Healthcare Crisis: Step 5 – If Needed
Years and years of tradition and entrenched industries will bog down sweeping reforms to the healthcare system. In this series I have suggested that a step by step approach would work, perhaps without getting too far past step 2. You can find steps 1 through 4 somewhere in this site or at my blog at http://lipspeak.blogspot.com/
Step 1: Remove State regulation. Create one level national set of regulations. Everyone but the States will favor this and it will lower costs and increase options.
Step 2: Allow any group to band together to buy health insurance or set up self-insured plans, inside or outside corporations. Every union, charity, trade association and Chamber of Commerce will favor this one.
Steps 1 and 2 increase supply and lower demand, which will lower prices. They will also reduce costs, allowing for profits at lower prices. There is a good chance that just doing this will significantly decreases costs and prices, increase options and insure nearly everyone who wants insurance. Most important, there is no reason these should not be relatively easily passed AT LOW to NO COST to the government.
Steps 3 and 4 might correct themselves if the above are accomplished. These involve eliminating volume bonuses paid to brokers to sell more of one company’s products. Step 4 is a limitation on malpractice if someone dies or becomes disabled because “extra” tests were not run to save everyone on medical costs.
If, and only if, Steps 1 and 2 (perhaps with 3 and 4) do not solve the problem sufficiently, then we should consider the following:
Government Funded Universal Catastrophic Healthcare Coverage
Any expenses over some significant number, like $200,000, in a year or for one illness or injury (cancer, Alzheimer’s for life), would be covered by the government. This will lower the risks to insurers and will thus lower premiums. Self-funded groups always purchase catastrophic coverage. This would eliminate that expense and lower self-funded costs.
To reduce costs, there would be no malpractice claims permissible against doctors performing work for the government.
There may be only specific doctors who are approved to do this work. A doctor could opt-in and take want the government paid or opt-out and look for private pay clients or cease work on cases above normal insurance levels. As with Medicare now, most will opt-in.
Anyone could opt-out if they want to use another doctor, but that would be a privately paid or insured risk.
Healthcare will remain privately provided. Competition, creativity, self-funded health coverage and professional negotiation by experts hired by the groups will drive insurance prices down. Groups with interests in helping certain people currently uninsured (Charities, Unions, Trade Groups, Hispanic Chamber, NAACP, Urban League, Churches, etc), would drive broader coverage. No State regulations, lower risks in groups, wellness programs in self-funded groups, some protection from lawsuits and ultimately a cap on liability will lower costs.
Just some thought from the peanut gallery. Good luck up there on Capitol Hill. You will need it.
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21 Responses to “Healthcare Crisis: Step 5 – If Needed”
Ned
It sounds to me you have simply guaranteed private profits.
“Government Funded Universal Catastrophic Healthcare Coverage
Any expenses over some significant number, like $200,000, in a year or for one illness or injury (cancer, Alzheimer’s for life), would be covered by the government.”
You have defined a system where the health care industry only has to insure low risk people and when someone has the bad taste to actually become critically ill, make the government pay for it.
Let's skip the middle man profit margins and the need for negotiators. The biggest fear tactic against single payer insurance is that one loses care and can't choose their own doctor. Your plan allows you to pay outside the system to regain that very choice. Again, paying extra for what now exists in private non-HMO insurance.
Sorry Ned, I just can't see any real advantages for your five point plan.
I agree with HemmD – just another way to guarantee profits for corporations that add nothing to healthcare. This was your most nonsensical post on healthcare yet.
I agree with both comments. Ned, you, like Obama lately (sigh) seem to take as a requirement, that we can't hurt the insurance industry. We have to find a way to keep them in it but make it (slightly) more affordable. Why? Neither insurance companies nor Medicare/Medicaid actually provide care. The only things we need done are to assess the claim and send a check. But with private insurers we have to pay for profit, bloated claims denial departments, marketing and sales and even lobbying costs! Never mind corporate jets, lavish trips for top salesmen, corporate suites and big executive salaries. Assess the claim, send the check.
Here's an interesting proposal along those lines:
http://www.balancedchoicehealthcare.org/descrip…
“The only things we need done are to assess the claim and send a check. ” What do you think those “bloated claims denial departments” do? You obviously don't know what you are talking about with your pie in the sky assessment. Insurance companies offer products just like car companies do. You can't pay for a yugo and expect a Cadillac. Why do you think managed care (HMOs) proliferated in the 90's? Becasue the providers were gaming the system and corporations could not afford the rising costs. By the way, how come I never hear any of you universal health care pumpers talk about the personal responsibility of citizens to take care of themselves? With 60% of the population over weight, health care costs are only going to go up. Enjoy your rationing….
Ned thanks for your ideas. Good to hear some thoughts other than “the government should rule our lives”.
Guys, can you help me understand this insurance-companies-are-evil school of economics? There seem to be a lot of people who believe it, and I can't get my head around it.
From what I've been able to discern, the beginning and end of any health care reform is to punish the insurance companies. Greedy providers, runaway costs, overblown regulations, and irresponsible consumers need not be scrutinized. In fact numbers of any sort don't matter, except perhaps what insurance company executives are paid.
Even accepting all that, some of the comments here have sent me for a loop. The same people who normally demand state-run insurance are criticizing Ned for suggesting it, apparently on the grounds that it wouldn't punish private insurance companies severely enough.
Can you help me out here? I must be missing something.
Insurers shun those taking certain meds
Basically they will sell you health insurance only if you don't need it…
greg
“You can't pay for a yugo and expect a Cadillac. “
We are already paying for the Cadillac, US costs are the highest in the world. Thanks for pointing that out.
“Enjoy your rationing….”
If rationing is a foregone conclusion, I'd rather have doctors make that choice over junior execs with an eye for profit.
Dr_J
“The same people who normally demand state-run insurance are criticizing Ned for suggesting it, apparently on the grounds that it wouldn't punish private insurance companies severely enough.”
Here's the problem discussing this with you. No one is demanding anything except efficient, well run, and economical health insurance for every American. Throughout this entire 5 point post, you have consistently defended private insurance as the salvation and minimal requirement for any solution; yet you fail to really address the glaring problems that these companies create today.
1. Coverage – Private health requires that the entire population must be sub-divided into groups so that suitable profit margins can be calculated to make profits. This system has consistently isolated those who require critical care, and systematically removed these “expenses” in any manner that can be found. (see DQ's example as a case in point.) This population subdivision only makes sense if profit is the criteria, it doesn't make sense if universal coverage is the criteria.
2. Profits – You have repeatedly complained that insurance companies get a bad rap because they in fact have small profit margins. When margins are small, it's a good thing if costs go up. If costs go up, the profits go up. We've seen this in the cost/plus contracts in Iraq. The same functional mechanism is at work here. The only time cost-cutting is examined, it's on the service side of the equation, not the production side.
3. Lobbying – Insurance laws, medicare and medicaid legislation is driven by private company lobbying. Bush's Medicare prescription drug program is just one example. Six months after passage, industry profits increased by over $8 billion. You can see how effective lobbying has become as a business practice. You wish to ignore this fact when talking about how ineffective the government is in providing service.
4. Rationing – The ever present bogeyman thrown out in every discussion. The government will ration care!!! You mean like private firms do now? 48 million have no insurance, and thousands go bankrupt every year trying to keep themselves or loved ones alive. The private model requires rationing for most, and no service for many. You never mention that rationing when warning us about future possibilities by the government.
In short, you clearly see no problem with how things are done now. That's the problem you and I have had from the start in this. As long as you wish to dismiss and ignore current problems with private health, you will never see what you're missing.
Excellent points, HemmD.
Dr. J, I'm not portraying insurance companies as “evil.” I'm saying their goals are at odds with ours. Their goal is to maximize shareholder wealth. Ours is to provide the best care for our citizens at the lowest cost. Insurance companies will never care more about your health than their profit.
The cries of “socialism” are incorrect. Doctors and hospitals do not become government employees under single payer systems, any more than they are insurance company employees now. We're just talking about who processes the claim and sends the check. Our government already processes many millions of claims annually and (for the most part) efficiently sends checks, for health care and payroll, disaster claims, tax refund checks etc. The main difference is that our government health care payers (VA, Medicare, Medicaid, govt employee health care) facilitate payment while private insurers attempt not to. The more claims they deny the more money they make. They also have high administrative costs including executive compensation, and they spend our health care dollars to market and sell policies, which government providers do not. They also pay handsomely to lobby (bribe) our representatives, another thing government providers don't.
By the insurance companies' own analysis, their costs are 8.9% overhead, plus profit and commissions, bringing the total to 16.7%. Medicare is 5.2% and headed down. The insurance industry projects Medicare overhead at 3.3% by next year, while theirs is not expected to vary “by more than a percent or two”.
Our current system is inefficient, expensive, and fails to deliver what we want: quality health care for all Americans at a reasonable cost.
2. Profits – You have repeatedly complained that insurance companies get a bad rap because they in fact have small profit margins. When margins are small, it's a good thing if costs go up. If costs go up, the profits go up. We've seen this in the cost/plus contracts in Iraq. The same functional mechanism is at work here. The only time cost-cutting is examined, it's on the service side of the equation, not the production side.
I don't follow your reasoning at all here. When you say “costs” are you talking about operating costs? It's just about never good for a business to have operating costs go up unless you can increase your revenue disproportionately, which was the case in the oil industry for instance. You can't apply this to insurance companies though.
HemmD, I'm glad you absorbed my point that insurance companies' margins are slim, but everything else suggests you haven't been reading anything I've written.
I've never claimed private insurers are the salvation to anything. I've said they don't matter, they're not the source of the problem, if you fix them you won't fix the problem, because they're not what's causing it. Is that clear?
In a sense, we seem to be in violent agreement about insurance companies. They have not, can't, and will never fix what needs to be fixed in health care. They will never streamline the 3-billion-dollar civilization of care providers, equipment manufacturers, drug companies, medical schools, government interlopers and so on that make the bulk of the health care industry. They will never force socially redistributive policies that require the rich and healthy to subsidize the poor and sick. They will never even provide a cheaper means than a savings account for paying your routine medical bills. What baffles me is why anyone would expect them to do any of these things, or spend any time complaining that they don't.
The real problem is that providers of medical goods and services charge too much. This is so screamingly obvious I can't imagine why we'd be talking about anything else. Obviously, if these bills were lower, you'd simply pay them directly and use insurance for only catastrophic events. This is the proper role of insurance anyway: to cover unlikely, expensive surprises–not things like most medical care, which you're almost certain to need a good deal of over your lifetime.
The providers in turn charge too much because they face their own cost structure. This is where the real heavy lifting is needed, where we need millions of smart people amply incented to innovate, to take risks, and to find creative ways to drive inefficiencies out of the system. Anyone who figures a team of government bureaucrats can do that by fiat is smoking crack. And anyone who's spending time demonizing insurance companies is certifiably insane. I hope your insurance covers that.
DaGoat
Sorry if I was confusing.
Try it this way. An insurance company makes a 1% profit of a group contract. say for 1 million bucks. 1% of a million is $10,000. So, if health costs go up on a yearly basis, the contracts get bigger and bigger too. 1% of 2 million, 1% of 10 million, you see where I'm going. The contracts get bigger, and so do the profits. The private health corp, however, doesn't have to change anything; they simply keep making more money.
Dr_J
“I've never claimed private insurers are the salvation to anything. I've said they don't matter, they're a distraction, they're not the source of the problem, if you fix them you won't fix the problem, because they're not what's causing it. Is that clear?”
What's clear is that you wish to provide any answers to the points I made. Ad hominid attacks inferring it must be drug induced (or certifiably insane) if one disagrees with you doesn't quite convince me.
If you don't see that insurance companies are the odds makers in a rigged system, and as prices go up and their profits go up too, we really don't have any common ground. The current pricing system goes through these companies who are happy to get their percentage in an ever increasing pie. Who wouldn't.
There are 48 million reasons why your advocated system does not work, and you simply refuse to address that.
If you want to cut cost, you stop funneling all the bucks through companies who write checks and keep profits based upon contracts that are sized by that “expense.” As their “expenses increase” , so do there profits. As I stated above do you want 1% of one million, or ten million?
Civilly yours
HemmD, I did address your first three points below, all of which are about how wicked insurance companies are. I'll do it again: they don't matter, they're not the answer, it's a waste of time to argue about their wickedness.
I haven't advocated any system, much less an insurance-driven one, so I have no idea where your 48 million reasons came from. I'm against any system that assumes insurance companies–private or public–will act like anything but insurance companies.
But if you want my five point plan, here it is:
1. Repeal a couple hundred billion dollars of deadweight government regulation that kills more people than lack of insurance does.
2. Reform the tort system to make it much cheaper (read: without lawyers and courts) to settle most malpractice claims.
3. Discourage employer-sponsored health care, for starters by not subsidizing it, to shorten the distance between the health care consumer and the health care shopper.
4. Encourage consumers to rely less on insurance and more on bank accounts for most care, through programs like HSAs, to the same effect as #3.
5. Continue to subsidize care via the government for people who will always be priced out of the market–the poor and the chronically ill. Preferably by writing them a check.
HemmD that assumes absence of competition.
Dr J, sharpen your pencil please, and tell me where you find $100 billion a year in savings from your list. That's the estimated 2009 administrative cost of health insurance. These costs have gone up more than any other part of health care, 9.7% in 10 years (drugs 8.9%, hospitals 7.2% and doctors 7.2%). Malpractice claims are peanuts, though a popular talking point. Believe it or not, there are legitimate cases in which doctors should be sued for negligence or incompetence, and depriving the public of their day in court when a doctor kills a loved one is a non starter.
Let's get serious about this. Health care is going to cost, whether it comes out of your paycheck as an employee benefit, out of your pocket as a personal check or one from your HSA, or out of your taxes. As I've already pointed out, the insurance industry itself admits their administrative cost is over 12% higher than medicare, so wherever you think hundreds of billions of savings are to be had in government regulation, it certainly isn't in the administration of health coverage.
However, I am willing to consider specifics if you have any. I propose cutting that excess profit and administrative cost, as it delivers nothing in health care. Where are your savings? (BTW, DaGoat, the insurance industry, despite 'competition' does not project any decline in their administrative costs, but admits that the admin costs of govt programs are declining).
GreenDreams, check out this study done at Duke University of health care regulation costs. http://www.cato.org/pubs/pas/pa527.pdf It estimates regulation imposes $340 billion in costs and delivers only $170 billion in benefits. Those are 2002 dollars, I'm sure today's would be larger.
The tort system imposes $113 billion in costs, the bulk of it due not to malpractice claims but the defensive medicine it encourages. Sure, there are legitimate cases of incompetence, but your scenario with a dead loved one is a failure of the tort system, not a success. The real benefit of the tort system is the malpractice it deters–$33 billion worth, by this reckoning.
hahahaha. ok, Cato Institute. I get it. Never mind. You'll believe anything. The cost of the neocon economic mantra “privatize, deregulate, cut government spending” has been what? Oh yeah, almost half the total wealth in America. Oops.
GD, you asked for numbers, I've provided them. They're not cato's, they're based on a bunch of academic studies done by people who actually look at numbers like this for a living. If all you have to counter them is ad hominems based on who's hosting the link, I'll take that to mean you can't argue with the numbers but don't find them pleasant to think about. They show a pretty lousy track record for government at driving health care costs down.
OK, Dr J. point taken. The problem with assessments of the costs of regulation is that they routinely ignore the costs of deregulation. My point was that deregulation has cost us trillions of dollars. As an example (though there are many), we deregulated savings and loans and hammered the economy, because corporations, sans regulation, do not behave in responsible ways. The same is true of the current crisis, in which the deregulated financial sector companies failed, without strong oversight, to behave responsibly. Telecom industry: they donated 80 million to get the rules relaxed, they took and squandered 90 billion worth of bandwidth. We still have pathetic broadband compared to more tightly controlled markets such as Korea, Japan and even India.
Health care. We're the only modern nation that uses a profit model for health care delivery. It has resulted in higher costs by at least 2X, while landing us in poor status with respect to measurable outcomes: heart disease, cancer, infant mortality, longevity, etc.
If we need to cut medical costs, we have to find things to cut. The most painless from a health standpoint, is the excess 15% plus, that we pay insurance companies not to deliver care, but to attempt to deny payment.
Other cost savings? Your list is not compelling, as you list the trivial expense of malpractice, which hasn't risen dramatically compared to all other costs. Besides, the cost of malpractice *insurance* is another area in which insurance company profits are not the doctor's friend. Drug costs: The drug companies profit from sales overseas at a fraction of what they charge us. They successfully lobbied to keep Medicare from negotiating, and to keep Americans from buying American drugs, produced here, sold cheap to Canada in order to make their quarterly reports look better. These are a function of corporate greed, and we can't afford our extraordinary largess in feeding them more money than their drugs (drug companies) or check-writing prowess (insurance companies) are worth.
BTW, are you a medical doctor?