Network News

X My Profile
View More Activity

Letting insurers 'win'

"We WIN," some insurance industry insider crowed to Ben Smith. "Administered by private insurance companies. No government funding. No government insurance competitor.” Similarly but oppositely, a few anxious e-mailers have written to ask whether Medicare buy-in isn't just a gift to the insurance industry, freeing them from having to insure older, sicker people.

Well, so what if it is?

Health-care reform is not a competition between liberals and insurers. It's a question of outcomes. If insurers don't make a profit insuring people over 55, and people over 55 generally can't afford to give insurers enough money to cover their costs, and bringing these people into Medicare will actually improve the financial outlook of Medicare, then that's a win. More than that, it's a win-win-win. Medicare itself was a huge boon to the insurance industry, but it was also a huge boon to every American over age 65.

If there was some way the deal could be slightly changed so that the CEO of Cigna got a flat tire while rushing to an important meeting and would have to wait a long time for a tow truck on a cold day, that wouldn't really make it a better deal. Moreover, the insurers aren't the only interests we're dealing with.

Providers, as I've argued before, are a much bigger problem, at least from the perspective of cost growth. Which is why we're suddenly hearing angry things out of hospitals and doctor's groups. That's actually a much more promising sign than insurer opposition, though insurers oppose Medicare buy-in too. When insurers are upset, it's usually because their profits might be harmed, and their profits, though arguably undeserved, are not a big part of the cost problem. When hospitals and doctors are upset, however, it's because their revenues are being harmed, and their revenues are a huge part of the cost problem in this country.

By Ezra Klein  |  December 9, 2009; 11:34 AM ET
Categories:  Health Reform  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Lieberman on the Senate deal
Next: Howard Dean: This is 'real reform'

Comments

How does this help anyone under 55?

Posted by: JayGR | December 9, 2009 11:52 AM | Report abuse

Some of us don't give a fig about the cost problem because the cost problem is simply a symptom of the country's refusal to tax those who have more than they need and its willingness to support endless, non-essential military adventures.

We care about equity and community. And if our fellow citizens continue to fail to value those virtues, we can kiss this polity goodbye. Maybe we already have. Dying empires aren't much fun to live in.

Posted by: janinsanfran | December 9, 2009 12:07 PM | Report abuse

Lets get cost control by allowing people and businesses to buy into medicare when premiums rise more that inflation or 3% whichever is lower. That will get the insurers to push providers to work cheaper, without the big hand of govt mandating pricing levels (although that would be the direct socialist way to get price contol.)

Posted by: srw3 | December 9, 2009 12:16 PM | Report abuse

Ezra, I am between 55 and 65. If insurers lose money on me because I can't afford to pay what it actually costs to cover me, then Medicare will suffer because I will pay them far less for the same treatments.

Posted by: bobsteph1234 | December 9, 2009 12:17 PM | Report abuse

"Providers, as I've argued before, are a much bigger problem, at least from the perspective of cost growth. Which is why we're suddenly hearing angry things out of hospitals and doctor's groups. That's actually a much more promising sign than insurer opposition, though insurers oppose Medicare buy-in too. When insurers are upset, it's usually because their profits might be harmed, and their profits, though arguably undeserved, are not a big part of the cost problem. When hospitals and doctors are upset, however, it's because their revenues are being harmed, and their revenues are a huge part of the cost problem in this country."

Wow, Ezra. Couldn't be better said. You've come a long way my friend.

Posted by: wisewon | December 9, 2009 12:23 PM | Report abuse

Yeah what a delightful outcome it will be for people to be forced by the government to pay ever-higher premiums to private insurance companies, Ezra.

The best healthcare reform would start with everyone who has ever worked for a private health insurer being lined up against a wall and filled with bullets. Then we can talk about cost control.

Posted by: mellifluent | December 9, 2009 12:29 PM | Report abuse

Mellifluent-

Your comment perfectly captures why public option backers lost the debate - ridiculous rhetoric completely detached from any real policy analysis.

Posted by: bbbolder | December 9, 2009 1:41 PM | Report abuse

"though insurers oppose Medicare buy-in too..."

OK I'll bite...

if it won't effect their profits AND they get the government to do a big hunk of their odious cherry picking for them why do insurers oppose the buy-in?

Posted by: teoc2 | December 9, 2009 1:48 PM | Report abuse

Ezra once again misses the distinction between providers and insurers. Of course providers are the major drivers of costs, how could we have a system in which they are not? They are the biggest cost drivers in Canada, UK, France, Germany, and every other healthcare system on the planet. Cost control obviously means we need reform on provider payments. I'm a fan of flat salaries to reduce the incentive to overtreat.

However, where Ezra goes wrong is his implicit assumption that insurers and providers are equally necessary and valuable to the healthcare system.

Providers are a necessity. You cant have healthcare without them. Insurers on the other hand, provide ZERO value to the system. Any savings they generate go into their pockets. So while its true that providers are a much larger contributor to the cost problem than insurers are, they are vastly inequal in terms of contribution to value.

We should outlaw the entire insurance industry and have a single payer govt model with doctors paid as govt employees on a flat salary model. Insurance companies provide NOTHING, yet get to put their hand in the money pile to take their 20% cut. They are mafioso extortioners who provide nothing of value to the system.

Posted by: platon201 | December 9, 2009 2:17 PM | Report abuse

"their profits, though arguably undeserved, are not a big part of the cost problem."

Come on Ezra, we know that. It's not profit, it's overhead and compliance costs.

Executives want big bucks. They know they get big bucks when their stick prices go up, and they know that happens when their Medical Loss Ratio is low which is exactly what you do not want in an efficient system.

More generally, you yourself said a competitive free market stinks for any item you want everybody to have, fire and police protection, roads, defense, etc. and health care.

Posted by: lensch | December 9, 2009 2:50 PM | Report abuse

"If there was some way the deal could be slightly changed so that the CEO of Cigna got a flat tire while rushing to an important meeting and would have to wait a long time for a tow truck on a cold day, that wouldn't really make it a better deal. "

Such facetiousness is almost as unbecoming as your Kool-Aid consumption, Ezra.

Posted by: pseudonymousinnc | December 9, 2009 3:43 PM | Report abuse

I expect insurers to object to the Medicare buy-in for a couple of reasons.

First and most important, Uwe Reinhardt has observed that insurers take a certain, predictable percentage of revenue as profit. This is a linear relationship - growth in revenue results in growth in profit. Expanded Medicare may remove the most costly population from insurers, but it will reduce revenue and therefore reduce profit. Of course they will have the increased revenue from the new customers made available through subsidies and mandates. But, it won't be as big without the 55-64 age set.

Second, the insurers want to prevent a transition to a single payer system. Expanding Medicare, even in this limited manner, leads to some quite dire possibilities for insurers in the future.

Posted by: bcbulger | December 9, 2009 3:49 PM | Report abuse

haha. You're assuming Ezra that the CEO of Cigna drives a car or is driven in a car. Maybe his jet will get a flat tire. That being said I can't see why insurers would be against this. As Ezra states it gets rid of an average unhealthy group of the population that wasn't (without a strong mandate) being covered. This would to me be the biggest cost reducer out there today. Likewise I can see why hospitals and doctors are up in arms. Now all we need is a serious requirement that insurers spend 85% or so on claims and we'd be all set. Oh and make sure the Dorgan ammendment passes.

Posted by: visionbrkr | December 9, 2009 3:54 PM | Report abuse

Well, here's the thing, Ezra. Provider revenues may be a much bigger problem than insurer profits. But providers profit by providing health care, whereas insurers profit by denying people access to health care. The latter could and should be eliminated--the former are necessary.

Obviously you know this, but your serene wonkishness irritates at times.

Posted by: Nick28 | December 9, 2009 5:25 PM | Report abuse

So it sounds like commenters acknowledge that providers are the real driver of health care costs, but forgive them simply because they hold MDs? I'm sure you extend similar logic to forgive the cost-driving behaviors of mega-hospitals.

If you want to know why health reform fails every time it's attempted in this country, take a good luck at your own logic. Sure, health insurance reform is important. But until our politicians, and we, as patients, demand a massive reworking of the provider payment system, true cost-saving health reform will not occur.

Posted by: bbbolder | December 9, 2009 6:24 PM | Report abuse

It is hard to see how you win on a bill that hasn't gone through conference yet. The Senate may *think* it can just tell the House to take it or leave it but that doesn't mean the House has to do what they're told.

Posted by: member5 | December 9, 2009 6:37 PM | Report abuse

They killed the public option. The final bill shouldn't have the mandate. This will give Cigna that flat tire, while at the same time making the program much more popular amongst voters.

Posted by: zosima | December 9, 2009 7:31 PM | Report abuse

zosima - You MUST have a strong individual mandate if you want to cover pre-existing conditions. Otherwise people will just wait until they get sick until they get health insurance. In fact, you better not allow people to get cheap plans (high deductables or co-pays, exclusions on some procedures, cost limitations, etc.) because again they will simply switch to a better plan when they get sick.

It is clearly absurd from an insurance perspective to not allow pre-existing conditions to influence coverage. It's like saying the fact a person's house is on fire has no bearing on whether he can get fire insurance.

This whole mess just shows that competitive free market insurance has no place in health care. This problen would not even exist in a government run universal system like Medicare for All.

Posted by: lensch | December 9, 2009 8:22 PM | Report abuse

Providers are a necessity. You cant have healthcare without them. Insurers on the other hand, provide ZERO value to the system. Any savings they generate go into their pockets. So while its true that providers are a much larger contributor to the cost problem than insurers are, they are vastly inequal in terms of contribution to value.

We should outlaw the entire insurance industry and have a single payer govt model with doctors paid as govt employees on a flat salary model. Insurance companies provide NOTHING, yet get to put their hand in the money pile to take their 20% cut. They are mafioso extortioners who provide nothing of value to the system.

Posted by: platon201 | December 9, 2009 2:17 PM | Report abuse


I'm sorry i missed this dribble earlier. They provide nothing??? How about utilization review to contain costs, step therapy, network discounts, capitation of providers, wellness programs? Most employers are large employers who self insure and insurers provide network discounts that garner around 55% discount as well as the other savings mechanisms I mentioned above and when they do it they do it for pennies on the dollar and save large employers BILLIONS. But keep spewing that 20% garbage. I'm sure you can get a guest spot on Keith Olbermann too.

Posted by: visionbrkr | December 9, 2009 10:38 PM | Report abuse

Ezra - there's are a few problems with your comments. First, for the group market we see cross-subsidization wherein people over 55 are covered and they're just subsidized by others. To the extent you think they would keep their employer plans but those on the individual market would move, I bring up the spector of adverse selection. If the government has them pay a set premium such as the average cost for a Medicare enrollee instead of individualized premiums, and Medicare is more generous than other plans they could get, you'd see the sickest individuals coming to Medicare and increasing the risk pool of the Medicare population without paying their costs. This could end up costing the government a lot without allowing the government to get the good risks. If you just expanded Medicare's mandate to those over 55, however, and included penalties for enrolling later (like with Medicare Part D), you might have something.

Posted by: GrandArch | December 10, 2009 11:28 AM | Report abuse

Hey Ezra,

Your column is full of baldfaced lies.

Good thing this is not 18th Century France.

Posted by: BigMike1 | December 10, 2009 11:52 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company