Last year Congress notably failed to move an inch toward real progress on the hot-button health
care issue du jour: patients' rights. Democrats had their proposal, aimed at making Republicans
look like insurance company stooges unwilling to help Helen Hunt force her HMO to let her child see
a real doctor. Republicans had their proposal, aimed at showing they disliked lawyers as much as
HMOs, and intended to "neutralize" the issue during the 1998 campaign.
We believed, and still do, that there are elements in both parties' approaches that
together could empower health care consumers with the choices, the information, and the
purchasing power they need to make competition work for higher quality health care at affordable
prices (see David Kendall's October
1998 Progressive Policy Institute (PPI) Backgrounder, Better Luck Next Time: Moving Beyond
Partisan Posturing on Patients' Rights).
But so far this year, both parties are trundling out last year's partisan proposals and
re-staging the drab pageantry of last year's partisan posturing on patients' rights. With prospects for
compromise on this legislation low and getting lower, we are delighted to offer a new idea for
placing real, live patients--not just their self-appointed champions among Congressional bill-writers,
federal and state bureaucrats, doctors and lawyers -- in the driver's seat on health insurance
decisions.
In a new PPI report Protection of the Health Care Consumer:
The 'Truth' Agency, Harvard Business School Professor Regina Herzlinger suggests that the same
simple institutional reforms that saved the securities industry from fraud, misinformation, runaway
costs, and a crisis of public confidence back in the 1930s, could work wonders in creating a
consumer-driven market for health insurance today.
According to Herzlinger, the key to the securities reform initiated by President Franklin
D. Roosevelt was the Securities Exchange Commission (SEC) -- a "truth" agency that did
not attempt to evaluate or micromanage securities offerings, but did insist on full disclosure of
information to investors and a level playing field for competition. The SEC did not, and does not,
"rate" securities, but does require that issuers provide the information necessary for
private-sector rating services to make reliable evaluations, and for competitors to make reliable
comparative claims.
Specifically, Herzlinger proposes a health care "truth" agency that would:
Register all health insurers (as the SEC registers securities firms) as eligible to operate
across state lines if, and only if, they fully disclose information on the financial integrity of their
firms, the scope of their policies, and the quality of services they provide, with powerful penalties
for companies that cannot back up their representations to the public.
Work with private sector organizations (like the securities industry's Financial Accounting
Standards Board) that would audit health insurance plans and provide common measurements of
their price, quality of care, and level of consumer satisfaction.
Encourage a host of private-sector analysts (a key part of the securities purchasing system) to
use disclosed information to evaluate the cost and quality of health insurance plans, helping to
hold down costs by stimulating competition.
With this limited but essential set of tasks, a "truth" agency -- or "SEC
for Health Care" -- could simultaneously make health insurance information reliable, improve
the fairness of insurance policy prices, help consumers redirect their money from good to bad halth plans, and lower everybody's transaction costs.
This step would not solve every problem connected with health insurance plans, or with
the health care system, but it would surely accomplish more, at a lower cost, and with less
bureaucracy, than the war of sterile words between partisan warriors marching nowhere under the tattered banner of "patients' rights."
