Wisconsin Congressman Steve Kagen has what he thinks is a noble goal in mind: ending price discrimination in the medical insurance marketplace. Why? As Kagen writes at the Huffington Post, charging people different prices for health insurance is unconstitutional.
Kagen uses some strong rhetoric in attacking insurance companies:
That’s why I’ve introduced the No Discrimination in Health Insurance Act. This essential legislation will guarantee access to affordable care for every citizen in America by bringing an end to discriminatory practices employed by insurance companies who deny life-saving coverage to millions of Americans solely because of their pre-existing medical conditions.
The grim reality is our Constitution does protect you against discrimination, until you become ill. Well, my legislation puts discrimination where it belongs — in the past.
Insurance companies are easy targets and are an easy way to score points with voters because virtually everyone despises them, myself included. High-profile cases like that of Nataline Sarkisyan make that easy to do.
Speaking about insurance companies Hilda Sarkisyan said, "They just like to collect. They don’t want to deliver." Which is true of all insurance underwriters – they are in business to make money. The way they do that is by cutting costs in two ways: by negotiating group prices from medical providers and denying benefits to their customers. It’s no surprise to anyone who’s ever been covered by an HMO that when an expensive procedure is needed, that’s when the barriers to service go up.
Kagen wonders:
Shouldn’t health insurance companies be made to openly disclose all their prices, so everyone sees the lowest price for insurance policies? Like prices for gas at the corner service station or food prices in your closest grocery store, every citizen should have the equal opportunity to pay the same price for the same product. It’s called competition — a uniquely American concept.
Go to your favorite restaurant and you’ll find a simple solution for solving our health care crisis. They’ll hand you a menu with a list of prices before you order.
Two things here. First, transparency in pricing is a great idea from a consumers standpoint. Or it would be, if the insured had any real choice as to their coverage. Yes, clearly everyone should know how much their medical expenses could be in a given situation. But this is a complex business and very few consumers are going to invest the effort to understand the minutiae of their health plan – unless they are already battling a particular condition, in which case they should be highly motivated to do so. But for most of us this simply isn’t that important.
Why? Like most insured Americans I get my health coverage through my job. My choices, if I want to get the employer contribution – which, at the rate of $6000 per year, I certainly do – are limited to those sanctioned by my employer. In many cases this amounts to virtually no choice at all, perhaps 2 or 3 options, take it or leave it. Yes, it would be useful to some people to have detailed pricing information available to them up front. Kagen is right – that should be the case. But let us not pretend that it would change the choices that 98% of the insured would make.
Second, and more interestingly, Kagen’s definition of competition is, well, let’s say it’s rather unique. True competition – which we do not have in the medical industry, lest anyone be confused – does tend to drive profits toward the cost to provide a service and companies’ costs are usually comparable, so in this sense competition does lead to a uniformity in pricing goods and services. But that’s a result of competition, not a cause or a social objective.
If we’re speaking of having an appendectomy, for example, done on comparable patients at hospital X by physician Y, then it’s reasonable to assert that the bill for the operation should be the same in both cases. That far Kagen is correct. But no farther.
If we adjust any of the variables in the equation – patient health, location, hospital, surgeon – the price of the operation would adjust accordingly if the normal competitive process were allowed to run its course. A more difficult operation necessarily costs more, as in the case of a Nataline, a patient already in poor health.
Better facilities and doctors also cost more. It’s simple supply and demand. The fact that this doesn’t necessarily happen in the medical industry is evidence of a lack of a competitive environment. Not surprisingly, the medical field is one of the most regulated in America.
So Kagen’s assertion that competition means that "every citizen should have the equal opportunity to pay the same price for the same product" is completely false. Competition means exactly the opposite in that in a free market all variables that figure into delivering a product or service have a direct impact on the final price.
Given that no two medical procedures are the same, what exactly is the justification for uniform pricing? That lies in the alleged benefits of risk distribution and averaged cost, not in market competition.
medical welfare = economic discrimination