What happened to the global economy and what we can do about it
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Right now, it appears that the biggest barrier to health care reform is people who think that it will hurt them. According to a New York Times poll, “69 percent of respondents in the poll said they were concerned that the quality of their own care would decline if the government created a program that covers everyone.” Since most Americans currently have health insurance, they see reform as a poverty program – something that helps poor people and hurts them. If that’s what you think, then this post is for you.
You do not have health insurance. Let me repeat that. You do not have health insurance. (Unless you are over 65, in which case you do have health insurance. I’ll come back to that later.)
The point of insurance is to protect you against unlikely but damaging events. You are generally happy to pay premiums in all the years that nothing goes wrong (your house doesn’t burn down), because in exchange your insurer promises to be there in the one year that things do go wrong (your house burns down). That’s why, when shopping for insurance, you are supposed to look for a company that is financially sound – so they will be there when you need them.
If, like most people, your health coverage is through your employer or your spouse’s employer, that is not what you have. At some point in the future, you will get sick and need expensive health care. What are some of the things that could happen between now and then?
For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment.
Once you lose your employer-based coverage, for whatever reason, you’re in the individual market, where, you may be surprised to find, you have no right to affordable health insurance. An insurer can refuse to insure you or can charge you a premium you can’t afford because of your medical history. That’s the way a free market works: an insurer would be crazy to charge you less than the expected cost of your medical care (unless they can make it up on their healthy customers, which they can’t in the individual market).
In honor of the financial crisis, let’s also point out that all of these risks are correlated: being sick increases your chances of losing your job (and, probably, getting divorced); losing your job reduces your ability to afford health insurance, either through COBRA or in the individual market; if your employer drops its health plan, that’s either because health care is getting more expensive (meaning harder for you to afford individually) or the economy is in bad shape (making it harder for you to get a job that does offer health coverage).
In addition, there is the problem that even if you are nominally covered when you do get sick, your insurer could rescind your policy, or you may find out, as Karen Tumulty’s brother did, that your insurance doesn’t cover the treatment you need. But while important, this is a second-order problem. The first-order problem is that as long as your health insurance depends on your job, your health is only insured insofar as your job is insured – and your job isn’t insured.
The basic solution is very simple. In Paul Krugman’s words: “regulation of insurers, so that they can't cherry-pick only the healthy, and subsidies, so that all Americans can afford insurance.” I know that there are lots of details that consume people who know health care better than I do, and I know those details are important. But as an individual who is worried about his or her own health insurance (and that is the point of this post), that’s what you want. You want to know that if you lose your job, you won’t be shut out because you’re too sick,*** and you won’t be shut out because you’re too poor.
But we won’t get there as long as people remain convinced that health care reform is for poor people. It’s for everyone – everyone, that is, who isn’t independently wealthy or over the age of 65. Because all of us could lose our jobs. (Have I repeated that point enough?)
Now, I admit that if you are over 65, health care reform is not for you, because you are in the one group in our society that enjoys true health insurance – insurance that you cannot lose, that is paid for by taxes, and that is effectively guaranteed by the government. So maybe there’s nothing in it for you, except perhaps an improvement to the prescription drug component of Medicare. But I cannot believe that, as the only people who have reliable health insurance, you would oppose health care reform that would provide reliable insurance for the rest of us.
* This doesn’t necessarily mean that all those people lost employer-based health coverage because their employers dropped their plans; some of it could be that the employee contributions were increased to the point where they couldn’t afford it anymore. 1.1 percentage points of the shift is due to people becoming eligible for Medicare or military health plans.
** If you lose your job, or you get divorced from a spouse through whom you get health coverage, you are eligible for continued coverage under COBRA. However: (a) this only necessarily applies if your employer has 20 or more employees; (b) you have to pay the full, unsubsidized cost of your health plan, which can be particularly difficult after losing your job; and (c) it only lasts for eighteen months.
*** I said earlier that insurers can’t charge premiums that are less than the expected cost of your care unless they can make it up on the healthy customers, and they can’t in the individual market. But if all insurers are prohibited from doing medical underwriting (pricing based on healthiness), then they will all have to overcharge the healthy customers, and the system could work. This is still a tricky issue – and single-payer (like Medicare) would be much simpler – but it can be made to work even in a competitive market.
By James Kwak
Written by James Kwak
August 5, 2009 at 5:23 pm
Posted in Commentary
Tagged with health care, insurance
Recision is a second-order problem? I guess that makes me a second-order citizen. The only “insurance” I can get in my state as a sole proprietor includes a provision that the insurance company can dump me with 30 days notice and no reason. No reason! So I am forced to self-insure as well. Most sole proprietors cannot afford to do so. I think this is a first-order problem.
Tom Burton
August 5, 2009 at 5:56 pm
James, You have to be careful because your fishy claim about insurance (if you’re sick, you have no right to affordable health insurance; in other words, if you don’t have a house, you have no right to affordable fire insurance) may be reported to the White House. I’m sure you don’t want to go through what Peter S. had to go; see
E. Barandiaran
August 5, 2009 at 5:56 pm
More proof that conservatives aren’t really very funny at all (Jon Stewart’s Daily Show should come with a disclaimer: Dittoheads, don’t try this at home) … maybe when the smug little narrator of this piece loses his job and finds himself with colon cancer and he can’t get insurance he can pull out his studio mike and, between retching into a bucket, he can darkly warn about the “government takeover of health care” that’s lurking on the horizon if we’re all not careful.
Gimme a Break
August 6, 2009 at 7:40 am
As far as I can tell, no proposal for Universal Health Care is on the table. A basic plan, covering doctor visits, off-patent medicine, and emergency care, and allowing for simpler medical bankruptcy would (i) provide care for those who need it (ii) be affordable, and (iii) leave a market for many other extended health insurance plans such as physical rehab and dental. This is the model that has worked in other countries. Is Congress proposing this? No. They are just cooking up yet another way to screw the productive elements of society.
GaryD
August 5, 2009 at 6:04 pm
James,
Well-articulated as always. The problem is that the Obama/Democrat plan (and their sales pitch) emphasizes coverage of the uninsured – this is a tougher sell than what I would call a more pure reform plan of solving the problems you point out and tackling the structural cost issues.
What we have seen with health care is what we see often: Americans can be for something in the abstract (universal health care coverage), but very much against it in practice when it comes time to sacrifice. Obama and the Dems should have taken the pre-election polls that indicated majority support for universal health coverage with a grain of salt – this was their error and because of it we will, yet again, put off the day of reckoning for our pending demographic crisis.
Ben
August 5, 2009 at 6:07 pm
Just one small point about Cobra: it really does not cover you if you relocate, unless a plan is offered in your new area by the same insurer that your employer uses. If you move out of the area, and their insurer has no coverage in your new location, then you are back in the individual market, which, as described, is no market at all.
J.D.
August 5, 2009 at 6:10 pm
James writes:
Since most Americans currently have health insurance, they see reform as a poverty program "“ something that helps poor people and hurts them.
Well, that’s because our brilliant Democratic party framed it that way.
The so-called “public option” is means-tested and subsidized.
means test + subsidy == welfare.
In other words, the reason people think it’s a “poverty program” is that it is.
Of course, it’s also a bailout for the insurance companies, since the mandate creates a guaranteed market for them by forcing people to buy their product, but for some reason, that aspect of the debate is only rarely covered.
lambert strether
August 5, 2009 at 6:33 pm
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