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Health Care: A Modest Bipartisan Agenda for a Rugged America

Will the newly elected Congress be able to make the U.S. health system safe for the individual?

November 30, 2010

Will the newly elected Congress be able to make the U.S. health system safe for the individual?

Why did the Democrats flunk their midterm exam? Could it possibly be because they copied too many bad answers from the Republicans' 2008 final? And because their own good answers, such as “yes” on healthcare reform, were awkwardly conceived, disingenuously accomplished and ineptly explained? When required to show their work, the Democrats deserved to lose credit. And they did.

The Republicans are set to fail, too. Torches alight, pitchforks raised and tea cups tempestuous, they seem determined to storm Capitol Hill to repeal the Patient Protection and Affordable Care Act and invent more “market-based” solutions.

But Republicans will find their path blocked, initially by the Constitution. And eventually by the Act itself, which — in the peculiar logic of the American political economy — is to say by interests newly vested and increasingly special.

A simple majority in the House of Representatives could have prevented the Act's passage, but now it alone will count for nothing if the Act's repeal is attempted. Even if disaffected Democratic Senators were to support a repeal bill sent over from the House, the president would write "veto" with a flourish and run no risk of override.

Come 2012, Republican repealers may not want to brag so fondly about their faithful long-shot effort. By then, some of the health reform law's more crowd-pleasing features may have become untouchable — as did Medicare, an earlier presumed "monstrosity," within a year of its enactment.

That, of course, doesn't mean there isn’t plenty left in the legislation that is bound to annoy, to harm, to burden unfairly and to enrich indefensibly. But it is probably asking too much to hope that the Act's defects — each with its own provenance and set of determined defenders — be addressed in a halfway sensible fashion by our next Congress.

After all, there is too much hurt and hubris. But what if Congress, this incumbents' club, feeling indiscriminate heat, were to work collectively toward health reform's reform? What could it accomplish?

It might reorder relations with the health insurance industry. But didn't the recent legislation already do exactly that? And at great political cost?

True, the PPACA, from now until 2014, will be reconciling much irony and prohibiting many abuses in the pre-Medicare health insurance market.

That said, insurance companies will be retaining many opportunities to manipulate their customers, to attract some while repelling others. And these opportunities will surely widen, as the so-called K-Street wedge is inserted and hammered home.

Too bad, since health insurance companies are no more than health-ambivalent financial institutions investing health-related cash flow. They'd prosper, even thrive, if all without exception were required to behave forthrightly.

That's the odd thing about these firms. We Americans are most familiar with them when they deal with us as customers, and we've instinctively learned not to trust them. The assumption is that they make their profits through the sharp dealing they exhibit with us.

We are even told that we benefit through their sharp dealing. Or, anyway, that society benefits, and that it's our duty then to appreciate their enhancement of the general welfare.

But, actually, health insurance companies compete as investors. Health insurance is their source of cash flow, but it's most importantly through their skill as investors that they profit. Investing, not clinical judgment, is their core competency.

They're even willing to pay out more in reimbursements to clinicians and hospitals than they take in through premiums. They refer to any such payment as a "medical loss" because it's a loss from investable capital.

They're sure they can use the cash we send flowing their way more productively than we can use it ourselves, and they're right more often than not. They're like banks paying interest on deposits or checking accounts. Interest rates may be too low to notice at the moment, but the concept holds.

Getting cash to flow through their investment operation is their obsession, and peer firms seek the same flow. Their lust for this flow led to the "patient backlash" that made "managed care" a notorious term.

And some smaller insurers were in the game then just for temporary control of the flow itself: fast in — and slow-or-no out.

But the big firms never stopped behaving like the financial institutions they truly were. Even if they did no better than to approach break-even on the in-and-out cash flow itself, they could still predictably make a gratifying profit on the investment of that cash flow.

It was the Wall Street bull market of the day that made managed care's cash-flow access so valuable. Member-per-month inflow was full and immediate, whereas clinical reimbursement was some distance in the future — and even then could be squeezed to a minimum, purportedly in the interest of "efficiency" and "quality."

Federal regulation of the health insurance industry under the commerce clause of the Constitution passed Supreme Court review in 1944, but federal regulation has been lax. The PPACA has tightened it in important regards but stops short.

Yes, we ran the managed-care experiment — on ourselves — to see if much good could come from an accentuation of competition in healthcare finance. And we came away disappointed.

A follow-on question now would ask if much good could come from an accentuation of regulation in the cash-flow operations of financial institutions drawing investable funds from clinical encounters.

Why might our incumbents' club in Congress bother, or dare, to take this on? To encourage small-business formation — and brighten the prospect for small-business success.

That’s why — but how so, you may ask.

Advanced nations have tended to fashion health systems compatible with, complementary to, and even complimentary — with an "i" — about their national self-image. The United States has been an exception.

Americans' self-image, supposedly, emphasizes personal freedom, individual responsibility and eagerness "to go West," to move away from social constraint and toward self-determination.

Yet, without really intending to, we forged a link between health and work, between health insurance and a good job, between health insurability and the getting and then the keeping of a good job, even if the adjective "good" applied to the noun "job" in no other than a fringe-benefits sense.

This link, which suppresses labor-market mobility, has long dangled as a protective amulet from the necks of larger employers and labor organizations.

And it has kept commercial health insurance premiums falsely high. This link has hung also as a millstone from the neck of our macroeconomy.

A conspiracy of spin cloaks this arrangement, which politicians, scholars and journalists alike have done little — and, obviously, nothing effective — to end. Indeed, the PPACA presumes its permanence.

But should it not be possible for small-business founders in the United States to break away?

For such bravado to be encouraged — or just to be made quick-and-easy, pocketbook-neutral and safe long-term — these individuals, willing to be rugged but not expecting to be roughed up, would have to have immediate and unquestioned access to what are now still group rates and group protections. And so would their families and the individuals joining them as partners and employees.

Would the individualist streak in our new Congress be wide enough, deep enough, real enough and resourceful enough to make our health system safe for the individual? If so, then much that remains objectionable in the PPACA might begin to melt away, leaving behind a pretty good bill. And a kinder, gentler Congress.

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Health insurance companies are sure they can use the cash we send flowing their way more productively than we can use it ourselves.

Without really intending to, we forged a link between health and work, between health insurance and a good job.

Health insurance companies compete as investors. Health insurance is their source of cash flow.