Building an American Insurance Bazaar

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Recently — and this doesn’t happen very often — I had lunch with a number of Turkish military officers. One of them said, “I think your President Obama is trying to do something good for his people. Yet they are protesting in the streets. They don’t seem to want this health care reform. Why?”

I said Americans had a profound mistrust of government. The protesters — or the sane protesters, anyway — objected to a probable increase in taxes and regulation that would come with any reform. Above all, the idea of a law requiring people to buy something, even health insurance, made the natives restless.

The Turkish officer nodded. “I think things are very different in America.”

He wasn’t just being polite. He’d made port in Europe as well as the East Coast, and his impression was that Americans had a unique outlook on the world. He didn’t say this, but Turkish people tend to be impressed by Americans because they’re so free of European prejudice toward Turks. Modern Turkey and the U.S. have a lot in common — they’re both proud, powerful, nominally secular republics — and American prejudice relies on color, so it doesn’t kick in with a pale-skinned, sophisticated citizen of Ankara or Istanbul.

The Turkish officers said Turkey had a national health care system that offered a “green card,” a plan for free health care, to anyone with income below a certain level.

“It’s not perfect, because rich people still try to get green cards,” the officer said. Nevertheless, health care is considered a basic service in Turkey. It’s expensive for the government to maintain, but street protests in Turkey, as in Germany or France, would materialize only if politicians tried to take it away.

Normally I’m proud of American exceptionalism. But the reason for the mess in American health coverage has nothing to do with any maverick individualist tradition. Americans have inherited a largely accidental system of employer-based insurance that started during lean times in World War II. Wage freezes imposed by the government led employers to offer benefits instead of higher salaries. The slow institutionalization of this system is the reason Americans can’t carry their benefits from job to job or into self-employment; and it’s one reason we can’t think clearly about new ways to pay for health care.

The Baucus bill, now determining the shape of things to come, will only make things worse. It claims to be the most “business-friendly” plan in Congress because it doesn’t order all employers to offer health plans. But it does fine bosses who fail to offer coverage to needy workers. The idea is to compensate the government for covering those same workers. Some writers have called this so-called “free rider” provision an “employer mandate in sheep’s clothing,” but really it’s worse than that: It amounts to a government incentive to keep needy workers out of a job.

The bill has a few good provisions, like a competitive health insurance exchange in every state — a virtual bazaar for basic coverage, which I’ve argued for in this column — but it grants this broad new freedom of choice to employers, not individuals. Ezra Klein recommends “phasing in Ron Wyden’s free-choice amendment” to open the bazaar to individuals. That would make insurance portable and drive down costs by introducing real competition to the health care market.

The insurance exchanges should also be national, not state-restricted — the idea for a national exchange was in Baucus’ bill last year.

But the last thing large insurers want is real competition. The lack of any such thing in the bills taking shape in Washington is a transparent reason for their success: The insurance industry, like the pharmaceuticals industry, sees the current direction of reform — universally mandated insurance, plus little change in the marketplace — as a chance to drum up business.

A truly competitive and well-regulated insurance bazaar would be a unique American solution to the universal problem of health coverage. The simple and conventional alternative would be a public option. A year ago the Baucus bill included one of those, too. But that was before this summer’s bloody rhetorical cockfights and all the protesters in the street.

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