A story about health care

 

LAWMAKER

There are big problems with health care in this country. It’s too expensive, and it seems unfair that people with preexisting conditions can’t get any form of health care.

INSURANCE INDUSTRY

Insurance only works by amortizing risk across all payers. We need enough healthy people paying into the system to pay for the sick.

LAWMAKER

Hm. Maybe the right choice is to have a single payer system run by the government. At least that’s what they’re talking about up on The Hill.

INSURANCE INDUSTRY

Look, if we eliminated preexisting conditions, everyone’s premiums would shoot up.  I have a model one of our eggheads whipped up if you want to see…

LAWMAKER

So you’re saying it’s impossible to eliminate preexisting conditions from consideration when issuing a policy?

INSURANCE INDUSTRY

I wouldn’t say impossible, but if we eliminated preexisting conditions, we would have to raise our premiums for those patients to a level that they probably can’t afford.

LAWMAKER

That seems unfair.

INSURANCE INDUSTRY

If any individual could buy insurance at a cheap price at any time, they wouldn’t ever buy insurance unless they got sick.  To keep their bills affordable, we would have to increase premiums on healthy patients to a degree that isn’t fair or sustainable. This is what we call the ‘free-rider’ problem.

LAWMAKER

OK. Well, you provide all the coverage in this country, and we want to do it without destroying the private insurance industry.  What can we do?

INSURANCE INDUSTRY

If everyone had to pay a small premium, that would spread out the risk enough that we could eliminate preexisting conditions and caps on lifetime coverage.

LAWMAKER

Everyone?

INSURANCE INDUSTRY

Yes, everyone.

A common misconception among Americans is that the popular provisions of the ACA, namely the lifting of restrictions on preexisting conditions and caps on lifetime coverage, are separable from the individual mandate that all Americans above a certain income level must buy insurance or face a tax penalty.

They’re not.  While insurance companies are for profit entities, they must also remain solvent, and removing preexisting conditions would not only encourage people to wait to buy coverage until they are sick, but also increase premiums for patients who elect to maintain coverage.

The ACA is not a move towards socialized medicine, and it is far from a government run health care program.  It is regulation of an industry that produces a product that has life or death ramifications. While regulation can seem counterproductive to many, there has been at least one example where regulation has provably saved lives- the auto industry.

In 1965, Ralph Nader wrote the book that would make him famous: Unsafe at Any Speed, which brought to light serious safety problems brought about by cost-cutting at General Motors.  While the merits of his argument can and will be debated at length, this was the first book that forced the public to really consider vehicle safety.  In response to public outcry, Congress made seat belts mandatory on all cars in 1966, saving countless lives.  In 1970, NHTSA was formed to create and enforce safety standards for modern passenger cars.  Since then, regulations from NHTSA have mandated airbags, crash testing, high mounted stop lights, side impact regulations, and more. As a result of better engineering and safety standards, you are now 4 times less likely to die in a crash in a modern car.

These regulations were initially fought by the car companies. Safety needs to be engineered into a vehicle, and it is expensive. In 1966, you could make any claim about safety you wanted to in a brochure and consumers had no crash test data to make informed decisions. From a rational business perspective, it didn’t make a lot of sense to add cost to a vehicle for crash safety, which was an abstract benefit that most drivers wouldn’t realize. Regulations leveled the field for manufacturers who could now invest in vehicle safety without sacrificing their relative competitiveness.  Crash tests make safety a selling point for cars and provide a marketing benefit to making cars safer.

Whether they intended to or not, NHTSA regulations reoriented many aspects of the automotive industry where safety became something that customers cared about. In doing so, the industry developed all sorts of technologies to improve vehicle safety, because safety started to sell. Not every regulation made sense, but most of them ultimately disappeared and were superseded by more reasonable standards.

The health care industry is 15% of US GDP and growing.  The health insurance companies are profitable and thriving, and acting in a rational way given the laws and regulations that are in place. Just like with the auto industry, the government should strive to align public interest with private enterprise, and the ACA is a set of regulations to improve public safety by ensuring that access to quality, affordable health care is available to all. The ACA can’t be perfect in its first iteration- but, like NHTSA, I would like to see it grow as a partnership between government and industry in a way that benefits patients.

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