By Winthrop Drake Thies, J.D., LL.M.
In my Letter to the Editor criticizing Sen. Sanders’ Single-Payer alternative to the Affordable Care Act (ACA) that appears elsewhere in this issue, I state that health insurance is now too thoroughly embedded in the American economy and society to be destroyed overnight. Politics, after all, is the art of the possible. Single Payer here is just not politically or economically possible.
And by advocating it Sen. Sanders reveals a utopian streak that puts his judgement in question.
Some 55 percent of insured Americans get their health insurance through work, via plans paid for (in part or fully) by their employers. The health insurance industry employs about a half million people. Hundreds of thousands of Americans own stock in health insurers and depend on it to some extent for their retirement security. Again, are American doctors docilely to become salaried employees, as in other Single Payer systems? I don’t think so.
My claim that going to Single Payer (in sum, Medicare for all) would utterly destroy health insurers is somewhat over-stated. Even in the United Kingdom, where the often supposedly wretched but actually rather good and broadly supported National Health System gives benefits to everyone, some 11 percent of Britons have supplementary private insurance. But surely single payer here would mean a hugely diminished health insurance industry. Where would all those fired workers go?
True, with their capital the insurance companies could theoretically go into other lines. Usually such a move into a new field is ill advised. Do you remember what happened to the once fashionable “conglomerates” of the late 20th century? Are Aetna and United Healthcare going to compete effectively with the experienced Geico and Allstate?
Okay, so we’re struck with an insurance based system, simply because of historical accident: the development of unions getting health benefits through insurance starting during World War II.
Now, however, some of the problems of the ACA are becoming clear. Not enough healthy young people are buying insurance to keep premiums affordable for older people, even with subsidies for the poor. Younger people in many cases see insurance as a bad buy: they’d rather pay the penalty to the IRS. Premiums, deductibles and co-pays are rising. Meanwhile, some insurers are losing money on individual plans and like United Healthcare threaten to leave that field entirely. The presently structured ACA is insupportable in the long run.
But there are three countries with long established insurance-based healthcare which apparently work reasonably well: the Netherlands, Switzerland and Japan. Each has far, far better healthcare outcomes (length of life, infant mortality, etc.) than we but far lower costs. Japan pays per person half what we spend on health care while having the longest life expectancy figures on the globe. How do they do it?
Largely by turning health insurers into regulated utilities, like Con Ed or Verizon, with profits limited. Also, with mechanisms that require insurers to share their actual experience, so that in one sense all insurers are in one giant pool. The poor are given subsidies to buy insurance.
Today we have taken a baby step toward utility status in the ACA by requiring health insurers to pay out at least 80 percent of their premiums in benefits. Insurers that fail to do that must in effect pay make-up “rebates” to their insureds. Making health insurers explicit utilities regulated by a new federal agency is not a big step. (Which might well cap the lavish pay top execs in the industry often enjoy.) And we could move up the required payout: possibly to 85 or 90 percent, leaving just 15 or 10 percent for administrative costs and return on capital.
We should study how the three countries with insurance-based healthcare do it and adopt the best provisions from each.
Mr. Thies (graduate of Harvard Law and NYU Graduate Law School) is a retired tax planning attorney. He is a student of economics and public policy and active in the Institute for Retired Professionals of The New School University.