Sunday, March 29, 2009

What is the similarity between the health insurance companies and the Soviet Union?

Do you remember the old joke about the Soviet Union? It had to do with whether a two-party system could ever work, and the answer was no, because if there ever were another party, everybody would join it.

The nomenklatura of the American health insurance industry have figured out that the same principle applies to them. In the current discussions of health care reform (and thankfully, since we kicked the Republicans out of the White House, that doesn't mean they're talking about slamming the courthouse doors on the victims of medical malpractice), one of the questions is what kind of public option should be built into the new system.

What the health insurance companies realize is that they're parasites, and they can't compete with the public system. Or, as they put it, A public plan would most likely employ the payments rates used in Medicare, which are far lower than the rates paid by private payers. In fact, the average family of four with private insurance spends an additional $1,778 on health care each year because of Medicare and Medicaid underpayments to providers. On an aggregate level, commercial payers incur approximately $89 billion more in costs than they would if public and private payers all paid equivalent rates.

Tim Noah has a longer article on this in Slate that is worth a look. His conclusion is that when the insurance companies whine about needing a "level playing field", what they really mean is that they don't want to face the competition from a public system that will inevitably put them out of business.

And it can't come a moment too soon.


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