Marshall Auerback and Randy Wray: America Needs Healthcare, Not Health Insurance

By Marshall Auerback, a market analyst and commentator and L. Randall Wray, a professor of economics at the University of Missouri-Kansas City. Cross posted from Alternet

In Friday’s New York Times, Paul Krugman argues that the Supreme Court conservatives grasping for reasons why Congress lacks the power to do anything that they don’t like have forgotten an important distinction: the one between a judge and a politician. We’re not sure this is correct. It’s always been the case that for all of their lofty protestations of being “above politics,” the Supreme Court has been political, whether it be the Warren Court or today’s Roberts Court.

That said, we’re not sure the Supremes are wrong to question the constitutionality of a private health insurance mandate that Krugman seems so keen to defend, asking: “Is requiring that people pay a tax that finances health coverage O.K., while requiring that they purchase insurance is unconstitutional?”

Historically, Krugman has been one of the most eloquent critics of the insurance-based model. Yet he makes the mistake common to many progressive defenders of Obama’s healthcare bill: He conflates two distinct issues and thereby masks the fundamental flaw underlying the entire approach. Private health insurance is not synonymous with healthcare. There is a big difference between levying a tax for a public good (i.e. healthcare) versus forcing people to buy a service from a private health insurance company, which is by no means synonymous with healthcare.

Using insurers to provide funding is a complex, costly and distorting method of financing healthcare. Imagine sending your weekly grocery bill to an insurance clerk for review and having the grocer reimbursed by the insurer to whom you have been paying “food insurance” premiums—with some of your purchases excluded from coverage at the whim of the insurer. Is there any plausible reason for putting an insurance agent between you and your grocer? No. Then why should an insurer stand between you and your healthcare provider? And why should you be forced to contribute to such an arbitrary scheme?

Furthermore, it is important to note how unusual the United States is—no other comparable nation (in terms of high per capita income) lacks universal healthcare coverage, and many nations that are much poorer provide universal access. And in most of the nations that are similar in other respects to the United States, government plays a much bigger role in healthcare delivery and in financing the system.

“Reform” measures actually promote the status quo by pulling more people into an expensive healthcare system that is managed and funded by insurers. Since two-thirds of household bankruptcies are due to healthcare costs, forcing people to turn over an even larger portion of their income to insurance companies will further erode household finances and exacerbate the problem. This is despite the fact that research by, among others, David U. Himmelstein and Steffie Woolhandler, demonstrates that single-payer reform could save about $380 billion annually that’s currently wasted on insurers’ overhead and the unnecessary paperwork (and screen-work) they inflict on hospitals, doctors and patients.

Even under today’s “reforms” in the Affordable Health Care Act, healthcare remains a function of employment, which preserves a significant cost disadvantage for U.S. corporations and is particularly unappealing during periods of high unemployment.

The U.S. is the only country in the world where healthcare has become a marginal cost of doing business, thereby putting American corporations at a significant cost disadvantage vis a vis their foreign competition.

The reality is that healthcare is not a service that should be funded by insurance companies. An individual should insure against expensive and undesirable calamities: tornadoes, fires, auto accidents. These need to be insurable risks, or insurance will not be made available. This means the events need to be reasonably random and relatively rare, with calculable probabilities that do not change much over time. We need to make sure that the existence of insurance does not increase the probability of insured losses. This is why we are not allowed to insure our neighbor’s house.

Insurance works by using the premiums paid in by all of the insured to cover the losses that infrequently visit a small subset of them. Of course, insurance always turns out to be a bad deal for almost all of the insured—the return is hugely negative because most of the insured never collect benefits. The insurance company’s operating costs and profit margins are more or less equal to the net losses suffered by its policyholders.

Ideally, insurance premiums ought to be linked to individual risks; if this actually changed behavior so that risk fell, so much the better. That would reduce the costs to those policyholders who do not experience insured events, and would also increase the insurance companies’ profitability. Competition among insurers would then reduce the premiums for those whose behavior modifications had reduced risks.

In practice, people are put into classes—say, “over age 55 with no accidents or moving violations” in the case of auto insurance. Some people are uninsurable—the attendant risks are too high. For example, someone who repeatedly wrecks cars while driving drunk will not be able to purchase insurance. The government might help out by taking away the driver’s license, in which case the insurer could not sell insurance even if it were willing to take on the risk. Further, one cannot insure a burning house against fire because it is, well, already on fire. And even if insurance had already been purchased, the insurer could deny a claim if it determined that the policyholder was at fault.

The insured try to get into the low-risk, low-premium classes; the insurers try to sort people by risk and to narrow risk classes. To be sure, insurers do not want to avoid all risks—given a risk/return trade-off, higher-risk individuals will be charged higher premiums. Problems for the insurer arise if high-risk individuals are placed in low-risk classes and thus enjoy inappropriately low premiums. The problem for many individuals is that appropriately priced premiums will be unaffordable. At the extreme, if the probability of an insurable event approaches certainty, the premium that must be charged equals the expected loss, plus the insurance company’s operating costs and profits.

However, it is likely that high-risk individuals would refuse insurance long before premiums reached that level, since they will be better off paying out of pocket. With costs skewed toward the less healthy part of the population that bought this insurance, the insurance company would invariably seek to mitigate this impact on cost through a process of prescreening to identify those likely to require expensive treatment, and either rejecting their applications or charging significantly higher premiums to compensate.

Again, this tends to guarantee that the uninsured pool is the most at risk. In any event, once an insurance policy is written, the insurer does its best to deny claims. It will look at the fine print and try to find exclusions and uncover preexisting conditions (say, faulty wiring) that would invalidate the claim.

From the narrow perspective of the insurance companies, all of this is good business practice. Even under a system which denies coverage on the basis of pre-existing conditions (the quid pro quo for the mandate), the legislation gives ample scope for the insurance companies to limit coverage. Sarah Palin was right. There are death panels in our healthcare system: they’re called health insurance companies.

And the reality is that as human beings we are all a bundle of “pre-existing conditions.” From the day of our birth, each of us is a little bundle of preexisting conditions—congenital abnormalities and genetic predispositions to disease or, perhaps, risky behavior. Many of these conditions will only be discovered much later, probably in a doctor’s office. The health insurer will likely remain in the dark until a bill is submitted for payment. It then must seek a way to deny the claim. The insurer will check the fine print and patient records for exclusions and preexisting conditions. Often, insurers automatically issue a denial, forcing patients to file an appeal. Again, good business practice for an insurance company, but lousy if the objective is guaranteed healthcare provision.

Given today’s political constraints, perhaps a full “single-payer” option might not be feasible, but one earlier variant of the proposed healthcare legislation did feature a Medicare buy-in. In effect, if the Supreme Court does strike down the major provisions of the Obama healthcare plan, Congress could easily use Senate reconciliation and expand Medicare via the Senate’s buy-in provisions (the House can approve this on the basis of a simple majority vote). The Congressional Budget Office has already signed off on this as a means of saving money (“budget savings” is in some respects a nonsensical concept, but it provides the necessary political cover to deploy what is essentially a budgetary procedure).

More important, the expansion of Medicare would provide a genuine “public option” that, by competing against private insurance companies (which would presumably no longer have any genuine cost constraints given that the ban to deny coverage on the basis of pre-existing conditions would likely be struck down with the individual mandate), would help control costs. It would also help solve the problem of preexisting. And because Medicare does not deny coverage on the basis of pre-existing conditions, it is actually far more cost effective than private health insurance. As James K. Galbraith notes in The Predator State (2008):

Public health insurance entities such as Medicare do not evaluate risk because they are universal. Therefore, they save the major cost associated with private health insurance. They pay their personnel at civil servant salary scales and are under no obligation to provide a return to shareholders via dividends or meet a target rate of return. Insurance in general is therefore intrinsically a service that the public sector can competently provide at lower cost than the private sector, and from the standpoint of the entire population, selective provision of private health insurance is invariably inferior to universal public provision.

In other words, this brings us closer to the “ideal” low-cost universal insurance plan that has long been advocated by people like Paul Krugman. Allowing a Medicare buy-in to Americans under age 65 would give people a genuine alternative to private health insurance and thereby render the whole issue of denying coverage on the basis of preexisting conditions moot. And it would substantially enhance the global competitiveness of American corporations.

A Medicare buy-in would also have the added benefit of getting us closer to a single-payer system, which is a far more rational way to control healthcare costs, largely due to the administrative complexity associated with our current patchwork system and the corresponding inability to bargain with suppliers, especially drug companies, for lower prices. Residents of the United States notoriously pay much higher prices for prescription drugs than residents of other advanced countries, including Canada. This proposal would also give American healthcare consumers far more bang for their buck than the current legislation. It would indeed be the height of historic irony if the Roberts Supreme Court was the instrument that led us away from a private health insurance based system toward something approaching a rational, affordable healthcare provision.

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  1. Septeus7

    Which option strike one as being more liberating? Being forced to send your money on compulsory cartel of profit insurance rackets with no intent to provide services or being allowed an option to buy into a already existing public program of which you are barred only because you have the profile of being less likely to use said program? Is there any contest?

    One action restricts liberty and the other extends it. Medicare buy-in is the only option for freedom loving people. Anything else is fascism. I will not buy Obama Poll Tax (think Charles II) insurance. They may lock be me up but I will not yeld to fascism.

    1. Put their heads on sticks

      The nine swine don’t care if you have health care. All they care about is walling America off from the minimal standards of the civilized world. Even as they blew off your right to health, they were licking their chops over gutting your right to education.

  2. indio007

    Health care is the biggest scam going. 10k a night for a hospital room that you have to share? That’s Ritz Carlton rates without the amenities.

    Outlaw health insurance. Exempt healthcare workers (not pencil pusher admins) from income tax for income that is less than 5 times poverty level.
    Problem solved.

    1. alex

      “Exempt healthcare workers (not pencil pusher admins) from income tax for income that is less than 5 times poverty level.”

      Sounds good to me, but my wife is a nurse.

      In practice why not just pay them a decent living and tax them like everybody else. Sure it would mean the government paying out wages/salary that are then taxed back, but how does that differ from government employees? The reason for doing it is that taxes are adjusted for circumstances.

  3. Middle Seaman

    We have gone endlessly through the arguments that show that the health insurance industry hinders health care rather than provide it in even in a minimal form. Going through Medicare to achieve universal health care is natural in the US context, but is not the only way to go. For instance, the Dutch use private health insurance for universal care, but have put that industry in a reasonable straight jacket; the industry is the administrative body and not the in charge of the faucet.

    Eventuall, everything is political. The Warren court supported the 99%, while the current court represents the 1% and its misbehavior, e.g. invention of company as person rights, is terroristic.

    1. alex

      “the Dutch use private health insurance for universal care”

      As do the Germans and Swiss. But in Germany and Switzerland the health insurance companies are all not-for-profit (not sure about the Netherlands, but I’d be surprised if it was otherwise). They are also very heavily regulated. The bottom line is that I don’t trust the US to properly regulate them, so we’d be better off with a Canadian style system of universal Medicare.

      1. Nathanael

        The Dutch used to have single-payer. Their partial privatization has been both a scam and a complete disaster.

        In Germany and Switzerland the not-for-profit health insurers are regulated to the level that ones with more money are ordered by the government to transfer money to ones with less money. And they do. Can you really imagine that here?

  4. Conscience of a Conservative

    It’s no accident that procedures covered by insurance experience higher inflation rates(rates of price increase) than procedures not covered by insurance(e.g. LASIK, Cosmetic). Insurance just shifts the burden around, we need to identify and deal with why costs has one up and we know.

    *One receiving benefit is not making the purchasing decision
    *Hospitals must take in emergency cases of uninsured
    *Cost of mal-practice passed on to all health care consumers

    The solution is Tort reform, higher deductibles and ending employer purchased insurance. Persons below the poverty level receive tax-credits to help purchase insurance.

    I would take this a step further and say we should adopt the Swiss system where insurance companies offer two products a regulated basic insurance option and an unregulated supplemental plan. The former covers what we as a society deem basic essential insurance and insurance companies must offer this at a regulated price as the cost of being allowed to offer unregulated free market suplemental plans.

    Supreme Court raises good issues re requirement of insurance, so why not make it optional and over-throw the hospital requirement of treating those without money. The wealthy can self-insure and if we’re giving the poorest a tax-credit equal to the cost of Basic insurance we’ve effectively removed the uninsured problem.

    1. Hugh

      Tax credits for the poor? Seriously? As in here’s a $100 now go out and buy health insurance, you know with a $5000 deductible. Yeah, that’ll work. It will work about as well as consumers making intelligent choices about how best to spend their money when most are simply pig ignorant about how to evaluate providers or about medicine and their medical needs in general.

      And can we please regulate tort reform to the minor role it plays in raising costs. Making it a major issue is just a conservative talking point, a way to direct attention away from the poor quality of the healthcare system and blame its victims.

    2. sgt_doom

      The solution is Tort reform..

      Typical US Chamber of Commerce (USCoC) talking points, completely ignoring the major cost drivers of the private healthcare sector, namely, rampant, runaway ultra-leveraged speculation across the entire healthcare sector by hedge funds, rampant and runaway private equity leveraged buyouts across the spectrum of the healthcare sector over the past decade and absolute corporation corruption — just check out all those historic criminal penalties and out-of-court settlements.

      Sending all the monies to the private insurance companies ain’t going to be the next step in universal healthcare, since they are the major barrier erectors to it.

      Let us stick to the facts, and not the chronic neocon reframing of reality and their incremental destruction.

    3. Brooklin Bridge

      As Rick Perry says, “It takes a brave man to kill an innocent human being…”.

      You seem to be particularly well endowed with that form of bravery.

    4. Citizen Alan

      Anyone who starts off a sentence with “The solution is tort reform” deserves to crippled for life due to medical malpractice. Also, “Conscience of a Conservative” is the funniest oxymoron I’ve ever heard. Might as well say “Delicacy of an Axe Murderer.”

  5. Michael Fiorillo

    Though I can’t provide specific references, I seem to recall similar arguments being made during and in the aftermath of Clinton’s health care debacle.

    While theoretically possible, it’s more likely a mirage that this Supreme Court would inadvertently create an opening for Medicare for all. I’m not a lawyer, but my reflex is to expect that Scalito, et. al. will do their best to craft a decision that preemptively forecloses upon that possibility, as well.

    1. Conscience of a Conservative

      Interestingly enough I was reading David Merkel’s blog today and he listed all the industry groups of the S&P 500 with their yields and pay-out ratios. The major drug companies were in line with Utility providers. It struck me that we’ve turned drug companies into utilities regulating pricing and product development. The negtive of all this is that the major pharma no longer commits its resources toward the development of life saving drugs and instead engages in financial engineering and spending all their funds on curing baldness , obesity and erectile dysfunction.

      1. Melody

        On par with captive insurance ‘consumers’ are pharma consumers who are unaware of NNT (numbers needed to treat) information. Every statin purchaser buys a product that if it does no good, does no harm (or so the mfg. says). But, in effect, each consumer is subsidizing the few who ARE helped by the drug, but more importantly, the manufacturer’s profitability. Additionally, pharma deceptively inflates the cost of bringing a new drug to market–oftentimes discounting public funding (through university research), and including some marketing schemes into the cost of development total. Americans are SO SCREWED!

  6. Jackson Baine

    Progressive ‘front’ groups all want Obamacare, what they won’t say is how it importantly maintains profit for the rentiers. This is why Max Baucus arrested Doctors. Jesse LaGreca apparently occupies on behalf of insurance corporations.

    “They won’t even put single payer on the table for discussion. Why not? Because it will bring a harsh justice – the death penalty – to their buddies in the multi-billion dollar private health insurance industry. The will of the American people is being held up by a handful of organizations and individuals who profit off the suffering of the masses.” – Mokhiber

    1. lambert strether

      One of the doctors arrested was Dr. Margaret Flowers (of one of the Occupy DC groups), for civil disobedience because Baucus refused to have any single payer advocates on his hearing panel. And could she buy a line of coverage on any of the “progressive” blogs? Of course not, since they were all shills for Obama. The same crowd is also running Warren’s campaign (which is why the collateral looks the same), another reason to be cynical — and by cynical, I mean realistic — about that effort.

      1. Nathanael

        It’s not true that it’s *all* the progressive blogs. (Hint: where’d you read about it?)

        It is true that it’s *most* of them.

  7. F. Beard

    If the US government is so intent on keeping the banks (which should be purely private businesses) healthy then why not the population too?

    Fascism (government privilege for the rich) leads to the need for socialism (government benefits for the poor).

  8. KenWalton

    I applaud the authors. I made the exact same argument to my state (Iowa) representative and senator, plus the democratic candidate for Congress for my district back in 2008. They appeared not to understand the difference. Perhaps in their world, everyone with health insurance gets health care, but that’s not the world the rest of us live in. It’s also possible that since so many health care insurance companies are headquartered in Des Moines that it would be politcal suicide to publicly recognise the difference.

    By the way, did anyone else think that there should be a “Health Care Games” book or movie to correspond to the “Hunger Games”?

  9. Fuzzy Investicle

    Good lord, THANK YOU! Excellent summary of the issues with this law. This is not a Dem/Repub issue (even though a-holes on both sides can’t help themselves). This is a shit bill that is unconstitutional. Ironically, Hillarycare would have been constitutional, but Obama decided to sellout to health insurance companies. They are the only group that makes out under this p.o.s. law. Health insurance is NOT friggin health care and this crap bill does nothing to control costs. In fact, it inflates cost and has already done so even though program hasn’t started.

    1. WiseAss

      Agree with every word of this analysis, but the question is more a matter of tactics than strategy and can we count on rational approach to the subject of healthcare in The US – and from what I’ve seen up until now the answer is NO. So we are left with what is feasible, although this hope is fading in the light of the supreme court approach. We are drowning here with the weight of healthcare costs. Every six months our employer switches insurance companies and on the way reduces their share of the costs , a difference that need to be added by us, the employees. On top of this, all policies have a lifelong cap of 1 million dollars which in case of serious illness quite achievable. Our company’s plan was when the law would kick in, to abandon healthcare all together and to pay the penalty which would be cheaper than healthcare costs. Not to mention our kids who cannot find a job that covers them and without this law will be left uninsured at the age of 22.
      We are being extorted here, but we have no choice but to promote this law which is the lesser evil.

      1. JTFaraday

        Just when you thought there couldn’t possibly be another God and Family entitlement…

        but you’re not the one being extorted. People getting hit up with the mandate are being extorted. By your logic their only recourse is to hope your employer wises up and dumps the whole stinkin’ lot of you out on the market you just screwed everyone else in.

        (You never know. It could happen. McKinsey needs a raise).

    2. sgt_doom

      Excellent comments, and to add one more: this opens the door and sets the precedent for the privatization of taxation, as it gives the power to private insurance companies to exact tax penalties on the citizenry, while also striking against small business, as they must provide the employees with health insurance when their number is greater than 50.

      This bill is solely structured as a major benefit (or as Chris Hedges stated, a backdoor bailout for the health insurance industry [which happens to be owned by the banksters — my comment]) for the private insurance and biopharmaceutical industries, while hindering small business in favor of the major corporations.

      And that “incremental improvement” nonsense: the citizenry will be legally penalized with tax penalties, but where oh where is the ironclad penalties against the insurance companies? And since the Obama administration immediately hired former Wellpoint VP, Liz Fowler, at HHS to sign waivers exempting the insurance companies from those incremental improvements — who knows when or if they will actually ever come into existence?????

      1. Nathanael

        Privatized taxation, historically, creates some of the most ugly anti-tax violence among the abused citizenry. The elites should watch their backs.

  10. briansays

    while i oppose the mandate unless accompanied with a public option
    the unspoken dirty secret of the right is that if you are poor and get sick and/or can’t afford the care you should die since your poverty/condition is your problem
    they just can’t/won’t say that

    1. Blue Fraud

      “What he should do is whatever he wants to do,” Paul replied. “That’s what freedom is all about, taking your own risks. This whole idea that you have to prepare to take care of everybody…….”

      “Are you saying society should just let him die?” Blitzer asked.

      The audience responded with shouts of “Yes!”

  11. Benedict@Large

    Even as a former health insurance industry professional, it’s pretty obvious to me that the US can no longer afford to have insurance companies act as an intermediary between the patient and the health care provider. That said, anyone who thinks that simply eliminating the insurer from this will solve or even come close to solving the US healthcare mess has no clue about how the system works. With all the sins perpetrated upon the insured patient over the years (and especially the last decade or so when these went beyond absurd), the insurers are simply a pass-thru, stripping their obligatory profit from the money pile, but ALWAYS passing on every penny of actual care inflation. It is this actual care inflation that is at the heart of the healthcare cost madness, with healthcare inflation regularly outstripping regular inflation by a substantial percentage for at least the last 35 years over which I’ve monitored it. Removing the insurer will not stop this, and since insurers actually do apply significant pricing pressure on the providers, removing them could actually make the inflation problem worse.

    [Note: I’m NOT suggesting insurers should stay in the loop simply because they pressure providers for lower prices. Simply noting that this function will absolutely need to be taken up by whatever replaces insurers.]

    1. ScottW

      You worked in the industry and probably know more than I do, but hasn’t Medicare actually kept medical costs lower than the private sector insurance side? All we ever hear is that doctors/hospitals cannot afford to treat Medicare patients. I completely agree we are getting fleeced by doctors/hospitals/drug companies compared to the rest of the World. All single payer countries seemed to have figured out how to control costs better than we have. But when profit is supreme, costs will rise.

      1. Benedict@Large

        There is certainly a difference in the overhead costs, with far more of every Medicare dollar reaching the healthcare provider. As for actual cost control, Medicare certainly has more leverage than even the largest private companies, and so can apply more price pressure, but my feeling is that the complaints of the doctors/hospitals are more pre-emptive than substantial. Medicare COULD apply a LOT more pressure than it does (which we see in Medicaid), so I’m sure some of their complaining is just politics aimed at preventing that.

        Note also however that there is a real hazard with Medicare applying substantially greater pressure than the private insurers: doctors/hospitals could simply walk away from senior healthcare (which is exactly what our experience with Medicaid demonstrates.) Only by applying this pressure across all second party payer coverages could this “patient shopping” be avoided. And I suspect only single payer could realistically do this.

        1. ECON

          As an aside my friend required brain surgery in Canada (Ottawa) and received the supreme best care from diagnosis, MRIs, preparation etc. and left the hospital and rehab in a week without $1.00 CDN owing. The same procedure was investigated and the price excluding transportation costs to/from LA was in excess of $300,000 USD. The Ottawa doc was American and guaranteed success in 6 hour procedure.

  12. ScottW

    Another evil of private health insurance that is little covered is the network system they all employ. I have coverage with BCBS of North Carolina, but got a flu shot at CVS Pharmacy in VT because I was living there for 3 months. I submitted the $60 claim (me and my wife) and it was denied. Why? I had the shots at a CVS Pharmacy in VT, not in NC where the shots would be fully reimbursed. I argued with 3 different claims reps. about how they should want people to get flu shots, the price was the same, there is a BCBS of VT, but to no avail. The IRS would be proud of these reps.

    Most people fail to realize if they have the audacity to get sick outside of their small state network of doctors/hospitals, they will be paying at least 20% more out of pocket for the services, on top of deductibles/co-pays. After paying for private health insurance for 25 years, I can conclude it is a complete scam, and does nothing to provide affordable, accessible health care to the insured. The fact we don’t have Medicare for all shows what a depraved society we live in.

  13. Susan the other

    The comparison to food insurance was salient. Health insurance has become such a boondoggle it amazes me that anyone can follow the issues at all. And it is even more disconcerting that so many doctors have gone into “concierge” practices and others refuse to participate in Medicare at all. Clearly, we are going to need to produce more doctors to bring the expense of medical services down. We really should consider decentralizing medicine; have India-style med labs in grocery stores and other accessible places; maybe even our homes. Hospitals are expensive because they are such behemoths. They run on inefficiency. The whole system is due for a radical overhaul wherein health “insurance” will no longer even apply.

  14. pdx

    Apparently we’ve forgotten the difference between going to the hospital and paying an insurance bill–or, as seems likely, in some quarters the difference is being glossed over. But screw Obama and the whores he rode in on. Let’s use the terms “health care” and “medical insurance.”

    1. lambert strether

      To the rentiers, health care and health insurance are the same. An opportunity for rental extraction. What I can’t understand is why Obama’s supporters take the rentiers’ perspective. Oh, wait…

  15. Benedict@Large

    As far as the SCOTUS case on the mandate, my view has always been that the entire event is a sham, at the end of which will appear a SCOTUS blessing for the mandate. A number of things now combine to validate this view.

    First, there is ample ammunition, even from right side think tanks, that argues quite persuasively that ObamaCare will blow up when fully implemented. Why then have the Republicans steadfastly refuse to use this REAL material, instead opting for ridiculous assertions of big government (they just noticed?), death panels (been watching too many movies lately?), and “original intent” (like we could really know). If the Republicans were paying me to advise them on how to lose, I’d simply tell them to keep doing what they are doing.

    Second, the Court seems uninterested in the issue of standing (I predicted this response), where the Court would say they can’t rule on the mandate until some real person who was actually subjected to it complained. This smells as if the Court wants to take the issue up BEFORE there are any actual “damages” from the mandate, a position that would only make sense if the Court wanted to bless ObamaCare without having to consider the real issues that an actual plaintiff or group of plaintiffs might present.

    Third, healthcare cost trends (and thus insurance cost trends) are pushing healthcare out of the price range of both individuals and employers. The most obvious and easy cut to this is the cost component due to insurance overhead. The insurers have been well aware of this for a long time (I personally warned them decades ago that this was coming), and knew that if they did not find a way to cement their involvement in healthcare, they would be pushed out of it. ObamaCare then was written TO CEMENT INSURANCE AS A PART OF HEALTHCARE at the request of the insurance industry, and their desire for this is the only reason why ObamaCare made it through Congress. Now, given that ObamaCare was written for the insurers, and NOT to address the healthcare needs of Americans, can there be any doubt how SCOTUS will rule?

    [Note on #3: The better response would have been to simply wait a few more years, at which point it would have become obvious that the insurers were dying, and their power to block real legislation would have been substantially less.]

    1. Nathanael

      You may be right, but don’t underestimate the *stupidity* of the Right Wing Catholic faction of SCOTUS. They may not know who their paymasters are, and may decide that “sticking one to Obama” is more important than bailing out the private health insurers.

      This is kind of a depressing analysis to make. The only two plausible outcomes result from *different kinds* of awfulness among the majority of the SCOTUS. Not one of the RATS (Roberts, Alito, Thomas, Scalia) should EVER have been a judge in ANY country, and I suspect all four of them really belong in prison.

  16. Abelenkpe

    I prefer single payer but the reason Krugman and others are hoping the court doesn’t strike down HCR is because returning to a system that bankrupts families for the crime of developing a serious illness is fucking pathetic.

    1. Eureka Springs

      With or without AHIP Dole Romney Obama care we are and will be the most expensive in the world by far with the worst health stats from cradle to grave in the developed world.

      When the law begins by establishing health CARE to be a human right… Only then should we begin to take it seriously as anything but a continuation of divide, conquer, extract.

      At best this bill promises to slow the rise in what are already double to near triple the rest of the developed world… our stats are in line with Costa Rica, yet they provide it for one sixth the cost.

      Any forced commerce which accepts this (triple price denial to tens of millions ta boot) as a starting /continuation point should be rejected no matter the theories… it’s simply embracing the ponzi, negotiating in errorism to do otherwise.

    2. Benedict@Large

      Most medical bankruptcies occur with people who actually have insurance. (They are far more likely to seek and actually obtain care than the uninsured.) ObamaCare MAY prevent a few of these cases, but if you’ve ever seen a billing file for a catastrophic illness or injury, you’ll understand why insurance of any kind will never address this issue.

      1. Lambert Strether

        Exactly. ACA is nothing more than a bailout for the health insurance companies. It does what doesn’t cost them anything first (putting young people on their parent’s policies), while 45,000 people a year die because without insurance they can’t get care (this too from Woolhandler). If public purpose had any place in this debate at all, the people who are actually dying would be taken care of first. But n-o-o-o-o-o-o! And even when the vaunted health exchanges go online in 2014 (do the math on the deaths) they will fail too, since health care is a lemon market, and the neo-liberal concept that people will shop for health insurance on the exchanges is an ideologically-driven delusion (that is, however, a very profitable delusion for the owners of nbeo-liberals).

  17. Rodger Malcolm Mitchell

    The reluctance to be “forced” to buy health care insurance is ludicrous. What is the alternative? No insurance? Charity in the emergency room? Die early?

    As for the “buy in” recommended by the authors, when do people buy in? Before or after they have become sick?

    Rather than an optional buy in, there should be universal Medicare, paid for by our Monetarily Sovereign federal government. Period.

    Those who don’t understand Monetary Sovereignty don’t understand economics.

    Rodger Malcolm Mitchell

    1. Benedict@Large

      Agreed 100%.

      That would also place the medical inflation problem right on the federal doorstep, which is exactly where it belongs.

  18. Ep3

    Except that Obama wants to raise the age for Medicare eligibility. So maybe we can put these two ideas together. We have a Medicare buyin option for persons over age 67!

  19. Lambert Strether

    “Given today’s political constraints, perhaps a full “single-payer” option might not be feasible”

    Wouldn’t it be nice if once, just once, the Democrats advocated for the right thing, instead of the feasible thing?

    1. alex

      Yes it would be nice. Don’t hold your breath though.

      The thing that galls me about “not politically feasible” is that it’s just a self-fulfilling excuse. Since the politicians are the ones who deternmine if it’s feasible, they’re the ones creating the impediment. They could change it any time they chose.

  20. kris

    I read Mr. Auerback and Mr. Wray from time to time. I think they are brilliant people. However, even brilliant people can be ignorant from time to time. This is ignorance at its finest.

  21. Ken

    I read Mr. Auerback and Mr. Wray from time to time. They are brilliant. and explain things clearly. To maintain the status quo is down rights heinous, too many people suffer and die needlessly. Wendell Potter, Bill Moyers, many others. Celebrate our rebels, our whistleblowers, our peace loving turncoats. Muckrake!

    1. kris

      I’ve lived in communism and currently I live in Canada.
      1) There is no such a thing as Healthcare. There is such a thing as Medical Care.
      2) Gov can operationally fund Medical Care, but gov CANNOT…absolutely cannot do anything about healthcare which includes working out, eating well, not getting depressed, having family happiness etc, etc, etc.
      3) Canada does NOT have universal medical care. Canada has RATIONED MEDICAL CARE. This is the decision the Canadians have made as the best possible for 34 million people.
      4) People are NOT happy with the medical care, but they have resigned as they do think it can get any better.
      5) I do not thing that a nation of 330 million people (including illegals) would accept rationed care, nor do I think it is doable operationally.
      6) Final, there is no good solution of medical care. It simply and naturally not possible.

      1. ECON

        Kris, what do you mean by rationed medical care. Yes the federal government and provinces have lowered wait times substantially across 6 important and prevalent medical procedures. In my experience cataract surgery was 2 months wait from date set.

        1. kris

          Thx for feedback.
          – National medical care budget is restricted to 11% by law.
          – Do you remember Aleve was not sold in Canada until 2 years ago since the manufacturer would not accept the price cap imposed by the gov office.
          – My buddy at work had to wait 6 months (about 3 years ago) to do a biopsy. It was all ok, but if he had anything bad, he would have been dead by that time.

          So, at 11% of National Budget only extremely good management can do good things like your surgery.
          What I am saying is that we Canadians have mostly accepted this system and we have understood that there is no permanent solution to Medical Care.

        2. kris

          In US the medical care system is not rationed to 11%. Since it is private people make personal decisions and it goes up to 17% of the national expenditure. However, since it is privately run by insurance companies, it is considered a commodity based on supply/demand. So 17% would reflect supply/demand prices. If prices go higher it could go 25%, or lower it could go 10%. Just like a commodity. I am not judging whether it’s a good or bad system. I am saying that for 330 million people, single payer system like in Canada would be impossible to manage in my opinion.

          1. Nathanael

            The single-payer system exactly like in Canada would work just fine here. Why do you think it wouldn’t?

          2. Nathanael

            Oh — and here we do have rationed medical care.

            It goes to the people with the most money.

            Do you seriously think people are going to tolerate that for much longer?

  22. Heretic

    You are getting lost in the details concerning the value provided by the insurance company…. As I see it, insurance companies do three things, of which 2 are valuable. A) they process claims, and attempt to weed-out fraud or malfeasance. Clearly this is valuable, since as a society, we do. It want free riders. Mind you, the profit incentive may induce insurance companies to engage in legalism to minimize or deny claims. B) based on the information gathered from valid claims, insurance companies can help provide insight on the factors that increase the risk of the insurance event occurring. Since the insurable event invariably results in suffering for the individual, hurts the profits of the insurance companies, and hurts the individuals family and potentially dmamges the community at large, the incentive of the insurance company and general society are aligned. Hence this also is a positive aspect of the insurance industry. C) the last aspect of the insurance company, to distribute the cost of the insurance insurable event via the collection of premiums on the rest of the population, is in fact a negative on society and on the individual. The only thing that insurance company do is store and gamble with the premiums to increase more money for themselves. But when it comes to the actual repair or rehabilitation of an individual or a community, it is real resources and the 99%, who are mobilized to do the actual work. So why do we need the insurance companies to conduct this mobilization, via it’s limited resources, And its opposing incentive to maximize its profit,’when the government can mobilize the resources via its fiat money and have as its primary concern the rehab of the individual

  23. Westcoastliberal

    Obama dealt away the “ace” of single-payer before anyone sat down to play and to make matters worse dealt away the only other card that made sense “public-option” before anyone anted-up.
    What we’re left with is a band-aid on a limb seriously infected and oozing pus. Sorry for the graphic description, but I’m pissed-off.
    The only solution to this is to let the 1% keep their gold-plated, expensive and ineffective “private” insurance and let the rest of us have Medicare for all as a single-payer plan. Unfortunately we live in a country where politics rules over solutions. But I for one think that’s about run its course.

    1. Carla

      @Westcoatliberal, from a north coast liberal (great lakes), this could work, with this caveat and probably a few others I haven’t thought of yet: doctors and nurses who want to work in the Medicare system and care for the 99% receive tuition-free training, while those who want to cater to the 1% pay (or borrow) the full freight for medical or nursing school.

  24. b.

    “The reality is that healthcare is not a service that should be funded by insurance companies.”

    This concept of “funding” repeates itself a few times in the article, and while I agree with what the authors say, it offends me to see such a sloppy wording. Insurance companies fund *nothing*, because they do not have any money. The insured – the people that buy insurance, or more accurately, are by their employer herded into an employer-chosen insurance, “fund” insurer and health care providers, and pharma, and the politicians receiving donations, and the CEOs of the companies in question, and, at long last, even the shareholders that get whatever the CEOs leave on the table. At the end of the day, it is the healthy and – for as long as they can be squeezed – the sick that “fund” the system, and anybody trying to make the case that there are too many leeches “funded” would do well to not imply that insurance companies “fund” anything except to the extent CEOs elect to invest profits into funding political efforts to sustain, extend, and preventatively bailout an extortion scheme that is ultimately unsustainable. Consider me offunded.

  25. b.

    “It would indeed be the height of historic irony if the Roberts Supreme Court was the instrument that led us away from a private health insurance based system toward something approaching a rational, affordable healthcare provision.”

    I should clarify that I agree with the diagnosis – that and why the US health care is inefficient – but I am somewhat stunned by the naivete on display. One should not go down the sewer pipes in search of a silver lining. A Medicare buy-in would still self-select, as those that do not yet need expensive insurance due to remaining healthy so far would opt to purchase cheaper private insurance. Given that “Congress might easily” serve the people instead of its owners, the question is not what – and how – we can get something, but what we demand. If the failure of 2009 turns into another dysfunctional round of progressivist “realpolitique”, I don’t think this nation will ever see any improvement in its fortunes.

    1. WiseAss

      Finally it is obvious that healthcare cannot be privatized the way it is done in the US. The insurance companies as factor of health provider needs to be dismantled but we haven’t solved intirely the house of cards that was carefully weaved here through the years. Students of medicine should not pay the outgargious tuition they pay nowadays to get their diploma, nor for practice insurance. In Germany students of medicine do not pay a dime and they need to agree to earn reasonable wages for long years. On top of that, patent laws for prescription drugs should be limited in time and cost should be bargained to a much lower level – this is how it works all over the world. But as Mark Twain used to say, “denial is not just a river in Egypt”. For the Americans to admit their whole approach is wrong would happen in the Messiah days. There should be general care to have decent healthcare.

    2. Nathanael

      In New York State, private insurance costs $1400/month on the individual market.

      Everyone in NY would take the Medicare buy-in.

      That’s enough by itself to make a difference.

  26. reason

    “The insurer will check the fine print and patient records for exclusions and preexisting conditions. Often, insurers automatically issue a denial, forcing patients to file an appeal.”

    This is true of all insurance (changing the word patients to customers). Insurance is fundamentally a fraudulent business, pretending to offer protection from risk, and then trying to avoid to actually providing protection. That is why a truly “comprehensive” basic social insurance is so important.

  27. Nathanael

    “Krugman argues that the Supreme Court conservatives grasping for reasons why Congress lacks the power to do anything that they don’t like have forgotten an important distinction: the one between a judge and a politician. We’re not sure this is correct. It’s always been the case that for all of their lofty protestations of being “above politics,” the Supreme Court has been political, whether it be the Warren Court or today’s Roberts Court.”

    For CRUCIAL commentary on this point, read this from 1913:

    Essentially, US courts have been politicized from the days of John Marshall. UK courts are not politicized precisely because of “parliamentary supremacy” meaning that the political choice of overturning the court can be done by the politicians.

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