Obama’s Blues

Member Group : Lincoln Institute

There is the story of the patient visiting the doctor and the doctor says: "I have good news and I have bad". The patient asks: "what’s the good news?" The physician replied: "the good news is that the tests I took show you have about 24 hours to live." The incredulous patient said: "that’s the good news! What’s the bad?" The doctor replied: "I forgot to call you yesterday."

Such is the dissention that Americans have lived with the last year in the enormous debate over health care reform. But in all of it, among all the noise generated by the politicians, pundits and pollsters what four critical words haven’t you heard in these arguments?

Blue Cross, Blue Shield.

Created in 1929 to insure teachers in Texas, Blue Cross/Blue Shield was health care reform in its day. With the rise of the great depression the systems grew among the employed concerned that they couldn’t afford what was generally called "hospitalization" back then.

In World-War II America with wage and price controls, intense competition for employees in the industrial sector led to employer paid health care benefits becoming the norm in union contracts. In 1965 Lyndon Johnson’s Great Society program included Medicare and Medicaid. The Blue Cross/Blue Shield network was the systems’ infrastructure processing 63 million claims worth $19.2 billion in the 5 years after the social reform legislation was enacted. Unheard of money at the time. In 1973 Congress authorized the formation of HMO’s – Hypochondriac Maintenance Organizations – that entirely changed the physician/patient relationship. Our fabled doctor didn’t make that important call probably because his waiting room was jammed with people seeking treatment that have no stake ultimately in the real cost of the system. Seventy one percent of health insurance premiums are paid by employers.

Today the nation’s 39 Blue Cross and Blue Shield franchises boast that they insure 100 million people, or 1 out of 3 Americans. Yet while Congress seemingly surges ahead to reform 1/6th of the nation’s economy nary a word is said about the Blues’ confounding processes.

In 1929 collectivizing agreements with hospitals and physicians was a good idea. In 2010 it’s simply that: collectivized. Generally with all combined competitors only holding a 20 to 30% market share where there is a dominant Blue franchise, the Blues contract with the hospital networks and competitors must follow. Hence there is very little real competition in the healthcare insurance industry and rates only go up.

The good news in our story is that the recent election in Massachusetts has fueled general confusion in Democratic ranks in Congress. President Obama’s health care insurance mandate bill is currently stalled. The Blues are stalled too. The advantages they gained in 1965 and 1973 were evidently the blue print for the administration’s public option plan. They were the only ones with the infrastructure to work it unless the President got authority to build a broad based new bureaucracy. An idea that even the champion of health care reform, the late Senator Edward Kennedy, thought was bad.

President Obama may have the blues over his landmark legislation’s stalled status but it provides him a unique opportunity to change course. Someday if Americans are allowed to buy health care as commodity insurance just like auto, home owners or life, choosing their deductibles and caps, the market will explode. The Blues will be forced to reform by competition, prices will drop, doctors and patients will respond more responsibly. The result? More Americans than ever will be insured.

Albert Paschall is Senior Fellow at the Lincoln Institute of Public Opinion Research, a non-profit educational foundation with offices in Harrisburg and King Of Prussia. Somedays is syndicated to leading newspapers and radio stations in Pennsylvania. [email protected]
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