Code Red: Two Economists Examine the U.S. Healthcare System

October 5, 2009

There They Go Again

Filed under: Competition,Health insurance,Health Reform — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 12:28 pm

Some former AMA Presidents have their turn in today’s Wall Street Journal to push for legislation allowing Americans to buy health insurance from insurers in any state. How exactly that would help remains a mystery. Consider my plight in Illinois. I can buy insurance from the local Blue Cross plan, or from United, Aetna, Cigna, or Humana, all of which have Illinois divisions. Let’s suppose I wanted to buy insurance from out of state. I happen to have data on Connecticut’s insurance market close at hand so I will use that as an example. If I wanted insurance from one of that state’s plans, I could purchase from a Blue plan, or from United, Aetna, or Cigna’s Connecticut divisions. Big help! Oh yes, there are also a couple of HMOs in Connecticut. The problem is that I would have to go to Connecticut to see a doctor. Pretty much the same story can be told for every state. We might well need more insurance market competition, but this isn’t the way to get it.

Are opponents to reform so intellectually bankrupt that this is the best they can offer?

2 Comments

  1. The fact is that could lead to increased cost. Every insurance carrier in every state performs similar administrative and underwriting costs, that if consolidated would offer large savings.

    More to the point, what value to the health care system does a “for profit” insurance industry provide.

    Comment by Larry Rine — October 11, 2009 @ 10:56 am

  2. Yes, it might save money to allow a single Aetna or Cigna to operate nationwide. It wouldn’t increase competition, but any savings would be welcome. I am not sure the savings would even amount to 1 percent of spending, however.

    Comment by dranove — October 12, 2009 @ 2:25 pm


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