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The plague or the cure?

As they move toward healthcare reform, presidential candidates mull the future of private insurers.

July 01, 2007|Ronald Brownstein | RONALD BROWNSTEIN is The Times' national political correspondent.

WHEN President Clinton's universal healthcare plan died in 1994, the most visible fingerprints on the murder weapon belonged to a bland middle-class couple named Harry and Louise.

Harry and Louise weren't real, but they were deadly nonetheless. They were the stars of an advertising blitz from the health insurance industry that undermined support for Clinton's plan by deriding it as a government takeover of the medical system. In the end, Clinton's plan collapsed without ever reaching a vote on the floor of the House or Senate.

Ever since, supporters of healthcare reform have mostly steered a wide berth around the insurance industry. But that truce is breaking down as politicians, in Washington and in state capitals across the country, begin wrestling again with the intertwined challenges of how to control costs, improve quality of care and provide health insurance to the nearly 45 million Americans without it.

All of those dilemmas force political leaders to grapple with a threshold question: What role should private insurance companies (which now provide coverage to almost three-fourths of Americans with insurance) play in the future of the healthcare system? The answers are coming back in three distinct categories: Regulate them. Liberate them. Or eradicate them.

The "eradicate them" school -- whose cause has received a boost from "Sicko," the movie from agitprop filmmaker Michael Moore that opened Friday -- wants to replace private insurance companies altogether with a government-run, single-payer system. (That's a system in which one single entity linked to the government contracts with doctors and hospitals and pays for all healthcare costs.)

The arguments about single-payer are familiar. One side says it saves money and improves care by eliminating the profit motive that drives the insurance industry; the other says it discourages innovation and causes long waits for treatment through shortages and bureaucratic delay.

For all the passion it evokes, the single-payer idea remains at the fringe of political viability. Though the cause energizes the left, the idea of the federal government completely replacing the private health insurance industry is so far outside the American experience that even the vast majority of health reform advocates consider it politically dead on arrival for the foreseeable future.

Agreeing with that analysis, the leading 2008 Democratic presidential candidates have all placed themselves in a second group: the "regulate them" camp, which would allow insurance companies to continue operating but under new rules.

The class of 2008's ideas represent a clear evolution away from the strategy that President Clinton, in the plan designed largely by his wife, Hillary, developed for dealing with insurers. The Clintons' universal coverage plan did not eliminate insurance companies, but it subjected them to extraordinarily detailed government regulation -- down to controlling their annual premium increases -- that would have converted them into something approaching public utilities. That prompted the furious industry counterattack that made stars of Harry and Louise.

This time, the leading Democrats are hoping to avoid such a direct collision, employing ideas "that allow a marketplace to [function] with some ground rules, as opposed to saying that government is going to make all the decisions," said Ron Pollack, executive director of the liberal healthcare group Families USA. Barack Obama, Hillary Clinton and John Edwards, for instance, want to nudge insurance companies into investing more in prevention and programs to coordinate care of chronic disease (which could help contain costs over time) by requiring companies that sell policies in government-run purchasing pools to offer those services.

More provocatively, all three have proposed national rules that would bar insurers from denying coverage based on prior health problems. More provocatively yet, Edwards and Obama have proposed limits on insurance industry profits. And both (with Clinton likely to follow when she releases her full plan) have called for creating a government-run health insurance plan that would compete with the private insurers in what could function as a small-scale test of the single-payer approach.

"If in fact the insurance companies ... are trying to squeeze higher profits out of the system without improving quality, then over time people are going to opt out of those private insurance-based systems, and that is OK," Obama said in a recent interview.

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