Will Healthcare Reform Work This Time?

Abstract

The current Democratic plan is based on the Federal Employees Health Benefit Plan. Insurance companies would submit plans to a neutral authority to vet them for benefit design, transparency, and maybe price. The companies would offer the approved plans to the public. Each plan would charge the same premium for everyone (community rating), and no one could be turned away because of preexisting conditions (guaranteed issue). This mixed public/private system may appeal to voters because it worked pretty well in the past, and continues to work well in large companies, where many mostly healthy people are gathered together for a purpose other than to buy insurance—a classic insurance market. However, preventing “cherry picking” by insurance companies will be difficult. Supporters of private insurance argue that private companies, driven by the profit motive, will be better able to control the soaring costs of health care. However, many citizens rejected the most effective methods of managed care in the 1990s. Finally, in the last 15 years Congress offered several programs to private insurers: Medicare Plus Choice, Medicare Advantage, and now Medicare Part D (the prescription drug benefit). Far from reducing cost, they all turned out to be more expensive per person than traditional Medicare.