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The "We Can Do Health Reform Without Taking on the Insurance Industry" Argument

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There are a lot of folks in the conventional wisdom, establishment-oriented Democratic circles that are trying the sell the argument that reform without a public option is still big, important, transformational health care reform. I totally get why they are doing it, and even have some sympathy for what they are trying to achieve: worried that we can't get a public option bill out of the Senate, they are scrambling to make it seem like whatever passes isn't a failure or disappointment.

The latest example is Third Way's Roll Call op-ed, "Don't Pass on the 'Next New Deal'". The folks at Third Way know how to make an argument -- and what they say sounds reasonable enough -- that if we regulate insurers to stop the worst things about our current system, that will still be a big improvement in health insurance rules.

What I fear instead is another bill like Kennedy-Kassebaum which, as I have written before, was supposed to solve some of the same insurance problems like people losing their insurance when they switched jobs, or being deprived for pre-existing conditions -- all of which continues to happen.

Another bad outcome would be that we get something like the Massachusetts health plan, which passed with a lot of hype a few years ago. It's not working very well, though, as way too many people can't afford to sign up for coverage, and the costs are quickly spiraling out of control.

These two pieces of legislation are failing because of the same problem: neither one took on the power of the insurance industry. These two bills, both passed with great fanfare in the thoroughly bipartisan fashion, are not working because they provide no check on insurance industry power, no competition and no reason for insurers to control their costs -- which, by the way, is exactly why they passed so easily with such big bipartisan support.

Remember, insurance companies are granted exemption from anti-trust laws by the McCarran-Ferguson Act. A very small number of them have overwhelmingly market power in huge parts of the country. Their rates are unregulated by the federal government. And they have enormous political power to go along with their massive market power.

What my friends at Third Way don't mention is that the insurance industry has happily signed off on all the regulatory changes mentioned above, just as they supported Kennedy-Kassebaum and the Massachusetts health bill. They know that with all the market and political power they have, without anti-trust or federal rate regulation to worry about, without competition from a public option, they can raise rates as much as they want and probably write loopholes into the regulations that they agreed to so that they will be easier to slide around.

This is the simple fact that has made progressives in the House draw a line in the sand in terms of keeping a public option in the final bill: without the public option check on private insurance, there will be no check on insurance company power to set whatever rates and rules they want to, and health reform will not work. A bill with no check on insurance company power, with no competition for insurers, will drive health care prices higher and will fail to solve the real problems we have in how insurance companies treat people.

So don't give up on a health care reform bill that keeps insurance companies honest, my friends at Third Way and my other friends in the DC establishment. In spite of all the doom and gloom of the conventional wisdom spinners, we have a path to victory, as long as we don't give up and decide we don't have the courage to do what needs to be done and take on the insurance industry. If we do what the President wants, and have competition and choice so that we keep them honest, we really will have accomplished something that can be compared to Medicare and Social Security.