Obama: undoing the death spiral

Going into today’s election, even if there is a massive jerk of the electoral knee and all the wackos — witches, Aqua Buddhists, whatever — get elected tonight, I’m grateful for the last two years under Obama.

Not because he’s lived up to his hype. The second coming of Jesus couldn’t have lived up to the expectations placed on his shoulders. But because he’s the only politician in a generation to have looked at our current problems–rising costs to employers, burdens on the individual, impossible budgetary challenges to state and local governments–and have the courage to confront some of the real causes rather than just bemoaning the effects.

I’m talking about health care reform. Spiraling health care costs are used by systems dynamics textbooks as classic examples of reinforcing feedback loops, where over time the cost of coverage rises higher and higher in an accelerating fashion. Sterman’s book says that this explains the failure of the so-called “medigap” coverage plans that covered the difference between what Medicare would pay and the actual cost of health care plans:

…In the late 1980s… underwriters had to raise premiums, including the premiums for medigap and Medex. In response, some of the elderly were forced to drop their medigap coverage. Others found they could get lower rates with other carriers or by signing up for plans offering fewer benefits or which capped benefits for items such as prescriptions. However, only the healthiest seniors were eligible for those other, cheaper plans. The sickest of the elderly…those with so-called pre-existing conditions…were not eligible for less expensive coverage or HMOs and had no choice but to stay with medigap…. As medigap losses mounted, premiums grew…[forcing] still more of the comparatively healthy elderly to opt out of medigap… Those remaining with the plan were, on average, sicker and costlier, forcing premiums up further. (Sterman, 176)

What Sterman describes in the context of a case study from the 1980s and 1990s is what is technically called a death spiral–a case where market failures (the inability of the market to provide coverage at reasonable costs) resulted in the destruction of all the health plans that were there to meet that coverage (“by 1997 only Medex remained.”) The same sort of death spiral was in effect for the broader market, with secondary effects that included precipitous increases in the cost of health care coverage for businesses and governments, with no market force in site to stop it.

Obama’s health care plan put together a set of measures to ensure that the size of the pool remained stable, including eliminating the pre-existing coverage denial that caused seniors to flee their medigap plans in the first place. There are certainly flaws in the plan, but by and large it is the first serious attempt to get the insurance market under control and reverse some of the insane cost spiral that affects every American business and every American.

Did the Republicans in Congress attempt to propose a credible counter policy to address the crisis? Did they hell. They trotted out lying rhetoric about “death panels” and demonstrated the shortest path to Godwin’s Law.

So tonight when reactionary commentators are cheering about the rolling back of progressive initiatives, think of this: at least the progressives, for all their flaws, saw with clear eyes a real threat to America’s competitiveness and tried to fix it.

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