The outcome of the Massachusetts Senate race has many Americans asking, “Can’t Congress just scale back the current reform package? Can’t we just pass health care legislation that fixes the insurance market and makes how we deliver health care more efficient?”
Unfortunately, achieving these core health reform goals is not simple. Here’s why.
Many Americans agree that insurance companies should not be allowed to deny people insurance, exclude pre-existing conditions from coverage, or charge people more because they are sick. But you cannot implement these reforms without an individual requirement to purchase coverage. Just ask New York state, which required insurers to sell to all customers without a mandate. More than half of people in the individual market experienced premium increases greater than 20 percent.
Without a requirement to purchase coverage, people who are sick are more likely than people who are healthy to buy coverage. Think about it. Without any compelling reason to buy, who would you expect to purchase insurance – a healthy 25 year-old male or a 55 year-old woman with a history of breast cancer? Insurers rightly fear that they are going to get more sick customers than healthy customers – which undermines the basic way that any insurance works, by pooling risk . (Can you imagine what would happen if we sold flood insurance to homeowners AFTER a river breached its banks?) Remember that in order to stay in business, insurers (and this is true of nonprofit health plans as well as for profit ones), insurers must charge premiums that are higher than their enrollees’ medical bills on average. Therefore, insurers are left with only one option to protect themselves – raise premiums for everyone. This creates a vicious spiral – a sicker risk pool, higher prices, and even more people who are uninsured. Ron Pollack, exectuive director of Families USA, offers a similar perspective:
As a number of states have learned, insurance market reforms -- as important as they are -- cannot work without expanded health coverage. Insurance market reforms implemented alone will lead to skyrocketing premiums as sicker, older people secure coverage and younger, healthier people don’t.
This incremental approach is a recipe for disaster -- both substantively and politically.
If everyone is required to buy coverage, however, insurers will no longer fear people are buying coverage only because they are sick. Therefore, an individual requirement to purchase coverage is necessary to achieve the central goal of a fair insurance market, but there is one more side of the triangle: subsidies to help make insurance affordable.
You cannot require people to buy coverage that they cannot afford. These subsidies require a significant amount of federal financing -- about $574 billion and $329 billion in the House and Senate bills respectively. As Senator McCaskill said on WAMU’s Power Breakfast:
I heard somebody say this morning, we’ll just do preexisting conditions. Well, you can’t do preexisting conditions unless you do a mandate and you can’t do a mandate if you can’t make insurance affordable. … It’s just all inter-related.
This spending must be financed, which also makes health care delivery system reform a necessity. It would simply be irresponsible to expand coverage without beginning to make our health care system more quality-based and efficient. Plus, reforming the delivery system -- particularly Medicare -- is one of the primary mechanisms used to finance coverage expansion in the two bills approved by Congress. After all of that, we are left with legislation that looks very similar to the bills approved by the House and the Senate.
On the flip side, some people argue we should move ahead with changes to the Medicare and Medicaid payment structures, holding off on coverage expansion. Asking doctors and hospitals to be more efficient when such a large portion of the population is uninsured is difficult from a policy standpoint and downright unpalatable from the perspective of doctors and hospitals.
So bottom line: we could not agree more with President Obama who listed insurance market reforms, cost containment, and help for small businesses as “core elements” of the health reform bill. But we also think solving these problems requires a comprehensive, rather than incremental approach.