"Competition" with the Insurance Industry

This news is late but worth reemphasizing. That report by the bullshit-producing consulting giant PricewaterhouseCoopers, commissioned by the insurance industry (AHIP), that has been waved around by healthcare reform opposition is entirely bogus, or what Ezra Klein calls "a predictable industry hit job," and elsewhere analysis laundering. The report concludes that the Senate Finance Committee's version of the healthcare bill would send households' premiums through the roof, adding $4000 or so.

The report is bogus because, among other things, it assesses only costs (see this similar discussion on climate change costs). A critical response by economist John Gruber lays out the reality. Yes, PWC puts a disclaimer in the fine print that it's just doing what it was paid to do. But the report's methodology is akin to calculating one's personal finances by adding up rent or mortgage, transportation, food, utility bills, etc., while excluding all personal income or other sources of money (i.e., you have zero money, just large bills and debts).

Ezra is all over healthcare - you should be reading his WaPo blog daily for the most intelligent analysis of the healthcare reform issue (the guy, along with environmental reporter Juliet Eilperin, carry the WaPo's remaining journalistic integrity almost single-handedly). The report, however, has backfired for the insurance industry underscoring the necessity of the public option.

[Rep. Anthony Weiner (D-N.Y.)] also made a fairly salient point. The analysis basically assumes that insurers will raise their rates because the finance committee won't make the pool of consumers more desirable for them. All of which lays out the logical case for providing consumers with a cheap and available alternative, set up and administered by the federal government.

"I think in a strange way and obviously they didn't mean this, the health insurance lobby fired the most important salvo in weeks for the option," said Weiner. "Because they have said clear as day... they'll raise rates 111%."

"Here is a tell," Weiner offered earlier. "If you have the health care industry complaining that we're going to raise costs because of these changes, it is then putting us on notice that we haven't put enough cost containment in the bill. You know if the health care industry themselves is putting out a whole report saying that, that should be a tell to the Baucus team that, you know what, maybe it is time to go back and revisit the public option.

"But the other thing that is interesting here is the deal was always good for the health care guys. Look, you'll get all these new customers coming in and that is going to be the reason that you're going to take a hair cut here. But make no mistake about it, if the health care industry keeps raising costs, and I think this is what's going to happen with the Baucus bill, we'll put new requirements on them, they raise costs. And whatever subsidies we are giving people to buy their own insurance, they won't be able to afford it And we'll keep on losing people. This is the whole argument for the public option. It is right here laid out by the health care industry right now."

It was always going to be a mistake to exclude some form of public option. The AHIP/PWC report ultimately confirms that conclusion.

See also SteveG's discussion of whether the insurance industry's lies are morally wrong.