Health Care and Insurance: A Lost (and Crucial) Distinction

This is something that should be part of the discussion. I do think that people with good insurance often go to the doctor because they can. At the same time people without good insurance often don't go when they should. Both of these situations increase the overall cost of medical care.

Excellent! Now how do we get others to start thinking this way too?

We have an HSA which is a great first step towards this. Our deductible is $3000, everything before that is 100% out of our pocket, everything after is 100% out of the insurance company's pocket. We could save even more on our premiums if we did an 80-20 after deductible.

This is one of the things passed as part of the Prescription Drug Plan, and one of the only reasons the Republicans passed it (PDP) was to get the HSA structure in place. (I heard this from Rick Santorum.)

If more companies would opt for HSA's and health care providers begin to see that people are paying for "maintenance", the laws of market forces would start taking effect and costs would go down.

I know that even now if we go to the doctor and tell them it is out of our pocket the fee is reduced, and in one case, a recommended test was deemed to be something that could wait if the problem didn't go away, whereas if the insurance company was paying the doctor had no problem ordering the test.

"I do think that people with good insurance often go to the doctor because they can. At the same time people without good insurance often don't go when they should."

Ron, thanks for your comment. I wonder at your use of the phrase "good insurance", though. In context, you seem to be suggesting that it's good because it allows people to use it for care that it not catastrophic.

The History:
http://www.neurosurgical.com/medical_history_an...

Driven primarily by a progressive agenda and not big Insurance companies. They asked for it, and for good or ill they got what they asked for.

Here is a snippet from a doctors reply to an Obama NYT editorial that makes the same point you do. first the Obama bullet point then the reply

"Require insurance companies to pay for routine examinations, preventive care, and screening tests like mammograms and colonoscopies."

"Once again, how can you be insured against a sure thing? The only way my company can pay for a colonoscopy is to add enough onto the premium to pay for it, plus their overhead."

BTW Polimom, glad someone posted this, I been pointing out that Risk management and not healthcare is the business of insurance for some time now.

Thanks for the link, Leonidas.

I have to say, though, that the history of how it evolved in the US is interesting, but I'm really mostly concerned with undoing the damage.

This really does look to be a classic case of the law of unintended consequences.

"BTW Polimom, glad someone posted this, I been pointing out that Risk management and not healthcare is the business of insurance for some time now."

I'd have to go look, but I think I posted about it once before too. It was quite a long time ago, though, and it may not have been here at TMV.

Polimom,

Once upon a time it was so. People took out health insurance to cover catastrophic accident or illness and paid the cost of routine health care out of their own pocket. What happened is that people tended to under-utilize (from a socially optimal point of view) preventive care. The introduction of the new-fangled concept of HMOs (about 40 years ago) was supposed to increase the use of preventive care by "bundling it in" to the cost of insurance. In that respect, it was too successful for it's own good. Once the cost of seeing the doctor was reduced to $5 or $10--or free, people discovered an amazing need for services they previously went without. As always, when something is subsidized, the demand for it goes up.

We are now enjoying the fruits of the "bundling" of catastrophic event insurance and pre-payment for routine care. Conceptually, these are very different things, though the distinction seems lost to the passionate partisans in this debate. As TX_HCG says, the introduction of HSAs is an attempt to get back to the separation of catastrophic event insurance and routine health maintenance payments. The HSA approach would have been much more effective, IMHO, if it had gone into effect before the great inflation in health care costs of the past 30 years. Still, perhaps it will move us in that direction.

As far as fixes for the problem, there is one area where I will likely find myself supporting a liberal approach (hey if Obama can make secret deals with Big Pharma and get them in his camp I can do this without loss of my Republican credentials, LOL ). That area is Big Pharma marketing practices..

The drug companies should have their marketing practices looked into and regulated. First step, treat drug advertizements on TV like tobacco commercials, ban them unless they are over the counter drugs. I'm normally free market but they are selling the public something that might be damaging to the nation. Doctors should be the ones who determine what treatment patients get, patients should not be pressuring doctors to proscribe to them the latest drug fad they see on television. These ads often convince people who are perfectly healthy that they might be sick, depressed, etc. The drug companies encourage this so they can get more profits from their products before their copyrights wear off and people can get generic brands, and also keep purchasing their name brand when generics can do the same job much cheaper. In fact some of these "new drugs" aren't really so new, they take an existing drug, give it the most minor tweak and get a new copyright and launch an advertising campaign. This new drug is marginally better in some cases, in others it might be worse for some of the patients, in most there is little or no difference.

Another area is taking Physicians to confernces and workshops in places like New Orleans and Las Vegas. They want that 3 out of 4 doctors recommend our product line in their ads, so the 3 that like their drug get invited to the next workshop in Vegas again next year with their wife and the 4th doctors sits at home. Its all legal but very shady.

So we should discourage preventive care because people use it too often? Preventive care often means less catastrophic care - not always, obviously, but often. Regular check-ups = checking for blood pressure, cholesterol, etc. = lowered risk for heart disease = less catastrophic care.

I agree that this isn't "insurance" in the classic sense. It isn't really risk management. But it's only a necessary social function.

As for HSAs - would they replace the current comprehensive private health insurance offered by most employers? What would that mean for, say, a woman who gets pregnant and requires thousands of dollars of care for even a normal pregnancy, delivery and neonatal care? That would blast through $3,000. But is it "catastrophic?"

We will never cut health care costs as loss as we have a private health care system. There is too much money to be made in health care - most of which can be charged off to consumers.

Either we continue with our hybrid, inefficient system (Medicare, Medicaid, Tricare, private insurance) or we replace it with something like a single payer. Other plans under consideration may move us toward single payer.

If we were to go to an HSA model would there not be an incentive for the insurance carriers to help cover preventative medicine to include proper care during pregnancy and delivery? It should save them money over the long term. Just a thought!

It seems to me that a two-tiered system would entail a boatload of administrative costs just to maintain the new second tier, let alone the investment costs required to initiate it.

So we should discourage preventive care because people use it too often?

NO!!!! Not at all. But we should absolutely (imho) stop thinking insurance is the right delivery vehicle for health care. Insurance isn't a delivery vehicle at all (or shouldn't be). As was said downthread -- they're not at all the same, conceptually.

Health care is the province of doctors and nurses and all the other practitioners who provide it.

Let's think of it another way (and avoid specific proposals like HSA's or whatever for now).

What if insurance companies only sold policies against loss due to unexpected events. Think traumatic injuries, severe diseases, etc. Those are definable and insurable. There's measurable risk that is mitigatible (to some degree). An easy example would be broken bones. In the normal course of a daily life, the odds there are low. Yes, sometimes people trip and fall down the stairs -- and that's covered as within the confines of 'normal risk'. Somebody jumping out of airplanes on the weekend, though, is obviously a higher risk. It'll cost more to insure against breaking one's leg, yes? So premiums either increase for that person, or they assume a higher threshold before a catastrophic policy kicks in.

Those insurable events, though, have nothing to do with normal health care. THAT is where the focus is off target. We all need to have it. Some people can handle routine maintenance without having to save toward or forego it. Others cannot, and need help with it. "It", though, is not the payment of a premium. "It" is the cost of the actual care.

Helping people is a place I think everybody comes together. Help encompasses everything from controlling costs to figuring out the best way to get that help to them. (That's where discussions like HSAs come in.)

Decouple the 'insurance' from the health care equation, and it's much easier to understand.

@Elrod

" So we should discourage preventive care because people use it too often?"

Ummm I don't follow this logic. First off no one and no plan democratic or Republican does anything to discourage preventative care. Secondly if people had to pay for their own healthcare maintenance costs, they would have more incentive to seek preventative care so they would not have to foot a larger bill in the future, as long as its not coming out of their pocket more than a deductable they can more easily brush preventative care to the side. I mean they think, "whats the worst that can happen? I pay $500 and the insurance picks up the rest. By putting the money in the people's own pockets they will more likely spend it where its actually needed. Of course they will have to take more personal responsibility and rely less on big government or big insurance telling them whats right for them.

But a lot of folks want government to take care of them and relieve them of all their personal responsibility and choice.

Polimom posts an article, the bots line up behind her. It supports my theory about the hired hands on the net. I could always be wrong but...lol..
*****

"Here on TMV, we’ve discussed health care reform (often with a fair amount of heat) up and down, in and out, and every which way. Usually, the threads end up circular, with everybody back at their respective starting places; we’re getting nowhere"

*******

Correct. There will be no compromise on health care. Your buddies at insurance central have to get it through their heads that we taxpayers are tired of picking up the tab for the 50 million uninsured and the ???million UNDERinsured at the ER.

We want our money to be spent in an accountable fashion that makes sense, is streamlined and efficient. The current option at the ERs isn't efficient, nor is it fair to overworked doctors and staff who need to see really critical patients there instead of a stream of twisted ankles, paper cuts and sniffles that is eating up a HUGE chunk of our money RIGHT NOW.

The two tier will be addressed in the fine print of the public option. Pack it up. There will be no compromise this time..

George,
"It seems to me that a two-tiered system would entail a boatload of administrative costs just to maintain the new second tier, let alone the investment costs required to initiate it.'

I guess I'm not sure what you're visualizing. The health care tier isn't new, nor is the (proper) insurance role. Uncoupling allows them both to function correctly.

Sil, come out of your ideological box. You seem to have passed right by the entire post to rant, and it's clear that you haven't a clue what I meant.

What I'm suggesting here does not further the current status quo, nor does it leave people without healthcare.

Start at the beginning and try again.

I think you make some good points here Polimon - unfortunately I suspect it's far to radical a change to receive any serious attention which is too bad.

I grew up in the 50s and 60's and I don't think I went to the doctor more than a half a dozen times between the ages of 6 and 20. When my two sons were growing up they went to the doctor that often every year. No matter how insignificant the ailment we went to the doctor for a magic pill even though there usually wasn't one. We not only have to decouple health care from insurance we have to decouple insurance from employment. People need to know how much all of this costs and at least until recently the cost was transparent for most.

I suspect we will have to see the system become even more dysfunctional before we see any real reform.

Ron, I agree that it's radical in the sense that it requires re-thinking the current model. But the solutions being proposed by both the Dems or the Reps ultimately maintain the broken, unsustainable status quo, whether they realize it or not.

I don't think it's all that difficult to grasp, conceptually -- but it will require people to stop and think, and to let go of (or at least temporarily suspend) their preconceptions (both ideological and partisan).

I wish I had a way to send this out there more widely, so people could at least try to understand it.

Sorry but I read the above observation about easy access to preventive care (check ups - not just eating healthy and exercising) as a criticism of the existing system. Therefore, I asked if the logical conclusion is that we should make medical check-ups and other non-catastrophic care more expensive so that people would ration their own usage.

High deductibles already do that. I had to shell out $1,400 dollars because my son spent two nights in the hospital with the croup. He's gotten a minimal steroid - prednisone - that treated him for every subsequent experience with the croup. Why did he have to be hospitalized the first time? He didn't. It was an utter waste of money and resources for a routine medical condition. And I had to pay all that money ON TOP of my monthly family premium of $650. Oh, and since it happened in November, the deductible would have reset shortly afterward.

Now, did it really cost that much money to keep him at Children's Hospital for two nights? Probably. But was it necessary? Not by a longshot. We took him to the emergency room because we didn't yet have a primary care pediatrician - we had just moved to the area - and when we tried to sign up with the local pediatrician (who we now use regularly) we were directed to go to the emergency room. But why the admission to the hospital for the night? And why for two nights after the prednisone had clearly helped alleviate my son's croup after the first night?

This experience really soured me on my insurance. If I had needed mere routine coverage - a doctor's visit, etc. - and spent the occasional $25 co-pay then I would never have known just how little coverage there really was behind that level. What's more, deductibles have gotten even larger since that time.

This is rationing, I suppose. I will not use the hospital for myself or family unless it is a true emergency - broken bones, appendicitis, etc. I will not get elective surgery that I had been considering, knowing that the deductible will eat me out of $3,000.

This is all my own anecdotal experience, obviously, so it's hard to generalize. But I honestly never gave much thought to health care costs until this happened. And to think of all the people out there with serious conditions.

Maybe splitting up end-of-life and catastrophic care from more routine visits would help to cut costs. Did I have to pay all that money to cover somebody else's more serious care? Perhaps - that's how insurance works, right? Spreading the risk... But does that mean I like the system we have? And since both premiums and deductibles have gone up dramatically in each of the last five years, what's to prevent this from becoming even more financially devastating next time? Every year my premiums go up faster than my wages - in absolute numbers. I am going financially backwards with the status quo - and I and my family are generally very healthy, fit, active, young, etc.

This is why we have to begin the process of fixing things now. I don't see the Obama plan as the be-all-end-all of health care reform. But it will begin the process of fixing a system that is barely functioning and facing a complete breakdown in the near future.

Elrod -- "Maybe splitting up end-of-life and catastrophic care from more routine visits would help to cut costs. "

I suspect it would. Dramatically.

BTW -- do you have any pharmacies in your area? Many of them near me now have clinics in them for care like you've described for your son. And at the risk of going off-topic (but related to Sil's ongoing focus on ER care) -- I think some of the major reasons hospital ER's are used so often for more routine medical needs are that they're easy to find (signs everywhere), and they're open 24 hours a day.

@ Polimom

You might find this interesting:

http://www.aei.org/docLib/20080818_HowtoFixMedi...

Polimom--

Possibly I'm not clear about the benefits of the uncoupling. But if you're proposing this uncoupling on the basis of cost-savings, I don't see any savings. Just the opposite.

As I understand your argument, there are two tiers to separate. One tier covers catastrophe, the other tier covers maintenance.

I'm clear on the distinction between catastrophe and maintenance. But I would guess the two were merged in the interest of efficiency.

Since you're proposing to "uncouple" them, aren't you proposing two separate systems? Wouldn't each system require its own administrative costs? Wouldn't separating the systems require investment costs?

I just don't see any obvious benefit. In fact, just the opposite, I see additional costs.

I'm going to give it a link over at Newshoggers and through in my own 2
cents worth.

@ Polimom

"But the solutions being proposed by both the Dems or the Reps ultimately maintain the broken, unsustainable status quo, whether they realize it or not."

Actually the Ryan plan, sustainable or not (thats another debate) heads in the direction you suggests. It puts money in the hands of the patient not the healthcare provider and encourages people to get the healthcare they need instead of looking for the magic pill and running a zillion expensive tests for a minor problem. Its not a full scale approach on the path you suggest, but its much closer than we have at present which in turn is much closer than any public option where people will crowd doctors offices because "Its Free".

Hi George, thanks for responding.
Since you're proposing to "uncouple" them, aren't you proposing two separate systems? Wouldn't each system require its own administrative costs? Wouldn't separating the systems require investment costs?

Actually, insurance companies don't need any help administering catastrophic policies. They've been managing them in all the other areas they currently work in all along. It's only in the health care arena that they've expanded so ridiculously far beyond their scope (and capabilities).

The actual health care 'tier' -- routine care, non-catastrophic care, call it what you like -- is also already handled, by the health care professionals. Currently, they're also attempting to administer an interface and reimbursement system that was developed and inserted into their province.

So no, I don't see a 'new' system that calls for administration of separate tiers. I'm suggesting we get the insurance 'tier' back where it belongs and out of the health care equation. (They won't like that, btw...)

Polimom, I have repetitively, routinely insisted that people make this distinction.

Leonidas -- the Ryan plan has elements that would support this. But it, too, works off the current model. And even if it had incorporated these different concepts, it doesn't go far enough by a long shot. Which is part of why I said the proposals from both sides are off course.

Both ideological starting points are only tackling half the problem.

Perhaps totally off-topic, perhaps not, but guess which flaming liberal, which pervert Socialist, this interesting piece in Salon.com is referring to:

"Yet by the standards of the present moment, as these same conservatives mobilize against health care reform to “stop socialism,” that same great man was actually a raving Bolshevik. For among his most enduring legacies was the founding and sustenance of the system that became the National Health Service. Arguably as much as any other British politician, it was ... who established “socialized medicine.”

Have fun

I agree, but I'm just saying that in the event such a change as your proposing seems to radical for many to accept, its a step towards it, just like on the other side a public option is seen as the gateway for mandatory universal single-payer healthcare

Something else interesting about the healthcare industry that pretty much debunks much of the left's approach of demonizing the risk management industry:

Is Nancy Pelosi a Modern Day Joe McCarthy?
http://graefcrystal.com/images/CRYS_REP_HLTH_IN...

The study finds that there’s no case here for undue enrichment of shareholders or over-compensating CEOs, the two things one would expect to find if the insurance companies were gouging consumers.

Also, Polimom:

1. Among the things I've said should be sought rather than the current nonsense, true insurance reform as a start (along with the promised Medicare reform nobody intelligent believes will be sought in earnest, ever by the Obama administration or by any Democrat in Washington), is a uniform minimum benefit package for health insurance (which aids portability), with pains taken to note that the emphasis should be placed on the word "minimum," not only because of the proper mindset that should be associated with federal interventionism (it's the "floor" above which it is the role of state and local governments to go, if there is any justification for federal involvement at all), but because the word correctly relates to the correct kind of approach that needs to be taken with insurance (as well as what others view and want, comprehensive health care).

2. As I've noted, one problem with expanding beyond true insurance and a properly minimal required set of benefits is that going to more comprehensive health care obviously raises the cost of insurance (or of the pre-paid health care), which is in large part the problem with affordability now to so many, given the bad practice in some states of requiring broad, excessively generous minimum benefits packages.

3. The current emphasis on prevention as a silly magic device by the Left (as well as a mechanism with which to engage in social engineering to various degrees, associated with politics and faddism regarding lifestyle, food, and so on, as well as political correctness in a more general sense) is silly.

4. Those who most need preventive care and other generous benefits of bloated "insurance" programs so often don't avail themselves of it (and it's not the place of government to compel or to [using irritating and smug PC language and a bureaucratic alternative here] "nudge" or "incentivize" them to use this care.

5. What the silly children on the left believe about the benefits of preventive care versus the reality is even more true when it comes to the costs. Preventive care, even merely screening for diseases,

6. However, to address that,

"The actual health care 'tier' -- routine care, non-catastrophic care, call it what you like -- is also already handled, by the health care professionals."

To add to the list of logical, sensible things I have listed numerous times that can and should be done now, in the name of true insurance reform and other better decisions, rather than what the Dems want to do (if they know really what they are doing; their effort is sloppy and when not pathological, looks to be, as usual, haphazard and without coherence and other attributes that require thought rather than aimlessness that their experimentation or bungled efforts typically reveal), let's say that eventually the federal government is going to be more interventionist (and more intrusive, etc.) in health care, and that a program of prevention (not encompassing the stupid "wellness" features and language, hopefully), with the most intelligent features of such activity, such as screening for chronic conditions that are known health problems or that can be markers of disease, among the population.

We know that many on the far Left (who normally are represented by the liberal Dems in Congress and as he has revealed openly now, by Obama currently) are fans of "public health," and what that term typically means. (It's a definite leftist entity insofar as politics related to it are concerned). A Federal Public Health Service is just the kind of entity to perform this preventive screening and possible care function. (This is the obvious logical agent for conducting such things that currently are neglected in the debate, such as vaccinations, which includes the controversial idea of vaccinating foreign residents here, etc. It is controversial because foreigners -- aliens -- should deserve no benefits from government, yet it is logical to approach these people and check and treat them for diseases that can infect the rest of us here.) If we are going to have a federal role in health care, the basics of public health are where such things as preventive care and screening (again, kept to a minimum even here, to keep costs controlled as well as to show some intelligence and maturity insofar as what we need and what we should be doing), things like vaccination, research on these issues and related things like epidemiology, etc., should be performed.

Such a Federal Public Health Service should not, of course, descend into PC and other idiocy such as behaving as a surrogate parent or worse, trying to control lifestyle decisions, engage in food faddism or other politics, or bombard us with idiotic, annoying ads about food, exercise, or other issues. (The Ad Council is bad enough as it is now; we don't need a Washington that behaves as Singapore would do!)

Actually, Leonidas, I can visualize several scenarios in which elements of both the liberals and the conservatives proposals could be incorporated. But I'm still trying to stay away from policy specifics and let the concepts themselves digest.

Polimom--

I'm going to try to be a little clearer.

It seems obvious to me that both catastrophic and non-catastrophic providers have to "administer an interface and reimbursement system that was developed and inserted into their province." This isn't unique to the non-catastrophic provider. Providers of all stripes perform medical tasks and hire business people to handle the administrative end of things.

I understand that both catastrophic and non-catastrophic events occur. I understand that health care providers intervene in both cases. I understand that paperwork gets filled out by both catastrophic and non-catastrophic providers. I understand that the paperwork gets submitted to the payers and the providers get paid.

Currently, people have one insurance policy that covers both catastrophic and non-catastrophic events. That means providers have to submit bills to one payer per patient. (In fact, people on Medicare are generally required, or maybe just advised, to also have supplemental insurance, which would mean two payers per patient.)

Under the two-tiered system you're proposing, would each patient have twice as many payers?

Also, wouldn't each patient have to pay into two systems--one for catastrophic coverage, one for for non-catastrophic coverage?

Obviously, I'm not getting your point. Maybe you could just tell me where the cost savings are coming from?

Leonidas wrote: @ Polimom You might find this interesting: http://www.aei.org/docLib/20080818_HowtoFixMedi

Leonidas, do you think your link to an American Enterprise Institute "Document" (sic) adding new "facts" or "truths" to this discussion?

The American Enterprise Institute for Public Policy Research (AEI) is a conservative think tank[1] founded in 1943. Its stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and responsibility, vigilant and effective defense and foreign policies, political accountability, and open debate."[2] AEI is an independent non-profit organization supported primarily by grants and contributions from foundations, corporations, and individuals. It is headquartered in Washington, D.C.

AEI scholars are considered to be some of the leading architects of the second Bush administration's public policy.[3] More than twenty AEI scholars and fellows served either in a Bush administration policy post or on one of the government's many panels and commissions.[4] Among the prominent former government officials now affiliated with AEI are former U.S. ambassador to the U.N. John Bolton, now an AEI senior fellow; former chairman of the National Endowment for the Humanities Lynne Cheney, a longtime AEI senior fellow; former House Speaker Newt Gingrich, now an AEI senior fellow; former Dutch member of parliament Ayaan Hirsi Ali, an AEI visiting fellow, and former deputy secretary of defense Paul Wolfowitz, now an AEI visiting scholar. Other prominent individuals affiliated with AEI include David Frum, Kevin Hassett, Frederick W. Kagan, Leon Kass, Irving Kristol, Charles Murray, Michael Novak, Norman J. Ornstein, Richard Perle, Christina Hoff Sommers, and Peter J. Wallison.[5]

These are the people who were proven to be the liars and flim-flammers that unfortunately lead us into the Iraq War? Your reference to the AEI regarding Health Care is like linking to the PNAC to sell us on the War in Iraq.

DLS -- please don't misunderstand me, but I am having trouble reading your comment because it's so full of unhelpful partisan snipes and ideological digressions. I wish it were more focused, so your actual ideas were clear.

"The study finds that there’s no case here for undue enrichment of shareholders or over-compensating CEOs"

This is great emotional fodder for the pro-Dem-effort kiddies and those on the margin of this group, and the Dems' health care project is failing, and now that they're getting worried and desperate, they're now attacking the insurers again and now approaching the topic of executive compensation.

* * *

"a public option is seen as the gateway for mandatory universal single-payer healthcare"

That has obviously what it has always been, from the very beginning. It is incrementalist and "indirect," as bolder and bigger moves by the Democrats are riskier, for most Americans don't want a mad rush to Medicare for All or (what they also fear, something neglected) something different and worse (which is what the inepitude and unnecessarily complexity of one Democratic legislative effort after another leads Americans to reasonably fear). The incrementalism is not static but (obviously!) will (and is meant to!) result in the displacement and (permanent) substitution of public for private care (the "crowding out" issue).

Loosening the eligibility criteria for S-CHIP, which concerned and offended people before the 2008 election, to enlarge the number of beneficiaries, was the incrementalist stunt tried earlier by the Dems. Loosening eligibility criteria for Medicaid would be a similar measure. Et cetera.

Such incrementalist measures, with their additional (and intended) "crowd-out" effect, are cause enough for concern by many, but what makes Americans currently concerned more an dmore are the other details that can easily be said to be unnecessary. (Worse still is the way the Dems have "worked" on this legislation, the worst-yet example of poor quality as well as poor behavior, which also concerns and offends Americans.)

The effort (and the reputation of the Dems, by their own hand) is failing, which is why the Dems are stooping, such as to appeal to envy from the resentful children who still support this effort or may have recently wavered but might be lassoed and returned to the herd if the right emotions are approached. Hence the effort now by the Dems to demand financial details from insurers, including compensation data.

George, thanks for hanging in there and working this through with me.

"I understand that both catastrophic and non-catastrophic events occur. I understand that health care providers intervene in both cases. I understand that paperwork gets filled out by both catastrophic and non-catastrophic providers. I understand that the paperwork gets submitted to the payers and the providers get paid."

First off, there aren't "catastrophic and non-catastrophic providers". There are only providers.

Insurance policies are triggered (and payment kicks out) at the time of the covered event. That's it. End of involvement.

In terms of who bills, or who they're billing: if people had health funds at their disposal (doesn't matter, for purposes of this discussion, where those funds come from), then I could easily see a point of delivery (read: medical provider) transaction that billed directly to that health account.

As to whether a patient would "pay into" two systems: yes, a catastrophic coverage policy would be separate. But you asked:

Under the two-tiered system you're proposing, would each patient have twice as many payers?
In the scenario I'm using for my response here, I would suggest that the insurance policy pay into that same health account. So no, the actual transfer of funds would only be between the patient and the provider.

I should add that your question is taking us into a level of detail that may be too deep for this introductory post.

@ Polimom

"Actually, Leonidas, I can visualize several scenarios in which elements of both the liberals and the conservatives proposals could be incorporated"

oh I certainly can as well, not all of the Democratic ideas are bad, but I think they will be much more reluctant to give up their philosophy of healthcare as a Right and something the government owes them, in order to come up with a system that actually works and is self supportive than Conservatives will be to give up ideological aspects in your new system. This is not saying that Conservatives are any less stubborn than Liberals, this is just saying that your ideas are much more compatible with limited government, personal responsibility, and fiscal restraint, than they are with the idea that government owes the people the "Right" of healthcare.

"so full of unhelpful partisan snipes and ideological digressions"

There are no substantial digression, and the "snipes" are identifying relevent issues. (It's identification, actually, of what is related and what affects what is happening and what might otherwise happen, too.)

The actual things that can be done instead are straight-forward to note in what I have posted.

"not all of the Democratic ideas are bad, but I think they will be much more reluctant to give up their philosophy of healthcare as a Right and something the government owes them, in order to come up with a system that actually works and is self supportive than Conservatives will be"

So true. We know that 2009-2010 at least is going to be a liberal, Democratic year, and that legislation passed in 2009-2010 is going to be Democratic, but that doesn't mean we Americans have to accept whatever (worsening) garbage that the Dems may rashly try to force on us. And we don't, increasingly.

"so full of unhelpful partisan snipes and ideological digressions"

Everything is relevent and appropriate. But if you want a limited scope, just sidestep the non-essential.

George -- I left out the most obvious cost savings in my prior response. Taking insurance companies out of the health care delivery models would remove their profits from the payment calculation. They would be returned to the traditional model of managing profits against actuarial risk: how often do people break bones? how many pregnancies become 'high risk'? What percentage of the population gets meningitis each year? etc etc.

Polimom--

Requiring separate catastrophic policies will mean additional administrative costs. I don't see how it can be otherwise. But it's possible that your system will save enough elsewhere to make up these costs. I guess we'll see in your future posts on this subject.

Thanks.

George, maybe I'm not understanding you. Do you see automobile insurance as an administrative problem?

"They would be returned to the traditional model of managing profits against actuarial risk"

"Traditional" would mean the following:

1. Experience rating. The problems with pre-existing conditions (no insurance, a much higher premium that makes insurance unaffordable, limitations and exclusions for such conditions and a higher premium as well, reliance on the high-risk government poll that has much higher premiums and is unaffordable) would remain, just at lower cost with true (catastrophic care) insurance than with comprehensive care.

This can be ameliorated by something I've noted before: Go to "community rating" over a sufficiently large population (likely with mandatory purchase to spread the per capita cost over the complete pool sought).

2. "Health care delivery" (comprehensive care) would revert from insurers (who acquired HMOs) to HMOs.

(Prior to the insurers, HMOs were the frequent villain in the health care scene.)

"Requiring separate catastrophic policies will mean additional administrative costs."

George, you're right. This is whether or not there are two parties (true insurance, comprehensive pre-paid care) or three (also government, whatever agent you can identify, which would help low-income people at least if not engage in something I mentioned earlier, taking the role of preventive and related medicine).

DLS -- yes, the HMO's are a possible delivery vehicle for health care. So, too, are the "co-ops". But when we're talking about point of service care, the dynamic changes because we're not trying to price toward a minimum number of people to achieve a pool rating. There are any number of options when we remove the "insurance rating" limitations.

Re: pre-existing conditions. Because of the mess we've gotten ourselves into, this is far and away the most challenging situation (imo). I've been mentally playing with a few different thoughts, but I'm thinkin' care for someone who has already been diagnosed with a heart condition (ongoing care related to the heart condition) falls under "routine care", after a certain point. I also think it's downright ridiculous (and appalling) that they are cut off from the current system for routine care, generally.

"Prior to the insurers, HMOs were the frequent villain in the health care scene"

Actually HMO's are essentially just insurance companies.

Davebo, as was pointed out downthread -- the HMO's were evolved by the insurers. I don't know why they have to stay that way, though. Essentially, they're a group of medical providers linked together to provide care. Such an approach isn't a bad thing when seen as health care rather than insurance.

Polimom:

This is one of the most enlightening, thought-provocative and civil discussions I have had the pleasure of reading at TMV--I am learning a lot.

Thank you for bringing up the subject and for keeping it on track (I now feel kind of bad for my off-topic remark referring to Sir Winston Churchill)

Perhaps one of the reasons it has been so instructive and "readable" is that most "commenters" have tried to keep the partisan politics out of it...with one notable exception.

While the particular writer may have some excellent ideas, comments such as the ones below (while they may appeal to the partisan reader), IMHO only serve to--to be frank--turn the objective reader off and cause him or her skip over what may have otherwise been some excellent comments:





"What the silly children on the left believe...


...rather than what the Dems want to do (if they know really what they are doing; their effort is sloppy and when not pathological, looks to be, as usual, haphazard and without coherence and other attributes that require thought rather than aimlessness that their experimentation or bungled efforts typically reveal), let's say that eventually the federal government is going to be more interventionist (and more intrusive, etc.) in health care, and that a program of prevention (not encompassing the stupid "wellness" features and language, hopefully)...

We know that many on the far Left (who normally are represented by the liberal Dems in Congress and as he has revealed openly now, by Obama currently) are fans of "public health," and what that term typically means. (It's a definite leftist entity insofar as politics related to it are concerned)..."

This is great emotional fodder for the pro-Dem-effort kiddies and those on the margin of this group,

The effort (and the reputation of the Dems, by their own hand) is failing, which is why the Dems are stooping, such as to appeal to envy from the resentful children who still support this effort or may have recently wavered but might be lassoed and returned to the herd if the right emotions are approached."

Thanks again

""Prior to the insurers, HMOs were the frequent villain in the health care scene"

Actually HMO's are essentially just insurance companies."

Well, comprehensive health care (providers as well as provision, even) under the guise of "insurance."

* * *

"IMHO only serve to--to be frank--turn the objective reader off "

CORRECTION: " ... subjective [who dislikes it or doesn't wish to face it]"

It's all relevent. Some may be unnecessary (and you are trying to be creative and contrive a fictitious moral high ground, perhaps, as your way of resenting it). Had you said that only (i.e., leaned toward truly being objective) you would have been on firm ground (rather than expressing resentment and repeating text in a way that truly was unnecessary).

The distinction between true insurance (which in health care would mean catastrophic care) and what we often are discussing instead, which I insist on clarifying frequently (it is comprehensive health care, what is meant by "health care") needs to be made; aside from the political and related quasi-philosophical issues raised by use of "insurance" to mean something more broad and general, this also involves what is the subject as well of what should or shouldn't be provided by government (not only that decision, but the scope and size of what is to be provided as well as the cost).

[sigh]

Yes, the distinction needs to be made and is being neglected, or the word "insurance" misused, currently.

Essentially, they're a group of medical providers linked together to provide care.

I disagree. Essentially they are a health insurance company that limits which doctor you are allowed to see and what that doctor is allowed to charge for various things.

The doctors enrolled still see other non hmo patients and are merely contractually obligated to always take on new patients.

Insurance companies also effectively limit what doctors are reimbursed, just not under prearranged agreements.

In the end, an HMO is an insurance company that limits what doctors/hospitals you can utilize.

@ D.E. Rod

" This is one of the most enlightening, thought-provocative and civil discussions I have had the pleasure of reading at TMV--I am learning a lot."

I'll fathom a guess that the lack of a partisan thread headline was a contributing factor to this. If you start out with a shot at the other side, is it any surprise that you will get a fair amount of partisan commentary for good or ill?

Davebo -- I see why you are saying that. But let's do a thought exercise. Let's pretend I've waived a magic wand and now insurance companies are not involved directly in health care.

Now further pretend I'm a doctor, and I decide to get together with a bunch of other medical folks (pediatricians? oncologists? orthopedic surgeons?), and we put in a lab while we're at it (and staff it). And then we, as a group, decide that we want to expand our client (patient) base by offering them a set of services at a discounted price.

Am I still part of an HMO as we've thought of it in the past? Nope. Don't I sound, though, like I'm part of a health organization?

Polimom, thanks for the follow-up.

"[W]hen we're talking about point of service care, the dynamic changes because we're not trying to price toward a minimum number of people to achieve a pool rating. There are any number of options when we remove the 'insurance rating' limitations."

Well, aren't we, in this case, trying to change it so that there are no limitations (exclusions) at all?

I should have added (would that have been welcomed?) that "community rating" has long been sought by reformers, including the "Medicare for All" "single-payer" people, with the assumption that nobody would be excluded from the community -- that all would be included in the community sought (typically, the entire nation). The point here being that the main thing is to ensure everyone gets what they need or want, in theory.

Note that this is separate from the the distinction between comprehensive care and true insurance; the assumption is made that whatever it is that is wanted to be provided to everyone is agreed on or reasonable. But sooner or later, what everyone should be able to get would have to be addressed.

* * *

"I'm thinkin' care for someone who has already been diagnosed with a heart condition (ongoing care related to the heart condition) falls under "routine care", after a certain point. I also think it's downright ridiculous (and appalling) that they are cut off from the current system for routine care, generally."

Oh, there are a number of reasons why almost everyone is in favor of some measure(s) of not only health ["]insurance["] reform, but health care-in-general reform.

To me, even the "thinnest" "broad" kind of health care, such as should probably fall into the category of "public health" and be administered for, example, by the Federal Public Health Service I had written about earlier, could be used in a way like this. Note that some preventive measures like even testing or screening are not cost-effective over large populations (including the entire US population), so no matter how good they are in theory (including their future-cost-reduction potential), they can't and won't (or at least shouldn't) be applied to everyone. But we could at least have a "multi-tier-" effective set of tests that people could get. Say they get the basics (the cheapest stuff) during annual or biannual exams. If these basic (cheapest) tests show anything wrong, then more tests would be done (as part of "insurance" or as part of a federal or other government public-health measure, as a routine act). And in theory, anyone who had a chronic condition would have more tests or more other kinds of care as a routine matter -- testing, long-term pharmaceuticals, or whatever all could be under the public health system, which would be integrated with one's "personal [individual] health" care "world" by the ideal "liason" for this: one's personal (general or specialist, if a chronic condition) physician.

(These things are easy for anyone to conceive, but I also write from experience of facing progressive chronic illness, diagnosed almost thirty years ago.)

In the example you're thinking of, the person with a heart condition would not be under routine (needed) care, but possibly (or likely) under the care of a cardiologist rather than a G.P. (though you can always say that there's more than can be done to empower GPs in addition to the "wholistic" role they can play).

"and we put in a lab while we're at it (and staff it). And then we, as a group, decide that we want to expand our client (patient) base by offering them a set of service"

1. Some would frown deeply on self-referrals as unethical, but I've found it greatly convenient in practice, as a patient who needs lab work. Visit the doctor, get the blood drawn right then and there is the way!

2. Someone asked a while ago, What do we do with abandoned Detroit over-bloated dealership casualties post-bankruptcy? Why not labs, clinics, community medical centers? (currently neglected tangible stuff)

* * *

"Am I still part of an HMO"

Semantics! HMOs always were about health, or more precisely, they used the "insurance" guise (as a way to avoid and reduce costs, and charge better prices than they would without lack of suitable cost-related information) . HMOs are nominally and legally insurers under this "insurance" guise, but again, the product is not insurance (against unforeseen, avoidable, avoided events) but comprensive care.

HMOs acted as "insurers" providing comprehensive care, were money-makers, and so were attractive to the conventional, true insurers to acquire -- it was natural, in that sense.

* * *

"If you start out with a shot at the other side"

Or if there is shooting (elsewhere on this site, and with this subject, everywhere, currently) ... the shooting and the motives are all relevent, if unnecessary in the strict sense. In this case, some not only fail but refuse to distinguish between true insurance and the broader scope involving health care, and there are so many other related issues and goings-on...

I see what you are saying Polimom but I've always thought of it as more of a top down process.

Regardless, I think we should be looking to detach our healthcare provider from our employers and for a lot of reasons.

Take the boom in recent years in employee leasing companies like Administaff. Part of it is obviously lowering insurance costs through large groups. But there is also incentive to provide management (real employees) with much better benefits than workers without breaking the law.

Additionally in an economic downturn as a business owner you can face a choice between layoffs, or decreasing or eliminating completely the portion of the insurance cost paid by the employer. At this point employees are faced with a choice. Pay the difference themselves, attempt to get their own coverage, if possible, or begin looking for employment elsewhere at the worst possible time.

I still think single payer with the option to go private is going to be the only answer. And I mean smart single payer with negotiated volume drug discounts, etc.

I've always thought of it as more of a top down process."

You and everybody else, Davebo. That's why I'm trying to stay so closely focused on this discussion today. Changing the landscape requires a difficult mental shift.

"I think we should be looking to detach our healthcare provider from our employers and for a lot of reasons.

I agree, also for a lot of reasons. I'm hoping to start talking details in follow-up posts.

@ Davebo

"I've always thought of it as more of a top down process."

Thats pretty much whats gotten us into this mess, and a lot of other ones. We haven't taken JFK's words to heart, "ask not what your country can do for you, ask what you can do for your country." We tend to think in terms of "whats in it for me" rather than "whats best for the nation" We want the security blanket but we don't want to pay for it, We want good healthcare, but we are not willing to work for it" "We want to help the poor, but we want government to take care of it instead of reaching into our own pockets and donating", etc. Change does not start from the Top Down, change starts with US, anything from the top down has a pricetag attatched of political favors, backroom deals, someone making money off the efforts of others, etc. "Change you can believe in" is when you as a patient decide that you don't need an x-ray when you are just getting stitches. When you decide your just having a bad day and not suffering from depression and need that new pick me up pill even though your insurance covers it.

Also @ DaveBo

"Regardless, I think we should be looking to detach our healthcare provider from our employers and for a lot of reasons."


One you didn't mention is the burden that healthcare via employers places on US companies in global competitiveness with countries that have socialist healthcare systems. That along with our high corporate tax rates compared to other nations and the fact that we tax our companies globally and not territorially put us at huge disadvantages. But thats another discussion.

Leonidas

Believe me, I know about that burden. But the problem with detaching health insurance from employers is that it can be an incredibly complex undertaking to shop price versus coverage. Hopefully a business has someone, even if only a consultant, who can wade through the print of an insurance policy.

I remember thinking last year sometime that perhaps what the government should do is certify a selection of policies. Lay out in clear terms what is covered and what isn't. What deductibles and maximum payments will be, and allow insurance companies to submit policies to the government for a variety of costs/coverage levels and "certify" that this policy meets the criteria of policy "X". Set a scale from all in covered to catastrophic only.

No insurance company should be required to submit policies for certification. But those that did would have a marketing advantage and consumers could compare apples to apples which is very difficult for the average person to do today.

But the problem with detaching health insurance from employers is that it can be an incredibly complex undertaking to shop price versus coverage.

And if you keep to the premise of this post, wherein insurance isn't the conduit to health care? Is it still complex?

Polimom,

One concern about a two-tier system is we'd pay more premiums for less coverage.

Another thing I haven't seen seriously looked at is the differences in cost for drugs and other services in the US so much more than in other countries?

@DaveBo,

Sure business has a person that can wade through, to find the best deal for the company, not necessarily the individual. People need to take responsibility. Now I'm not opposed to the government establishing a database to facilitate people searching for insurance across state lines. Thats actually a positive governmental approach that empowers the people instead of trying to put them to sleep.

That being said, I'm against certification as you detail, it only gives room for influence peddling and lobbyist working on the appropriate Congressmen to set the standards for such certification. Have a database, invite everyone into it and have prices and terms of coverage in a simple uniform format, let the people do the rest. If people want to see ratings they can go to consumer report or another consumer advocacy site.

Hi Rambie, thanks for joining in.
One concern about a two-tier system is we'd pay more premiums for less coverage.

I don't see how. "Premiums" in the context of this post, would be for "catastrophic coverage" -- and are typically much much lower.

A liberal argument so open-minded that the proponents cannot agree even with their own side.

Sorry, I WANT HEALTHCARE NOT INSURANCE!

FULL nationalized healthcare is the ONLY answer. Its just a matter of time before this capitalist pig paradise becomes the last nation to institute that which is obviously moral and just!

Open Minded? HA! We only come out of our corner TO FIGHT!

VIA LIBRE`!

"Have a database, invite everyone into it and have prices and terms of coverage in a simple uniform format, let the people do the rest. If people want to see ratings they can go to consumer report or another consumer advocacy site."

I think that sounds great...and why not add a public option to that list while we are at it ;)

While I really like the different approach and the spirit of this thread, I've lived in a health care system where both public and private options were available...and things were cheaper and simpler in that system.

No matter what happened to you...you are were covered. 10 Euro copay for the first visit and that was it.

I might end up moving back some time soon...we'll probably go private this time. Why...because with the more expensive private care you get access to the chief surgeon, not just any surgeon. In the private system you get any drug you need, not the generic equivalent or the cheapest of the 5 different options.

So we have the option of going with a private insurance that offers higher quality for a higher price or the public option that is cheaper, but not as good.

Not exactly a terrible thing.

Father Time

" Sorry, I WANT HEALTHCARE NOT INSURANCE! "
Your wishes are answered, you have a public option:
http://www.goarmy.com/benefits/health_care_and_...

"Ask not what your country can do for you, ask what you can do for your country."

Shannonlee,

"I think that sounds great...and why not add a public option to that list while we are at it ;)"

There already is one, they are just waiting on applications,
http://www.goarmy.com/benefits/health_care_and_...

As a former Senior VP of Prudential Healthcare I have found this discussion interesting. After reading 60 plus comments here are my thoughts on what has been said so far.
1 - The advent of full comprehensive medical coverage started during the Korean war. There was a wage freeze at the time so generous health benefits were awarded by corporations as a way to get around the wage freeze. It was not a political ploy by the Democrats but Insurance companies certainly did not object to the added revenue. This was strictly a capitalist reponse to problems retaining qualified employees given so many men were overseas at war.
2 - There is no question that HSA's and high deductible plans will save money in the short run. However, they can start to have problems in the longer run. Namely, the reluctance of people to spend money on preventive health. One of the ways, I overcame this is by providing a premium discount for the following year if the insured had an annual exam. This could be expanded by providing further discounts if the insured followed up on the physician's advice.
The other long run problem is the high deuctible plans exacerbate the cost differences by age. In other words for young healthy people the high deuctible plans are a real advantage. Utilizing this advantage makes the pool for older works hgher cost to the point premiums on the catastrophic portion start to rise dramatically. In effect the excess premiums that insurance companies collected on the young are lost, making premiums on the rest of the people higher.
Another problem is that purchasing medical care is unlike any other market driven practice. If you are really sick, you end up doing whatever the doctor tells you and thus are not controlling anything. Also because there are so many parts and participants to the health care process, it's impossible to quantify pricing. For example, if you have a heart attack you go in whatever ambulance arrives to an unknown price. The ambulance takes you to a hospital, maybe even one you are unfamiliar with. Said hospital may or may not be in your network. The ER doc does a bunch of tests and gives you a bunch of pills - no cost information available. You end up in an operating room for an angiogram and you are subject to the mercy of whatever cardiac surgeon and anesthesiologist happens to be on call that day. Cost differences for said personel can vary by tens of thousands of dollars. While under 100% high deductible plans this will not make much difference - such plans are on their way out and 80% plans will be primary in the future.
3 - HMO's are insurance companies. The idea that a group of docs could get together and run their own plans died in the early 90's. They simply did not have the administrative saavy and financial resources to run such plans. All it took was a couple of premature babies and the docs were bankrupt. It takes many millions of dollars to be able to handle the risk in healthcare expenses. As soon as the docs start hiring administrative, business, marketing and financial people they are no longer just a bunch of docs that got together but a full-fledged business subject to the profit pressures of their financial backers. Kaiser and Group Health up in Seattle are the only two full fleged non-profits left. Even the BX-BS plans are changing to profit making insurance companies.
4 - Pricing in healthcare is very complex full of jargon. It's all driven by CPT codes and there are thousands. The hospitals are driven by DRG codes and there is no such thing as given a person a set price for a knee replacement. An estimate can be given but as the case with mechanics and contractors, the price never comes in at that number. The entire pricing model of health providers would have to change in order to have a consumer friendly pricing policy.
5 - The idea that allowing insurance companies to cross state lines will save a lot of money is bogus. United Healthcare, Aetna, Cigna, Humana, Wellpoint etc etc already operate in 50 states. They can easily handle association plans and goups of small employers. The only ones who could gain anything by waiving state regulation are the small fly by night organizations who collect premiums and then disappear leaving insureds holding the bag.
6- The big money in claims come from chronic conditions like diabetes, cancer, and heart ailments. Controlling costs here is critical and the way to do that is with comprehensive preventive care - not high deductible insurance.
7 - Purchasing coverage as an individual is a daunting task. Even if you can read and understand the coverages and limitations and exclusions that's only about half the battle. The company's claim practices are crucial- What is their Usual and prevailing fee structure look like, what is their policy on new surgical procedures and techniques, what is their definition of medical necessity etc etc. Group coverage has the advantage of having the corporation as your advocate and believe me that works when it comes to claim problems. As an individual, you have zero power in disputes and little in the way of cost effective ways to fight.
8 - Tort reform is a minor issue in health care costs. The total expenditure on malpractice annually is $60 billion less than 3% of the total health costs. How much defensive medicine is practiced and it's costs is anyones guess. More tests means more money so who is to say those extra things would not have been done anyway.
9 - Community rating and doing away with pre-existing conditions is absoluely essential. However, we do have to come up with a way to handle people who drop out of the insured market until they are sick. This can be handled with premium surcharges for a certain number of years or two year benefit cutbacks.

Anyway, my wife is calling me for dinner - so maybe more later.

jdleddell, thanks for the post. You made many of the points that I was thinking of after wading through the comments. I think much of what you are talking about are some of the essentials of health care that make it exceptionally complex and confusing policy area to talk about, much less reform. Many aspects of health care are inherently difficult to deal with because they are classic market failures--imperfect information, large externalities, large barriers to entry for producers. Asking people to comprehensively price and 'efficiently' make decisions is a dream. Certainly we can do it more efficiently.

I fear that decoupling preventive (maintenance) care from catastrophic will just lead to less preventive care. As people have to pay more directly for doctors visits and routine tests (which add up), they will demand less, as the consequences of their (lack of) action is really not very clearly tied to the action itself.

On top of that, where do you draw the line between maintenance and catastrophic? What about pregnancy? It is certainly a choice, why should others have to bear the cost (semi-sarcastic), either through tax dollars or increased private premiums? What about aged care, which as our health technology increases only lasts longer and racks up more costs? These are routine costs that are very expensive and difficult for individuals, especially poor ones, to bear.

In the end we need to do something to increase the price signal to consumers, albeit with the understanding that health care provision will never be a perfect market system. I think that decoupling is a good start, both decoupling of coverage types as well as insurance coverage from employers. But there also need to be incentives for preventive care and decisions that restrain costs, as well as some sort of redistributive system that assists the poor (*this last one is a largely normative proposition that certainly can be disagreed with).

Thanks for the thread Polimom and (most of) the posters!

jdledell -- thank you for your thoughtful input. There's a lot in there to think about, and as APR says, your comment illustrates a great deal of why this is all so very complex and difficult to reform. I've argued in other threads that expecting consumers to pick and choose specific treatments because they're paying for them is asking a bit much.

I'm going to have to come back around to some of your specifics in the morning -- it's been a long day here. In particular, I'm interested in further discussion of how we (as a society) can encourage ongoing maintenance / preventive care, while simultaneously decoupling some of these components.

APR -- I agree that reduced preventive care is a totally undesirable outcome. But there are incentives and approaches unexplored, I suspect. I think that conceptually, though, this is an interesting track, and it clearly moves thinking in a more creative direction. Thanks for coming into the discussion.

A couple of fast thoughts before I close down the computer (and my eyes) for the night:

Pregnancy is one of a number of medical issues that supports the argument for more individualization in the system. And your comment about aged care is congruent with jdledell's input regarding chronic conditions.

All in all, much food for thought.

And I don't disagree at all with your final normative proposition.
:->

@ jdeldell

" The idea that allowing insurance companies to cross state lines will save a lot of money is bogus. United Healthcare, Aetna, Cigna, Humana, Wellpoint etc etc already operate in 50 states."

Are those policies exactly the same in each state or are the prices and coverages different? Are there administrative costs to tailoring the plans to each area? Do these practices protect the largest insurance companies from competition as smaller companies do not have the resourses to engage in all these markets despite sometimes providing better service? How many customers would you estimate big insurance companies stand to gain if a public option is offered and insurance is made mandatory? How much additional money will that bring to big insurance companies?

Seems to me your position is a big insurance talking point in order to preserve competitive advantage and profit margins. I've defended big insurance in the past, but I'll only defend big insurance to a point. Since your a former Senior VP of a big insurance provider I appreciate your experience, but I regognize you potential bias. I'm not looking to debate the specifics of the insurance industry, I'm obviously outgunned and couldn't win such an argument if I were 100% right and you were 100% wrong, I'm just looking for clarity regarding my specific questions in a more or less yes or no format.

Also you stated:

" I overcame this is by providing a premium discount for the following year if the insured had an annual exam. This could be expanded by providing further discounts if the insured followed up on the physician's advice. "

I think that is/was and excellent idea. I commend you for coming up with that creative answer to a problem, its full of win-win.

Wow, 71 comments. I'm sorry I don't have time to read them all (something I always try to do before commenting). Your post brings up similar points as a previous post on TMV which I responded to: http://themoderatevoice.com/43298/health-reform...

I agree with you for the most part, that part of our problem is that insurance is paying for routine care, but I object to the use of the example of filling up your car with gas, and how your car insurance company doesn't pay for that. The difference is that if your car runs out of gas, it stops running, and your car insurance company doesn't have anything to do with that. However, if you don't get preventive care, you could get very sick and your health insurance company will have to pay for that. So, the health insurance companies have an incentive to make sure you're getting the appropriate amount of preventive care.

One possible compromise I suggested might be this: Your health insurance company pays for a few routine visits a year, to give you the chance to meet with your doctor and discuss options for potential tests you might want to run based on your age/health condition. But, beyond those routine visits, the consumer pays for their health care up to a maximum (maybe 3000 or 5000 dollars), at which point the insurance company starts picking up the tab. This would allow consumers to make an informed decision about the cost/benefit of doing particular diagnostic tests and elective procedures (thus decreasing the cost of health care overall as consumers choose to reasonably ration their own care, rather than having the insurance company or the government decide for them), while still covering the patient in case they need more extensive health care.

Is this plan perfect for everyone? No, but it would make sense for some. Would I advocated mandating this sort of system? Absolutely not. But it underscores the need for more choice in the system, which is severely hampered mostly by the employer-based insurance system. But I digress.

Polimom--

I certainly think there is more to car insurance than just writing a check to the shop that fixes your car.

I've never been in an accident, but a few years ago my neighbor's car was hit by someone who made a left-hand turn without looking for oncoming traffic. My neighbor was bleeding, so he got a ride in an ambulance to the nearest emergency room. (His injuries were minor.) The other driver walked away without a scratch, but since the accident his fault he was issued a ticket by the police.

In spite of that, since the other guy got home first, he called his insurance company first. He told his insurance company that my neighbor was at fault. They rented him a car to use while his car was in the shop. When my neighbor finally got home and reported the accident to his own insurance company, they (his term) "laughed" at him, because they'd received a report that the accident was his fault.

Since the other guy had been issued a ticket, my neighbor's insurance company eventually got a police report exonerating my neighbor. They called him at work the next morning and (he rolls eyes when he tells this part) "apologized profusely".

By that time, of course, my neighbor had already called a lawyer.

So sure, I see automobile insurance as an "administrative problem": hospital, repair shops, rental cars, many lawyers, adjudication through some court, someone to answer the phone and laugh at you, someone else to call you back and apologize profusely.

At any rate, it's obvious I'm not understanding the benefits of your idea. Since you're planning to write more about this topic, I hope you'll clarify them.

Again, thanks.

I must disagree, Dad. If health insurers have a stronger incentive than you do to to keep yourself healthy, the system is already seriously broken. If they can get you a better price for routine care than you can get on your own, that's broken too.

Poli,o,

Coming in real late to this one, but thanks.

It occurred to me that there is a way to implement the two tier system in the cheapest way.

Maintenance costs are well defined and is a service that would benefit from negotiated pricing.

With the government's 3.5% overhead as demonstrated in medicare, could a pseudo public plan covering everyone be an option? I hated to say the 'p' word, but private insurance could get then get back to insurance,:rating catastrophic risk over a pool a people.

I'm not trying to start a policy debate, but it seems to me it solves George's concerns and gives us all benefits.

Sound reasonable?

Dr. J,

Good point, but I don't think it's a question of who has more incentive. Both I and my insurance company have an incentive to keep me healthy. So they have an incentive to help me do what I can. We're both generally free market advocates I believe (if I'm wrong, forgive me for supposing). So what do you have against an insurance company wanting to do something proactive to help the consumer stay healthy, which is in their interest? Now, if they cover too much stuff (which you can argue they do), that would work against them because their costs increase due to the principle of diminishing returns. Therefore, it seems to me a sensible insurance plan would cover some basic preventive services, and then the catastrophic stuff (another difficult question is what is catastrophic), and leave the patient to cover the stuff in between. Again, in my view this would just be one option of many.

" If they can get you a better price for routine care than you can get on your own, that's broken too."

True, you wouldn't (or shouldn't) be saving money, but the point is that the insurance company adds an additional incentive to see the doctor occasionally. If it would cost you $100, then would charge you that $100 whether you go or not, so you might as well go. If the patient doesn't like that, they are free to shop for a purely catastrophic plan that is $100 cheaper (or maybe $90 dollars cheaper since you are then a higher risk since you might not be getting enough preventive care).

HemmD

"could a pseudo public plan covering everyone be an option?"

co-ops are still on the table for me, providing they can be run off their own revenuse and not eligible to recieve tax dollars. You could maybe offer initial funding loans that they would be required to pay back over time (maybe 10 years total) and if they proved unable to do so would be automatically shut down. This would give government a chance to show that they could actually run an effificient program.

Polimom,

An excellent post and a brilliant job of keeping the comments thread on track (and mostly civil).!

Much good input received since I went away a few hours ago to have a day off. Let me just comment on some of the most recent input:

"There is no question that HSA's and high deductible plans will save money in the short run. However, they can start to have problems in the longer run. Namely, the reluctance of people to spend money on preventive health. One of the ways, I overcame this is by providing a premium discount for the following year if the insured had an annual exam. This could be expanded by providing further discounts if the insured followed up on the physician's advice."

and

"I fear that decoupling preventive (maintenance) care from catastrophic will just lead to less preventive care. As people have to pay more directly for doctors visits and routine tests (which add up), they will demand less, as the consequences of their (lack of) action is really not very clearly tied to the action itself."

Indeed. The whole HMO concept was built around lowering the cost of preventive care so as to increase the amount of it that was demanded and received, thereby lowering the total (lifetime) demand for health care services. Anything that increases it's cost is likely to decrease the amount of preventive care demanded and received.

Having said that:
1) Is every $ spent on preventive care spent wisely (doctor visits for the sniffles, demanding prescriptions for antibiotics for the common cold!) or does the 80 / 20 rule apply here? (I'm not trying to identify which preventive care events are in the 20% that results in the 80% of benefits, but in theory it could be done.)
2) If we agree that whatever scheme emerges will have less than the socially optimum amount of preventive care, then we (i.e. the taxpayers) should probably provide a subsidy to reduce it's cost and get the level demanded and received to the socially optimal level (or at least, the 20% of interventions that result in 80% of the benefits). No, I don't want to offer suggestions on how to do that; it's late . . .

"Pricing in healthcare is very complex full of jargon. It's all driven by CPT codes and there are thousands. The hospitals are driven by DRG codes and there is no such thing as given a person a set price for a knee replacement. An estimate can be given but as the case with mechanics and contractors, the price never comes in at that number. The entire pricing model of health providers would have to change in order to have a consumer friendly pricing policy."

Absolutely! Pricing, not by the 'whole course of treatment' (for a given occurrence/ailment), and not even by the 'episode' of treatment, but by the 'component' of the 'episode' of treatment, is almost guaranteed to result in 'overtreatment'. That's a serious cost problem, but as a consumer of health care services, my preference would be towards being overtreated not undertreated. ANY solution to the cost problem needs to be careful not to drive undertreatment ("death panels", anyone?) any more than absolutely necessary, AND a second mechanism will likely be needed (audits? medical appeals to "non-payer organizations"?) to keep this tendency in check.

"The idea that allowing insurance companies to cross state lines will save a lot of money is bogus. United Healthcare, Aetna, Cigna, Humana, Wellpoint etc etc already operate in 50 states. They can easily handle association plans and goups of small employers. The only ones who could gain anything by waiving state regulation are the small fly by night organizations who collect premiums and then disappear leaving insureds holding the bag."

Sadly, this is true. The idea of allowing the purchase of insurance from other (lower cost) states is essentially a back-door approach to evading heavy handed regulation and excessively generous 'minimum coverage' levels that many state governments have mandated. The better solution (in keeping with Federalism) is to replace the politicians in the offending state(s) and have them repeal regulations and excessive mandates.

"The big money in claims come from chronic conditions like diabetes, cancer, and heart ailments. Controlling costs here is critical and the way to do that is with comprehensive preventive care - not high deductible insurance."

Yes! Along with:

"Community rating and doing away with pre-existing conditions is absolutely essential. However, we do have to come up with a way to handle people who drop out of the insured market until they are sick. This can be handled with premium surcharges for a certain number of years or two year benefit cutbacks."

The fundamental problem with chronic illnesses and pre-existing conditions is that that the insurance model does not handle them well. In a chronic illness, the risk factor has already materialized--the only questions are how much is it going to cost (lifetime), who pays, and what conduit will be used for the payment (private insurance? govt single payer?)

For pre-existing conditions, the fact that you have had 'it' once significantly increases the chances of you having 'it' again, moving you into a different risk pool--one which will have very high average costs. One solution is community rating (i.e. spread the costs over all in the community--whatever community one is talking about), another is direct subsidization by the taxpayer (several conduits might work for this, including single payer). Since:

"The big money in claims come from chronic conditions like diabetes, cancer, and heart ailments."

What seems needed here is some combination of incentivizing the right level of preventive care and direct subsidization of at least that aspect of the person's health care cost, e.g. US taxpayer pays XX% of the lifetime cost of treatment for diabetes, but the individual is treated the same as others for the risk of cancer, broken bones, etc. Preventive care incentives could take the form of discounts on health care coverage for annual physicals, weight loss/maintenance, etc. (Think discounts on car insurance for anti-theft devices, defensive driving education, etc.)

And finally (for tonight, anyway):

"On top of that, where do you draw the line between maintenance and catastrophic? What about pregnancy? It is certainly a choice, why should others have to bear the cost (semi-sarcastic), either through tax dollars or increased private premiums? What about aged care, which as our health technology increases only lasts longer and racks up more costs? These are routine costs that are very expensive and difficult for individuals, especially poor ones, to bear."

While pregnancy is not a totally unexpected event (usually!), and high risk pregnancies can be actuarially modeled, this "condition" can be handled by spreading the risk (i.e. cost) over the community (i.e. women, or at least women between Age1 and Age2, for example). Similarly, the risk of prostate cancer (a genuine ailment, and not a normal--though expensive--'medical condition') could be spread over the male population of the appropriate age groups. The real killer here is "aged care". Demographically, we have quite the pig moving down the python here. This will drive increased demand (via more demanders) at the same time as many. many new, experimental treatments start to come on the scene. Sheesh . . . . .

I propose we lave this one to the next round of health care reform.

Polimom,

This was a well-written and succinct post. Thanks for advancing the conversation.

I agree totally with you. I know people that go to the doctor when they have a cold. When did people stop knowing how to treat a cold without a doctors visit that cost a few hundred dollars.

So this will probably be deemed crazy all to quickly but I can tell you how I saved a good deal of money on my own healthcare. I do not believe in being on pharm. my entire life and I do not see MD's unless I have no other choice. This means that if I go to an MD and he tells me about a new pill to fix my issues I first ask if this will help make me live longer, if not I do not take it.
The reason is that I tend to go to either Naturalpathic Docotors or ND/MD's exclusively since I figured out that unless it is something life threatening most dr's treat symptoms not problems. For instance if I am having breathing issues and I go to an md they can give me a drug to help me out I am sure but I will pay for that script every month for the rest of my life or I go to an ND that tells me "quit smoking" and I save a lot of money and effort by stopping the cause of the issue. Many people have food allergies and other environmental issues that could be addressed with a lifetime of drugs and care or could be solved by not eating dairy or garlic or what have you. The rub of course is that i have to pay to see an ND out of pocket but I will say I never see odd charges sent to me months later that the DR forgot to bill me for or the insurance company will not cover either. If by "preventative" we mean putting people on drugs to fix symptoms this will be very expensive and unsustainable no matter what plan we choose but if we can find a way to ensure that "preventative care" actually tries to address the actual problems by actually covering allergy tests that are usually not covered and for that reason really expensive costs could come down if people know what is making them "sick". I am not saying this would fix everything but it would help a lot. I know to many people on drugs for the rest of their lives with an ulcer that they could fix even though they do not bother because the doc just hands them a monthly script. MD's are great when you actually need them but until it reaches that level an ND or Nurse Practitioner are much cheaper and they actually listen well and offer good advice.

Here are some additional thoughts and clarifications.
1 - Someone asked how many uninsureds might be covered with health reform. The best guesses in the Industry are some 20-25 million of the 47 million unisured. Mandatory coverage will never get everyone - auto insurance and Mass health are examples. Some people will always stay on the fringes of society. Nonetheless, even 20-25 million additional insureds means $80-100 billion in additional insurance company revenues - that makes it attractive from a capitalistic perspective.
2 - The issue of mandatory additional coverage in many states is a vexing problem. Making things like chiropractors, accupuncturists, social workers, drug and alcohol coverage, etc etc etc adds 5%-10% to the premium. Whether they are necessary or not depends on your individual perspective. Most times states pass these laws in keeping with our democractic capitalistic approach to things - if you give money to politicians you get what you want.
What I would recommend is plans and insurance carriers can opt for either a federal license or a state license, similar to what banks do. A federally chartered carrier could offer the same plan in all 50 states. Currently there is some semblance of this approach in that an Insurance contract is governed by the state of domicile of the plan sponsor and the same coverage can be offered in all 50 states. The same is true of self-insured coverage under an ASO or ASC approach. However, HMO managed care necessitates not only state specific coverage but also separate business entities by state - an expensive waste of money.
3 - It was asked if competition from little companies operating accross state lines would be adventageous competition to big insurance companies which already operate across state lines. There already are 7 national carriers, more competion than cell phone, car or computer companies so I don't see any real advantage.
4 - Medicare administrative costs run about 3.5%. However, this is not as big a savings vs group plans as most people think. Large employers under and ASO contract pay fees of 4%-5% on top of the actual cost of claims. Medium size employers pay fees of about 10-12% and small employers pay fees of about 20-25%, An individual policy runs costs of 30%. A single payer plan would cut about $200 billion in administrative costs out of a $2.2 trillion dollar health care budget. The cost savings of a single payer are half on insurance company side and about half on the health provider side as they no longer have to deal with most of their paperwork and plan confusion. The administrative savings would be enough to cover 47 million uninsureds.
4 - Even though I worked for an insurance company for 32 years, I believe ultimately we in the US will end up with a single payer plan - however it is too radical now for American culture and the job dislocations in the insurance industry alone would be enormous. However, the cost savings of size are too juicy to ignore. Consequently, I see the healthcare industry consolidating to the point we have only 2-3 carriers, each covering 100+ million people.
5 - One of the things that is going to have to be addressed is the geographical differences in the practice of medicine. The practice of medicine is primarily based on local physician culture - it's incestuous. Docs get together all the time both socially and business wise. If Otto the orthepaedist does knee replacements a certain way and if the docs like Otto, everyone follow that pattern. The referral game is the same way, if George the GP likes Carl the cardiologist, then many referrals are made and Carl will probably reward George with a case of vintage wine at Christmas and a few very expensive dinners and golf outings etc. The result is that rates of things like cesarean births, angiograms, knee and hip replacements vary by hundreds of percent geographically and there is no sound medical reason for the difference. This is one of the primary reasons health costs vary geographically far, far, far in excess of the differences in cost of living.
6 - One of the things that would be a game changer is taking the risk and management of high cost patients out of the insurance equation. This is a proposal that I tried to push in the 90's after Clinton's plan blew up, in dozens of trips to DC meeting with Congress staff and politicians. Essentially Congress would set up a quasi-public reinsurance facility like Fanny Mae and Freddie Mac for high cost patients. Insurance carriers would pay a reinsurance premium and the new Henry Health corp would cover claims in excess of $100,000. This would immediately make insuring individuals and small business far less risky and would save 10-15% of the premium immediately. Claims in exces of $100,000 amount to some $400-500 billion annually, an amount large enough to need government financing of the risk. This would allow carriers to concentrate on providing health care rather than spending so much time and energy on health care FINANCING.
7 - Ultimately we have to decouple healthcare from employers. It will aid our economic competiveness internationally, as well as make changing jobs less painful. What I would like to see replacing the employer model is a geographical model. Each state would have two competeing plans with annual rebiding to keep carriers honest. Smaller states would be grouped together to to provide critical mass. The geographical model provides incentives to attack the local disparity in medical practice approaches.

More later.

@ jdledell,

again thank you for your commentary but you did not address most of my questions above. Your explanation about small companies ans a wider market was not convincing, and looked more like a sidestep, all you said were 7 big companies operated nationally you did not address whether the prices for the same policies for these companies were the same in all State markets, whether the differences in the Strates were a deterrent for smaller companies to offer service in more markets, and other questions I posed as well,

jdledell -- you're bringing a lot of insight into this discussion -- I appreciate it VERY much.

Let's bring some of this together. I'm going to gratuitously lift a comment by CStanley from another thread, from a post started by elrod.

Americare - a defined basic health insurance package paid for through general taxes, and for those who can afford it and want it, a regulated market that offers supplemental insurance.

That's actually a model I might support, depending on how it's structured.

Like most conservatives, I think that our current system which prevents hospitals from turning away poor/uninsured people is responding to a true public obligation. I don't think that giving everyone a publicly subsidized, gold plated healthcare plan is a good method of reducing costs and in fact will add to it by increasing demand for routine care.

But having everyone covered by a basic, bare bones plan- particularly if it were along the lines of HSA/HDHP structure which encourages people to think about how the dollars are being spent- would allow people to get routine care without going to the ER. If it had that kind of individual accountability built into it, but also allowed for a sliding scale according to people's means- then it might work to reduce costs and keep demand under control. The sliding scale could be implemented in one of two ways- either by having the actual price for the policy adjusted to income, or by giving tax credits for people to purchase the policy and fund their HSA.

There should also be some focus on increasing supply, so that it's not so mismatched to the demand which will still increase somewhat under that scenario.

There could probably also be a gradual dissolution of Medicare and SCHIP, if the new system could accommodate those needs.

Elrod's phrasing is at odds with my post. I don't see the solution as a "basic health insurance package"; rather I think we should be thinking in terms of a "basic health care package". Since that thread evolved from a different place altogether, I'm going to just invoke semantics, and see if anybody agrees with me that there are possibilities here.

"I do think that people with good insurance often go to the doctor because they can. At the same time people without good insurance often don't go when they should."

Ron, thanks for your comment. I wonder at your use of the phrase "good insurance", though. In context, you seem to be suggesting that it's good because it allows people to use it for care that it not catastrophic.

I think this is focused on whether or not people make rational healthcare decisions if they have to pay out of pocket. The biggest study on this was done quite a while ago, the RAND study done in the 70's I believe. Overall, most people did make good decisions when they had to 'self ration', but there were exceptions, most notably among the poor. Simply put, it seems that if you have almost no disposable income after rent and food costs, you aren't likely to decide to go to the doctor every time you should, but if you have disposable income and are choosing between cutting a few dinners out or getting that yearly checkup, most people are pretty rational.

In my mind, sliding scales could do a lot to rectify that one flaw. Have everyone have to feel the effects of their basic healthcare decisions to some extent, but have that effect be proportional to their incomes.

A side note- there seem to be some great, issue oriented healthcare discussions going on at TMV this weekend. It figures that it's on a busy weekend for me- worked most of the day yesterday and today the weather here is idyllic and I don't intend to spend the day indoors. Hope that everyone will keep visiting these threads and continuing to post more about the issues instead of the politics.

Leonidas

I did not mean to deliberately sidestep your question, it's just that there is a lot of material in this thread to absorb. As to your question on big insurance companies vs small here is the best analysis I can give. For large companies - Microsoft, Verizon, GE etc, there is simply no way for smaller carriers to compete - the big 7 are the only answer. To break up coverage between different carriers by geography simply adds too much to the premium. For small employers who are located in one spot with say 50 employees, it's still hard for a small carrier to compete with the big boys. That is due to the large carriers having significantly more volume and thus driving better deals with hospitals and docs. With Insurance so expensive, a lower premium that large carriers can offer is 90% of the buying decision.


Large carriers use their cost advantage to pad profits by using the smaller carriers higher premium as a straw target and just undercutting it rather than pass all the cost savings along. Insurance companies don't make much, if any profit, on large employers. The buyers are too sophisticateed and competition is fierce amoung the large carriers since all of them want the big volume to drive their deals with health providers.

The plans offered by large carriers are usually consistent state to state. Most large employers opt for self insurance with the carrier providing administrative services only (ASO) This makes the palns exempt from state regulation by way of ERISA. There is no way for small entreprenurial companies to compete when premiums are so important. If I can get a computer from Dell for $500 vs having my local computer store build the same one for $1000, which am I going to buy regardless how much I like the guy at my local store? The same is true with large and small insurance carriers.

I started to write something last night but after reading it realized I was obviously trying to write when I was already too tired.

First, let me apologize to Polimom for those comments I made before questioning her honesty. They were over the top and I shouldn't have written them. Not being perfect, I cannot promise that I won't repeat that stupid error but I will be trying to avoid it. Secondly, I'm pleased that I can say that I agree with pretty much everything she has posted in this thread. I even agree with a post of Leonidas's where he is pointing out how advertising prescription drugs doesn't help our system at all.

This is something I had also been thinking of and trying to figure out how to say it. Polimom has done a wonderful job of it in this thread and the huge contribution by jdledell has made for some great reading on the subject.

Even the insurance model is not necessarily as bad as some people say in some cases. Davebo linked to an article in a post in another thread addressing some of the claims about systems outside of the U.S..

Going back to healthcare, though, one of the things that I consider vital to a decent health care system is that it include dental, vision and mental health care. This doesn't mean that a system should have to provide Lasik surgery but I would consider glasses reasonable (Think of what it means to your ability to work.) and dental shouldn't have to provide purely cosmetic procedures but anything to do with abscesses, infections, etc. should be as should tooth replacement. People die from poor oral health care. An article in The Nation referred to this as the hidden health care crisis. There are also economic issues. Two different articles I've read have pointed out the obvious, which is that it is just this side of impossible to get a job if oral health problems have cost you some of your teeth.

@jdledell

Thanks for your reply it is appreciated.

I do wonder about one thing, you say there is no way the smaller carriers can compete, yet they are still in business, seems to me they can compete at least on some level. Also you say that: " To break up coverage between different carriers by geography simply adds too much to the premium." That seems to support my position that there would be a cost savings at least for a portion of the competion in allowing for purchasing across state lines.

Would it make sense to make this a sticky post? There is a lot of great info and discussion here and I am afraid it is going to get buried.

Creating a reasonable, tiered system of health care is a real priority. Definitely, the first step, politically, is to make people understand that health care is not co-equal with insurance.

We really need to break down the costs of providing general health care. In this country we rely on high cost health labor (doctors) for services that in other countries would be provided by someone at the level of a nurse or pharmacist. It is ridiculous what people have to pay as an upfront cost for acquiring a prescription, for example. An expansion of Free Clinics offering a modest array of premium services, if universalized, would be a great addition to our health services. Also, an extension of authority for lower-level healthcare professionals.

One thing I am amazed that I can never find is a good revenue/cost analysis of all the members of a supply chain for a procedure or class of procedures. I don't even know how anyone can be expected to make a judgement about where our system needs to go without that kind of information. We don't really know whose costs are driving healthcare inflation.

Any ideas?