A reader’s note


Reader donald sent this note for consideration:

Sunday night while slogging back up to Burlington from Hartford, CT (460 miles round trip as it turns out) we were listening to NPR. I didn’t think to make a note of what show, but it was discussing health care and brought up a point I wasn’t aware of that explains a lot of the rational part of the current controversy.

The story is that a decade ago Aetna was in trouble in the health insurance field. They returned to profitability not by greater efficiency or any of the other things one might expect, but by dumping hundreds of thousands of customers in markets where they were weak relative to other providers.

Why would showing customers the door be a money making move? Because insurance companies negotiate rates with providers, and the bigger the company in any given market, the more clout it has to negotiate lower rates. Costs are shifted to weaker players in the local market and to their customers.

I think this explains one reason why the health insurance companies fear a government option. The government would likely be a strong player in many (most) markets, and will negotiate good deals. Costs will be shifted to the health insurance companies by the free marketplace with no subsidies of other unfair competitive tactics. The insurance companies are not afraid of unfair competition exactly. They are afraid of being “Walmarted”

Is there a way to avoid this? The NPR program claims there is. According to them Maryland sets the price for all medical procedures so that all insurance companies are reimbursed at the same rate for the same procedure. That (purportedly) means that health insurance companies in Maryland have a leveller playing field than the rest of the country and have to compete on the basis of factors other than the deals they can negotiate with healthcare providers.

I believe that similar practices exist in countries with health care systems that actually work. Perhaps we should consider something similar nationwide in the US.