Last night at the Goldman School of Public Policy at UC Berkeley – my school! – I heard California Insurance Commissioner David Jones, a very engaging and impressive speaker and person, talk about Proposition 45, which will be on the ballot this year. Prop 45 would empower the Insurance Commissioner to review health insurance premiums for reasonableness, and rescind excessive increases for cause. Far from revolutionary, this power already resides in the state insurance commissioners in 37 other states, and a similar power resides in the California Insurance Commissioner for many other policies, such as auto and home owners insurance. Naturally, the health insurance behemoths have raised $37 million to fight against 45.
It surprised me at first that the California Medical Association has lined up with the insurance companies, as has CAPG, the California Association of Physician Groups, since doctors and health insurance companies are such enemies. Jones opined that the docs probably feared that putting pressure on insurance prices would cascade down to their own fees. Makes sense. It's surprising that the nurses are for 45 – good for them, for a change.
Dean Henry Brady puckishly asked why there needed to be regulation at all, since there are four predominant players in California – Kaiser, Anthem Blue Cross, Blue Shield, and Health Net. Isn't that enough to compete? Answer: no, it isn't. With an impressive show of wonkish economic argot, Jones swatted that challenge away with ease, saying that in lots of fields four isn't enough, that the barriers to entry in health insurance are enormous – just the financial requirements are staggering – so regulation is necessary here. He also gave some pungent examples of unwarranted rate increases that included the ill-advised California Blue Cross increases in 2009 that pushed the ACA over the finish line, a true “what were they thinking?” moment.
But that set me to thinking yet again, who exactly is it that is against health costs rising? Consumers, yes, and consumer groups have raised some money to support Prop 45, although not in the ballpark of the corporations with vested interests. But who else? Everyone in the industry wants a piece of the pie. Even some economists observe the support to employment provided by the health care industry, which is kind of stupid if you think about it, since it is disguised unemployment, really, employing people wastefully where they are not needed.
When Detroit was like this, and everyone in the industry was happy to have prices high (and quality low, but that's another matter), the Japanese realized that ships could carry cars and made a bundle as Detroit hollowed out. I have always thought that health care was impregnable to foreign assault. But I'm now wondering, is it really? There is already medical tourism to Asia for surgery – you get the operation, airfare, luxury hotel, and for all I know, a girl to help you through it (speaking as a guy), and save a bundle in the process. Maybe that's just for starters. Telemedicine is coming, and virtual visits. Radiology is being offshored to India, especially during our night and their day. Telemedicine can be pretty bad as it now stands – a testimonial from an enthusiastic woman in a recent SF Chronicle article raved about how her migraine was gone in hours after antibiotics prescribed via telemedicine. Antibiotics for migraine? But that can no doubt be improved. You never know what people will come up with.
High prices leave an industry vulnerable. Price regulation can be their best friend, fight it as they might. But there is no boundary to the shortsightedness of the health insurance industry, let alone private-spiritedness. It is good to hear that at this point Yes on Prop 45 polls 10 points ahead of No. I think I'll distribute some leaflets up and down my block. That's the least I can do for the American economy.