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A bailout for insurers?

There's an argument on the left that the health-care bill represents a "bailout" to the insurance companies. Matt Yglesias puts this in the proper context:

I’ve seen Marcy Wheeler characterize the plan as an “industry bailout.” And, indeed, if I were a small government conservative one political tactic I would employ would be to start characterizing all initiatives involving government spending as a “bailout.” You could say that [the stimulus]’s provisions funding K-12 education are a “bailout for teacher’s unions.” You could call [cap and trade] a “bailout for windmill makers.” And you can call the health care bill an “insurance company bailout.” But the mechanism by which insurers can get extra money under reform is that ... more people get health insurance at a price they can afford.

To put this a bit more sharply, if I could construct a system in which insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, began exerting real pressure for providers to bring down costs, vastly simplified their billing systems, made it easier to compare plans and access consumer ratings, and generally worked more like companies in a competitive market rather than companies in a non-functional market, I would take that deal. And if you told me that the price of that deal was that insurers would move from being the 86th most profitable industry to being the 53rd most profitable industry, I would still take that deal.

And that may be the exact deal we're getting. The profit motive is not, in and of itself, a bad thing. The Apple computer I'm typing on, the Netflix movie I wish I were watching, the pork buns I wish i were eating -- it all comes from profit. But Apple isn't allowed to have slaves build its computers, Netflix can't destroy the incentive to make films by pirating all of its DVDs, and Momofuku can't let rats infest its kitchen because exterminators are expensive.

Health insurance suffers from market failure in part because it suffers from regulation failure. We're adding the regulations now and we'll see, in 10 years, whether people hate insurers somewhat less, or whether they've embraced the nonprofit model, or whether they're clamoring for public insurance. Either way, putting insurers into a structured market where they'll have to compete against one another and users will rate them should make things a lot better. Public insurance might be the best way forward, but an insurance market that works for consumers is progress nevertheless.

By Ezra Klein  |  December 16, 2009; 9:16 AM ET
Categories:  Health Reform  
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Comments

"Health insurance suffers from market failure in part because it suffers from regulation failure."

Well said. For balance, I'd add that it suffers first and foremost because health care has a number of market imperfections that REQUIRE significant regulation. This is typically where ideologues get bogged down: the right ignores the needs for regulations but notes markets can work, the left sees the market imperfections as a reason for government provision of health care.

But given the challenges of cost control, the realities that Western European countries are still on fiscally unsustainable paths and have increasingly experimented with adding market-oriented features to their health systems-- the right answer probably is a market-solution with heavy regulation. Health care spend is simply an issue that is too challenging to have the solution be purely driven via a political process from a government-driven system.

Posted by: wisewon | December 16, 2009 9:30 AM | Report abuse

"insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, began exerting real pressure for providers to bring down costs, vastly simplified their billing systems, made it easier to compare plans and access consumer ratings, and generally worked more like companies in a competitive market"

This really does capture the important reforms of the insurance market and it is worth highlighting these to the left. Fixing these issues are the problems. Single-payer is a means to an end. (I'd note that the "real pressure on providers" is still TBD. But theoretically, this is one area that insurers should compete-- along with pushing for higher quality. But this is more theoretical than the other benefits mentioned-- its worth splitting out actual regulatory reforms from the hoped-for consequences.)

Nice post.

Posted by: wisewon | December 16, 2009 9:34 AM | Report abuse

The idea that this bill is a bailout for insurance companies is a joke. It seems as if some liberals aren't aware that there's this thing called the stock market that allows millions of people to help determine the value of companies. Health reform is negative for insurers. Let me repeat again: health care reform is bad for insurers. If liberals think it's such a bailout, they should invest in insurance companies and make a lot of money, because the "market" doesn't share their view.

And Ezra, will you please explain to me why the market for insurance isn't competitive? Since you're not an economist and all.


And i would hardly say it suffers from regulation failure - unless you mean that it suffers from too much regulation. I'd like you to explain to me when, in the past, government regulation has ever lowered the cost of a product. Not sure why you think it will now....

Posted by: MBP2 | December 16, 2009 9:35 AM | Report abuse

Very good points but I just cannot get past pork buns? Really, that is your dream food?

Posted by: mlvch | December 16, 2009 9:39 AM | Report abuse

Great. We wait 10 years to see whether a small group of underpaid, experience-poor officials can rein in a group of smart, incredibly well-versed folks who are getting paid on the basis of how thoroughly they can make fools of their regulators. (Oh, and that's the best-case scenario. If things go badly, we go back to the GOP notion that regulators are there to make industry more profitable.)

Posted by: paul314 | December 16, 2009 9:40 AM | Report abuse

But Ezra, you were the one who pointed out that the competitive free market simply does not work for items you want everyone to have such as fire and police protection, roads, defense, ..., and health care

And wisewon, you say, "the realities that Western European countries are still on fiscally unsustainable paths ..." Where do you get this data? Since they still spend HALF as much for better health care, they have a long way to go before they even get into our current situation. Again I refer you to the projections at http://www.cepr.net/calculators/iousadeficit/calc_iousa_deficit.html which (if you believe in projections which you apparently do) show how much better off we would be if we adopted the more efficient systems of other countries.

Finally both you guys talk about the wonderful reforms which would make our system more efficient and responsive, but where has this utopia ever come about? Again other countries with vastly more efficient systems ALL have government run universal ones. Why can't we learn from reality instead of trying to keep a system that has not worked, does not work and probably will never work?

Posted by: lensch | December 16, 2009 9:53 AM | Report abuse

"And Ezra, will you please explain to me why the market for insurance isn't competitive? Since you're not an economist and all."

FWIW, it's only non-economists who claim that healthcare is amenable to "market forces". Economists who have spent their careers in this area all agree that it is not. Paul Krugman discussed this in his blog in August.

http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/

Posted by: Athena_news | December 16, 2009 9:55 AM | Report abuse

I'm self-employed and pay for my own insurance, and have been gung ho on the public option...at this point, I'd be willing to trade the public option for regulation that would force insurers to spend "90 percent of every premium dollar on medical care."

After administration costs, that probably gives insurance companies a 6 or 7% profit margin, which I would begrudge them.

And perhaps (I don't know if this is even possible) some benevolent foundation (or even Costco) could set up a true, not-for-profit insurance company that could be included in the exchange.

Posted by: tnoord | December 16, 2009 9:56 AM | Report abuse

Oh, I forgot to mention wisewon's talk of "fiscally unsustainable paths." Uwe Reinhardt has pointed out that people who say things like this have simply done the wrong computaion. What's important is not how much something will cost in the future or what pecentage of your income (GDP) it will use up, but how much you will have after paying for it (in real dollars).

For example, using more conservative asssumptions than the CBO he computes that we will have 70% more money after paying for Medicare in 2050 than we do now.

So he asks what do you mean by "fiscally unsustainable".

Posted by: lensch | December 16, 2009 10:00 AM | Report abuse

"insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, began exerting real pressure for providers to bring down costs, vastly simplified their billing systems, made it easier to compare plans and access consumer ratings, and generally worked more like companies in a competitive market"

I'd be all for most of that. But, just for starters, the CBO has said we CAN"T make insurers spend 90 percent on medical care -- that would be socialism.

Why do you keep talking about provisions that don't exist? There is nothing much in this bill that will prevent insurers, in the real context of sick people up against squadrons of bureaucrats and lawyers, from avoiding paying for care that people thought they had spent their premiums on. The insurers will simply deny. They may later be held to have been wrong, but the sick person is dead. That's how the incentives work in this.

I simply don't get why smart people don't understand the limits of the efficacy of weak regulation up against a strong profit motive. Greed wins.

Posted by: janinsanfran | December 16, 2009 10:11 AM | Report abuse

Ezra, your post points out clearly how ideology on the left as equally as ideology on the right trumps reason and even compassion. The faux progressives have their own corporate health insurance, but they seem dead set against anyone else having it who might be pleased as punch to have health insurance.

Posted by: cmpnwtr | December 16, 2009 10:15 AM | Report abuse

Lensch,
Wisewon's point should encompass broader spending on the entire welfare state in Europe. If you look at the age profile of the large Western European nations, they have an even larger bulge of older people that will need to be supported by fewer workers. Taxes can only take you so far my friend before the citizenry begin to ask questions.

Posted by: novalfter | December 16, 2009 10:18 AM | Report abuse

ezra,

while everything you have written here is true, it's missing a particular perspective: that of someone who had a job, has lost the job (with their insurance) and cannot afford to get a new policy. i am in that situation. i have tried (god KNOWS i have tried) to find a health insurance policy i can afford. it does not exist in the state of illinois. i am working two part-time jobs to meet my expenses, i am unable to save anything, and i do not have health insurance an i cannot afford it. basically, if you are poor in this country, it's a roll of the dice - i have put my health and my welfare in the hands of fate; i'm fairly certain at your level of income and expertise you've never been without health insurance nor seen what it's like to try and go to a doctor when you don't have it. even in the city of chicago, it's a nightmare.

Posted by: burntbeans | December 16, 2009 10:27 AM | Report abuse

novalfter - What you say makes sense, but where is your data? How do you know that increases in productivity would not solve the problem you cite? Maybe older people will become more productive. I certainly don't know.

Look here is some real data. Many other countries have much higher taxes, but also higher growth rates. For example, our total tax rate is 26.1% while Sweden has a total tax rate of 50.2%, the average per capita growth in the GDP 1995 - 2005 was 2.1% for the US and 2.6% for Sweden. Spain had a 50% higher tax rate and 50% higher growth. Japan, on the other hand, had a lower tax rate and its growth was less than half of our growth.

Furthermore many polls have shown that people in Western Europe are simply happier (whatever that means).

Posted by: lensch | December 16, 2009 10:28 AM | Report abuse

"if I could construct a system in which insurers spent 90 percent of every premium dollar on medical care, "

Was this not one of the sacrifices upon the altar of Lieberman?

Posted by: adamiani | December 16, 2009 10:29 AM | Report abuse

The "non-profit" model? What planet do you live on? Most (not all) of the Blues consist of a non-profit "fig leaf" holding company with dozens of for-profit subsidiaries. They then contract for services with those subsidiaries at inflated rates.

How can you write about health insurance and not understand this basic fact?

Posted by: uberblonde1 | December 16, 2009 10:43 AM | Report abuse

The use of the word "bailout" is actually very telling.

I think most of the popular opposition to the health care bill, both on the right and now on the left, is fuelled by residual anger about the bank bailouts.

Posted by: tyronen | December 16, 2009 11:00 AM | Report abuse

Either the exchanges were just a fig leaf to get people to accept a public option, or there must have been some basis to believe they provided a useful market to encourage competition among insurers on "good" dimensions. Making this market as much like a market is the key remaining issue in health care reform.

Posted by: windshouter | December 16, 2009 11:04 AM | Report abuse

"We wait 10 years to see whether a small group of underpaid, experience-poor officials can rein in a group of smart, incredibly well-versed folks who are getting paid on the basis of how thoroughly they can make fools of their regulators. "

Let's not be naive: the people who came up with rescission, pre-existing condition exclusions and dragging out lawsuits to the courthouse steps as *smart business practices* already know which loopholes they're going to exploit and which regulatory penalties they're going to treat as business expenses.

Posted by: pseudonymousinnc | December 16, 2009 11:30 AM | Report abuse

"To put this a bit more sharply, if I could construct a system in which insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, ..."

Just curious Ezra if you understand the definition of insurance? Just in case you don't here you go from Webster:
"coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril"

I don't believe if you force insurance companies to take people who are already sick that constitutes "insurance". That's more like welfare forced on the private sector which with the Obamacare's paltry fine for not signing up for insurance will probably put private health insurers out of business. I'm sure you'd like that Ezra since your a big proponent of government run healthcare, but I don't think the American people will be too thrilled with it. Think of it like this what if you passed a law that said that car insurers had to cover everbody that wanted car insurance not matter their past record and on top of that you'd have to charge them the same rate as people who have good driving records. Or how about if you told home insurers that they'd have to do the same thing even for someone who went to jail for buring his house down to collect the insurance money. He would pay the same rate as everyone else. Whey should health insurers be treated any differently from any other insurance company? Because to Ezra and his liberal compadres health insurers are evil and should be wiped out. I mean they are the only thing standing in the way of Ezra's cherished single payer system.

Posted by: RobT1 | December 16, 2009 11:39 AM | Report abuse

Whether or not the term "bailout" is strictly accurate is beside the point.

Ezra, the aspect that puzzles me about your saying you'll "take that deal" is that none of the parts of the "deal" address the primary reason that people choose not to buy health insurance on the private market--IT'S TOO DAMN EXPENSIVE! Nobody who lacks insurance is going to look at your "deal" and declare, "By gum, now I'll be *happy* for the government to force me to buy health insurance that I can't afford!"

I'm reticent to link to Kos, lest anyone accuse me of being a worshipper of the Great Orange Satan, but he makes a good argument for dropping the mandate here:

http://www.dailykos.com/storyonly/2009/12/15/814776/-Remove-mandate,-or-kill-this-bill

I'm beginning to think that the only thing left in this bill that will be positive both a) practically, in terms of getting more health CARE (not insurance) to people, and b) politically, will be the increase in the number of people covered by Medicaid. Those people will get affordable health care--end of story.

Posted by: mattbot69 | December 16, 2009 11:40 AM | Report abuse

@pseudonymousinnc: "the people who came up with rescission"

Do tell, what do you know about rescission besides the cherry-picked anecdotes you've seen on TV?

Posted by: ab13 | December 16, 2009 11:56 AM | Report abuse

RobT has it exactly correct; the solutions proposed by Ezra are not insurance, however, he draws exactly the wrong conclusion. The correct one is that free market insurance, per se, is a very bad model for health care as is easily seem by looking at the rest of the industrialized world.

Posted by: lensch | December 16, 2009 12:04 PM | Report abuse

"the pork buns I wish i were eating"

Finally a sensible word coming out of this guy's mouth! Yay Pork Buns!

P.S. to the guy grousing about progressives having 'ideology' too, well duh! The advantage however is that our ideology happens to add up better (see Bush Tax cuts or any post by P. Krugman).

Posted by: leoklein | December 16, 2009 12:08 PM | Report abuse

ATTENTION: THE 90% PROVISION WAS DROPPED, AS VIRTUALLY ALL SENATORS HAVE INDICATED. Furthermore, where in the world is the pressure in this bill for premiums to come down? According to the CBO, those who don't receive subsidies will see there premiums go up. How many times does the CBO have to state premiums for a large percentage of the population will go up before people quit talking about a bill that lowers premiums. How many times does the CMS actuary have to indicate the Medicare cuts will cause severe problems before people quit pushing this terrible bill.


I challenge anyone, ANYONE, to give a cogent explanation as to how this plan will drive down premiums. YOU CAN'T DO IT, BECAUSE IT WON'T.

Posted by: Bob65 | December 16, 2009 12:15 PM | Report abuse

First off. The profit motive you speak of is fine for the Mac you are typing on, but it is not fine for health care. I am sorry, but when it comes to health care profit should not matter. Sorry.

Second. Forcing people to buy a product that does not meet certain good minimum standards is wrong. Right now from what I have seen the bill does not offer me a choice of good plans to buy into at a decent cost. Sure, if I am a very rich person I can get a great plan, but my employer offers a pretty crappy PPO as its' standard plan but if I am willing to fork over a third of my take home pay I can get a great HMO plan.

If reform is going to be done right then we need not for profit affordable choices.

It is time to start killing the health insurance industry and replacing it with a not for profit health care delivery system. The system can be run by an outside agency, but it needs to be not for profit.

Posted by: jbou891 | December 16, 2009 12:15 PM | Report abuse

Anyone who thinks forcing insurance companies to insure those with pre-existing conditions will lead to a decrease in premiums is frankly too d*mn stupid to even be engaged in this debate.

Posted by: Bob65 | December 16, 2009 12:16 PM | Report abuse

This bill might have some meaningful benefit if the regulations were going to stay in place, but they're quietly being stripped out.

From what I've been reading, the ban on recissions has been replaced with a clause that allows recission in case of "fraud or misrepresentation". Since fraud is the reason insurers currently give to rescind policies, how is this different from the status quo?

The revised senate bill ALSO allows annual caps on coverage, as long as they are "reasonable"--but reasonable is not defined by the bill, so in effect the coverage limits have also been stripped out.

So what we're left with is a bill that says everyone must buy insurance, and insurance companies can't refuse to sell a policy to you. They can still cap your coverage or rescind your policy, but they can't refuse to take your money. I can't believe I'm saying this, but I hope the Republicans can kill this thing.

Posted by: julie18 | December 16, 2009 12:20 PM | Report abuse

julie18, everyone supports caps on coverage. Otherwise you'd have to think we should spend millions of dollars trying every possible treatment no matter the cost or expected benefit. The NHS places a cap on coverage through quality-adjusted life-year standards. The idea that a cap on coverage in and of itself is a bad thing is ridiculous.

And I'd ask you the same question as pesudonymousinnc, what do you know about rescission besides the cherry-picked anecdotes on the news?

Posted by: ab13 | December 16, 2009 12:25 PM | Report abuse

"To put this a bit more sharply, if I could construct a system in which insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, began exerting real pressure for providers to bring down costs, vastly simplified their billing systems, made it easier to compare plans and access consumer ratings, and generally worked more like companies in a competitive market rather than companies in a non-functional market, I would take that deal."

And if you also told me that the provisions would be written in such a way that they would be enforced and complied with by future administrations, I might even agree with you.

Personally, I think it's enough right now just to simplify billing systems, expand subsidies somewhat, remove the mandates, claim victory, and live to fight another day.

Posted by: JPRS | December 16, 2009 12:40 PM | Report abuse

It was always my understanding that this legislation would include three crucial regulations: 1. No preexisting conditions restrictions, 2. No recissions, 3. No arbitrary caps on coverage.

If the terms "fraud" and "reasonable" were narrowly defined in this legislation, I might not have a problem with them. But I don't think any insurer who to cancels or caps my coverage is going send a letter explaining how they just wanted to stiff me and be unreasonable. They're going to say I committed fraud or submitted unreasonable claims.

Posted by: julie18 | December 16, 2009 12:40 PM | Report abuse

Ezrz, erversely, requiring 90% of premiums to be spent on care encourages insurance companies to let premiums rise.

For example,

10% profit on a $10k/yr plan is $1k
10% profit on a $12k/yr plan is $1.2k
contain costs and reduce premiums to $8k? profit is $800.

(technically not profit - administration fees from which profit will come, but same idea).
Without controls on the price of the inputs (drug costs, hospitals), there is every incentive for insurers to simply let premiums rise.

Furthermore, with a total mandate, there is no effective way to fine insurance companies as a whole for their behavior. Any fines will simply pass through to consumers in the form of higher premiums, similar to fining tobacco companies.

Pass a simpler smaller bill a la Howard Dean.

Posted by: dieselmcfadden | December 16, 2009 12:45 PM | Report abuse

I think the 'bailout' language is warranted.

I'm hoping someone can explain the industry's financial advantages from the certainty of adding 40 (or 30) million new customers to its books? The business value of each customer may be degraded somewhat via regulations, but I'd but there's a sub-primey/derivatives type market jsut waiting to exploit this.

Posted by: perhapsnot1 | December 16, 2009 12:50 PM | Report abuse

"Pass a simpler smaller bill a la Howard Dean"

How about HR676 wich is 70 pages long and simply gives an improved Medicare to every man, woman, and child in America?

Posted by: lensch | December 16, 2009 12:54 PM | Report abuse

Let me give yet another example why the competitve insrance model stinks. Why do other countries have more and better preventative care, eg pre and post natal care in France? It not only reduces suffering and saves lives, it is cost effective (at least in the medium term).

The answer is 4.8. This is the average numbers of years a customer stays with a given insurance company. Why should insurance companies pay for something that will just benefit the next company?

Posted by: lensch | December 16, 2009 1:00 PM | Report abuse

lensch, more preventive care does not save money, it costs more money.

Posted by: ab13 | December 16, 2009 1:01 PM | Report abuse

"How about HR676 wich is 70 pages long and simply gives an improved Medicare to every man, woman, and child in America?"

ABSOLUTELY NOT. One of the biggest problems with the discussion has been the apalling level of ignorance on both sides of the table. Medicare for all is no solution to our underlying problems; as George Halvorson noted in his interview with Ezra a few weeks ago, it would cover everyone but save us less than 1% over what we are spending today. We are spending almost twice as much as most industrialized countries and most of them are NOT single-payer.

Liberals in this country are stuck in the 60s and every time I hear Howard Dean talk about single-payer being the only way to go, I want to wring his neck. What made sense for the UK in the 40s and Canada in the 60s would not necessarily be good for us today.

We need a healthy discussion about all the Universal care models being used and that has yet to take place. Liberals here have been whining about Republican obstruction for at least 15 years and, as far as I can see, have done nothing about educating their own constituency (let alone their own legislators) about the options available. Instead, they have adopted conservative rhetoric (e.g. more competition in the insurance industry will result in lower overall costs) and ignored the reams of data about what actually works.

While this has been going on, countries with true universal systems have had the luxury to tweak their own systems to better fit the realities of today -- talking about Medicare for all is another red herring. We need a system that reflects an actual national policy, not a patchwork of political programs. And it must be *universal*. Some form of single-payer might work; as would some form of all-payer, or even individual payer. But it has to be focused on a rational approach to both delivery and cost control...which pretty much rules out Medicare.

IMHO.

Posted by: Athena_news | December 16, 2009 1:16 PM | Report abuse

Actually, Apple does use slave labor:

The Ethical Dilemma in Your Holiday Stocking
http://www.truthout.org/topstories/112709ms01

Apple in the middle of another sweatshop labor dispute
http://arstechnica.com/apple/news/2009/05/apple-in-the-middle-of-another-sweatshop-labor-dispute.ars

Posted by: concerned51 | December 16, 2009 1:43 PM | Report abuse

"Do tell, what do you know about rescission besides the cherry-picked anecdotes you've seen on TV?"

Is that "AB" at Yglesias, the insurance company shill? Here y'are:

http://tauntermedia.com/2009/07/28/unconscionable-math/

Posted by: pseudonymousinnc | December 16, 2009 1:52 PM | Report abuse

But this 90% you are talking about is most likely history. This from Sunday:

http://wonkroom.thinkprogress.org/2009/12/14/cbo-90-mlr/

Without that in there we have no cost containment measures and the insurance cos can just keep jacking up prices all they want. That's even worse given the cadillac tax.

Posted by: intoxination | December 16, 2009 1:53 PM | Report abuse

ab13 - that's why I said in the medium term. I don't think the long term situation is a cut-and-dried as you, but it does seem a bit cruel to get savings by letting people suffer and die earlier than necessary.

Athena - If I had my druthers, I'd have us do as the Taiwanese did and have a conference of heath care economists to look at the rest of the world and devise a super system for us. The reason I support Medicare for All is that it is an incremental step; we already have the framework set up. Look, if we can give eveyone decent healthcare, have nobody suffer, die or go bankrupt for lack of health care and save 1%, well that's a pretty good start.

I disagree with "But it has to be focused on a rational approach to both delivery and cost control...which pretty much rules out Medicare." I think the deivery and cost control will be extremely difficult because you will have not only the insurance industry against you, but also most of the physicians fighting you. Furthermore if you have a national organzation running the show, you can get data from everyone (not just old folks), anaylyze the data, and I hope then make good decisions. I favor a quick and dirty solution that saves lives and sets a foundation for going after the higher hanging fruit.

But given what we have, I'd even go for the Swiss system in a New York minute.

Posted by: lensch | December 16, 2009 1:59 PM | Report abuse

To put this a bit more sharply, if I could construct a system in which insurers spent 90 percent of every premium dollar on medical care, never discriminated against another sick applicant, began exerting real pressure for providers to bring down costs, vastly simplified their billing systems, made it easier to compare plans and access consumer ratings, and generally worked more like companies in a competitive market rather than companies in a non-functional market, I would take that deal


Actually in NJ we have currently a law that says 80% needs to be spent on medical care and last year the average of every insurer in the small group market was 85% with the insurer with the largest market share paying 88.2 cents of every dollar out in claims. You know what that's getting us? 20-30% increases across the board because in this liberal state where everything under the rainbow is covered (some good some bad) and there's no individual mandate we've been having the healthy drop out because of cost but the sick stay.

With a weak mandate like we have now I'm sure this is where the entire country will be in 5-10 years.

Its also difficult to exert real pressure on providers when the laws are set up to pay providers much more when they don't participate with an insurer than when they do. The UCR rules are being ABUSED by providers in NJ to their gain and the silent loser is insurance companies who just turn around and raise rates. Horizon BCBS spent $50 million dollars in the first half of this year to out of network ambulatory surgery centers. They then had to turn around and raise rates because of it. And the scam continues. When will people wake up and realize that these providers that scam the system scam US when we are forced to pay higher premiums because of their increased profits.

Posted by: visionbrkr | December 16, 2009 2:12 PM | Report abuse

oh and btw, the subsidies are a bailout to insurers. they don't need it. hold them to 85-90% MLR's, tell docs what they can charge, tell Pharma their deal is being re-done and actually cut costs.

Posted by: visionbrkr | December 16, 2009 2:14 PM | Report abuse

it is comical that some people think insurers aren't regulated. Try telling those in the industry that and you'll get laughed at. If they're not regulated then why does every single state have a dept of insurance specificially set up to regulate them and guildelines galore for them to follow. The true question is what is the cost of regulation TO our insurance premium. Sure its necessary to ensure insurers don't go crazy like some do but its like tellling doctors they need to be regulated. Does Pharma need regulation?

Posted by: visionbrkr | December 16, 2009 2:17 PM | Report abuse

BTW athena, why isn't Medicare for All "universal"?

Posted by: lensch | December 16, 2009 2:17 PM | Report abuse

BTW ab13, looking over my notes, Ezra claims that preventive care IS cost effective just because of the money saved by keeping people from getting diabetes. I've never seen any data either way.

Posted by: lensch | December 16, 2009 2:20 PM | Report abuse

@pseudonymous: "Is that "AB" at Yglesias, the insurance company shill?
http://tauntermedia.com/2009/07/28/unconscionable-math/"

It's so cute when you continue calling me an industry shill, when my own stated views on the proper direction of health reform do not line up with the industry's view. Willful ignorance looks good on you.

And I was really hoping you would point to that exact blog post, and you did not disappoint. His logic is laughably flawed. What he completely misses is that the people who are likely to lie and/or commit fraud on an insurance application are the ones who will also be submitting expensive claims. He's trying to make the argument that any randomly selected person who has a claim has a very high probability of being rescinded, implying that so many innocent people are at risk. But by completely ignoring the aforementioned correlation his argument doesn't make any sense.

The reality of the situation, as anyone with any knowledge of it knows, is quite different than what he describes. The overwhelming majority of rescissions follow this general path: December 1st, person applies for insurance indicating a clean bill of health and no injuries/illnesses. December 10th, person goes in for $75K knee surgery. Insurer investigates, finds out the injury happened in late November, and rescinds the policy. A few cherry-picked anecdotes (some of them were unreasonable, I've never claimed that some insurers don't need to change their practices on rescission) are not the norm, and the general perception of the practice is ridiculously detached from reality. Do people really think the numbers from that blog are accurate, and that anywhere near 50% of people with a large claim are being wrongfully rescinded? Then why do we only have the handful of cases we've read about in the news? Why haven't thousands of people come forward with their stories? The truth is that the number is absurd. I really wish I was more at liberty to disclose statistics on rescissions at my company and the completely fraudulent behavior of the applicants.

I also enjoyed his claim that insurance applications are "designed to create inaccuracies", his evidence being that Don Hamm from Assurant could not identify a specific medical condition listed on his company's application. Mr Hamm unfortunately gave a pretty weak answer, but that does not change this simple fact: if someone had already been diagnosed with that condition, they WOULD know what it was. Whether or not the CEO can identify every condition on the application has absolutely no bearing on whether people who have those conditions will be able to.

Posted by: ab13 | December 16, 2009 2:43 PM | Report abuse

lensch, the CBO has already said that more preventive care does not save money, as the additional spending outweighs the savings from averting disease.

http://www.cbo.gov/ftpdocs/104xx/doc10492/08-07-Prevention.pdf

Posted by: ab13 | December 16, 2009 2:49 PM | Report abuse

What does this "86th most profitable industry" line imply? It's MEDICINE that people need, not insurance. All that insurance does is spread risk and I'm thinking interested amateurs could come up with the tables and payment schedules that would be accurate. Call it open-source actuarial science. So where's service that yields the profit?

Posted by: jamusco | December 16, 2009 3:30 PM | Report abuse

"The reason I support Medicare for All is that it is an incremental step; we already have the framework set up. " -- lensch

I view it as an incemental step down a bad path. We don't need to expand what we have; we need to change where we are going.

"Look, if we can give eveyone decent healthcare, have nobody suffer, die or go bankrupt for lack of health care and save 1%, well that's a pretty good start."

Ummm no, that would be an acceleration of national bankruptcy.

"I think the deivery and cost control will be extremely difficult because ..."

Which is another argument for getting of the train we're on and changing direction entirely. One of the biggest problems we have with Medicare is that it was intentionally designed to appease providers. We need to say, "that doesn't work so we're going to start from another direction".

" we have, I'd even go for the Swiss system in a New York minute"

Same here. I'd actually prefer something more like the French or German system (which would be easier to implement here) but at least the Swiss system has the virtue of being truly universal.

Posted by: Athena_news | December 16, 2009 3:44 PM | Report abuse

"You know what that's getting us? 20-30% increases across the board because in this liberal state where everything under the rainbow is covered..." - visionbrokr

I was thinking about that the other night. A host of interest groups are now lobbying behind the scenes to get coverage for [you name it] included in the standard package for the exchanges. I for one would rather see everyone have more basic coverage with supplementary policies for extras. Finance basic coverage through payroll taxes or some other *universal* mechanism then let employers and individuals buy up from that.

Think about it, what we're probably going to get instead is a high-cost "basic" plan with employers being discouraged from offering extras like vision, hearing, or dental.

Posted by: Athena_news | December 16, 2009 3:51 PM | Report abuse

Athena - "Ummm no, that would be an acceleration of national bankruptcy."

This is flat wrong. Read what I wrote above.

Uwe Reinhardt has pointed out that people who say things like this have simply done the wrong computaion. What's important is not how much something will cost in the future or what pecentage of your income (GDP) it will use up, but how much you will have after paying for it (in real dollars).

For example, using more conservative asssumptions than the CBO he computes that we will have 70% more money after paying for Medicare in 2050 than we do now.

Posted by: lensch | December 16, 2009 4:01 PM | Report abuse

Ezra offers a nice summary of likely reform in the 2nd half of the post, which has little relation to the first half I think.

Regarding the "bailout" -- sure, it is indeed.

Private insurance is already beginning the "death spiral". It's a long slow process, and it's underway. Oh, and includes massive and spreading bankruptcies and job loss in such a scenario:

http://findingourdream.blogspot.com/2009/10/great-american-health-care-bubble-or.html


But...Gov. is riding in to the rescue, and so insurers indeed are looking at a lucky day soon.

Posted by: HalHorvath | December 16, 2009 4:05 PM | Report abuse

"oh and btw, the subsidies are a bailout to insurers. they don't need it. hold them to 85-90% MLR's, tell docs what they can charge, tell Pharma their deal is being re-done and actually cut costs.

Posted by: visionbrkr | December 16, 2009 2:14 PM "

---

That "all-payer" type thing (providers rates set from above) is a kind of last-ditch thing in the American style of doing things I think.

I'd settle in regard to these specific items on anti-trust (stop the large cartels of doctors meant only to set cartel-like rates), and to end the specific Bush-era corruption of non-negotiated Medicare drugs.

Posted by: HalHorvath | December 16, 2009 4:11 PM | Report abuse

athena,

you've got that right. YOu know that the retail pharmacy industry in NJ several years back lobbied that insurance companies shouldn't be able to offer a discount through mail order pharmacy so many plans had to take that out. They ran a study that said they were losing "X" percentage of their business. YOu know what, who cares. Build a better mousetrap or someone else will.

Reproductive endocrinologists lobbied the state for infertility benefits and voila, they got it and now the state is littered with them and its covered for many (not all due to market segments) and costs are crippling the state. The only problem that these idiots that are lobbying for this don't realize is that when people can't afford the premiums that these "mandates for coverage" require then they drop coverage and don't have the benefit they lobbied so hard for.

Oh and other NJ mandates recently attempted:

baby formula
gambling addiction


The list goes on and on. I want a mandate to cover my cable bill. Someone should pay for that!!!

Posted by: visionbrkr | December 16, 2009 4:33 PM | Report abuse

ab13 - I read the CBO letter. First of all it is just a letter, not an official report. They tend to be rather sloppy in their letters. In this one, what they mean by preventive care is not at all what I meant. Their example is a test to detect a disease which may make treatment easier and more effective, but does not "prevent" the disease.

Furthermore, insurance companies do pay for this kind of thing. I never had any trouble getting my insurer to pay for a PSA test (before I forbid my doctor from ordering them).

What I had in mind was more like what they call "wellness" care, but more particular. They talk about life style changes that affect the whole country, while I meant something that helps an individual prevent illness. The example I gave was of Pre and Post natal care in France, eg someone comes to your house and makes sure you and your baby are eating properly.

They say they cannot tell if wellness care is cost effective although it probably pays for itself in therapeutic value.

I think you need to find another report if you want to convince me that preventive (my definition) care is not cost effective.

Posted by: lensch | December 16, 2009 4:41 PM | Report abuse

visionbrkr - I realize you should know what you are talking about here, but I live in NJ (Princeton) and every drug plan I ever had including the one I had last year (I have none now) had a discount for mail order. Also it is meaningless to mentions "attempts" to mandate. All sort of crazy ideas are proposed.

Posted by: lensch | December 16, 2009 4:47 PM | Report abuse

Many posters have falsely asserted that democratic senators have dropped the insurance mandate regulating that 90 cents per dollar be spent on medical costs.

I heard Jay Rockefeller interviewed on MSNBC this afternoon and he disputed that this provision has been dropped. Since it's his provision, I'll trust that he knows more than angry bloggers who haven't attended any meetings.

Rockefeller said that a provision ranging between 85 to 90 cents on the dollar would remain in the bill. If that possible 5 cent difference is leading people to mischaracterize the dropping of the entire provision, then shame on them for misinforming the public in order to score some ideological points.

Rockefeller also had the courage to say that Howard Dean was "stunningly" irresponsible and downright wrong in trying to kill the bill.

Rockefeller is a real progressive who fought as hard as he could for the public option. But he also has to face the hard realities of caring for his constituents. He understands that the senate operates through compromise and sometimes you have to take some losses to get a win. He said that senators will continue to work every year to improve the bill and that at least they will have a foundation of insurance reform to be working from.

Howard Dean, to me, seems to be trying to rival Lieberman for the limelight. I think they're both equally ignoring the plight of the disenfranchised who have no heath care (and are unable to get health care) right now. If you fall into that group, then this could be a life or death vote--and that's far more real than a purist idealism.

Also, if I'm not mistaken, didn't Dean help to implement similar insurance reforms in his own state? If so, then he seems just hypocritical. Why would that be good for people in Vermont but not for the nation?

Posted by: joyceschuld | December 16, 2009 4:50 PM | Report abuse

ab13,

don't feel bad. I get that industry shill line all the time from pseudo but what dummies like him or her don't understand is that we must be REALLY stupid because we're BEGGING for true cost controls on a system that personally in turn make us LESS MONEY. Insurance companies are begging for cost controls on the system to in turn reduce their total profits yet they're being called shills by those on the left. Last I knew if I asked to make less the "SHILL" charachterization wouldn't fit.

Posted by: visionbrkr | December 16, 2009 4:57 PM | Report abuse

lensch, that is the common definition of preventive care, now you're moving the goalposts. As to whether it is a letter or an official score, they are citing the results of numerous other studies on the issue. It's not as if this is just a throwaway comment they made without evidence.

And they specifically address wellness care, and say that little evidence exists that it reduces cost. If you're the one claiming it does, the burden of proof is on you.

Further, absent any definitive evidence that wellness care reduces cost, why would we choose to pay for it with insurance? Wellness care for the most part consists of planned, predictable expenses. Paying for it with insurance just means prepaying for the care with additional admin expenses added on top. Yes, many insurers pay for it today, but this is part of the reason costs are inflated.

Posted by: ab13 | December 16, 2009 5:09 PM | Report abuse

ab13 - Come on, you were the one that said preventive care was not cost effective; I just said I didn't know. I am sorry that I thought preventive care was to prevent illness.

You aren't reading what I wrote. I didn't say insurers SHOULD pay for wellness care, I said they did. My orignal comment was that because of our fragmented system, insurers do not want to pay for what I call preventive care (you and the CBO call wellness care) because the benefits took too long. I used this as an example of why a universal system run by a single entity (so far always government) is better than what we have.

Posted by: lensch | December 16, 2009 5:20 PM | Report abuse

"Come on, you were the one that said preventive care was not cost effective; I just said I didn't know."

No, you said:

"It not only reduces suffering and saves lives, it is cost effective"

I am citing a credible source that says it is not. You then moved the goalposts to wellness care.

"I didn't say insurers SHOULD pay for wellness care, I said they did. My orignal comment was that because of our fragmented system, insurers do not want to pay for what I call preventive care (you and the CBO call wellness care) because the benefits took too long."

Insurers don't want to pay for wellness care because it is not an insurable event. If they can be sure that it is cost-effective it may change their mind, but at this point there is very little evidence that it is and quite a bit of evidence that it is not.

Posted by: ab13 | December 16, 2009 5:29 PM | Report abuse

lensch,

there are many different market segments in NJ and the rules did not apply for all. I'm researching my proof you need for this but the law did exist at one time in NJ and i suspect you'd hopefully agree that there are many laws in NJ that regulate insurers cover everything under the sun and much of that has very little to do with "medical necessity" which should be the driving factor.

Posted by: visionbrkr | December 16, 2009 5:36 PM | Report abuse

I said "It not only reduces suffering and saves lives, it is cost effective (at least in the medium term)."

Selective quoting is a proof of dishonesty.

As far as I am concerned, this discussion is ended.

Posted by: lensch | December 16, 2009 5:37 PM | Report abuse

"Uwe Reinhardt has pointed out that people who say things like this have simply done the wrong computaion. " -- lensch

I don't think we're in the same discussion here. The issue (for me at least) is not how much it costs, it's how effectively we spend money. I've been reading Reinhardt for a couple of years now and I haven't seen anything from him that intimated that "Medicare for All" would be a sustainable option.

Posted by: Athena_news | December 16, 2009 6:07 PM | Report abuse

Athena - I live in Princeton, so I get to go to Uwe's lectures and heckle him. As I say he has said many times that Medicare as it is today (not Medicare for All) which just covers the most expensive part of the population IS sustainable until 2050 at least.

He won't talk about any universal plan because he believes " Americans are not mature enough to see virtue in other countries' systems", but I (not him) believe that if Medicare as it is today is sustaainable, then Medicare for All which would have a healthier risk pool and would save hundreds of Billions each year (Wollhandler & Himmelstien estimate about $400 Billion) by the elimination of the high overhead and compliance costs of private insurance and another $100 Billion by eliminating drug company marketing would be even more likely to be sustainable.

Here is Uwe's argument on Medicare:

"If "economic sustainability," then exactly what do people have in mind with that phrase? During the past 4 decades or so, the long-run, smoothed average annual growth rate in real (inflation-adjusted) GDP per capita has been about 2%. Suppose that fell to only 1.5% for the next four decades. The current average real GDP per capita of about $40,000 would then grow to about $72,500 by 2050 in constant-dollar terms. Medicare now absorbs about 3% of GDP, leaving a non-Medicare real per capita GDP of $38,800. It was estimated by the CBO about a year ago that Medicare will absorb about 9% of GDP by 2050. Let’s make that 10%. At these numbers, the non-Medicare real GDP per capita available to today’s little critters who will run America in 2050 will still be close to 70% larger than is our current non-Medicare GDP per capita."

Posted by: lensch | December 16, 2009 7:11 PM | Report abuse

"I said "It not only reduces suffering and saves lives, it is cost effective (at least in the medium term)."

Selective quoting is a proof of dishonesty.

As far as I am concerned, this discussion is ended.

Posted by: lensch | December 16, 2009 5:37 PM"

There was no selective quoting. Did you or did you not say it was cost effective? You haven't offered any evidence of that, and when confronted with evidence to the contrary you tried to shift to something else. I haven't said anything dishonest, and do not appreciate the accusation. You said it was cost effective and then said you never claimed it was cost effective. That is dishonesty. Either back up your claim or retract it.

Posted by: ab13 | December 16, 2009 7:30 PM | Report abuse

To clarify even further, omitting the "at least in the medium term" parenthetical did nothing to change your claim. Your claim was still that preventive care is cost effective, and you've offered no proof and have not refuted the evidence that contradicts you. Questioning my honesty because I did not copy and paste the entire sentence, even though it did not change the meaning of your assertion, is itself dishonest.

Posted by: ab13 | December 16, 2009 7:36 PM | Report abuse

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