Thursday, December 17, 2009

"The Perfect Stom of Financial and Physical Ruin" and the Republican Trap

Meanwhile, Jeffrey Feldman has written a very, very good piece about what mandates to buy private insurance without a public option would look like:

The big change will be for the rest of the country that would suddenly be faced with an unprecedented and up-to-that-point not understood requirement.

Everyone would be required to buy an annual health insurance policy for ourselves and our family members--dictated by government to purchase a private product.

Now, advocates for a mandate assure us that it would lower costs because it would plug the "leaks" in the insurance "pool." They also claim that there is already a mandate in the auto insurance market, and it has not caused anybody any harm.

In reality, there is no such thing as a coverage "pool" that does not leak. In the current situation, for example, undocumented immigrants will not be covered (of which there are, ehem, one or two in America). So at first, undocumented workers will be the biggest, identifiable and substantial "leak." Even after a mandate went into effect, emergency rooms would still be treating new arrivals to this country who live at the margins of our system, but need medical care just the same. Mandates without coverage for immigrants would mean that the cost of private insurance would still go up. Leaky pool.

As for the comparison to auto insurance: it does not hold. Consider, for example, the everyday scenario of an American who decides they need to buy a car. They shop around, then calculate whether they afford the purchase or lease expenses, fuel, maintenance, parking, and--insurance. At this point, many decide not to buy a car, thereby freeing them from the mandate. Others decide that they can afford a car, but cannot afford both liability and collision insurance. So, they get minimum coverage, exposing themselves to great financial risk.

In a mandate health insurance system, the same scenario would likely arise: forms of private insurance would arise offering coverage that satisfies the mandate law, but leave the individual exposed to so much financial risk that any real health crisis will be a guarantee of financial ruin. At least when it comes to buying a car, we can evaluate this risk and decide to take the bus. With a health insurance mandate, there would be no "take the bus" option.

Since no government can require people to spend themselves into poverty, the result of the mandate will be that a large chunk of the American middle class would choose to expose themselves to enormous financial risk in the long run in order to avoid spending all their money on health insurance in the short term.

The private insurance industry--probably the most sophisticated industry in history--will have no trouble developing precisely the kind of products that will feed off the short term concerns of middle class families. Families of four that earn enough money to feel like they are doing well, but not enough to pay $10,000 for a health care policy, will be enticed to buy policies that help them "save money," "control their costs," "take control," "get rich." It does not take much imagination to see how well these kinds of late-night-TV products would succeed. They would be the junk bonds of health insurance, the sub-prime mortgages of health care, the "Rich Dad" videos of the mandate era. They would fuel a health care bubble, and then, inevitably: a health care bust.

Five, maybe ten years, after the system started, we would be faced with our first financial crisis brought on by the mandate.

In such a crisis, the government would be faced with a rise in personal bankruptcy caused by fraudulent health care products that would make the housing crisis look like a tame night at the canasta table. Tens of millions of Americans would be in financial ruin because the policies they chose to buy to satisfy the mandate had left them exposed to crippling health care expenses. They bought a policy, as mandated, but because there was insufficient regulation to protect the consumer from junk policies--bankruptcy, all over the country, in every corner, over every hill and dale, bankruptcy....

...Meanwhile, with the personal bankruptcy and financial market crises unfolding in a perfect storm, talk would begin of the most shocking news of all: how unhealthy Americans have become since the mandate took effect.

Unhealthy with health insurance?

Think about it: What would be the one way to guarantee that your insurance premiums would not rise--a common method that millions of Americans use every day? Carry insurance, but avoid any situation where it would come into play.

So, even though these Americans at risk had insurance, millions would have figured out that the best way to avoid a personal financial crisis would be to avoid the doctor and hospitals altogether.

It would be a strange new world, indeed: a world of unhealthy people with health insurance--people whose solution to the financial dangers imposed on them by the mandate and an unregulated private insurance market would be to shift the risk from their household balance sheets to their medical files.

A mandate would mean health insurance, but bankruptcy--coverage, but bad health.

Even if it takes another few months, we would be far better off sitting back down and making sure we do not set in motion the mandate crisis of the future.

All in favor, say "Aye."
Bolding is mine.

Again, for the Yglesiases and Kleins and Cescas and other strawman-erecting "Senate bill hawks" out there:


This is also why the Republicans have been playing the games they have. They knew, from the beginning, that well-crafted health care reform could be the end of their party as we know it. Their party is built on apologies for the excesses of private enterprise, and the instinctual loathing of collective action. If there had been well-made government-led health care efforts, people might realize that collective action to protect individual rights wasn't such a bad deal afer all.

So they led the Dems into a trap. They knew, beyond a doubt, that Obama and the Senate Dems were aching for "bipartisanship" on this. Both have made a point of fetishizing it in the past, and both were likely to keep on doing it. They had to look hostile and recalcitrant in public, because they still always have to consider their base. But, in private, a few of them kept on playing at being just reasonable enough that it was conceivable that the Dems could get a few "R" names on the "yea" list.

It worked. The Dems thought they had a partner. Baucus sacrificed his credibility and became a laughingstock because of it. They hacked and hacked and hacked again at anything approaching tolerable policymaking in their legislation to bring some Republicans on board.

The Republicans didn't get on board. The Republicans were never going to get on board. They were just there to ensure that, sooner or later, the Dems would sacrifice so much that the legislation would be intolerable. It happened a few days ago, and we're seeing the fallout now.

No matter what happens, the Republicans win. If progressives—now so alienated from the party that they can barely stand it—support the bill, the Dems will all wear it. When it fails, when it creates this "financial and physical ruin", the Dems will be wiped out and the Republicans will gain control. Liberalism and progressivism will be discredited by their connection to this horror; the fact that this bill is antithetical to the ideals that animate liberalism will be completely washed away. The Republicans win.

If progressives oppose it, the Dems will be forced to defend it more and more vigorously against their own greatest supporters. Sooner or latter there will be one too many Democratic partisans crying "SCREW YOU YOU DIRTY HIPPIES" in their desperate attempts to defend the indefensible, and progressives will wash their hands of the party entirely. The Dems won't survive that. As the Canadian Liberal party learned to its great sorrow, a party cannot survive without a committed base. The Republicans STILL win.

No, the only way that the Republicans don't win is if the Dems do something, ANYTHING, to make this bill less terrible. Removing the mandate might help, but it really will screw with the economics of it. Passing some sort of medicare expansion or public option would have helped, but the House bill that includes a public option won't even get a chance at reconciliation, because neither Obama's Senator-packed White House nor official Washington could give a rat's ass about America's Representatives.

The Republicans are better at the game. I've said it for a long time now. It's still true. Obama beat them, but only because they're terrible at governing, and because the Obama that we saw in the campaign was someone that people could support. Over the last year, that Obama has been wiped away, and replaced with the worst Rubin-esque elements of the Clinton administration. The dream of a new FDR or LBJ lies in ashes, along with any remaining hope that American progressives might have once had for their country.

They knew your weaknesses. You didn't remember their strengths. That's why they won. And That's why you lost.

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