I think I know the reason why Obama and the Democratic leadership keeps single-payer out of the discussion -- and no, it isn't just because the insurance industry fills 'em up with campaign contributions.
Insurers usually make profits not from underwriting (selling policies) but from investing the money they get from people who pay their premiums. This investment is called "the float." Thus, insurers own a lot of those wacky financial instruments based on crap mortgages. That's why the industry is in iffy shape right now. (There's even talk of a government bailout of the big insurers.)
What would happen to the economy if the health insurance industry largely disappeared? How would the rest of the insurance industry be affected? How would the banks be affected? How would the government be affected?
I honestly don't know the answer to those questions. I'm trying to find out. If you have answers, please share. But before you answer...
Consider: The insurance industry owns roughly half of all U.S. corporate bonds. Corporate bonds are how companies get cash in order to grow -- or, these days, just to stay afloat. Companies need those bond investors now more than ever.
Consider: The industry also owns a huge proportion of commercial real estate loans. A lot of people think that commercial real estate will be at the heart of the next financial crisis. How could we hope to avoid that crisis if the owners of that paper go under?
Consider: Right now, about $7 trillion worth of residential mortgages have been securitized, and the insurance industry owns a massive chunk of those securities. The insurers feel screwed: They bought a bunch of paper that turned out to be overpriced. (Of course, they should have known better.) What would happen to the financial services industry -- to the "too big to fail" banks -- if the owners of all that iffy paper suddenly vanished?
Don't get me wrong: I still would prefer to see the entire health insurance industry gone, gone, gone. It serves no purpose. Even Joe Scarborough recently asked: What do the insurers bring to the process?
But we must also ask: If the health insurers go, what will happen to the rest of the insurance industry? If the entire industry totters, what will happen to the financial system as a whole?
Who will buy all of those corporate bonds? If nobody buys those suddenly-freed bonds, what will happen to American companies? To capitalism? To your job?
Like everyone else on the left, I've been laughing at the right-wing fruitcakes who keep calling Obama a bolshie. After all, he hired Larry Summers and Timmy Geithner, who ain't exactly a couple of Reds. We've been telling people for a long time that meaningful health care reform doesn't mean that the country is going to go socialist.
But what if it does? Inadvertently, indirectly, unwittingly. What if it does?
If reform causes Wall Street to crater, what happens next?
Even if you like the idea of socialism, don't be so quick to embrace catastrophe. Think about it. If the entire system were to collapse suddenly, who would lead us out of the ruins -- the ghost of Olaf Palme, or the ghost of Adolf Hitler?
Maybe this is why Paul Krugman keeps reminding us that it is possible to have universal health coverage without single-payer.
12 comments:
A lot of people think that commercial real estate will be at the heart of the next financial crisis.
You might want to take a look at Mike Shedlock's post Manhattan Commercial Real Estate Office Sales Plunge 91%.
This post illustrates the number one reason I know the insurance industry in America ain't going anywhere anytime soon--it is the single most powerful instrument in this nation. No Democrat known to have any real power is going to speak out against it (or god forbid do anything to start dismantling it) unless s/he wants to not wake up tomorrow morning thanks to the large bullet that has been passed through the center of his/her forehead.
If the health insurers go, that's a huge injection of money into the economy as a whole, because employers no longer have to pay for coverage plans for their employees. I don't think it'd be all that risky.
Maybe my reasoning is too simple.
There are ways around this conundrum:
1) Phase the introduction of single-payer
2) Let the insurance companies contract to provide administration services (much as companies that self-insure already do).
All it requires is approaching the problem in good faith, which are elected representatives are unwilling to do.
one has to finance a single payer system... in Europe it's financed by taxes. Normally the tax is the highest on the employer, but minimal (but higher than in the US) on the individual. Complementary taxes on products affecting health (booze, cigarettes, fat, salt and sugar) are often used too + a tax on big pharma.
Curiously it's not affecting all those people to the point of "collapse". Actually there are more small and middle-sized entrepreneurs in percentage in Europe (10% exactly) than in the US. Besides social mobility (the ability to lift yourself through work to a better situation) is higher in France than in the US, to take one example. So much for "socialism".
But private insurances then ? They take often the complement part in Europe (even driving 30% of the market) over the public part and they are making BILLIONS, because people buy the complement to be covered 100% or because they want to have access to "comfort" medicine. Obviously the system works here and costs half of what it costs/inhabitant in the US.
I cannot find any other reason a similar system can't be applied in the US if not for a) greed b) obsolete ideology...
Does anyone here know what proportion of the insurance industry is health insurance? How much of the industry revenues come from health insurance as opposed to life, auto, liability etc. Google was not much help.
If Single Payer 'decimated' the insurance industry, where would all that money slosh to? I found some answers in a couple of Tom Friedman articles (of all places) last month. Remember Cap 'N Trade? Look to the nascent, carbon trading market - The Chicago Climate Exchange (CCX).
http://tootruthy.blogspot.com/2009/07/tom-friedman-trashes-cap-n-trade-then.html
Friedman insisted a link between HEALTH CARE legislation and the energy/climate bill:
“Health care and the energy/climate bill go together. We need both now. Imagine how poor we would be today if U.S. firms did not dominate the top 10 Internet companies. Well, if we don't dominate the top 10 E.T. rankings, there is no way we are going to be able to afford decent health care for every American. No way."
Also note that right now, there is a great push from Team Obama's tech lobby advisors to fund Electronic Health Records (EHR) vendors (Microsoft, Google Health, GE Health etc.) through over $20 billion in Stimulus Bill funds from the American Reinvestment Recovery Act of 2009 (ARRA).
Also, just when single payer and the public option have received their “death notices”, Joe Biden incidentally pulled into Chicago today stomping for a cure for EHR vendors, many whom, needless to say, supported their campaign.
Wall Street thrives on risk, and like you point out, the insurance industry is still essentially the Old Grande Dame with her finger on the purse. When it comes to health care, we are not sacrificing this beastly behemoth until it can be transferred one with legs.
Too bad. But we're number ONE, dammit – even if we are not really anymore - or so goes the Friedmanesq logic. We'd be damn lucky to “go socialist” and enact Single Payer, but as Friedman observed, health care and the energy/climate bill go together and we need one to fund the other – or they should go together. Trouble is, the CCX is a newbie derivatives beast still in the crib.
What would happen to the economy if the health insurance industry largely disappeared?
This was actually Bill Clinton's (who, by the way, was a Rhodes Scholar in Economics) chief concern about - and reason for being against - single-payer back in 1993. Historically, when he changes his mind on a issue, he does so when new information came to light and so requires such a change. I think he's now in favor of it (?), so I would be interested to
see if that concern was resolved to his satisfacation (and how), or if some other factors - such as sharply rising costs - have since overridden it.
Sergei Rostov
So, the health insurance industry bought junk paper from Wall Street and if we cut their gravy pipe they'll sell it off. Who's going to buy it?
As far as corporate bonds go, Obama trashed that market when he jerked the Chrysler bond holders around and gave that company to the UAW.
Time to see if my skill set is needed in Europe or Asia as living here is going to go down hill real bad real soon.
Joe, companies are constantly re-evaluating their business models. They have to in order to survive. Did you know that AT&T now considers itself a deliverer of entertainment, not a communications company? Well, they do. A phased-in Medicare for All would allow them plenty of time to adjust their business practices. Besides, they'll still be selling supplemental insurance, I imagine, just as they do right now to many on Medicare.
grayslady
Employer taxes might go up, but they wouldn't come close to the cost of private health insurance plans, especially for small businesses.
Actually, I've been thinking of the ATT model. Reminds me of the days when the phone bill was my biggest single monthly expense after rent. That sure has changed. And the change did not destroy the economy.
Still, who the hell is going to buy all those corporate bonds? The market will be flooded, the price will go down, and corporations will not be able to raise capital.
The question remains...
Post a Comment