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Tilting at Windmills

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June 29, 2009

'HIGHLY CONCENTRATED'.... When it comes to health care policy, two of the more popular buzz words, even among conservatives, are "choice" and "competition." Mitt Romney, for example, said on "Meet the Press" yesterday that Republicans "believe in allowing people to have choice in their health care." Likewise, Joe Lieberman recently emphasized the importance of "competition" in the system. Kathleen Sebelius told CNN a couple of weeks ago, "Choice and competition is what we want."

What's not to like? Americans are predisposed to like choices and competition, and when it comes to health care, any approach to reform that offers consumers fewer choices and less competition is necessarily suspect.

It's worth remembering, then, that conservative defenders of the status quo are fighting against choice and competition. Zachary Roth has a very good piece today pointing to a HCAN report documenting the fact that most Americans don't enjoy "anything like a competitive marketplace for health care."

The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country's insurance markets are defined as "highly concentrated," according to Justice Department guidelines. Predictably, that's led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.

Far from healthy market competition, HCAN describes the situation as "a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate."

So extreme is the level of consolidation, in fact, that one former top Federal Trade Commission official working with HCAN has sent a letter to the Justice Department's Antitrust Division, asking for an investigation into the health insurance marketplace.

Specifically, the Justice Department considers a marketplace "highly concentrated" if a company's market share tops 42%. HCAN found 10 states in which one or two companies control 80% or more of the market. In Alabama, home to Sen. Richard Shelby (R), one of the strongest opponents of reform, Blue Cross Blue Shield controls 83% of the statewide market.

Individual insurance companies enjoy practical monopolies in many parts of the country, which keeps prices high, profits high, and consumers screwed. It's why the public option is seen as such a serious threat -- it would introduce at least some competition, and offer consumers some choices.

In terms of political framing, this would, it seems, give Dems a pretty big reality-based hint: ambitious, progressive reform is necessary for consumer choice and competition. To oppose reform and a public option is to oppose choice and competition. And everyone loves choice and competition, right?

Steve Benen 3:05 PM Permalink | Trackbacks | Comments (27)

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Comments

I'm limited to either the HMO my employer offers or the PPO. I have no control over anything else.

That's not my idea of choice. I'm at a BIG place. We should have several companies fighting over our premium dollars. And a public plan option as well.

Posted by: fourlegsgood on June 29, 2009 at 3:11 PM | PERMALINK

I read Roth's report and realized that he is on to something, something big. I suspect that when all is said and done a lot of health care opponents, especially in the Senate, are bought and paid for by their friendly neighborhood monopoly. There isn't anything like a free market in health insurance.

Roth's report goes a long way to explain why there is any opposition at all to a public option.

Posted by: Ron Byers on June 29, 2009 at 3:12 PM | PERMALINK

Well, right now my "choice" is to pay more than a thousand bucks a month for the two of us (including a $7,500 per person deductible) or go entirely without, as we've been excluded from getting private insurance because of a pre-existing condition.

Not liking this version of choice much....

Posted by: Mo So on June 29, 2009 at 3:16 PM | PERMALINK

I wasn't surprised to read the percentage of BC/BS customers in Alabama (I'm one). Health insurance choices here boil down to 1) BC/BS, 2) Medicaid, or 3) a state, county, or municipal government job. #3 is often the best choice simply because our public employees' health and retirement plans are exceptionally well managed. The quite obvious downside is that it isn't open to those of us who don't work for the government. Sen. Shelby has to know that if the state's public plan was open to all residents, it would instantly compete strongly with BC/BS. If the federal public plan were managed anywhere near as well as Alabama's, millions would flock to it.

Posted by: Luke Coley on June 29, 2009 at 3:21 PM | PERMALINK

I'm with Mo So on this. I, too, have a pre-existing condition, and either have to take what my employer offers, maintain COBRA coverage from my previous employer, or go without. Not really much of a choice.

Posted by: Michael W on June 29, 2009 at 3:22 PM | PERMALINK

This also highlights a potential issue for supporters of reform to face (and hopefully, defuse). Why oppose a public plan if all it does is introduce competition? Because it will do more than that. Clearly health insurance is an industry in which economies of scale dominate. Big insurers can afford to muscle out smaller ones, leveraging their size into market power, which in turn helps drive up market share. But... the very biggest insurer will be the government.

This analysis seems to indicate that public option will in fact lead inevitably to single-payer -- not in defiance of the market but because of it.

Personally I'm OK with single-payer, but I think honesty will be called for.

Posted by: Bernard Gilroy on June 29, 2009 at 3:37 PM | PERMALINK

This is wrong on so many levels.

First, while Americans luvs them some patriotic buzzwords, healthcare will always be rife with market failures, period. Demand is virtually inelastic when you are deathly ill. Entry costs are high. Information cannot flow freely and if it did, there would be assymetry as most consumers don't understand the details that doctor would. So from the word 'go,' analysis based on ideal market conditions is flawed.

Second, the status quo fails the "competition and choice" test on several levels. As Steve and commenters above have noted, the employer often has few choices due to concentration. Once the employer chooses a provider, most employed persons have no real economically viable choice but to take a plan from that provider. What has not been discussed as much, however, is that those plans often stifle competition among providers.

Case in point: my retired parents are economically dependent on insurance from my father's retiree benefits (he worked in manufacturing). The company unilaterally changed carriers, and the new carrier had an exclusive contract with one of two major hospitals and affiliated clinics in town (most plans allow both hospitals and their networks). As a result, my parents - both older and with ongoing health problems - had to leave their long-time primary care provider who knew their histories, personalities, treatment analyses, etc. The new provider network did not have to outcompete my parents' prior providers -- my parents were delivered to them .

this system is not good for anyone, and certainly does not represent choice or competition for the average consumer of healthcare.

Posted by: zeitgeist on June 29, 2009 at 3:39 PM | PERMALINK

When is someone going to pose this question to a republican opponent of the public option:

"On one hand, you say that government is totally incapable of operating efficiently; bureaucratic waste and fraud would render the public option dysfunctional, therefore there is no point to even attempt it. Then in the same breath, you say that a public option would destroy the private insurance market. Can you please reconcile what seems to be a blatant contradiction; the government will screw up health care because it can't run anything right, but at the same time you say if it's allowed to compete, it will put private insurance companies out of business."

Posted by: citizen_pain on June 29, 2009 at 3:48 PM | PERMALINK

Via Adam Clark Estes at the Huffington Post, here are some important Congress critters and Senators and the amounts the health care industry has chosen to pay them.
Sen. John McCain (R-AZ): $7,504,867
Sen. John Kerry (D-MA): $7,341,399
Sen. Arlen Specter (R-PA): $2,149,503
Sen. Max Baucus (D-MT): $1,795,949
Sen. Mitch McConnell (R-KY): $1,743,835
Sen. Joseph Lieberman (I-CT): $1,685,890
Sen. Richard Burr (R-NC): $1,350,454
Sen. John Cornyn (R-TX): $1,346,574
Sen. Jon Kyl (R-AZ): $1,321,457
Sen. Charles Grassley (R-IA): $1,160,826
Sen. Sherrod Brown (D-OH): $1,081,378
Sen. Jim DeMint (R-SC): $ 999,611
Sen. Bob Corker (R-TN): $ 994,699
Sen. Orrin Hatch (R-UT): $ 980,417
Sen. Thomas Harkin (D-IA): $ 935,711
Sen. Saxby Chambliss (R-GA): $ 919,793
Sen. Blanche Lincoln (D-AR): $ 896,067
Sen. Debbie Ann Stabenow (D-MI): $ 827,294
Sen. Benjamin Cardin (D-MD): $ 797,185
Sen. Christopher Dodd (D-CT): $ 788,650
Rep. Tom Price (R-GA, 6th): $2,090,127
Rep. Frank Pallone (D-NJ, 6th): $1,627,024
Rep. Joe Barton (R-TX, 6th): $1,518,285
Rep. John Gingrey (R-GA, 11th): $1,392,343
Rep. Charles Rangel (D-NY, 15th): $1,304,569
Rep. John Dingell (D-MI, 15th): $1,148,060
Rep. Eric Cantor (R-VA, 7th): $1,136,519
Rep. Roy Blunt (R-MO, 7th): $1,102,468
Rep. Charles Boustany (R-LA, 7th): $1,058,786
Rep. Nathan Deal (R-GA, 9th): $1,046,519

Do you really think the industry has paid this kind of money merely for access? If so I know about this bridge in Brooklyn. . . .

http://www.huffingtonpost.com/adam-clark-estes/introducing-the-eyesears_b_221118.html

Posted by: Ron Byers on June 29, 2009 at 3:50 PM | PERMALINK

We should have several companies fighting over our premium dollars. -fourlegsgood

You probably did, but they weren't fighting for your business...they were fighting for your board or shareholders business. The insurance companies don't even see you beyond the statistic you represent in their sales pitch.

Lashing insurance to our jobs is one of the major problems with health insurance and the jobs market in the US today.

Posted by: doubtful on June 29, 2009 at 3:54 PM | PERMALINK

I'm not holding my breath but I so hope the health care insurance industry bites the big one. Can we introduce something else that takes the auto insurance industry down too?

Posted by: Gallop Trollop! on June 29, 2009 at 4:06 PM | PERMALINK

..premiums have gone up more than 87% in the past five years and health insurance companies' profits rose 428 percent from 2000 and 2007.

And yet single payer has been taken off the table by the administration and Democratic congresspeople.
And Diane Feinstein is not troubled by criticism from the left on this issue. Unbelievable.

Posted by: impartial on June 29, 2009 at 4:20 PM | PERMALINK

And everyone loves choice and competition, right? -- Steve Benen

Wrong! Silly Benen... Only godless libruls are pro-choice; all good goopers are pro-(corporate monopoly)-life

Posted by: exlibra on June 29, 2009 at 4:22 PM | PERMALINK

My employeer offers only one insurance company with a HMO plan which was priced out of existance this year, an PPO plan and an HSA plan.

I have had to switch to the PPO which means my meds will go from $10 each to $20 each for generic. So I will spend $80 each month instead of $40.

Now $40 a month might not seem a lot to some of your readers, but it's 1/2 a phone bill, or two movies and popcorn, or two weeks worth of gas (pn a good week) to me.

Posted by: Kurt on June 29, 2009 at 4:28 PM | PERMALINK

I'm quite satisfied with my health insurance plan and the plan that lets me set aside pretax dollars for non-catastropic medical expenses, and would appreciate it if you folks would leave them the frack alone.

Posted by: Dotar Sojat on June 29, 2009 at 4:32 PM | PERMALINK

fourlegsgood: More than a decade ago, Michael Kinsley remarked on the palter of "choice"

Posted by: tec619 on June 29, 2009 at 4:33 PM | PERMALINK

GREAT!

I choose to have the same plan as Congress, with the same level of benefits, at the same cost.

When does it start? Sign me up!

Posted by: MsJoanne on June 29, 2009 at 4:39 PM | PERMALINK

I would like to disagree with the premise of this post. I don't think that the public cares about choice or competion when it comes to healthcare; they want good quality health care without long wait times and without paying too much. Choice and competition are only relevant to the extent that they improve the quality of healthcare or its availability, or lower its price.

Posted by: Daryl McCullough on June 29, 2009 at 4:39 PM | PERMALINK

I keep wondering what fantasy world there is where people have some kind of choice on health care. The insurance company picks the doctor or you pick from their list, and your employer picks the plan.

Over about ten years and 3 employers, I had at least ten different insurance providers. By the time I had a chance to use the insurance maybe once, the employer would move to a new plan. Consequently I had a different doctor every time I visited.

Only people who work for very successful large companies have good health insurance, but they still don't really have any choice about it.

Posted by: Capt Kirk on June 29, 2009 at 4:40 PM | PERMALINK

Here's a comparison with auto insurance. I've no tickets or accidents in 25yrs yet because I've filed bankruptcy I pay triple the amount of car ins as my friend who has the smae history yet never filed bankruptcy.

The ins companies use you credit reports along with driving history to determine rates. My credit rating should have nothing to do with my auto ins rates but these private companies have lobbied the states to make sure it does so they can maximize profits.

There still are a few states refusing to allow auto ins cos to use credit ratings to determine rates...but very few.

Posted by: bjobotts on June 29, 2009 at 5:44 PM | PERMALINK

How can a not for profit plan compete with a for profit plan...and isn't that the point.

The wealthy never worry about premium rates and coverage anyway.

Posted by: bjobotts on June 29, 2009 at 5:47 PM | PERMALINK
Wrong! Silly Benen... Only godless libruls are pro-choice; all good goopers are pro-(corporate monopoly)-life Posted by: exlibra on June 29, 2009

On healthcare that makes Repubs anti-choice.

On Bernie Madoff that makes Dems anti-life-sentence.

Sounds about right.

Posted by: MarkH on June 29, 2009 at 8:26 PM | PERMALINK

I have Blue Cross/Blue Shield of Alabama, and I have no complaints... but I live in California and work for a government contractor who is based in Huntsville. Does the 83% of statewide coverage reflect only those people covered in Alabama or could it also reflect coverage of employees in other states?

I still will support a public option.

Elmo

Posted by: Elmo on June 29, 2009 at 10:59 PM | PERMALINK

"I'm quite satisfied with my health insurance plan and the plan that lets me set aside pretax dollars for non-catastropic medical expenses, and would appreciate it if you folks would leave them the frack alone.
Posted by: Dotar Sojat on June 29, 2009 at 4:32 PM"


One comment in 23 in favor of the current status quo. About in line with both the NYT and the WSJ polls on Americans' wishes for public health care.

Frack off, Dotar.

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