Rational Arguments

If you follow my blog at all, you know I’ve never been a big defender of the public option.  I think that a lot of people think it’s single payer lite (it’s not).  Others thing its awesome power will force prices to come down (not likely).  And some think that the fact that it should have less administrative overhead would make it so much cheaper than other options (not likely either).

But I also scoffed at opponents of the piblic option who said it would “limit competition”.  As if competition existed right now.  Quoth the AMA (not a very progressive organization):

The AMA’s most recent look at the health insurance market — “Competition in health insurance: A comprehensive study of U.S. markets,” released Feb. 23 and based on 2009 data — finds that 99% of 313 metropolitan areas tracked would be considered to have “highly concentrated” insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked “highly concentrated.”

Only Miami, Fort Lauderdale, Fla., and Colorado Springs, Colo., are not considered to have highly concentrated markets. But even these metropolitan areas are not deemed to have competitive markets but instead are rated as “moderately concentrated.” The Justice Dept. and the FTC would consider a highly or moderately concentrated rating as a point against a merger or acquisition of plans within the same market.

One insurer held 70% or more of the health plan market share in 24 of 43 states measured, up from 18 in 42 states in the previous year’s study. In 92% of the 313 markets in the report, one insurer held at least a 30% share.

In past releases of its survey, the AMA has noted that insurer market dominance has allowed health plans to force physicians into take-it-or-leave-it contracts. But this year the AMA — echoing other experts — noted that market dominance has allowed plans to give patients take-it-or-leave-it pricing.

Are you getting that?  Competition has gone down since last year.  Almost 100% of markets are highly concentrated, as calculated by the number of available options and their individual market share.  That means there are limited choices available, leaving people at the mercy of rate increases and coverage decreases.  Adding a public option would increase that number significantly, and therefore increase competition.

And that’s the best argument I’ve heard yet for a public option.  I still don’t think we’re going to get one right now, and I don’t think it’s worth sinking the bill over.  But if the insurance industry wanted to make sure that Democrats considered adding one in later, they sure are on the right path.

Some past presidents of the AMA wrote an editorial in the WSJ today.  First of all, I find it amusing that past presidents of the AMA are complaining about a lack of access to those making policy.  I haven’t been invited recently to the White House lately either, and you don’t hear me complaining.  Well, maybe you just did.  Anyway, the AMA has been able to contribute heavily to the discussion about health care reform.  President Obama even came to your last meeting.

I’ve been getting a ton of emails asking me about the arguments made there.  So go read the whole thing and come back.

There’s nothing new in there.  Many of their points have already been refuted in this blog, in fact:

1. Competition across state lines is not the answer.
2. Medicare reimburement rates are not a fault of government involvement.
3. Innovation has nothing to do with health care reform.
4. Tort reform does not equal health care reform.

These are old arguments, and – believe me – they’ve been heard before.  I’m not surprised they weren’t invited to the Rose Garden to be heard again.

A reader writes:

Part of the fear corporate America has is that they can’t trust that our government will present a fair competition if they enter a public option into the system. The government makes the rules on what the insurance companies must cover. Are they going to follow those same rules? Will they also follow the state regulations on what insurance must cover? Ex. in-vitro fertilization, etc?

Currently insurance companies must pay a premium tax to the state (Arkansas) for every dollar of premium they collect. That premium tax helps fund state children’s insurance programs (ARKids First). Will the government also have to pay a premium tax? That is part of what increases the rates for private insurance. If the government doesn’t pay that tax, they are already at an advantage.

If the government wants to compete, then they need to do so on a level playing field, which you can never have when only one side makes the rules.

If there is a public option, and even millions more paying at a reduced rate, the remainder of the payers — private insurance — will get hit harder then they do now. As a result, the private payers will be forced out of business…

There are just 4 major carriers in Arkansas. Imagine if the government competition forcing even 50% of current carriers to fold, that’d leave us with only 2 non government options. That would cause even more pressure on the 2 remaining to make up the deficit caused by the government options. It wouldn’t be long until we’d not have anything other than the government option. At that point, would we still have to call it an “option”? It’d be the only plan available so now option to it.

Let me state right off the bat that there is a difference in my describing how things should be, and what a bill says.  Please remember that I am not a politician, nor am I endorsing a bill (or even a version of one).  I will discuss the relative strengths and weaknesses of different approaches, and offer my thoughts on your arguments.  It’s ultimately up to others – and you – to decide what we should do.

So I’m going to tell you what the public option is supposed to do.  I can’t say that every version of the bill will do what I say.  The reader’s first concern is that the rules will be different for the public option and private plans.  No.  That’s not how it should work.  Once the public insurance option is seeded and begun, then it must operate off of premiums.  If it can’t do that, it has to raise the premiums.  It will be under the same rules and regulations.  It has to be a fair fight – including taxes and such.

I disagree that you cannot have competition when one side makes the rules.  Private universities seem to do fine competing with public universities.  Same with FedEx and UPS versus the post office.

As for competition, a study by the AMA, not known for its radical agenda, found that in the majority of metropolitan areas there is a severe lack of competition.  The public option is intended to make sure that competition increases.  It is intended to add another guaranteed option for people in those areas.

As long as these rules are enforced, if it is a fair fight, and private insurance can’t offer the same value for the same price, should they continue to exist?  If they can, I’m all for them.  If they can’t, I don’t understand why we should be forced to pay more.  Do people really have so little faith in the private sector?