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"Exchangz.... " (photo: CaioSchiavo / flickr)
There is a zombie myth that if you make people buy health insurance on exchanges the magic of the marketplace will bring down costs. The problem is that this idea has never worked in reality. It didn’t work for Medicare Advantage’s private health insurance exchange, it didn’t work in the federal employee insurance exchange, and it has not worked when tried by other countries.
In an article for the New England Journal of Medicine, Ewout van Ginneken, Ph.D., and Katherine Swartz, Ph.D. examine the private health insurance exchanges in Switzerland and the Netherlands and conclude the exchange mechanism itself is a failure at cost control.
A sobering message is inescapable: although exchanges will help greatly to cover previously uninsured people, cost containment and quality improvements are not outcomes to be expected from the exchanges alone. The experience of Switzerland and the Netherlands suggests that reforms involving the provision and purchasing of health care are needed along with health insurance exchanges. Massachusetts, which established the first exchange in the United States, recognizes this lesson. Continuing in this direction, just 3 weeks ago (on July 31), the Massachusetts legislature passed a bill that establishes a commission to monitor the growth in health care costs, creating incentives for hospitals and other providers to reduce costs, and encourages the creation of accountable care organizations.
The article was written to be a cautionary note to states as they set up their exchanges under the Affordable Care Act, but the basic point applies equally as well to the Republican plan to voucherize Medicare.
There is absolutely no reason to believe, based on decades of past experiences, that making seniors shop around for insurance on an exchange will control costs. The only way turning Medicare into a voucher program will save the government money is if the government then starts giving old people insufficiently small vouchers shifting the costs onto them. Simply making old people pay more to get insurance is how the original plan by Paul Ryan saves the government money.
It would be much easier for Democrats and their allies to point out the exchange idea, which forms the basis for the Republican’s plan to turn Medicare into a voucher program, is simply bad if they didn’t spend a year claiming insurance exchanges were great in an attempt to sell Obamacare. Now Democrats either need to pretend the zombie myth is true or risk looking like total hypocrites on this point like Ezra Klein and Peter Orszag do.
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A rational persn could drive themselves insane if they actually paid attention to the two parties competing for the privilege of selling out their cnstituents.
Most importantly, it did not work in Massachusetts. Governor Patrick has had the legislature looking at ways to control the costs of Romneycare.
The only mechanisms to control costs in the ACA are the regulations on medical cost ratios and the pricing effect of the allowable Medicare costs.
What a well-managed exchange (unlikely state exchanges in the hands of captive state regulators) would do is allow apples-to-apples comparison of policy provisions across plans, post claims history and complaint data, and do satisfaction surveys. It controls costs to the extent that it is widely used for comparison shopping for policies, which is not a guaranteed prospect for a system that assumes everyone has access to an internet-linked computer.
What is never clear in the discussion of the costs of health care is whether the analyst is talking about typical personal or family costs, personal or family out-of-pocket costs or aggregate costs to the society. Those three can be affected in different ways.
I remember how often we heard about exchanges being a viable alternative to the public option during the health care reform debate: oh, exchanges are just as good; everything will be fine, don’t worry about it. God, how I hate those lying, cheating Beltway shitfucks.
The exchanges were always part of this Trojan Horse. When the Dims were shown to never be serious about Single Payer, and junked the Public Option at first opportunity, leaving the status quo intact and in complete control of costs, could anyone have doubted this was an Insurance bailout?