Item: Congress remains deadlocked on the Patients' Bill of Rights. Most Democrats want to give consumers the right to sue a managed care company for malpractice if the company wrongfully second-guesses the doctor, in effect practicing medicine without a license. Republicans oppose this measure, seconded by the insurance industry.

Item: In Massachusetts, insurance companies that sell Medigap insurance (to cover what Medicare does not) want rate hikes of as much as 40 percent. As this kind of such insurance becomes more unaffordable, only people who are very sick, or very affluent, or both, buy it - which then requires further rate hikes.

Item: The House Republicans have approved a bill to offer partial prescription drug coverage to people eligible for Medicare but without controlling drug prices. The actual insurance would be sold by private insurance companies. Most drug costs would still be paid out of pocket.

Item: A Wall Street Journal investigation reports that two major companies that sell long-term care insurance signed up elderly people at low rates that turned out to be too good to be true. Then, when the companies had to pay out costly claims, they jacked up the premiums to the point where many of the subscribers who needed the care could not afford to continue the coverage.

What do all these stories have in common? They testify to the failure of market forces to allocate health care either efficiently or fairly.

The basic principle of insurance is what economists call the law of large numbers. If you want to manage risks, it makes sense to spread them around to a very large group.

In the case of health insurance, the largest available group is the entire population. That way, the well subsidize the sick, the young subsidize the old, and nobody fears losing coverage when they are sick or old.

But when private insurance companies carve up the population, they maximize their profits in a fashion that is socially perverse. They try to enroll the people least likely to get sick.

Or if they are unlucky enough to end up covering sick people, they often discourage doctors from providing costly treatments.

It makes no economic sense to divide the population into different population pools for purposes of health care. The result is not greater patient choice but greater limits on choice.

The one plan that consistently lets any patient choose any doctor is Medicare, our one universal program. It is the for-profit HMOs that tell you whom you can't see or what treatment you can't have. These same managed care companies don't want Congress to pass a patients' rights bill; that would limit their ability to dictate the withholding of care.

Take the case of drugs. Prescription drugs are the fastest-rising cost in the health care budget. Elderly people now spend more on drugs than they do on doctors. Drugs are often the most cost-effective and painless treatment available, but most older Americans lack full prescription drug coverage.

A great deal of the research behind new drugs is borne by taxpayers via government-funded research. Yet much of the benefit goes to private drug companies that benefit from generous patent protection as well as public research dollars.

Year after year they keep prices high and usually enjoy the highest profit margins of any industry.

So it's no surprise that we spend more and get less for our health dollar. The fragmented, for-profit health industry leaves tens of millions of Americans uninsured and underinsured. It gives insurers incentives to discriminate against the sick. It leaves drug prices far higher they ought to be.

The solution to all of this is universal coverage. Then no insurance company would spend a nickel on marketing or on dividing the sick from the well or on thinking up incentives to divide doctors from patients, because everyone would be insured. People who needed prescription drugs would get them.

There would still be difficult ethical dilemmas of how far to go with costly heroics, but we would be spending every available penny far more efficiently and humanely.

The vast majority of Americans want universal coverage; the big exceptions are the insurance and pharmaceutical industries.

It makes you wonder who is running the country.

Robert Kuttner is co-editor of The American Prospect. His column appears regularly in the Globe.

© Copyright 2000 Globe Newspaper Company

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