An Unworkable Mess

By Steffie Woolhandler and David Himmelstein
New York Times, Room for Debate blog, Dec. 11, 2009

Milk and lemon both taste good in tea. But mix them together and it’s a curdled mess. Similarly, the latest Senate health reform compromise combines two appetizing elements — a Medicare expansion and tighter insurance regulations –- to create a noxious brew.

Both the House and Senate versions of reform would turn over hundreds of billions of tax dollars to the same private insurers who’ve proven incapable of controlling costs or giving American families the coverage they need. And these bills would make failure to buy insurers’ defective products a federal offense. Together these measures greatly augment insurers’ financial and, hence, political muscle.

The only concessions wrung out of the insurers for this windfall are modest new regulations on the policies they sell to individuals: insurers will have to accept every applicant; they won’t be allowed charge the sick higher premiums; and they’ll be able to charge older people only two to three times more than the young.

Most of these regulations won’t change things for people who get their coverage through an employer, but they’re helpful for the many of the roughly 7 percent of the population who buy their own private insurance.

For insurers, the regulations make the near-elderly who don’t get employer-sponsored coverage into pariahs. On average, they cost insurers far more than twice as much as the near-teens, but they can’t be charged premiums to match their costs.

Now the Senate plans to take some of these high-cost patients off private insurers’ books, and make them Medicare’s problem. Consequently, the costs of this Medicare buy-in will be high — both for patients and for the taxpayers who will subsidize the near-poor starting in 2014.

Meanwhile, younger, healthier and hence more profitable patients will be forced into private insurance. There’s no public option for them, nor for anyone offered employer-sponsored coverage. If you have private insurance and you like it, you can keep it; if you have private insurance and you don’t like it, you still have to keep it.

But even though it’s bad health policy, this new compromise is brilliant politics. For insurers, it offers a hidden subsidy. Meanwhile, it gives the appearance of responding to the vocal and growing legion of single payer supporters who want Medicare for All.

In the end, the Senate compromise, like its House counterpart, will do little to salvage the sinking U.S. health system. Costs will continue to skyrocket, putting coverage more and more out of reach for middle class Americans, and driving the costs of taxpayer-funded subsidies through the roof.

In contrast, a single payer system could save nearly $400 billion annually on health insurers’ overhead and the paperwork they inflict on doctors and hospitals -– savings that would make universal coverage affordable. Medicare for All won’t grow from the Senate compromise, but from its ashes.

Steffie Woolhandler is a professor of medicine and David Himmelstein is an associate professor of medicine, both at Harvard Medical School. They are co-founders of Physicians for a National Health Program (