Since the rollout of the Affordable Care Act’s federal online health insurance exchanges back on Oct. 1, it has become apparent that there are substantial problems not only with the law’s implementation, but with its structure and foundation as well. (For a good look at the seriousness of the online problems, check out Ezra Klein’s WaPo summary ). One of the other issues that’s gaining attention in the media is the fact that the Affordable Care Act seems to be having little effect on controlling insurance premiums in rural areas. In fact, it actually appears to be making them worse.
A recent New York Times article goes into significant detail on the issue, first explaining some of the obvious issues that make rural areas less competitive in terms of their health insurance markets than their urban counterparts:
While competition is intense in many populous regions, rural areas and small towns have far fewer carriers offering plans in the law’s online exchanges. Those places, many of them poor, are being asked to choose from some of the highest-priced plans in the 34 states where the federal government is running the health insurance marketplaces, a review by The New York Times has found.
Of the roughly 2,500 counties served by the federal exchanges, more than half, or 58 percent, have plans offered by just one or two insurance carriers, according to an analysis by The Times of county-level data provided by the Department of Health and Human Services. In about 530 counties, only a single insurer is participating.
It shouldn’t come as a surprise that rural areas are proving problematic for the ACA; this is a basic problem that was foreseen by most of those who were at all knowledgable on the subject of health insurance markets. (I remember, for instance, going over this very point in my “Introduction to the U.S. Health Care System” course in college). One of the proposed methods for dealing with this problem was the inclusion of the “public option,” which would have allowed those who were dissatisfied with the high premiums offered by the one or two insurers available to them to enroll instead with a government-run health insurance agency. This solution, though it was ultimately defeated and did not end up as a component of the ACA, was seen as especially promising for rural areas. The idea of the public option was relatively popular, and garnered support from influential figures on the left such as Paul Krugman and Robert Reich.
I have intentionally avoided discussing Paul Krugman on this blog for a long time, but his views on the public option are relatively representative of many and so I have decided to share them below.
The truth is that the notion of beneficial competition in the insurance industry is all wrong in the first place: insurers mainly compete by engaging in “risk selection” — that is, the most successful companies are those that do the best job of denying coverage to those who need it most.
While the opponents of a
privatepublic plan say that they’re trying to defend market competition, what they’re actually doing is defending lucrative local monopolies.
It’s worth noting, however, that plausible free-market alternatives to the public option solution for rural areas have been put forward, and that at least one of them opposes the lucrative local monopolies as well as the public option.
I came across this option this morning as I was reading John C. Goodman and Gerald L. Musgrave’s 1992
Patient Power: Solving America’s Health Care Crisis
after my morning run but before I left my apartment for work. As the book’s title implies,
is an argument in favor of diminishing the power of state and corporate bureaucracies over health care decision-making and returning that sovereignty to patients themselves. You may agree or disagree with that overall position, but thus far Goodman and Musgrave’s analysis has shown itself to be at least worthy of serious consideration.
As far as rural areas and health insurance premiums go, Patient Power calls for the rural areas to be converted into what its authors refer to as “medical enterprise zones,” (or, MEZs). First of all, the authors nod to the arguments of Krugman and others that private solutions are incapable of controlling costs in rural areas, before arguing that it’s actually government intervention that is most responsible for out-of-control costs.
Many people assume that the only way to meet the health care needs of rural citizens is to spend more government money on rural health care programs. In fact, current government programs and policies are probably a far greater obstacle to good quality care at a reasonable price than is lack of funds.
Goodman and Musgrave point out that a whole slew of laws and regulations inflate costs in rural areas for reasons that make little sense. Medicare regulations (at least in 1992, when Patient Power was written) require rural hospitals to keep professional staffs that grossly overcompensate for their needs, and some state laws require fully staffed surgery centers even when rural hospitals do not perform surgery. I also wrote last week about the fact that some primary care physicians seek to prevent qualified nurse practitioners from providing a comparable quality of care at a lower price to those in need. Rules such as these make it cost-ineffective for health care professionals to operate in rural areas, and their repeals would offer opportunities for increasing competition and lowering costs there.
As such, Goodman and Musgrave recommend that rural areas be converted into MEZs, where rules such as these would simply not be in effect. MEZs, in other words, would act as exceptions to all of these rules.
The concept behind Medical Enterprise Zones (MEZs) is that underserved areas should have the freedom and flexibility to make their own decisions about the best way to meet health care needs with scarce resources. Accordingly, within MEZs, many of the normal restrictive rules and regulations would be suspended, thereby creating new options and opportunities for people who live there.
In addition to MEZs, which are defined geographically, Goodman and Musgrave propose Medical Enterprise Programs (MEPs), which would be applied to certain markets rather than to certain regions. I am still in the early pages of Patient Power , but the authors do promise that they will elaborate on this idea in later chapters, and I’ll probably have a lot more to say on the subject once I reach that point.
Anyway, I just wanted to point out that the public option argument is very popular, but I’d never heard about MEZs before. I find this idea exciting (even if it was proposed back when I was just a toddler), and would love to read more either in favor of or against it. I’ll be doing some more research on my own, but feel free to share any thoughts or feelings in the comments section of this post. At any rate, the idea and its merits seem definitely to be worth considering, and at the very least it should be clear that opposition to public option plans is decidedly not the same thing as defense of lucrative monopolies.