Public Goods, Public Utilities, and the Public's Health

By Flint, Samuel S. | Health and Social Work, February 2011 | Go to article overview

Public Goods, Public Utilities, and the Public's Health


Flint, Samuel S., Health and Social Work


The battle over dismantling health reform dominates today s health policy agenda. Some opposition to the Patient Protection and Affordable Care Act (P.L. 111-148)--now typically referred to as the Affordable Care Act (ACA)--comes from those on the political left who see health care as a public good similar to the military, the fire department, and the court system (Physicians for a National Health Program, 2010). Only government can fund and deliver public goods, because the private market cannot be relied on to do so with the equity and efficiency required for critical services needed by everyone. Many on the political right fear "a government takeover" of the health care system that will lead to the loss of the very market-driven, creative solutions that are so desperately needed to reign in the cost escalations that threaten to make health care unaffordable.

I see the ACA as a politically shrewd compromise that captures the principal benefits of both camps and creates the least disruptive path to a workable framework that can ultimately lead to universal health insurance coverage at sustainable prices. This middle ground is achieved through the ACA'S requirements shifting the health care system from a lightly regulated market commodity to a heavily regulated public utility.

Public utilities are privately owned firms that provide necessities in monopoly or near-monopoly situations. Because unfettered monopolies can price gouge, they are required to accept extensive government regulation to ensure that they do not abuse their market power. Some public utilities are complete monopolies (for example, regional electric, water, and gas companies), and others (for example, cable television, telecommunications) have some modest competition. However, all public utilities are profit-driven, privately owned businesses, which distinguishes them from public goods that are funded and operated by the public sector.

Public utility regulation has two fundamental characteristics. First, all utilities are legally obligated to serve virtually everyone, despite the known unprofitability of certain customers and customer groups. All customers are allowed to use as much of a utility's services as they like, with occasional exceptions such as temporary limits on lawn watering during droughts. Second, the prices that are charged to consumers are determined by public commissions rather than private corporations. Public utility commissions have essentially unrestricted access to a firm's books. This provides them with far greater insight into a company's financing than is required of publicly held companies, let alone privately owned businesses and other proprietorships.

Contrast that environment with how health insurers operated up till now. Insurers could select their customers and set their own prices, like any other seller of goods and services in a private market. Insurers do contend with some government regulation handled primarily at the state level, but these regulations are limited to issues such as fiscal solvency requirements, state-mandated benefits, "patient protection laws" for managed care plans, and truth-in-advertising and other marketing practices. However, state regulation does not address consumer accessibility or pricing.

In 1996, enactment of the Health Insurance Portability and Accountability Act (HIPAA) (EL. 104191) created federal-level regulation for insurers in the large-group and self-insured employer markets. HIPAA requires insurers to cover all group members, regardless of preexisting conditions, and to renew all insurance plans, regardless of claims experience. However, HIPAA's impact is limited in that it does not address pricing. This makes guaranteed issue and guaranteed renewability a hollow promise, because annual premiums can be hiked at the whim of the insurance company. Undesirable clients can simply be priced out of the market. And HIPAA does not apply to the individual and small-group markets, the areas where consumer rights are most constrained. …

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