ClintonCare may be gone, but an irrational system remains

February 13, 1996|By Robert Kuttner

IN 1994, THE CLINTONS' health plan disappeared, done in by the Republicans and the insurance industry. But the crisis in health insurance did not disappear.

Now the Senate Republican leadership, after months of intense jockeying, has agreed to schedule a vote on a very modest reform bill sponsored by Republican Sen. Nancy Kassebaum of Kansas and Democratic Sen. Ted Kennedy.

The bill would address two of the most flagrant abuses of the present fragmented system. People who leave or lose their jobs could take their insurance with them, and no one could be turned down for coverage because of a pre-existing condition.

Even these very partial reforms have the insurance industry exercised, and mounting an all-out lobbying drive to defeat the bill. The Health Insurance Association of America claims that this measure would substantially raise costs for people who already have insurance.

And they may well be right -- because meaningful partial reform of the current system is all but impossible.

This bill should be enacted. It would remedy one of the worst injustices that the present mess permits. But if it does become law, the bill will create perverse incentives and add to the administrative complexity that makes American health insurance the world's least cost-effective.

For one thing, the ban on insurance denials based on pre-existing conditions would send a powerful economic signal to people of modest means: Don't buy insurance until you are seriously ill. That, in turn, would cause them to forgo preventive care, often delaying treatment until a condition becomes more expensive to treat.

This is analogous to poor families using hospital emergency rooms as their neighborhood physician. People don't do this because the emergency room is convenient or cost-effective (it is the most expensive place to seek treatment, you get a different doctor every time, and the waits for non-crisis care are often long). They patronize emergency rooms because they are the one place that won't turn you away for lack of coverage.

The second element of the Kassebaum-Kennedy bill, ''portability'' of coverage, is also a logical partial reform given the current system. But it sheds light on just how crazy the system is. And it, too, will raise costs.

Why, after all, should your health insurance be tied to your employment? The two have nothing to do with each other.

This custom is a historic accident, the legacy of companies offering fringe benefits to attract workers during World War II labor shortages, at a time when wartime wage controls precluded higher pay. After the war, during an era when unions were stronger and corporations viewed employees as assets rather than regrettable cost-centers, enlightened companies included health benefits as part of the compensation package.

But in the 1990s, when the very phrase job security has become an oxymoron, it is absurd to tie health insurance to employment. In this context, the Kassebaum-Kennedy bill is necessary protection. But what a poor substitute it is for an overhaul of the entire system.

Most health plans are devised and financed based on projected health costs of a given work force. As people leave their employers and take their coverage with them, the plan has to keep track of them and bill them separately. This is of course less efficient and more costly than administering a group plan.

Keeping track

For doctors and hospitals in a given area, keeping track of dozens of local health plans is hard enough. As people migrate around the country, taking their health coverage with them, after a few years local doctors and hospitals will have to familiarize themselves with the ground rules and reimbursement schedules hundreds, even thousands, of different plans.

So, yes, the Kassebaum-Kennedy bill would raise costs. And yes, the bill is simple justice. It is a plain outrage that we should lose our health coverage because we lose or change a job, or because we have the effrontery to become sick.

But how much simpler and more efficient life would be if there were universal coverage! No portability problems, no pre-existing condition rules, no administrative nightmare sorting out rules of different plans.

The bill deserves support because it addresses a gross injustice. It would also expose the irrationality of the present system. If the bill creates a hassle for the insurance industry, no one deserves it more richly.

Comprehensive health reform is off the agenda for now. But it will return a lot sooner than most people think.

Robert Kuttner is a syndicated columnist.

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