JONATHAN COHN JANUARY 10, 2012
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Just overheard on MSNBC, as Mitt Romney answered a question from Andrea Mitchell about yesterday's "firing" statement:
We all want to get rid of our insurance companies. We don’t want Obama to tell us we can’t.
Romney likes single-payer -- who knew?! My friends at FireDogLake will be happy. I'm not sure the boys at Club for Growth will feel quite the same way.
Of course, I'm taking the quote out of context, as many people have done in the past 24 hours. Romney never said he enjoys firing people, although the particular choice of phrase does reinforce doubts about Romney's perspectives on the economy. And Romney obviously doesn't want to get rid of insurance companies. He's a Republican who, as governor of Massachusetts, signed into law a health care reform that relies heavily on private insurers.
But this points to the underlying problem with conservative dogma on health care, one Aaron Carroll points out today. Conservatives have great faith in competition to improve health care, by driving up quality and driving down costs. And while liberals like myself think conservatives put too much faith in competition, I think most of us would agree that competition has at least some value.
The problem is that true competition can't exist without regulation. Insurers would use that freedom to avoid enrolling sick people and to make whatever coverage decisions would increase their profits. And while Romney suggested (in the same speech, I think) that insurers will promote better quality because they'll find it profitable, experience tells us that's frequently not the case. Even if good care does save money, it frequently does not yield benefits for many years. (That's usually the case with prevention.)
You can see that today in the most deregulated part of our health care market: The market for individuals who buy coverage on their own. It has all the symptoms of market failure. Individuals lack decent information: Plan details are difficult to decipher and policies frequently turn out to be less comprehensive, or less reliable, than consumers realized at the time of purchase or turn out to need later on. Many individuals have few choices and those with serious pre-existing medical conditions may have no choices at all.
Carroll sums it up nicely:
The real issue, unfortunately, is that very, very few people have the luxury that Gov. Romney is endorsing. Let’s say that you are self-employed, and lucky enough to have found a company to provide you with health insurance. Then, let’s say you develop cancer. You suddenly find out that your insurance company stinks. So you fire them, right?
Of course not. You’re screwed. Now you have a pre-existing condition. There’s not an insurance company out there that wants to cover you. So you don’t fire them. You scream, and curse, and cry, but you’re stuck. Only healthy people have the luxury of picking and choosing.
Let’s also not forget that most people don’t find out that they’re not getting “good service” until they’re sick. Healthy people don’t make much use of their insurance, so they don’t know how bad it is. They only find out after they’re ill, and then it’s too late. It’s only fun to fire the insurance company if you’re sure you can go to another company to get what you need. Almost no one can.
The lesson here -- and this doesn't apply to exclusively to health care -- is that sometimes you need regulation in order to make a market work. And while there's a very legitimate debate between left and right over how far that regulation should go, I believe the best evidence we have suggests it takes a lot of regulation, and some money too, to really make the market for health insurance functional.
Romney should know this as well as anybody, since the law he signed in Massachusetts did exactly that. It organized the individual market, so all that people buying on their own can choose from among a variety of plans that they know will provide basic coverage and will always be there for them when they need it.
The Affordable Care Act does the same thing, which is why Romney's latest quip is wrong, too. If you want to fire your insurance plan, you should be rooting for Obamacare, not against it.
Update: I added links and changed a few words to avoid annoying repetition of the word "conservative."
10 comments
Insurance health providers are most likely hired, fired and rehired by corporations, or at least by those folks employed by businesses keeping a close eye on expenses. When translating Mr. Romney's statements, it's important to use the key that "corporations are people, my friend".
- Doug12
January 10, 2012 at 2:15pm
Assessing insurance policies would be easy if we knew in advance what illness or injury we would suffer. Will it be diabetes, colon cancer, heart disease, ALS, or trauma or other injury from an accident. Of course, we don't know. Indeed, most people underestimate the risk of suffering from a disease, and overestimate the risk of being involved in an accident. And not surprisingly most health insurance policies are pretty good at covering the latter but not very good at covering the former, and extremely poor at covering chronic disease, which many of us will eventually suffer. Viewed in this light, health insurance policies are more like lottery tickets than insurance. Good luck!
- rayward
January 10, 2012 at 2:26pm
"sometimes you need regulation in order to make a market work. " Brilliant. Exactly so. And that is the fact left out of so many Republican dogmatic talking points, that simply assume (or even claim) the Free-Market can regulate itself. And yes, that IS why I'm rooting for Obamacare.
- AllanL5
January 10, 2012 at 2:28pm
We need to rethink the whole for profit health insurance market. Insurance companies make money by collecting premiums and not paying out. The longer they can sit on their money the better. How is this good for our health? It is in a insurance companies best interest to make it hard to see what is truly covered or what happens when something catastrophic happens to you. You could be paying for a Cadillac health plan only to find out that it has a $1M lifetime cap and that 4 week stay in the hospital comes to a whopping $1.5M and you are on the hook for the rest. Health insurance companies need to be nonprofit and they need to be that way from top to bottom. They shouldn't be owned by a for profit company. We have first hand evidence in California on how that would work out with PG&E.
- dirque
January 10, 2012 at 2:45pm
On Doug12's point above, it's also the case that the bigger the corporation, the better the leverage it will have over health insurance companies. If you are the owner of a small company, it's quite possible that you have little choice and the insurance provider(s) can dictate to you. Obviously, your employees are not as disadvantaged as purely individual policyholders (or policyseekers) would be, but even as a firm you may not be able to 'hire and fire' the way Romney's whimsy would like to suggest.
- ironyroad
January 10, 2012 at 2:51pm
Dirque, PPACA eliminated lifetime limits even on grandfathered plans. No plan has a dollar cap on an essential benefit right now.
- ReganaD
January 10, 2012 at 3:24pm
How can competition between insurers have any bearing on health care costs? The only conceivable way is if insurers try to cut outlays by denying coverage for particular services, the presumption being that the service for which service is being denied is nonessential. Now, some of the work done looking at differences in per capita health care expenditures between similar communities in the US and between countries--work well-described by Atul Gawande in a couple of NYer articles--suggests that there may be a lot if nonessential treatment out there driving up costs (Gawande thinks that an entrepreneurial culture among particular groups of doctors and fee-for-service reimbursement are the main drivers), but private insurers are not in a good position to identify these inefficiencies and effect change. For example, suppose that after adjusting for differences in patient populations we find that in one community home health services are utilized twice as often as in another community with no difference in outcome. Clearly the excess utilization in community A is a good target for cost savings. The trouble for insurers is that distinguishing the patients in community A who don't need home health services from those who do is, for an outside administrator, basically impossible. The diagnoses are all the same. How is an insurer to know that one patient getting daily wound dressing changes could never cope on her own while another would do just fine? All the insurer can do is cut reimbursement for dressing changes across the board, which in the end just introduces another sort of inefficiency: the patient who can't cope with her wound on her own ends up getting readmitted to hospital, incurring still more unnecessary costs.
- AaronW
January 10, 2012 at 3:31pm
"We all want to get rid of our insurance companies. We don’t want Obama to tell us we can’t."
Kudos, Jon, for even being able to concentrate, let alone write a superb takedown, of Mitten's slogan. I'm simply dumbfounded that he would fix his mouth to say something like that. Then again, from a certain angle, it sounds really Populist Tea Party pablum-ish...I wonder if he even has any idea what those sentences mean when put together like that?
- GSpinks
January 10, 2012 at 4:55pm
I ask those who are against regulation if they would fly on an airplane, go to a restaurant, buy publicly traded stock, buy a car, or take a prescription drug if they did not believe that regulation made these economic activities safe and whether economic activity has not in fact been increased by regulation?
- Nusholtz
January 11, 2012 at 9:38pm
That's the problem with the Republican attitude toward regulation -- it's for me, not for thee. So they don't think they need regulation, that it just cripples business -- until the lack of regulation starts to bring down large financial institutions. THEN the call goes out for Government rescue, but even then, without conditions. They don't think they need or want a safety net -- until the crisis happens, then they call out for the safety net. This explains the sudden turnabout in December 2008 of Republican policies. Before that, deregulate, the Free Market can regulate itself, look how this market is booming! After that, it's "well THIS shouldn't have happened! Quick, throw money at large financial institutions, they're too big to fail!"
- AllanL5
January 12, 2012 at 3:35pm