Chadwick: Health Care Reform and Common Sense
Believe it or not, there is some good news regarding health care reform. Legislators, employers and employees are actually in agreement on a number of important issues facing the industry. If only both political parties in our legislature could come together to implement changes that are not controversial, perhaps the remaining disagreeable items could be tackled later.
From all my conversations, it appears that there is nearly universal consensus supporting the elimination of pre-existing conditions, which are deemed unfair and basically un-American. The notion that a pre-existing condition could disqualify one from insurance coverage is not only grotesquely unfair, but it stands notionally to thwart one of the most powerful economic forces in the U.S. economic system, namely the mobility of labor. People in this country willingly move from company to company in an effort to advance their careers, and the existence of a pre-existing condition clause that pertains not simply to the employee but to any member of the family has the effect of tethering an otherwise upwardly mobile worker to inferior conditions.
Secondly, there seems little reason not to allow health insurance companies to compete across state lines.
In the personal property insurance market, the practice has existed for over a century.
One can go shopping for automobile, home, marine, motorcycle and liability insurance coverage from a host of separate insurance carriers. In fact, there are websites that help one to navigate the vast array of coverage options and there are companies in the business of finding the coverage that best suits individual needs. So why not with health care? If in Connecticut (where I live) the number of health insurers were to increase from the three available today to ten or twelve, I’m inclined to think that premiums might even decline, instead of endlessly rising.
Tort reform may not be an issue that many of our legislators want to tackle, but their constituents most assuredly want them to do so. Even President Obama has fired a shot across the bow of the Congress by admitting that tort reform is necessary. Almost everyone I know can give examples of doctors engaging in the practice of defensive medicine to reduce the likelihood of being sued. It is a hugely costly tariff of sorts, far more expensive than the ‘extra five percent’ that is bandied about.
Somehow I have to think that if one pooled together hundreds of small companies that individually do not have enough employees to provide the diversified risk that an insurance company needs to underwrite, one could generate a large enough population – say 50,000 – to be attractive to underwriters. It seems so simple a notion that I cannot fathom why it can’t be done. Admittedly, many health insurance companies today are not truly providing insurance. Rather they are acting as facilitators for large corporations and managing an insurance budget predetermined by the employer. But I believe that a pool of any randomly selected twenty, or thirty or forty thousand people could provide good insurance characteristics.
One of the legislated changes in the current health care reform law is the requirement for companies to adopt electronic recordkeeping. Many companies were already engaged in making the shift from paper to electronics. The requirement to do so will improve productivity, will reduce costly and risky errors and will allow for improved health care.
The above set of issues don’t seem to be controversial – except for legislators’ anxiety about losing funding from the all-powerful lawyers’ lobby if they enact tort reform. So I say, “Let’s get a move on, Congress.” The President has admitted that things need to be changed in the current law. Use it as an opportunity to improve competition and productivity and let the private sector do what it does best, namely compete on price.
The issue of the many other people who remain without insurance will not go away. But somehow I find it counterintuitive to entrust the Federal Government with the oversight of millions more insureds when it is experiencing close to $100 billion annually in Medicare fraud. If Medicare were a private company, I can assure you its fraud rate would preclude it from winning a federal contract. I say, “Clean house, eliminate the fraud, prove you can run your existing book of business effectively and honestly, and then maybe there is logic to expanding your contract.”
Patricia W. Chadwick has had more than 35 years of investment experience. She is the founder and president of Ravengate Partners LLC, a consulting firm that provides advice on financial markets and global economics.