14 February 2008

Insurance Adds Negative Value

Ezra Klein has a nice post beginning with the proposition that the health insurance industry adds negative value to health care -- that is, they make it worse. For those conservatives who go on about how competition always makes things better, he offers, "Competition among drug dealers does not aid the neighborhood, and currently, competition among insurers does not aid the ill. Indeed, their inattention to actual care is startling."

Bravo.

Barry Keene, a businessman who is vice-president of Health Care for All Colorado, often sounds sincerely sympathetic to the plight of the insurance industry -- something with which I can't quite empathize, although I understand the argument. Ezra puts it like this:
It is actually counterproductive for insurers to compete on giving us the best care. It's not simply that they're not doing it, but given the structure of the marketplace, they shouldn't do it. Imagine insurer X creates the best damn diabetes protocols in the country. And they begin advertising this fact. What happens on Day Two? Well, they're flooded with individuals suffering from diabetes, or individuals who fear they will one day be suffering from diabetes. These people, in the current system, are a bad deal. Not only is it near impossible to insure them at a profit, but pooling their costs (which is what insurers do, after all) raises premiums for all the insurer's other customers. When the average customer of an insurer gets sicker, prices go up for all their customers. So the healthy folks contracting with that insurer quit the pool, and go find a cheaper deal, which forces the insurer to raise premiums again, driving out more healthy folks, which forces them to raise premiums again, which drives out more healthy folks, and so on. It's what we call an insurance death spiral, and it ends with the collapse of the insurer.

2 comments:

Nate said...

An even better post was the following day;

http://www.prospect.org/csnc/blogs/ezraklein_archive?month=02&year=2008&base_name=medical_errors#comments

In the Study he links to;

http://www.boston.com/news/health/articles/2008/02/14/1_in_10_patients_gets_drug_error/

They show a clear example of how Insurers do push providers to improve care.

"Community hospitals in Massachusetts may not have a choice but to implement such computerized systems, based on increasing pressure from insurers who see the systems enhancing patient safety and saving money. Gerald Greeley, director of information services at Winchester Hospital, said Blue Cross Blue Shield of Massachusetts and Harvard Pilgrim Health Care, over the last year, have demanded the gradual introduction of the computerized physician order entry system as a condition of reimbursement contracts with Winchester Hospital"

Apparently the Insurance Industry moved by Ezra's claim of negative value took immedaite action to contribute to improving the system. The hardest thing about being a Conservative going on about how competition makes things better is showing Progesssives who are two lazy to do any reseach the truth. The only thing startling is how little Ezra and those that link to him really know.

Jake said...

Breatny_Spears - Baby One More Time