Obama's and Kucinich's Conversation
By David Henderson
I think Bryan has done an admirable job of explaining how the immediate ban on pricing for pre-existing conditions will cause major adverse selection and will break down health insurance as insurance. Arnold says that Tyler Cowen believes the Republicans didn’t offer serious ideas or serious criticisms but notice that Tyler didn’t actually make a case. Instead he punted to two other bloggers who didn’t make much of a case. I’m no fan of Republicans–most of them started to socialize prescription drugs, supported two bad wars, and still support the drug war–but Tyler is simply wrong. Some of his commenters pointed this out by pointing to Republican Congressman Paul Ryan’s thoughtful comments at the health care summit.
But I think I understand why Dennis Kucinich, who wanted single-payer, switched from a No vote to a Yes vote. Here’s the transcript of a secretly recorded conversation on Air Force One.
Obama: Dennis, I know you want single-payer and so do I. I’ve made that clear on numerous occasions. We both see the public option as a step to single-payer, but that’s a step too far. I can’t get it in this bill and still win.
Kucinich: Now you see why I won’t vote for it.
Obama: But, Dennis, have you actually read the bill? Don’t you see how it will lead to single payer but will just take a little longer?
Kucinich: Er, what do you mean Mr. President?
Obama: Have you heard of adverse selection?
Kucinich: Yeah, but I don’t really know what it is.
Obama: Well, here’s what Larry Summers explained to me. When insurance companies can’t distinguish between healthy and sick people, they have to price to some average of the two. But those high prices discourage the healthy from buying so and the insurance companies know this and so they have to price even higher than otherwise. That’s called adverse selection.
Obama: Don’t you see, Dennis? The way the insurance companies handle this problem is to get information on people’s health and price accordingly. That reduces adverse selection.
Kucinich: And this is supposed to make me feel good about your bill that keeps private health insurance?
Obama: Yes, because our bill doesn’t allow the insurance companies to price higher for pre-existing conditions. So lots of people who are relatively healthy will actually game the system–not buy insurance and pay our piddling fines–and then, when they’re sick, get insurance then. The insurance companies will know this and will have to price high to account for it. Lots of people’s health insurance premiums will rise. I know I said that 32 million more people will get health insurance but I can’t know that. No one can. My bill might even cause fewer people to get health insurance as they game the system.
Kucinich: Still waiting for the good news.
Obama: What happens when insurance companies start to raise premiums through the roof? Do you really think people will blame us? Some will, but many will blame insurance companies. How many people blamed Nixon’s price controls on gasoline when they had to line up at the pump? Most of them blamed the oil companies. Then I, or my successor, will say, “Much as we’ve tried to reform health insurance, these titans of industry are unreformable. We must get costs under control. So we need a public option priced at reasonable rates.”
Kucinich: Yes, Mr. President.
Update for those “who have rocks in their heads,” as William Barghest put it. Of course, I thought it would be clear that I have no such transcript. It apparently wasn’t.