The Oxford University Press in the US has its own blog. Who knew? As a Cambridge man I shudder at promoting anything from the dark blue side of the British divide, but Jill Quadagno (who’s book on why we don’t have national health insurance was reviewed by Jonathan Cohn and mentioned in this earlier THCB post) has written a piece on why she believes healthcare is a critical national competitiveness issue". I’m not sure I really buy that argument too much — the US is too strong in some industries and too weak in others for the 15% labor cost differential that health care makes to be too big a deal overall–although obviously it makes some difference at the margin as to where GM will put its next car plant. It does seem to me that their overall problem is that they stopped making great cars in 1969.

What is more important, I believe, is that a dollar spent on health care is a dollar not spent on education, alleviating homelessness, conserving energy, etc, etc (although apparently not one also not spent on invading Iraq, running a punitive war on drug users, or building more and more prisons) — so that we should be wondering why we are spending so much on health care, and wondering what we are getting for that spending.

And as I’ve said many times in THCB, the existence of uninsurance means that there is the opportunity for the health care system to force those who can’t afford it out of the system, and therefore enables the system as a whole to increase its costs without having to be concerned about the overall impact of this price effect. If there was some mechanism by which the extra costs were capped within the system, without the safety valve of uninsurance, life would be very different. And that’s why solving the uninsurance issue is also the solution to solving the cost issue.

And while we’re making such a fuss about Jonathan Cohn this week, he has a book review out of One Nation Uninsured, by Jill Quadagno. Not having read (or even heard of) this book which is a history of why universal insurance reform has failed in the US, I can’t comment much on it, but the story as relayed by Cohn is more or less true. Every time reform gets close one special interest or another kills it, and nothing ever gets done because the voting public perceive the reform to be a income transfer from them to poorer people.

Some people are working on the first issue (Brian Klepper’s group, the Center for Practical Health Reform is one), trying to get the industry as a whole to realize that the Titanic is headed for an iceberg, and that some level of reform is needed that will stop the attempts by providers and suppliers to find the ever expanding frontier and make us all live happily together within our borders. But I don’t hold much faith in that.

I do, though, think that the next time around, the pressures on the voting public are sufficient that enough of them might identify with the UN- and under-insured that a universal plan might sneak through.  But that does mean that things have to get pretty bad over the next 2-8 years for that to have a chance.  But then again, as was reported by the team at UCLA, California is on its way to having less than half the population with employer-based insurance. If that trend keeps playing out, and everyone else is getting only a high-deductible plan, middle class discontent may just be bubbling up enough for real change to happen.

The Kaiser Family Foundation reviews The New Republic’s Jonathan Cohn’s piece (now directly linked)about the Shadegg bill which would allow the purchase of health insurance across state lines. Here’s their description of Jonathan’s piece pulled verbatim:

A bill (HR 2355) that would allow U.S. residents to purchase health insurance in any state serves as a "vivid example" of Republican efforts to provide U.S residents with more "choice," but "what conservatives in this country never mention is that giving us these new choices also means taking something away — typically, programs that make us more secure," Jonathan Cohn, senior editor at the New Republic, writes in an opinion piece. "At first blush," the legislation, sponsored by Rep. John Shadegg (R-Ariz.), "seems utterly sensible," in part because it would allow residents to "shop for insurance the same way they should for consumer goods," Cohn writes. However, he writes, health insurance "isn’t just another sweater you can return to L.L. Bean if it arrives with holes in it," and residents "won’t have somebody to warn them if they are about to purchase a defective policy." Cohn adds that the bill would "flood consumers with new options, overwhelming the regulators, many of whom already feel undermanned in the fight against scam artists." In addition, the legislation would eliminate state regulations that require health insurers to cover "cancer screening, psychiatric treatment and other services that most Americans rightly deem essential," he writes. According to Cohn, the bill would leave some of the sickest residents with "no choices at all" for health insurance, and state high-risk health coverage pools would prove "woefully inadequate" to address their needs. The "best way to fix" the U.S. health insurance system is to "create one big pool of beneficiaries through some kind of universal health insurance system" that would allow residents to select from "well-regulated private health plans" or from all physicians and hospitals under a system that "bypasses insurance companies altogether," Cohn writes. He concludes, "Those aren’t the kind of choices that conservatives want to give Americans, since they happen to require expanding government. But they’re the kind of choices Americans would appreciate the most" (Cohn, The New Republic, 8/22).

Jon hits at the two problems with these bills. a) Fraud and how state insurance departments are relatively helpless/hopeless now — so just wait till they have to try to figure out what’s being sold locally by the bad guys from Topeka (or wherever), and b) (my main bugbear) how those states who do have some minimal attempt at community rating will find those insurance risk pools utterly destroyed when consumers find that they can bay a bare bones plan, which in the small print is licensed in Nevada (or wherever).

The problem of course which John mentions but doesn’t really drill into is how this would turbo-charge underwriting. Only those who pass muster would be accepted by these plans, and if they figure out that you may be sick or ever met a sick person or a doctor before, then you’ve got no chance. Even in guaranteed issue states (like California) health insurers currently can and do medically underwrite you, making premiums for the exact same benefits for people with pre-existing conditions or a history of prior surgery go up by a factor of maybe six and maybe twenty. See here for more evidence about that.

So effectively in Shadegg’s world the individual and small business market would fall into two camps. One for healthy people with high deductible cheap plans that they never use, and one for the sick and increasingly uninsured. And we’re seeing from new data on California out today from UCLA, that even without Shadegg’s help the number of people with employer-based insurance is falling very fast (leaving it to the taxpayer to pick up the pieces).

The only possible stop to this legislation may come from the rest of the health care industry. A health plan that operated within one state and had a hard time moving may not like this bill (or the AHP alternative for small businesses) very much. Some of those health plans are a certain color, and we’ll see how much clout they have with their state’s senators when this bill gets to that august body later in the year. Meanwhile, you know why my credit card can charge me 35% interest despite the fact that California has a law banning "usury"?  Well that’s because my credit card comes from the banking mecca of South Dakota. Think about the equivalent of that in health insurance.

CODA: Incidentally, this news service from Kaiser Family Foundation and several like it (including California Health Care Foundation’s) is provided by the The Advisory Board Company. Kind of funny that they’re running a left wing piece, from an editor who’s opinions most of the health care system (i.e. their clients) probably disapproves of, when they have probably made the most pure profit off the current health system of any single firm. But don’t start me on my criticism of "The Grand Alliance" again….and anyway, I guess I have the same issue (without the profit or potential ownership headaches that go with a major league baseball team).