The principal mechanism that the proposed health care legislation utilizes to broaden coverage and to bring down the cost of medical care is to increase competition in the market for health insurance. In this respect the Baucus bill is woefully deficient in three respects. The most important wrangling over the bill will involve changes to the bill intended to address these concerns.
The most important feature of health care financing reform is the "Exchange," a market for health insurance that will allow individuals and employers a wide range of choice in the purchase of health insurance. The most serious reservations against the Baucus bill all concern whether the proposed law will achieve its goal of opening up competition in the health insurance industry, thereby reducing cost and improving coverage. Senator Baucus has yet to address three aspects of his bill that have been heavily criticized. They are:
1. Will the law create a single, national market for health insurance or will the states retain the authority to control who may sell insurance within the state? At present, the Baucus bill contemplates fifty separate state health insurance "exchanges." In my opinion, the Exchange should be national in scope, with uniform national standards. Too many states authorize only a handful of insurance companies to do business within the state. Insurance regulation should be the responsibility of a single, national oversight panel with responsibility to design standards so that consumers can compare policies from the widest possible range of choices.
2. Who will be permitted to purchase health insurance through the Exchange – large employers, small employers, all individuals, or only individuals who are not otherwise covered? At present, the Baucus bill prohibits large employers and persons whose employers provide health insurance from purchasing insurance through the Exchange. This is nonesense. If everyone is permitted to purchase insurance on the Exchange like the Wyden-Bennett bill would allow, it will lower the cost of insurance for everybody.
3. Will the law permit the government to underwrite (not to fund) an insurance carrier – the so-called "public option"? At present, the Baucus bill only allows "co-ops" to be formed, but does not allow large employers to participate in these co-ops. I favor allowing taxpayers to create a non-profit insurance company that would compete with private insurers – it would not be allowed to sell insurance below cost, but by having private insurers bid to provide health insurance that would be backed by the government, it would increase competition in the market. Senator Snowe wants the bill to include a "trigger" – that is, if the cost of health insurance on the Exchange does not come down as expected, the "public option" would become operational. I agree with Snowe – if the first wave of reforms doesn't work, let's have something else waiting in the wings.
As we move through this week towards a vote before the Senate Finance Committee, watch to see whether these concerns are addressed.
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"have the taxpayers to create." That's classic, professor!
Would it be appropriate to compare the market plan for health insurance to what happened in the banking industry in the later half of the 20th century? Such an analysis might support a proposal for a multi-state Exchange.