Thursday, March 3, 2011

Rational health insurance systems exist—but not in US

Via:  Miller-Mccune  h/t

Why Should I Buy Health Insurance?

Europe has answered that question to its own satisfaction with a mandatory system that treats health care as a social insurance handled by private firms.

By Michael Scott Moore

As judges around the U.S. weigh the constitutionality of the Affordable Care Act — Obama’s sweeping health care reform law — it’s worth asking how Europe navigated the same questions.

The problem in most state challenges to the new law is the un-American-sounding mandate, the requirement that everyone in the nation must buy health insurance. Europeans have had similar mandates for decades, but you hear very little soul-searching here about fairness or freedom of choice. Is it because Europeans are all a bunch of socialist weenies who don’t mind an overregulated market?

Not quite. The European Union — that garden of overregulation — has fair-competition rules meant to keep markets free, just as the U.S. Constitution has the Commerce Clause. Now, no less than the years after World War II, when Western European countries built their modern health care systems, forcing the public to buy something, whether bowling balls or fire insurance, would seem un-European as well as un-American. It would be an artificial prop for an industry.

But health care, early on, was judged to be different. In the freest European systems — the Swiss, Dutch and German schemes — people can choose from a vast variety of health care providers. But by law they have to choose one. In return for this gift of guaranteed business, the government regulates the companies heavily. The justification for such meddling is that health care is a “social insurance,” a basic service, not a standard sold product.

As Timothy Stoltzfus Jost, a law professor at Washington and Lee University, pointed out in a paper last year, the result is not exactly a market-disciplined health care system. “This [European] understanding of the nature of health insurance is not merely conceptual, but is reflected in the approach that Switzerland and the Netherlands take to financing and regulating health insurance,” he writes. “In both countries, public funding is extensive.”

The German system, intriguingly, reverses the grim “risk-based” equation familiar to every American looking to buy insurance. German citizens pay into a pool for health care according to their income, not their health risks — but the Krankenkasse receives a lump of money back from the pool according to each patient’s risk. That means German insurance companies draw more money for taking on patients with more risk — a built-in reason to cover the old and infirm.

It involves a lot of government fiddling, but what Krankenkassen don’t do under this system is suffer. They do, however, act like insurance companies. When you buy coverage in Europe, you get it.

The incentive structure in America right now pushes companies in the other direction, away from paying coverage wherever they can. That’s the problem Obamacare wants to solve. No purely market-driven system on earth has yet solved it. The systems in Switzerland and the Netherlands were held up for a while as possible free-market models for the U.S., but they’re not strictly market-driven, founded as they are on a notion of health care as a social service.

Legal arguments over the mandates in Obamacare focus on whether the Commerce Clause of the Constitution gives Washington the power to regulate an industry that tends, historically, to be handled by individuals, or by localities and states. It probably does, but the idea of being forced to buy insurance by law will still confuse a lot of Americans when Obamacare kicks into high gear in 2014.

America has to find her own way through this thicket of legal distinctions. There’s no reason to ape the Europeans, because their systems aren’t perfect; in fact it would be nice to watch the American legal process forge something new. But Europeans settled the underlying moral questions — to their own satisfaction — decades ago.

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