Discriminating Our Way to Universal Health Care
posted by Frank Pasquale
When libertarian bloggers hear about rationing by the British National Health Service, they get quite distressed. But I rarely hear the same level of outrage over stories like this:
One of California’s largest for-profit insurers stopped a controversial practice of canceling sick policyholders Friday after a judge ordered Health Net Inc. to pay more than $9 million to a breast cancer patient it dropped in the middle of chemotherapy. . . . “Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured,” [a private arbitration judge] wrote in a 21-page ruling. . . . When Health Net dropped her in January 2004, [the patient] was . . . forced to stop chemotherapy for several months until she found a charity to pay for it.
A few years ago, a doctor/novelist (Robin Cook) suggested that private insurers may eventually provoke adoption of a universal health care system if they use new technologies of genetic discrimination to avoid sick patients.
The argument is worth quoting in full, because it points out some deep difficulties in a “market” for private insurance that provides “tailored” policies in response to individual needs:
[A] negative consequence of [a] new ability to predict illness is the potential for discrimination in one form or another if confidential health information is released. Unfortunately the chances of such a breach of privacy occurring, despite lip service by politicians to prevent it legislatively, are probably inevitable. Not only is microarray technology easily accessible, but for-profit private insurance companies have strong incentives to use it to protect their bottom lines by denying service, claims or even coverage.
It is precisely this danger, however, that may lead to a great breakthrough: the inevitable movement to universal health care. In this dawning era of genomic medicine, the result may be that the concept of private health insurance, which is based on actuarially pooling risk within specified, fragmented groups, will become obsolete since risk cannot be pooled if it can be determined for individual policyholders. Genetically determined predilection for disease will become the modern equivalent of the “pre-existing condition” that private insurers have stringently avoided.
As a doctor I have always been against health insurance except for catastrophic care and for the very poor. It has been my experience that the doctor-patient relationship is the most personal and rewarding for both the patient and the doctor when a clear, direct fiduciary relationship exists. In such a circumstance, both individuals value the encounter more, which invariably leads to more time, more attention to potentially important details, and a higher level of patient compliance and satisfaction - all of which invariably result in a better outcome.
But with the end of pooling risk within defined groups, there is only one solution to the problem of paying for health care in the United States: to pool risk for the entire nation. (Under the rubric of health care I mean a comprehensive package that includes preventive care, acute care and catastrophic care.) Although I never thought I’d advocate a government-sponsored, obviously non-profit, tax-supported, universal access, single-payer plan, I’ve changed my mind: the sooner we move to such a system, the better off we will be. Only with universal health care will we be able to pool risk for the entire country and share what nature has dealt us; only then will there be no motivation for anyone or any organization to ferret out an individual’s confidential, genetic makeup.
Cook’s argument is a powerful counternarrative to a dominant theme of “medicine & technology” discourse. Usually, technological advance is Exhibit A for the logic of a tiered medical system–if only the comparatively wealthy can afford something new, it’s fine to allow them to get better technology than others because it incentivizes the development of technology that all can afford. But if technology makes existing markets for private insurance obsolete by rendering risk more transparent, it may well catalyze more egalitarian methods of pooling risk.
February 23, 2008 at 10:03 pm
Posted in: Health Law, Privacy
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Responses (5)
Daniel S. Goldberg - February 24, 2008 at 12:43 am
Note that this award was ordered by an arbitration judge, the importance of which ought not be understated. Nor is it irrelevant that the $9 million in damages were punitive in nature, and that the arbitrator found the insurer breached its duty of good faith and fair dealing (I’m not sure how it is in California, but I practiced insurance law in Texas, and in Texas it’s difficult to satisfy the BOP on this particular duty, meaning that the conduct would have to be quite egregious to prove up this count).
Perhaps the tort reform proponents urging that consumers are not necessarily worse off in arbitration would endorse this decision?
The language in the opinion is actually worth quoting here, as its among the most acerbic I’ve seen from an arbitrator, though, admittedly, most arbitration resolutions are not reduced to writing:
“It’s difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive.”
Reprehensible, surely. But it just shows the power the possibility of rents exerts on our behavior. It’s why, again, I query, along with Allen Buchanan, why anyone ever imagined for one solitary second that health insurers are likely to act in ways that allocate resources justly.
KipEsquire - February 24, 2008 at 1:15 am
Isn’t it interesting that redistributionists once legitimized their views with a “veil of ignorance” and are now legitimizing it with an “anti-veil of knowledge”?
Whatever it takes, I guess.
Roger Zimmerman - February 26, 2008 at 8:57 am
To claim that Health Net’s (and the other California insurers) behavior is that of an actor in a free-market system is ludicrous. This is just another example of regulation begetting more regulation. The insurers were using cancellations as a cost control measure in a rigged system - one that forces them to cover a prescribed menu of conditions and prescribed rates if they want to do business. Now they can no longer use that cost control measure, so they will try to find others, such as discriminating as best they can with initial sign ups (though I’m sure this is heavily regulated as well).
In a free market, insurers could discriminate based on price and coverage, and reach an equilibrium which would offer the widest possible insurance options with the greatest efficiency. Since DNA does not guarantee future health (one way or the other), there would still be some degree of risk which could be shared among those that were not currently sick.
Would some people be priced out of health insurance? Of course. But at least they would have a viable health care industry to serve their needs as charity cases, in contrast to the slowly decaying monstrosity that would result from the complete nationalization of health care funding.
Frank - February 26, 2008 at 9:05 am
To Roger Zimmerman: is there any serious politician or policy expert pushing a nationalization model in the U.S.? France, Germany, the Netherlands all provide models for us more compelling than the British NHS…which has itself become more open to private insurance and innovation.
Taiwan provides yet another model:
http://dissentmagazine.org/article/?article=985
“The provision of health care is not nationalized, despite a degree of information and coordination that, for example, the British system cannot match after spending billions on computerization. Rather, [Taiwan's National Health Insurance Program, introduced in 1995] is a classic single payer scheme—the government runs a compulsory, mostly premium-financed insurance system, which negotiates a single payment schedule with the private and municipal or government-owned providers.”
“Health care is provided by a competitive mixture of municipal and public (about one-third of the beds) and privately owned hospitals that also offer comprehensive primary care. Between them they employ almost two-thirds of doctors.”
Daniel S. Goldberg - February 26, 2008 at 4:11 pm
Roger,
I am unsure I understand your point. Please explain to me how, in a completely free and unfettered market, there exist incentives for insurers to cover seriously ill persons?
Of course, this could easily be done by simply correlating premiums to the risk level, but that kind of begs the question b/c, as you admit, so many sick persons would be priced out of coverage and thereby excluded from the pool. So I’m having difficulty seeing how this current case is a product of “regulation” rather than the array of incentives in the health insurance industry. Removing all regulation would hardly ameliorate these incentives, nor would it make it likelier that sick persons obtain insurance coverage, if we care about that at all.
Indeed, premiums are more closely calibrated to individual risk in the individual health insurance market, which is partly why the cost of individual health insurance is exorbitant.
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