"Feldstein: If Your Insurance Company Won’t Pay For Something, You Can Just Buy A New Policy"
Today, Harvard economist and former Reagan Council of Economic Advisers Chairman Martin Feldstein appeared on CNBC to discuss his fear that the health care reforms being debated by Congress will lead to government rationing of care. But during the segment, he displayed a stunningly limited knowledge of how health insurance actually works, implying that insurance companies rarely cut people off when they get sick, and when they do, it’s easy to simply go somewhere else and buy a new policy:
[Insurance companies] turn down very, very few things, and again it is not the government doing it. So if my insurance company doesn’t allow certain drugs or doesn’t allow certain kinds of treatments, I can choose a different kind of policy. And the idea as I see it in the Obama proposal is to force us all into a certain kind of spending pattern because the government is concerned, the administration is concerned, with how much the government is spending.
CNBC’s Mark Haines (who makes a lot of sense when he is not discussing Wall Street bonuses) replied, “Oh please. First of all, the private insurance companies are a bureaucracy, so this bureaucrat argument is nonsense. And second, you’ll pardon me sir, your argument is a very easy one to make by someone who has money.” Indeed, Feldstein seems to think that buying health insurance is the same as buying apples. If one rots, it’s a cinch to go out a find a better one somewhere else. But the insurance market doesn’t work like that.
For one thing, even people with employer-based health insurance are limited in their options, and if the plans that their employer provides don’t have the coverage they want, they have to go into the individual market, where nearly nine out of every ten people seeking coverage never get it.
Second, the insurance market is riddled with monopolies that limit the sort of mobility Feldstein espouses. According to the American Medical Association, “94 percent of insurance markets in the United States are now highly concentrated, and insurers are thriving in the anti-competitive marketplace.” And even assuming that there is competition, as the New York Times’ Gina Kolata pointed out today, buying individual insurance is often like ordering off a menu that “has no prices and you have no idea what you will be required to pay until a few weeks later when the bill arrives in the mail.”
So does Feldstein really think that people whose insurance company has turned down a treatment can take their now pre-existing conditions and go find coverage elsewhere? Or does he just expect everyone to pay huge out-of-pocket prices for things that the insurance companies refuse to fund? He may have the luxury of paying (or he may be covered by Medicare, since he is 69 years old), but that is not the situation that many Americans find themselves in.