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A National Private Health Care Market Place: Feeding Reform to the Big Dogs

by Fred Fortin

The Wall Street Journal, and at least one major republican presidential contender want to create a national private health insurance market place as part of any reform. In an editorial last year on market-based health care reform proposals offered up by AHIP, the WSJ argued in favored of creating a private national insurance option. They complained that “the current system is a special interest anachronism in this age of Internet and global commerce,” and that we should “let the markets work” presumably at a national level rather than through 50 sets of state regulations.

Rudy Giuliani proposes that people be allowed to purchase health insurance across state lines if state mandates prevent affordable coverage. Giuliani writes in a Boston Globe opinion piece,

“One of the advantages of our federalist system is that different states can try different approaches to solving problems and learn from each other. States should be empowered to meet benchmarks regarding the affordability of insurance options and the availability of preventive care. The result will be a health care system focused on wellness, not just sickness. And if a state insists on expensive mandates that keep health care options unaffordable, we will open the state insurance market up to interstate commerce so their citizens can shop for insurance options in other states.”

Other than the single payer option, this notion is one of the most radical out there and would turn the health insurance industry on its head. Although the idea doesn’t seem to be gaining much traction, we should give it some serious attention.

My contention is that a national private health care market imposed on the states will take us to the same uncomfortable place that we would end up if we followed the single payer route: zero local control over health care planning, decision making and responsibility. Maybe being from Hawaii, I’m overly sensitive over the vast distance between Washington, D.C. and Honolulu. But I think there’s more to worry about here than just geography.

For that last twenty years or so, local control over health care has steadily diminished. Certainly the federal government has been the prime perpetrator with the federal HIPAA law emblematic of this trend. Its implementation pushed millions of dollars in unnecessary costs onto the states and local health care delivery providers while bringing very little of comparable value to the table. And for all of this, local authorities have little or no control over the administration and enforcement of the law which rests primarily with the federal government.

Unfunded mandates managed by federal agencies and the immense cost shifts to states and private payers from Medicare and Medicaid have covertly, and significantly, inflated local health care costs. In addition, the increasing regionalization of these government health programs often cut out local agencies and providers from participation.

On the private market side, we see the rapid consolidation of both health insurers and providers into fewer, and much, much larger corporations. Many are for-profit with wall street priorities. Many have global aspirations; health care is getting flatter after all. But along with Washington, these are very big dogs in a yard getting smaller everyday.

Both single payer and the opening up of a national private health care market place beyond state and local authority, are reform strategies that feed these big dogs. Combined with, say the national licensing of physicians and other providers, a national private health care market place could explode in organizational bureaucracy, complexity and alienation from local concerns.

And when these big dogs fight, as they are wont to do, the collateral damage can be considerable.

To be fair, national private market competition may reduce costs, or so the argument goes. But that’s not a given. Hawaii, for example, is one of the lowest costing states when it comes to health care premiums. So go figure.

It would be easy to dismiss these concerns as the whining of parochial special interests or the entrenched status quo. And well there’s not much one can say to deflect that kind of critique. One could ask, of course, what area of political and economic life is absent “special interests” but that would be begging the question.

For me it comes down to the inherent dangers I see in these two health reform strategies for local communities to become even more marginalized from important decisions that impact their daily lives than they already are. It may be a a fool’s errand to try a keep health care local, but it’s like this: I still need to walk the dog rather than the dog walk me no matter what its size.


5 Comments »

[…] my entire post over at the World Health Care Blog Posted in Globalization, Hawaii, Healthcare, […]

  Pat wrote @ October 3rd, 2007 at 3:01 am

I still need to walk the dog rather than the dog walk me no matter what its size.

Good point, this is an issue that must be address as localized cost containment is critical.

  David Demers wrote @ October 3rd, 2007 at 4:28 pm

To me control means I get to decide what coverages my plan includes, it means I get to choose how and when I’ll use the delivery system, it means there is a relationship between my choices and my costs…or savings, and it means I take responsibility for me lifestyle choices and get lower rates because I do. All these things are impeded by our current paternalistic system. No one is accountable because the current system disallows responsibility. As early as the 1970’s the Rand Corporation had studies showing that when utilization and cost are linked, consumers economize, and there are no differences in outcomes.

[…] argued before that nationalizing the private health insurance market place would be a big mistake. Such a policy […]

[…] creating a truly competitive, national market.” On this point he’s in line with the Wall Street Journal, and McCain’s health reform plan, among others. I’ve argued against this notion […]

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