Posted by Rojas @ 3:57 pm on February 23rd 2010

HIRA: Obama’s health care constituency creator

Get used to the term HIRA. The acronym, which stands for Health Insurance Rate Authority, is the new federal agency which is springing into existence as part of the reconciliation of the House and Senate health care bills. How one can “reconcile” the contradictions between two pieces of legislation by adding something that is part of neither is an interesting question, but not one I wish to dwell upon at present.

The function of HIRA will be to block health insurance companies from charging what they wish for their services. No, really. The sole function of this agency is to impose direct price controls on the insurance industry whenever the government deems their premium increases to be “unreasonable”. Because it is, of course, the proper function of government to decide when private profits are excessive. And, where necessary, to require businesses to operate at a loss, rather than force consumers to have to actually pay the costs necessary to produce the services they consume.

Well…no, that’s not quite right, either. A straight up price control would be economically insane on its own terms. But HIRA’s mandate is not to impose industry-wide standards. It is to isolate individual insurers and block their rate increases when the government wills it to be so. Needless to say, the potential for politically motivated abuse here is endless. Effectively the government is giving itself a cudgel with which to put politically non-cooperative insurance providers out of business, thereby rewarding “team players” in the industry.

And people wonder why corporations want to influence elections.

Normally, of course, price controls of this short would result in shortages, as suppliers would be unable to meet the new demand. In health care this would mean that high-risk populations would lose coverage entirely as covering them became unaffordable. But of course, that can’t happen under the Obama plan, because insurers CAN’T deny coverage. So what is created is…a massive new constituency of syncophantic ensurers who will go out of business unless we add a public option to clean up the mess that HIRA creates. Which, I guess, is fine, if you thought we ought to have a public option or a single payer system to begin with.

So I guess what we’re increasingly faced with is a rather stark contrast in philosophy. The Democratic health care proposals at this point can no longer be described as a hybrid plan. It is inevitably a comprehensive state takeover by degrees, with the insurance companies serving as the equivalent of a utility. People who believe that the government ought to provide health care directly to its citizens ought to be supporting the Democratic proposal. Those who believe that health care ought to be a market good–to any extent–will be wanting to support an alternative.

9 Comments »

  1. Well fair enough on your generic price control concerns, but the health insurance industry, and the wider health care industry, as structured to be about as opaque as one can make it. I would be in 100% agreement with you if there actually was a free market, or something even remotely close to it, that would in essence negate the very reason for a HIRA-like organization. But we have nothing like a free market system, we have an unholy Frankenstein system that combines the absolute worst elements of rent-seeking corporatism with the risk elements of the market with the inefficiency of the collectivist method, while garnering none of the benefits of any of them. The very rough estimate is that we pay twice the price for half the service compared to other industrialized first world nations. In such a situation you really have to generic paths: make it much more of a free market system, which would entail an extraordinary effort to force to remove the forces that have blocked any pricing transparency in the system while also permitting an exchange like system, or regulate it far better while enforcing mandates that will still allow industry profits. I understand, and am with you on preferring the former. But conservatives and their libertarian allies, as very loosely represented by the GOP, have had quite plenty of opportunity to take a lead on this when they were in power, and have chosen absolutely no action. Up until a month or two ago, the number one GOP recommendation, almost the sole recommendation, was tort reform, which will do very little to help but will certainly hurt those who actually do deserve compensation for our malpractice generating system. Running a distant second was purchase across state lines, which strikes me as simply a way to avoid the state level regulation while not actually doing anything about the complete lack of transparency in the system.
    I have spent some time trying to help a desperate coworker fight through her medical insurance woes, my impression of the industry from this experience matches those of the industries most ardent critics: A significant portion of the health care industry is so insulated from either market reform pressure or legitimate regulatory control that they routinely and freely deny, obfuscate, and steal. It is a feature, not a bug. Trying to find the cost of a pending procedure was like a hellish trip through bizarro world. Those of us with decent insurance too easily dismiss the concerns of those without.

    Comment by Jack — 2/23/2010 @ 7:31 pm

  2. The uninsured have it rough…and therefore we should initiate, instead, a system of compulsory purchases coupled with politicized price controls?

    You find the existing system insane. I get it. Your preferred alternative is complete command and control? Or do you see some way that the reconfigured Obama plan DOESN’T end in that outcome?

    So something must be done. Can this plan possibly be that something?

    Comment by Rojas — 2/23/2010 @ 7:49 pm

  3. Or, to put it another way:

    Higher education is arguably as necessary a good for persons in our economy as is medical care. And the costs of higher education are increasing at an even more rapid rate.

    Should we put together a HERA to strike down tuition increases at universities when it suits the whim of the incumbent administration?

    Comment by Rojas — 2/23/2010 @ 7:54 pm

  4. A significant portion of the health care industry is so insulated from either market reform pressure or legitimate regulatory control that they routinely and freely deny, obfuscate, and steal. It is a feature, not a bug.

    Jack and I are of one mind on this one. His post is nearly exactly my opinion. And, as he said, I would be okay with a robust market alternative, a striking down of the anti-trust exemption, a total doing away with the employer tax credit including opt-out options for Medicare, purchase across state lines, and probably a dozen more things that would be no less ambitious than Obama’s plan. That would be my #1.

    However…

    Which, I guess, is fine, if you thought we ought to have a public option or a single payer system to begin with.

    At this point, that would be my #2. My #3 would be some hybrid, which Obama’s plan roughly is.

    My #4 is a political paralysis that results in nothing more than corporatist give-aways combined with idiotic deficit-enhancing tax breaks and with a new round of “don’t touch entitlements!” horseshit, but effectively just business as usual. Which is roughly the result that we’ll get if Obama’s reform goes down.

    The system is broke. And Jack is right—outside of think tank white papers and the cogent thoughts of a few random congressmen, the Republicans have not had a health care agenda or even the remotest political will to come up with and try to pass one in, hell, 30 years or more.

    If the option is incrementalism leading to a roughly single payer situation, or what we have now allowed to compound itself indefinitely, I choose the former.

    Comment by Brad — 2/23/2010 @ 8:13 pm

  5. Higher education is arguably as necessary a good for persons in our economy as is medical care.

    Btw, I don’t think that’s really arguable.

    Also: there is a public option in higher eduction, which frankly works pretty well. And there is still the capacity of market pressure to work (to burst the bubble) that does not exist in health care.

    Comment by Brad — 2/23/2010 @ 8:16 pm

  6. OK, then, Brad. We’ll play the game you played with the abortion amendment. Independent of the larger bill, which you already supported, do you think these price controls are worthy of your support? If so, why?

    Comment by Rojas — 2/23/2010 @ 11:14 pm

  7. No, I do not. Unlike the rest of the bill, which strikes me as a pretty moderate pragmatic solution, this strikes me as game-playing, an immediate political response that will probably wind up rather horrid in action, although mitigating if in the context of the rest of the health care bill, in the sense that you guess, that it’ll probably just lead to a faster pace of nationalizing health care, which I’ve already expressed my half-hearted support for in the absence of practical alternative.

    Big sentence aside, no. It strikes me mostly the same way it strikes you. I only mentioned the rest in the context of the bit of yours I quoted, and Jack’s post.

    Comment by Brad — 2/23/2010 @ 11:32 pm

  8. Adding, in case you couldn’t tell, I am generally really uncomfortable with my position on health care reform herein expressed, but have yet to come upon a real-world argument that turns me. I keep waiting for some Option C, but keep finding none.

    Comment by Brad — 2/23/2010 @ 11:33 pm

  9. Rojas, I’m coming in a bit late, but let me address a few of your comments. I hope you will not mind the fisk format, it is merely convcnient.

    The uninsured have it rough…and therefore we should initiate, instead, a system of compulsory purchases coupled with politicized price controls?

    No, I am saying the the uninsured, the underinsured, and the struggling but insured, are saddled with a system so opaque and intentionally, institutionally flawed that even given a bit more income they could not sort out and select a best option, a market efficient option. They are at the mercy of forces beyond their control.

    You find the existing system insane. I get it. Your preferred alternative is complete command and control? Or do you see some way that the reconfigured Obama plan DOESN’T end in that outcome?

    I defer to your knowledge about the specifics of the Obama plan. But what I do prefer, with GREAT reluctance, is a European style system that provides better coverage, care, and treatment at a lower cost than ours, even if you call it a dirty name. I have made my peace with it. The free market battle in this arena has been lost, the GOP chose to loose it, and the choice is corporatist Frankenstein or collectivist inefficiency. Given the statistics, I will tolerate the latter.

    Higher education is arguably as necessary a good for persons in our economy as is medical care. And the costs of higher education are increasing at an even more rapid rate.

    First, I would argue that far too high a percentage of our population is intent on a university eduction when the public good would probably be better served by a significant portion of them receiving a robust Vo-Tech style education instead.
    Second, and more importantly, the cost of a university education is pretty easy to determine. Compared to determining individual health care costs in order to compare (not actually competing) plans, deciding on colleges is like basic arithmetic to the health care’s differential equations. I could not do a Laplace Transform if my life depended on it. But adding? Yeah, I can do that.

    Should we put together a HERA to strike down tuition increases at universities when it suits the whim of the incumbent administration?

    No, because there are quite literally a thousand other options for any person applying to higher eduction, all of them with easily discernible pricing structures.

    Comment by Jack — 2/24/2010 @ 12:08 am

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