Some are calling this health care bill a “good bill.” Tom Harkin is trying to sell this bill as a “starter home” with a “solid foundation.” Those who think this Senate bill is built on a strong foundation are either too invested to acknowledge its complete failings or don’t understand the many key components missing from this bill that are necessary to produce a properly working system.
If this bill were truly a smaller but better built bill, I would be applauding the Democrats in the Senate. But this bill is built on a foundation of sand. Even if it looks like a good house from a distance, it will collapse during the next storm.
I do not know a single working health care system that is as full of problems, errors, loopholes, and massive giveaways as this bill will be. The systems this bill most closely resemble (Switzerland, Netherlands, Belgium and Germany) require millions of moving parts to make them work.
All other countries with a primarily private health insurance system require all health insurance companies to sell a precisely designed, high quality, basic insurance package. This Senate bill will give insurance companies huge leeway to design a confusing array of policies only within set actuarial value levels. The bill will also allow for the sale of junk insurance (60% actuarial value plans with an $11,900 out of pocket limit and “catastrophic” plans). This is a recipe for expanding coverage in name only. Keeping insurance companies from gaming the system is hard enough in other countries where they all sell a single plan. In this Senate bill with huge design leeways for plans, it will be next to impossible.
Another tool used to prevent insurers from gaming the system is a strong risk adjustment mechanism. Again, compared to other countries like Germany or the Netherlands, the bill is woefully lacking. The CBO and CMS said the risk adjustment mechanisms in the bill will not prevent premiums from increasing due to adverse selection. Without a stronger risk adjuster, insurers will still compete by trying to dump the sick and get the maximum number of healthy people enlisted instead of trying to compete with quality and customer service.
All the other systems have a central provider reimbursement negotiator. Without this (and the repeal of the anti-trust exemption) the system will be extremely wasteful and anti-competitive. Forcing each insurer to secretly negotiate payments with the thousands of providers is a recipe for waste, fraud, and abuse. It creates a snowballing effect making it nearly impossible for new insurers to break into new markets. The Netherlands, which has the toughest regulations of any country, is the only one that allows for-profit insurance companies to provide basic coverage. All others require, by law, which basic insurance must be sold on a nonprofit basis.
And the regulations in the bill are full of loopholes, perverse incentives, and passages that are open to wide legal interruption. The “community rating” age ratio is unconscionably high at 1:3. The few systems that allow insurers to charge older people more (most have one price for everyone) use a better system of age-based pricing bands. The policing apparatus needed in these other, better designed, systems is very large and their job is much easier. Regulations without strong oversight are worthless.
Where is the $40 billion needed to pay for a large federal policing force to make this system work? The bill simply tells the state insurance commissioners, which have completely failed us so far (and are often in bed with the insurance companies), to do it. It will be an enforcement nightmare.
What I outlined are only some of the most glaring missing critical components needed for a workable system. This Senate bill is the house built upon sand, unable to weather the coming storm.
I’m not some wild-eyed idealist angry that the Senate bill does not use the public option. If they offered the German, Belgium, or Dutch system I would sing its praises from the mountaintops. But what is being offered is doomed to an expensive fail, the question is only when and how.
Some have said this is a reform package that we can build on. However, it is not a starter home with a strong foundation (unless selling out women’s reproductive rights is the new definition of strong foundations). It is a house of cards built with massive corporate giveaways. I think it is a bill that further enriches, empowers, and entrenches the enemies of reform.
To use another metaphor, I hope every progressive looks under the hood before they buy this lemon. It may look ok at first glance, but I promise you the engine is rusted out completely. At the very least, remove the individual mandate so it can be held as a bargaining chip by progressives to extract greater reforms between now and 2015, when the mandate would go into effect. Passing the individual mandate now (just so it can sit on the books for years) would be a political and negotiating disaster for Democrats. As it looks now, the next reform battle will be fought on the terms of the insurance companies even more. That is not what I think is a step forward.