Why the GOP’s new healthcare ‘reform’ plan looks so danged familiar
Via Jonathan Cohn and Kevin Drum, it transpires that the House GOP majority is crafting a new healthcare “reform” program to substitute for the Affordable Care Act. It should surprise no one that the new plan incorporates two provisions that have been Republican nostrums, like, forever, and that are distinguished by their utter irrelevance to the goal of making healthcare more accessible and affordable to anybody.
These nostrums are (1) allow health insurance to be sold across state lines and (2) make it harder to sue for malpractice.
These are two of the most anti-consumer ideas ever proposed in the healthcare field; they amount to a bill of rights for ripoff artists, bad doctors and careless hospital managements. It’s worthwhile to explain, for the umpteenth time, why.
First, selling insurance across state lines. As we’ve explained before, this has long been Item A on the health insurance industry’s wish list. It’s amazing that it still walks among us, because the downside is evident from an experience that almost every adult American has had: paying their credit card bill.
The credit card industry shows us exactly what would happen if health insurers were no longer subject to the insurance and consumer protection laws of the states where their policyholders lived, as opposed to the states where the insurers are located. There would be no standards at all.
Until 1978, credit card issuers were subject to the interest rate caps in their customers’ home states. In California, for instance, cards couldn’t charge more than 10% interest, the state limit. But that year the U.S. Supreme Court ruled that credit card issuers could “export” their home state’s interest cap.
Promptly, the states with high or nonexistent interest rate caps, such as Delaware and South Dakota, became kings of the credit card industry, attracting the consumer credit subsidiaries of Citibank, Wells Fargo and other big banks. One issuer in South Dakota, which counts its credit card industry jobs by the thousands, even put out a card carrying an annual rate of 79.9%.
Eventually, Congress stepped in to impose some relatively modest consumer protection rules on the industry--in 2009. So it only took 31 years.
The same thing would happen if health insurers were permitted to export their home states’ health insurance standards and regulations. In the same sense that interest rate limits on credit cards no longer exist, coverage standards and rate regulation in the health insurance industry would no longer exist. You’d be able to buy coverage if, and only if, you were a good risk, and it would be the insurer who would decide. (The insurer would set its own price, too.) If that’s the insurance market you think we should have, the GOP plan is for you.
Then there’s malpractice “reform,” another hardy GOP perennial usually pitched as an effort to end “frivolous” lawsuits.
This specious variety of reform has lots of fans. As we wrote a few years ago, “the public’s on board because it’s easy to hate lawyers. Doctors and hospitals love it because they hate to get sued. Insurance companies love it because the less money they pay out to plaintiffs, the more they get to keep. Republicans love it because trial lawyers give three-quarters of their political donations to Democrats. And Democrats pay it lip service because they’re afraid to look like lawyer lovers.”
The only people hurt are those who find the courthouse door slammed in their face. In California, which has had a model tort reform statute on its books since 1975, that’s predominantly women. That’s because California’s law, like most other such proposals, works by slashing “pain and suffering” awards in favor of protecting economic damages such as lost earnings and medical expenses.
Because women injured by malpractice typically earn less than men but suffer greater lifestyle injuries, their recovery is slashed. So, too, are recoveries by families of infants and small children, who don’t have earnings to lose. California’s law, as it happens, has had such negative effects on consumers that its own creator, former Assemblyman Barry Keene, now says it was a mistake.
Tort reform laws are openly discriminatory, but what’s even worse is that they’re aimed at a problem that has been grossly exaggerated.
Objective studies show that medical liability isn’t a big driver of health costs overall. The cost of malpractice litigation--including both court costs and the cost of excessive tests and procedures to stave off malpractice cases (“defensive medicine”) has been estimated by the Congressional Budget Office, among other sources, at roughly 2% to 3% of all U.S. healthcare spending -- in other words, no more than $50 billion out of a total annual bill of more than $1.7 trillion. (You’ll hear estimates as high as $200 billion from outfits like the American Medical Assn., which is the antithesis of an objective source.)
The whole notion that U.S. juries are handing out huge awards for “frivolous” malpractice claims is also baloney. A study by Harvard’s School of Public Health found that frivolous cases -- those that should not have been brought at all -- are rare -- and usually don’t end with a payment to the plaintiff. The bigger problem is the opposite -- worthy cases in which the victim doesn’t get a dime.
That aspect of things will only get much worse under the sort of malpractice rules the Republicans have been pushing. The New Republic’s Cohn, usually a clear-eyed analyst of healthcare policy, thinks that malpractice reform could “yield some real cost savings,” if it’s the right kind of reform. That’s a pipe dream: the Republicans have never pushed that kind, which involves tightening oversight of bad medicine and assuring punishment of bad doctors. The GOP just wants to stop lawsuits, which sometimes are all we have to fight bad medicine.
So the GOP package is sadly typical. As is often the case, the question is who the GOP is representing when they put these ideas out. Because it sure isn’t you or me.