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ObamaCare: Insurance Rescission on a National Scale

David Gratzer
September 16, 2009

In his speech before Congress, President Obama shifted political attention to the one health-care issue where Democrats are gaining ground: consumer protection. He opened his address with heart-rending stories of sick Americans who lost their health coverage while they were ill, suffering and even dying because of resulting uncertainties over treatment.

In legal jargon, rescission simply means "putting a contract aside." In health-care policy jargon, it's when an insurance company finds a reason to suspend or revoke existing health coverage. To Democrats, this practice represents the worst of American health care—which is why the President referred to it last Wednesday. But we need to ask: do Democrats have a sensible alternative?

The cause for rescission varies. Sometimes, the company drops a policy because fraud is alleged on the part of the patient. In other cases, insurance is revoked because of a pre-existing condition. Whatever the cause, the fear is that you could lose health coverage at the exact moment you need it. So Americans will likely cheer the Democrats' effort to ban rescission, even if this could mean higher premiums.

Let's be clear: insurance company practices aren't always defensible. Anecdotal evidence suggests that some companies have been unfair—and courts have sometimes sided with former patients. But Democrats aren't suggesting measures to increase transparency and competition among insurers. Rather, their plan bans private sector rescission with one hand—but then creates public sector recession with the other.

How? Democrats want to manage health care costs through a new health-care central committee called the Independent Medicare Advisory Commission, or IMAC. IMAC was inspired by the "comparative effectiveness" research used to manage costs in single-payer systems. The best example is the United Kingdom's National Institute for Health and Clinical Excellence, or NICE. And, yes, that's what they call it.

Rescission can put a patient in limbo by denying treatment (or leaving him or her with huge medical bills). IMAC rationing will do the same, only for hundreds of thousands or millions of patients at a time.

Does this seem like an extreme conclusion? Consider the record of NICE. Under the guise of "comparative effectiveness research," NICE makes decisions for the medical system. Instead of denying care patient by patient, they do it more broadly, using complex mathematical formulas to label entire treatments as unworthy. NICE doesn't aim to better health care. Its mandate is to use formulas to justify health-care rationing.

Consider some recent NICE decisions.

August 7, 2008. British patients are outraged after NICE rejected the use of the drug Sutent to treat kidney cancer, despite evidence the drug could extend patients' lives by years. The drug is available elsewhere in Europe. The Daily Mail reports: "[NICE] admits the drugs work, but says if they are approved, patients with other diseases will go without." NICE reversed its decision in March 2009.

August 27, 2008. NICE surrendered, reversing a previous rejection of Lucentis, an anti-blindness treatment. With classic British understatement, the BBC says that NICE felt patients "should wait until they went blind in one eye" before coverage was justified. The Royal National Institute for the Blind bitterly attacks NICE for making patients wait two years for the reversal.

June 11, 2009. Doctors, patients, and drug manufacturers won a court appeal in 2008 after they demonstrated flaws in NICE's comparative analysis of Aricept, an Alzheimer drug. NICE responds by changing its analysis formula—and then re-announcing the rejection.

July 9, 2009. NICE announced another change of heart. The government body rejected the drug Tyverb for coverage two months earlier, claiming the breast cancer drug cost too much for too little benefit. But NICE will now reconsider its decision based on a different perspective of effectiveness. Meanwhile, thousands of breast cancer patients are left in limbo.

Will Americans experience the same NICEties as the British have? In response to fears that America would get its own version of NICE, OMB Director Peter Orszag and Senator Max Baucus (D-MT) insisted otherwise in June, promising to use comparative effectiveness research money only to keep doctors informed, not to ration care. Just weeks later, the Senator agreed to write IMAC into the ObamaCare plan, with the power to impose its recommendations on Medicare unless vetoed. As President Obama noted in his speech to Congress, IMAC’s cost-cutting, high-risk directives will almost certainly be copied by private insurers.

Mr. Orszag calls IMAC "the most important game-changer" in the fight to control health care costs. Thus, rescission for the masses is just around the corner. Or rationing. Just don't count on anyone in Washington using either term when they talk about insurance reform.

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