R&R – Reachout and Rebuild

Published in the East Hampton Star 2/23/17 by John Hooker from North Haven.  John is an expert on Health Care with a long career working with big pharma (says David P).

Blind free-market ideology can be dangerous to your health! Now that we are in the midst of revisiting our health care system, it’s worth drawing a parallel with Switzerland to illustrate how a country that revised its health care system in the ’90s is still struggling today.

Why do I select Switzerland, with a population of only 8.2 million? Because the system is private, federalist (the 26 cantons function somewhat like states), and should normally succeed: The median income of the Swiss is twice that of the United States and offers everyone topnotch health care — and the fact that Ford magazine claimed in 2011 that it was the best health care system in world.

So what is going wrong? Since the Swiss health care overhaul (the LAMAL law of 1994), the number of Swiss health care insurance companies has gone from about 100 to 59 today. That was almost a quarter of a century ago, and they still haven’t optimized their system.

Let me give you a quick illustration that happened in 2015 and was published in the Swiss press. Assura, an insurance company with a reputation for being a pioneer of low-cost premiums for basic insurance plans, saw its reserves suddenly depleted by a mammoth deficit of 253 million Swiss francs (currently the same in dollars). What happened? Their “strategy” of attracting customers with low-cost premiums suddenly backfired: New clients in 2014 grew by 20 percent but medical expenses grew by 27 percent. Almost overnight, they were in trouble.

Another insurance company the same year bought up a smaller one and went from solvency to deficit, because they couldn’t evaluate the health care status of the new clients beforehand. Well, too bad, you might say, poor management. But do market rules really apply in health care? Swiss law compels all insurance companies to offer a basic plan to everyone, which corresponds to the lowest premium rate companies offer. The basic plan is mandatory, and benefits are determined by law.

At year’s end, young, healthy individuals tend to shop around for the best deal, because insurance companies are free to charge what they want for the basic plan and, by the way, new clients cannot be refused for pre-existing conditions. Conversely, the old and sick customers tend to stay put, out of fear of losing add-on benefits they contracted for previously with their current company. The result is that competition among insurance companies tends to breed insolvency, because the basic plan — if underpriced to lure new clients — can drain resources suddenly and unexpectedly. How can anyone claim free-market competition when the buyer and the client are in the dark?

Back to the U.S. Since 2009, the media have blared the need for young, healthy individuals to join the exchanges of the Affordable Care Act so as to compensate for less healthy and older individuals to be included in the same insurance pool. As we embark on the repeal, or the replacement, or A.C.A. repair, it is important to note that free-market ideology is at loggerheads with the profit incentive that makes free-market competition work efficiently, at least in the case of health care insurance companies.

Joe Biden recently said on “60 Minutes” that Democrats consider health care a right, and Republicans, a privilege. Whatever one thinks, my point here is that in a system where insurance companies compete for customers who will most likely not use their products — where customers don’t know what their future needs might be and do not have a decade of medical studies to assess them; where customers know neither the cost nor the specifics, once the bills arrive, and, finally, where outcomes have no objective point of comparison — how can anyone claim that free-market capitalism can jibe with a health care market?

It’s the politics, stupid!

JOHN HOOKER