Monday, August 24, 2009

Crossing state lines

I’m not saying the argument for selling insurance across State lines is totally without merit but I am saying this Wall Street Journal piece doesn’t do much to convince me. For example:

Affordability would improve if consumers could escape states where each policy is loaded with mandates. "If consumers do not want expensive 'Cadillac' health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits," Mr. Herrick has written.

There are so many problems with this I don’t know where to start. How about with “if consumers could escape states”? Well, they can. If you don’t like the mandates in your State, either elect State representatives who will change them or move to a State that doesn’t mandate anything. This is what Federalism is supposed to be about: citizens of a State deciding for themselves how they want to be governed. If the citizens of my State of New Jersey have decided they want to force insurance companies to pay for everything from soup to nuts, that’s their decision. How any conservative can advocate negating their decision by riding roughshod over State law is beyond me.

In fact, let’s all sort ourselves out this way. I wonder how many bloggers who are vociferously in favor of more Federal government involvement in health care are liberals living in States where health insurance companies are lightly regulated. Living in New Jersey, I view many of their arguments with amazement. The situations they describe simply don’t exist in New Jersey where insurance is regulated and mandated within an inch of its life. I’ve never had a treatment so much as questioned much less not paid for and I’ve had some whopping big treatments. So maybe people who hate State insurance mandates should move to States without them and people who love government intervention in health care should all move to New Jersey.

Returning to the WSG article. The argument lumps together one extremely iffy quasi-medical treatment - acupuncture; one genuine but not widely needed medical treatment - fertility treatments; and one cosmetic treatment - hairpieces. But wait. Are there really insurance plans that pay for hairpieces as in what some bald guy wants to buy when he turns 50? Maybe. But I think it’s a heck of a lot more likely that the “hairpieces” Mr. Herrick is so concerned about are actually “prosthetics” purchased for chemotherapy patients who have lost their hair.

It is entirely possible that some States mandate treatments many people are not interested in. But they also mandate that insurance cover items like a certain length of hospital stay after a mastectomy. (Remember “drive-by mastectomies”?) Or allow a mother to stay in the hospital for a certain length of time after a Caesarian section. It may be that you think those are needless luxuries; you’re not one of the people who are horrified by HMO’s relentless focus on the bottom line regardless of what “amenities” they have to throw overboard. Let's think this through.

Say you're fine with the insurance companies escaping all types of State mandates, even the ones that seem like decent ideas. You figure that if people don’t want drive-by mastectomies they can ante up for more coverage. Uh-huh. How long do you think it will be before all the mandates imposed by a very liberal State like New Jersey simply get imposed at the Federal level? Interest groups pressure the government entity with the power. Sell insurance across State lines - especially while we have a Democratic President and Congress - and you’ll find every insurance company in the country required to pay for acupuncture, fertility treatments and hairpieces.

And if by some miracle those Federal mandates don’t happen then we’ve got other problems. The WSJ article says:

This doesn't mean sick people who have kept up their coverage but are more difficult to insure would be left out. Congressman Shadegg advocates government funding for high-risk pools, noting that their numbers are tiny. The big benefit would come from a market supply of affordable insurance.

So after all the hysteria about euthanizing grandma we’re now going to entrust sick people to the government’s tender mercies. I try to imagine a place where the country can find more health care savings than it could by rationing care to those who need it most and I can’t really think of one. Imagine if the government was deciding on treatments for cancer patients, for those with multiple sclerosis or ALS; for those with chronic heart disease; for children born with cystic fibrosis or Down syndrome. And how tiny are their numbers after all? What happened to all the blather about how much chronic illness costs us every year?

But let’s leave aside that problem and assume we are in fact talking about only a tiny group and who cares if the government does them in - think of the money we’ll save! That tiny group is the least of our worries. How about incredibly Balkanized health insurance plans? Like, say, an interstate health insurance plan that covers only healthy single young men between the ages of 18 and 35. Oh, it won’t say that in the plan description. It just won't pay for birth control or yearly gyn exams; won’t pay for Viagra or cardiac care; won’t pay for ulcers or migraines; won’t pay for any childhood illnesses or checkups or vaccinations; won’t pay for much of anything except broken bones from snowboard accidents. Heck, the insurance companies could charge a dollar a year for that kind of policy and make money.

Of course once those 18-35 year old men get “too old” or have children or experience a serious illness, they’ll be shuffled along to another, more expensive policy. Because, you see, the market that isn’t healthy 18-35 year old men will be sliced and diced into smaller and smaller segments with the cheap coverage separated from the not so cheap, the somewhat expensive separated from the really expensive. Which pretty much disposes of this next argument:

Mr. Rother also said "risk selection" is a problem. But the coverage mandates cause that. As more healthy people opt out of health insurance because it is too expensive relative to what they consume, the pool transforms into a group of older, sicker people. Prices go higher still and more healthy people flee. High-mandate states are in what experts call an "adverse selection death spiral."

He’s right about that spiral but he’s wrong if he thinks selling health insurance across State lines is going to magically unwind it. It’s simply going to move the problem. Yes, the healthy 18-35 year old men might - I emphasize might - buy a health insurance policy if it’s dirt cheap. But the other little segments that insurance companies chop their customers into are going to opt out in droves because their policies are going to be full of people just like them: each successive segment defined by the need for more coverage because of age, existence of children, and illness; each successive segment increasingly expensive. This is fair in some absolute market sense but it’s not going to solve the problem of the uninsured. And it will eventually mean more and more people end up in that government funded high-risk pool because they simply cannot afford the insurance plans offered for their age, life-stage, and illness cohort.

Besides if you really want healthy people to leaven your insurance pool then force everyone to buy insurance. That will take care of the opt-out problem. Of course, a mandate like that may well be unConstitutional but we’ve already established that’s not a deal-breaker for this crew.

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