Some have suggested that a health care bill with no public option would be fine as long as it mandates universal coverage and forces insurance companies to cover people with pre-existing conditions. I think that forcing insurance companies to cover people with pre-existing conditions is a terrible idea that opens a whole can of worms. I think that the only sensible way to cover people with bad pre-existing conditions is with a "buy into medicare"-style public option, which is why a public option is absolutely necessary.
First: it's clear that if you are going to mandate insurance companies cover people with pre-existing conditions, you would also have to mandate costs.
Otherwise, it's pointless: they'll charge some ridiculous rate which would for all practical purposes prevent you from getting health care.
Any sensible mandate to insurance companies to cover pre-existing conditions must involve government mandated price controls. but what is a pre-existing condition, anyway?
When people say "Pre-existing condition" usually, people immediately think of the nasty ones like diabetes or cancer.
But, if you think about it, your entire medical history and everything about you is actually a pre-existing condition, albeit not necessarily ones that will prevent you from getting insurance.
Before they set your premium, Insurance companies use complex formulas which coalesce all information about you together to determine your likelihood of costing them money. I think that government interference into this process would be a horrible idea... Think about it... you're basically forcing insurance companies to cover people they don't want to cover, and they'll do everything they can do get out of it. And to implement this, you'd basically need long complex charts of what is and is not a pre-existing condition that the insurance companies can or cannot charge extra for. Next, are the formulas that insurance companies use to determine costs really open-book? Who's to say they aren't charging more for this or that pre-existing condition, but just not telling you?
Because of the problems described above, the only sensible implementation of price controls for pre-existing conditions, would necessarily involve a price cap: The government would find a rate that it thinks is above reasonable for healthcare, and all insurance companies would be required by law to cover you at this rate or less, regardless of pre-existing conditions. (People who could not afford the rate, would receive government assistance paying). Key point: the rate would be capped for everyone regardless of pre-existing conditions (the alternative would be to have the government dabble extensively in the private price formulas of insurance companies, which is a stupid idea).
But it's not that simple: It would also have to mandate what insurance companies must cover. You can't charge someone a capped rate for junk insurance, can you? I'm sure the insurance companies will try. So the government would have to set standards on what all insurance must cover. But it gets worse, there would be loopholes: Insurance companies already approve what doctors you can see (and they need this ability to prevent themselves from getting ripped off by quack doctors). So, Insurance companies will in theory "cover" your pre-existing condition, they'll simply make it very difficult for you to get health care by limiting which doctors you can see or making doctors file extensive paperwork before they can be approved by your insurance companies, which would limit the pool of doctors, thereby limiting their losses. To prevent this, if they even can, the government would have to add basically another layer of bureaucracy and regulation. And there may be other loopholes that I'm not thinking of at the moment, I'm sure the eggheads in the insurance companies will leave no stone unturned in their effort to earn profits for their shareholders.
Alternatively, the government could subsidize insurance companies to cover people with pre-existing conditions at the capped rate. This could also be a regulatory nightmare. The insurance companies would certainly find one area of health care where the government subsidy formulas favor them, and exploit it to hell, sell you junk insurance for huge subsidized and milk out profits on the public dime.
Every layer of bureaucracy and regulation, both on the governments end and the insurance company's end, adds to the hassle, adds to the overhead.
Also, price caps--which would be necessary in any sensible scheme to force insurance companies to cover everyone--often make for bad economics. What do you do if prices skyrocket? you'd have to raise the cap. In some cases, this could be politically difficult but it might be economically necessary. Price caps really open up a whole new can of worms. I think we should not go down that road.
So i don't advocate price caps: I think that attempting to get private insurance companies to cover people with pre-existing conditions is a waste of time, what we need is a strong public option to cover them:
- The public option, which should be basically like medicare, should cover everyone who wants to sign up for it. The amount you pay should be based on income and nothing else.
- This would mean lower administrative costs because the government does not need you to fill out paperwork or know anything about your medical history before they sign you up. They can simply sign you up for medicare for a simple formula based on your income. They also don't have to worry about making a profit so they're not going to hassle you over legitimate payments, or go over your claims with a fine toothed comb looking for any technical reason to deny your claim. This will also lower overhead.
- The public option shouldn't need to break even. I'm not saying they should go out of their way to make it lose money-- but if it doesn't pay for itself it should be subsidized by taxes on rich people. Be wary of any "Public option" proposal that sunsets if it gets too expensive. Murphy's law here: if it can sunset, they'll probably find a way to make it sunset.
- No need to add 5 or 10 layers of bureaucratic regulatory crap to extort insurance companies into covering people with nasty pre-existing conditions.
- People who have pre-existing conditions but still want additional coverage can buy supplemental insurance, in addition to signing up for the public option.
It all comes together beautifully: the public option just makes more sense than over-regulating the insurance companies.
I'm calling on everyone to give no ground on the public option. The leadership of the Right wants to kill the public option, not because it's some far left idea, but because it's the only thing in the bill that will work. Without the public option, the bill is a failure, and the republicans want it to fail because if it works they'll be out of a Job. They want Obama to fail, and the way to make it fail is to kill the public option. Democrats need to stand together to support real health care reform.