, the one good thing to come of that experience.) But, by the end of the century, frustration had set in. At the time, government provided insurance directly to people with incomes below a certain threshold; everybody above bought coverage on their own. The left found the system inequitable, since people with private coverage sometimes had better access to care; the right found it inefficient, since they thought public insurance interfered with the natural forces of competition. Eventually, they brokered a deal: Create a seamless system to cover everybody, regardless of income or medical condition, but do it all through private carriers.
The new system came on line in 2006 and, so far, the results are encouraging. Everybody picks an insurance carrier once a year, more or less the same way employees of large companies routinely do here in the United States, during annual open enrollment periods. By law, the coverage is generous, no matter which carrier somebody chooses. Plans cover all medically necessary services--as defined by the government, in consultation with independent experts and medical societies--and they pay for all but a tiny fraction of the bills. The government provides income-based subsidies, and roughly two-thirds of the population gets some assistance. In surveys of major countries by the Commonwealth Fund (which financed my own travel to the Netherlands), the Dutch were least likely to report forgoing care because they couldn’t afford it.
But the real secret to success is what happens behind the scenes, in the way government watches and regulates the insurers. The big worry with private insurance is always that carriers, eager to make a profit, will try to avoid paying the large medical bills that people with serious health problems inevitably generate. And the main way insurers do that is by avoiding such people altogether--a practice known as "cherry-picking"--which can ultimately destabilize the entire insurance system.
The Dutch government prohibits cherry-picking. Insurers cannot turn away applicants, or charge them more, because of pre-existing medical conditions or risk of illness. For example, they can’t demand that you pay higher premiums just because you happen to work in a physically hazardous job. And, because clever insurers can find ways around such rules--by, for example, marketing largely to young people--the Dutch government takes some crucial additional steps. It makes sure the minimum-benefits package pays for ongoing chronic-disease treatments, as well as for medically intensive services for the seriously ill. It has also been collecting and publishing easy-to-understand data about insurers and providers--not just prices, but consumer reactions and quality indicators as well. The hope is that people will use the data to guide their coverage decisions from one year to the next.
Perhaps more important, the Dutch have what some would consider the world’s most sophisticated scheme for "risk equalization." Because even the best regulations may not stop people in relatively good health from congregating in certain plans--and because such separation can wreak havoc with the whole insurance system--the government audits each plan’s enrollment every year. Insurers with really healthy beneficiaries--say, a lot of young single people--pay a fee. Insurers with really unhealthy beneficiaries--plans with lots of diabetics or retirees--get a subsidy. In effect, the program takes away the financial reward for shunning unhealthy patients.
That, of course, is all well and good for the enlightened Dutch. But how would you replicate such a system in the United States? To begin with, mandating transparency could help a lot. One way insurers here take advantage of consumers is through confusion. They don’t always make clear what’s covered, they don’t always provide basic information in ways that allow consumers to easily comparison shop, and they aren’t currently required to submit data about their activities to any single authority. Fortunately, that’s one set of problems reform seems likely to fix. A provision first introduced by Representative Rosa DeLauro and Allyson Schwartz, along with Senator Jay Rockefeller, would mandate a "coverage label" modeled on the nutrition label that all food products must include. The label would let consumers see, in plain terms, what protection different policies covered. In addition, the plans under consideration in Congress would establish minimum-benefit standards, initially for individuals and small businesses. (They could later extend to all plans.) Consumers who bought plans governed by the standards wouldn’t have to wonder whether a plan covers preventative services or chronic care, because that coverage would be part of the law--just like in the Netherlands.
But, as in the Netherlands, the more important work is what consumers won’t see directly: the way the government will regulate insurers. And it’s not so clear that the reforms under consideration will do everything they must. A key goal, here as there, is preventing insurers from cherry-picking. In theory, all of the plans would prohibit insurers from excluding or charging higher rates to people in poor health. But the bill now before the Senate Finance Committee, for example, would allow insurers to vary rates according to age--which can be a proxy for health--by a factor of five. (Adequate subsidies can help mitigate this, but the Finance bill doesn’t have those, either.) What’s more, because all the plans before Congress allow companies to vary offerings considerably, insurance companies could tilt their coverage in ways that attract healthier beneficiaries. An aggressive risk-equalization scheme, like the one in the Netherlands, could help thwart such efforts--but the reform bills don’t specify how aggressive those schemes will be.
One additional issue, not to be overlooked, is the question of price. Dutch consumers don’t have to worry about paying a lot of money for their health care, even if they are sick, in part because the insurance has very little cost-sharing--and in part because the government continues to play a strong role in setting prices, although it’s been gradually relaxing them. But there’s nothing in the current bills approaching the type of price controls that the Netherlands has. In the Senate Finance bill, some middle-class people could spend almost one-third of their incomes--$20,000--on medical care. The House bill has better protection, but there may not be political support for it.
Unless, of course, progressives can create political pressure for such regulations. Most of the left is focused on preserving the public option, in some form; and, overall, that does still seem like a highly effective way to make private insurance work. But, if they can’t succeed, improving the other elements of reform becomes all the more important. The U.S. health care system will never look entirely like the one in the Netherlands: the demographic, cultural, and political differences are simply too vast. But, with sufficiently strong regulation, it can achieve some of the same virtues. And that would be an accomplishment of which the left could still feel proud.
Jonathan Cohn is a senior editor at The New Republic.
7 comments
The rise and fall of the "public option" has been greeted by all too many mainstream media "liberals" by rationalizing the abandonment of something that, existenatially, will almost certainly have no impact on their own lives anyway. It then becomes a question of good or bad "policy"; a question, in other words, that can be debated as all such policy options are: over the heads of those who will be adversely effected by the Democrats abandoning them yet again to Wall Street. And the relationship between Dutch citizens and their government....is it comparable to the relationship between U.S. citizens and the government here? Apples to apples? I, uh, suspect not. As Cohn notes succinctly, "[p]rivate insurance in the Netherlands works because it operates more or less like a public utility. The Dutch government regulates industry practices tightly--more tightly than the reforms now moving through Congress propose to do in the United States." That's the key of course. It might be plausable to abstract out the public option if the government was in fact prepared to crack down on the private insurance industry. But who can [with a straight face] expect Congress and the White House to enforce that? Some say that if insurance companies were carefully monitored and strictly prohibited from denying coverage for preexisting conditions...if they were effectively required to keep costs down...if they were denied the opportunity to wiggle out of paying large medical bills...if they were prevented from playing all the other games they do now to rip policy holders to shreds...the public option might really not be necessary at all. Does Cohn really believe that? Based on what evidence. Evidence here, in this country. Obama and Congress will tote up and tout all the progressive changes the new law will bring about. But legislation is just a bunch of words. How those words are translated into the worlds we actually live is another thing altogether. I can already imagine Rachel Maddow some months from now going down the list point by point: Here's what Obama and the Democratic Congress said would happen, and here is what is actually happening instead. Remember the post 2006 election K Street "crackdown"? By then though The Editors across the nation will have moved on to something else. Something like, say, why the employee free choice act really doesn't have to be either free or a choice to give unions parity with Wall Street. Who will handle that here at TNR, John Judis? Come on, without a public option citizens can opt into how much pressure will the healthcare industry be under to make substantive change? You can juggle the words into whatever rationalization works for you but it doesn't change the obvious: no players in the health care industry will be any more "generous" than their enablers in the federal government force them to. That's the "tradition" here in America, of course. But it's something Cohn barely remarks on at all. I would be curious though if Cohn would go into more detail about how state capitalism works in the Netherlands. Is there the equivalent of K Street? Is there the equivalent of power brokers in the federal government passing bankers and corporate CEOs in the revolving doors set up between those who negociate the nexus between political and economic power? Does it work the same way there as it most certainly does here? And who are the "progressives" Cohn is talking about here in exerting political pressure? The "progressives" in the media? The "progressives" on the Internet? The "progressives" in the Democratic Party. THOSE "progressives"? Sadly, they will have to be the ones. After all, the "left" in America continues to go the way of unions, activists and community organizers. They're still out there of course. But mostly "local" and barely able to get a trickle of protesters to Washington thus far. And Rachel Maddow was still only one person the last time I checked. george walton d/a
- iambiguous
September 29, 2009 at 2:07am
Up until this post by Mr. Cohn, I thought all the focus by the Democrats on the public option was intended to divert attention away from the crux of health care (i.e., health insurance) reform, namely the regulation of the health insurance industry by the Federal government to prevent insurers from, among other things, cherry picking, limiting benefits, and denying coverage for pre-existing and chronic conditions. I didn't agree with the strategy, but if it worked, I would be the first to acknowledge its brilliance. Now, with Mr. Cohn's post, it is painfully clear that it was the Republicans who employed the strategy of keeping all the focus on the public option in order to divert the Democrats' attention away from the crux of health insurance reform. So here we are coming down the stretch, and Mr. Cohn now reveals to us that the reform legislation making its way through Congress lacks these essential health insurance reform measures and that, perhaps, we should focus on health insurance reform rather than the public option. I don't blame Mr. Cohn, who has made an invaluable contribution to the reform effort. But this revelation by Mr. Cohn makes me sick.
- raylward
September 29, 2009 at 7:39am
Jonathan, How much does the Dutch system cost per person? Is it as expensive as the system here in the US?
- leisure guy
September 29, 2009 at 10:40am
raylward, I'm not sure I follow your argument. It seems to me that the left would be very interested in health care reform, whether it includes the public option or not and that the right would want to kill both, especially the public option. Now, if your point is that the left has seized upon the PO as the be-all-and-end-all solution to universal, affordable health coveraget to the degree that it ignores any other methods to reform, then I agree that may be true. Very naive, INMHO, but true nonetheless. I can't imagine why the progressives would NOT want to keep other ways of reforming on the agenda. The right would definitely benefit from keeping the public's attention on the PO (and, killing it) as a strategy to distract, confuse and scare the public into not supporting any change in the status quo. So far, I think their strategy has been very effective. As much as I disagree with their politics and overall ideology, I have always admired the Right's ability to control the agenda, hijack the debate, spread disinformation and confusion to instill fear, foster solidarity in their own ranks and stay "on-message".
- desertdog
September 29, 2009 at 12:08pm
desertdog, the Democrats are terrible at framing, the Republicans experts. Reagan was the master, always framing issues with a very sympathetic face. This is my point about the Democrats' lsoing strategy. Suppose that the Democrats had framed the isuue as health insurance (as oppose to health care) reform, with cherry picking, limited benefits, and pre-existing and chronic conditions (cancer is, in most cases today, a chronic condition) as the centerpiece, and framed the issue around someone who was denied coverage, or who lost coverage, due to a pre-existing or chronic condition. Take my brother, who suffers chronic leukemia. He uesed to work at a small, locally owned bank, but the health care costs for his condition created a dilemma for the bank - keep my brother and drop the health insurance benefit (the insurer significantly raised premiums because of his illness) or "encourage" my brother to quit. And once he quit and ran out of COBRA coverage, he had no insurance but whooping medical expenses. So he loses his job, his life savings, and finally his dignity (if Medicaid is viewed as welfare). Framed this way, health insurance reform would have passed months ago. Instead, the Democrats framed the issue as universal coverage, the face of which are the "deadbeats" who don't have health insurance. In other words, another welfare program for the undeserving. Topped off with death panels for grandma and aborted fetuses paid for with tax dollars. The sympathetic, hard-working guy with the bad luck to suffer a chronic condition. Or the unsympathetic dead-beat looking for another handout. Americans are suckers for a sad story but have no tolerance for the shiftless. You be the judge of which strategy is better.
- raylward
September 29, 2009 at 1:01pm
Yes, I see your point better, now. Your argument is that the issue should have been INSURANCE reform at the beginning rather than the bigger and more complicated health care reform. So now, the debate has already spun out of control and gets hijacked by the Right and the corporatocracy who then turned it into a caricature of itself. I tried to warn some of my lefty friends to tone down the "Obama's gonna give us everything we've been waiting for since Reagan" talk. Ah those soft-headed lefties, always trying to get the whole utopian universe instead of settling for the neighborhood. As my grandfather used to say at Thanksgiving dinner...."Your eyes are bigger than your stomach". Don't try to fill the plate so full you can't finish your dinner. The Dems never learn. It's like sending Bambi in to a knife fight with the Big Bad Wolf. So sorry to hear about your brother. Another hard-working, regular middle-class guy trying to be responsible and do the right thing who ends up getting thrown out of the bus and left on the side of the road by our insane system.
- desertdog
September 29, 2009 at 2:30pm
Since I'm throwing the Democrats under the bus I'll make one final point. At any time the Democrats could have offered health insurance reform (no cherry picking, denial of coverage for pre-existing conditions, etc.), and would more than a handfull of cranks in Congress actually voted against it? So why didn't they? Because it would be unfair to the insurers to require they accept every applicant but not require everyone (meaning the young and healthy) to have health insurance. That's right, the Democrats have been protecting the insurance companies. Sad, but true. Of course, the Democrats could have proposed health insurance reform without universal coverage so we could have watched the vermen from the insurance companies insist on the need for univervsal coverage and make their own proposals to get us there, but Democrats being Democrats, they preferred to stay on the high ground. But being right about universal coverage doesn't get us there. If ever the Democrats learn that politics isn't an intellectual exercise, maybe they will get somewhere. Until they do, we are left to wonder "if only."
- raylward
September 29, 2009 at 6:33pm