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Why did insurers try and stop their bailout?

One of the liberal arguments against the health-care bill was that it was a giveaway to private insurers. It's curious, then, that those same insurers were quietly funding a campaign to kill the bill.

This isn't a "gotcha" against liberals, incidentally. This bill really is a pretty good deal for insurers -- though not in ways that make it a bad bill. I'd love to know what AHIP thought the endgame was if they stopped this legislation. Is it just that any reform represents the beginning of the end of their industry, at least in the form it's existed for the past 80 years or so?

By Ezra Klein  |  January 12, 2010; 5:22 PM ET
 
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Comments

Like the Republicans, insurers never really wanted to stop the bill. They just want to make clear that it wasn't their idea and it probably won't lower premiums. Expect the White House to soon begin engaging in its own version of expectations management.

Incidentally I don't believe the Goldman report that rated "no reform" as the best option for insurers. It may be that they were focusing on the for-profit companies. What I'm hearing from execs at non-profits is that they expect to come out ahead.

Posted by: bmull | January 12, 2010 5:44 PM | Report abuse

bmull,

you're 100% wrong. As one who actually SEES what insurers put out as memorandum about health care reform they didn't want to stop the bill but they KNEW that costs weren't going to be addressed in a way they wanted them to. They knew THEY were going to be the scapegoat so that's why they've been against it. If you recall the biggest talk about AHIP was around the report just after the SFC came out with its last minute adjustment that included the watering down of the individual mandate. They KNOW what will help and having everyone covered is a REQUIRED start in their book. When that was compromised via the weakening of the mandate, they spoke up (to their downfall). Then later many others said the same exact thing but I'm guessing since they're not INSURERS they were actually taken a little more seriously.

Insurers know how to contain costs and as Ezra says very often on here it relates to having a stake in it and knowing what that stake is. Every insurer out there has an HSA with very high deductibles for all its employees. They know that when people pay $50 for an ER visit (that actually costs $1000+) they go for whatever they need assuming they can afford $50. But when you have the employee pay a portion of that cost through an HRA or HSA then people think twice before going when its not truly an emergency.

Insurers know that the current system (if no reform happened) is unsustainable. They've been BEGGING for reform for years(but what they feel is the right reform), one where everyone is accountable. This is probably pretty close to their best endgame short of telling docs they have to take medicare rates from all insurers. Then again if that happened we'd have an even greater shortage of docs than we have now.

Posted by: visionbrkr | January 12, 2010 5:53 PM | Report abuse

Then again if that happened we'd have an even greater shortage of docs than we have now.

visionbrkr do you really think that doctors will ditch their 12+ years of education and their practices because of medicare rates?

Posted by: srw3 | January 12, 2010 6:01 PM | Report abuse

srw3,

Do you really think docs can afford to practice medicine at Medicare rates for all (if they're not increased?) Do you think they can afford the "doc fix"?

If you're a doctor paying $200k in malpractice insurance $10k a month in rent in NY and a staff of 4 employees each making $50k per year do you think you can get by on Medicare rates? Seriously. Not to mention every other fixed expense that comes with owning a business.

Posted by: visionbrkr | January 12, 2010 6:05 PM | Report abuse

"visionbrkr do you really think that doctors will ditch their 12+ years of education and their practices because of medicare rates?"

Do you really think that forcing docs to take medicare rates from all insurers would NOT have an impact on the supply and quality of doctors? So you believe in a free lunch?

Posted by: ab13 | January 12, 2010 6:18 PM | Report abuse

I'm just curious. Someone has to get less money to bend the cost curve. Doctors make a lot of money. It seems like they are going to have to take a hit, along with hospitals, device manufacturers, pharma, and insurance companies. Doctors in the US make far more here in the US than in any other country (2 to 3 times up to orders of magnitude more). It seems like they are going to have to take some reductions in salary with their current patient load or treat far fewer patients (nurse practitioners and other non-doctor medical staff will see ma,y of their patients for less cost) which will also reduce their income. What other choices are there?

Posted by: srw3 | January 12, 2010 6:27 PM | Report abuse


I'm just curious. Someone has to get less money to bend the cost curve.

srw3,

technically that's not correct. Two points. One, we could live healthier lives. If we reduced obesity to nil average life expectancy would increase 4 years and we'd be at or near the top of the rankings liberals always remind us that we're 37th in not to mention we'd reduce cost dramatically.

Secondly I'll use myself as an example of a way to save cost. I'm in an HSA and fully aware of my cost. My 5 year old son was playing with a friend two months ago and banged his head. He had a small two inch gash in his head that was bleeding. If I had a $50 ER copay I'd probably have gone right away. I have a $2500 deductible. I cleaned him up, put liquid bandage on it and he was fine. I saved myself $1500 in an ER visit and him and me 3 hours of waiting. The trick is to know when you can do that and when you can't. If we're all cognizant of what our costs are then we'll act more appropriately.

Posted by: visionbrkr | January 12, 2010 7:25 PM | Report abuse

"visionbrkr do you really think that doctors will ditch their 12+ years of education and their practices because of medicare rates?"

Do you really think that forcing docs to take medicare rates from all insurers would NOT have an impact on the supply and quality of doctors? So you believe in a free lunch?

Posted by: ab13 | January 12, 2010 6:18 PM | Report abuse

maybe its some fancy new math that we're not aware of that allow docs to make next to nothing but still pay all their bills.

Posted by: visionbrkr | January 12, 2010 7:26 PM | Report abuse

Ezra - You're great on policy. But i think you've got this one wrong. You say, "This bill really is a pretty good deal for insurers.... I'd love to know what AHIP thought the endgame was if they stopped this legislation."

I 100% disagree. By what metric is this bill a "good deal" for insurers? the metric that matters to shareholders is a return on their capital. From that perspective it's a bad deal. Insuers' margins will go down, their return on cpaital will go down. So, since the primary goal of a public company is to deliver a return for shareholders, why should insurers support this bill??

You want to know what AHIP thought? they thought they'd get a reasonable bill, with a strong individual mandate in return for taking everyone and charging them all the same price. That's a fair trade. Instead, they get a weak mandate, restrictions on their margins, a tax that takes away 1/3 of their profits, and constant threats to their business model. Please tell me why AHIP or the insurers should be in favor of this?

I haven't seen much (if any) commentary from the liberal/progressive perspective that understands how markets or insurance works.

Posted by: MBP2 | January 12, 2010 9:04 PM | Report abuse

visionbrkr-- your story gave me a laugh. I don't 100% disagree with what you said. I am concerned that primary care docs woud quit if everyone had HSAs. There are also people who will put off needed care. I'm not overly concerned about doctor salaries. Pay 'em all $500,000 if you want. What really matters is whether they practice in the most cost-efficient fashion. That means using their brains and not just their scapels.

Posted by: bmull | January 12, 2010 10:15 PM | Report abuse

bmull,

why would they quit? People would still go to see them for necessary care. Are you advocating people getting unnecessary care to just increase the profitability of docs? If systems are well structured to make people pay what they can afford then people wouldn't put off unnecessary care but if we give everyone, everything for "FREE TO THEM" (ie medicare for all) then won't people just go for unnecessary care because they have no comprehension of what the true cost is?

Personally i'm in favor of capitation (as i've said before) with bonuses paid on results.

Posted by: visionbrkr | January 13, 2010 8:10 AM | Report abuse

Major premise: Insurance companies are pure middle men. They add cost, but no value.

Minor premise: clearly cost containment is next on the agenda for health care reform.

Conclusion: The best target for cost containment is that which adds no value for health care reform. Insurance companies don't care about this bill. They care about the next one, that this one prepares for.

Posted by: pj_camp | January 13, 2010 8:37 AM | Report abuse

visionbrkr, you've got it all right except for the part about docs accepting Medicare rates. You sound like you know about insurance reimbursement, so you know that private insurers pay about 120% of Medicare and most Medicare patients pay about 50-80% of Medicare, and the uninsured don't pay at all unless you're lucky.

So in a world where Medicare reimbursement is the going rate for everybody, and nobody or mostly nobody is uninsured, it's probably a wash. Worst-case-scenario, if a doc takes no Medicaid patients now (and shame on him or her for that), he or she takes a one-time 20-percent pay cut (and who's to say, if this becomes law it isn't phased in over time anyhow).

In the last two years a lot of Americans have taken 20 percent pay cuts -- or worse -- and found a way to get by. Frankly, the whining of the docs over a possible one-time, 20-percent pay cut gets absolutely zero traction with airline pilots, who have been positively reamed on pay in recent years. Or the unionized auto workers who held their noses and agreed in 2007 to two-tiered pay schemes where new hires are on a whole different pay scheme that is significantly lower than the older workers doing the same jobs.

For pilots, auto workers and the countless other employment sectors who've taken pay cuts, the idea that a primary-care doctor making $150K a year has to now find a way to get by on $120K arouses absolutely no sympathy. A cardiologist who complains when his or her take-home drops from $500,000 a year to $400,000 would just evoke chuckles.

As for the issue that this impossible-to-overcome, one-time, 20-percent pay cut would reduce the supply of doctors, there may be a little something to that. Older docs who are close to retirement anyway might pack it in -- but then, that would create openings for new, young, enthusiastic docs, more than willing to take their place, and needing that "chump change" to pay off their student loans.

For that matter, what else is a mid-career doctor who thinks he or she can't get by on Medicare rates going to go do? Anything else he or she might try is going to be a pay cut far more substantial. I used to be the editor of a suburban bi-weekly newspaper, and whenever a reporter position would open up, along with the applications from the usual young journalists, I'd often get resumes from lawyers and teachers who were mid-career, fed up, and wanting to "get out of the rat race." When they found out what reporters make, they quickly embraced a new-found enthusiasm for their chosen profession.

Doctors got to go to the best colleges and med school because they were the smartest people in the crowd. If they can't figure out how to adjust their business model for a one-time, 20-percent pay cut (again, a worst-case scenario), then perhaps they're not so smart after all. I rather think they, of all people, can work it out.

Posted by: Rick00 | January 13, 2010 9:23 AM | Report abuse

Woops. That should say "MediCAID patients pay about 50-80 percent of Medicare." My bad.

Posted by: Rick00 | January 13, 2010 9:31 AM | Report abuse

Rick00,

the problem is your argument goes for hospitals, not for doctors offices. the uninsured MUST be treated at hosptials due to EMTALA. Not at doctors offices. Kills your premise right there.

Posted by: visionbrkr | January 13, 2010 4:42 PM | Report abuse

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