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Posted by on Sep 7, 2009 in Health, Politics | 140 comments

Is Low Medicare Overhead A Myth ?

One thing that has been mentioned in the debate over health care reform is the idea that Medicare has a much lower overhead than private insurance companies so to switch over to a government system would save money. But one of the problems is that this assumes the current overhead would remain the same if millions more joined the system.

As has been pointed out by some of the opponents to a government system, part of the reason that overhead with Medicare is low is because the costs of treatment are high. Most people on Medicare are older and thus have more health problems, accordingly it costs less as a percentage of those costs to manage the overhead.

For example consider two people, Charlie and Grandpa Joe.

Charlie is 25 and on private health insurance, Grandpa Joe is on Medicare.

During a given year it costs $ 50 in overhead for both men to cover the basic record keeping.

Charlie has $ 1,000 in medical services and it costs $ 100 for the overhead. So his total cost is $ 150, his percentage though is 15%.

Grandpa Joe has $ 20,000 in medical services and it costs $ 550 for his overhead. So his total cost is $ 600, or four times higher than Charlie. But as a percentage of total services he comes out at 3%.

If you put Charlie and his friends on a Medicare style system, the costs are likely to rise.

Obviously this is but one point, but is is one worth considering as we continue in the health care debate this fall.

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Copyright 2009 The Moderate Voice
  • joeaudio

    Obviously, this is a real stretch of an argument. If you mean to say that the more people covered by a program increase it’s overhead, yes, that would be true. But, please calculate the savings vs. the current system and get back to me on that.

    Now let’s talk about the millions of dollars the current system pays to CEOs and the billions in profits.
    Run that through you calculator.

    • JeffersonDavis

      I’ll be the first one to agree that the health system sucks. I think most Americans agree with that statement. One need only go to the ER and spend 6 hours watching a tech eat a sandwich while you or your child sits in pain; or goes to the doctor just to have pills thrown at you (compliments of his pharmaceutical rep).; to understand that the system is broken.

      However, in your statement, you mentioned CEOs and profits. Unless you address the pharmaceutical scam, get insurance out of medical decisions, and at least consider Tort Reform…..the CEOs of those entities (as well as attorneys) will still get the lion’s share of the money – only paid by taxes instead of directly.

      A few things need to be implemented in any possible health care proposal:
      1. Put in place a “wellness” plan that emphasizes and rewards good lifestyle choices (through lower premiums).
      2. Requres doctors to at least TRY to cure their patients, instead of immediately “treating” the symptoms.
      3. Eliminate frivolous lawsuits for doctors that act in good faith.
      4. Regulate the insurance industry with massive sweeping reform.
      5. Regulate the pharmaceutical industry with price caps on prescription drugs, and allow doctors to choose homeopathic remedies if available.

      Granted, if those five items made it into a bill; many CEOs would lose their jobs. Many pockets, too, would no longer be lined with money. I guess that why I will never see it in my lifetime, right?

  • SteveK

    Well said joeaudio. One thing for sure… Bankruptcy attorneys have a lot vested (invested?) in maintaining the status quo.

    Unfortunately for them the tide has turned in the Health Care Debate. The $1.66M/day “Big Boys” and their sycophants on the right HAVE to ramp up the offensive.

    More and more and harder and harder till they’ve pushed themselves over the cliff with their own inertia… A riot of lemmings.

  • joeaudio

    SteveK,
    Did you just pull that “Bankruptcy attorneys have a lot vested (invested?)” out of thin air, or did you read Patricks’s profile?
    “Patrick Edaburn is an attorney with a practice focusing on bankruptcy and estate planning.”

    • SteveK

      Medical Bankruptcy in the United States, 2007: Results of a National Study

      ABSTRACTBACKGROUND: Our 2001 study in 5 states found that medical problems contributed to at least 46.2% of all bankruptcies. Since then, health costs and the numbers of un- and under insured have increased, and bankruptcy laws have tightened.METHODS: We surveyed a random national sample of 2314 bankruptcy filers in 2007, abstracted their court records, and interviewed 1032 of them. We designated bankruptcies as “medical” based on debtors’ stated reasons for filing, income loss due to illness, and the magnitude of their medical debts.RESULTS: Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.CONCLUSIONS: Illness and medical bills contribute to a large and increasing share of US bankruptcies.

  • PJBFan

    It is amazing how those supporting the so-called “public option” are anything but tolerant of any concerns. Patrick did not say anything about opposing reform, or even the so-called “public option.” He merely noted that the overhead costs of a “public option” or its future, socialized medicine, is going to go up, and may cause problems in estimating the real cost of what this plan is.

    As well, let us note that the article cited, while coming from a reputable source, The American Journal of Medicine, the article does not talk about medical bills making up the largest portion of debt, but rather, notes that 62.5% of bankruptcies filed have 10% or more as medical costs. The article does not discuss what percentage, likely pretty low, have the argest part of the debt belonging to medical bills. Ladies and Gentlemen, this article is naught but a red herring posted by those who would take away any private involvement in the health care system and place it in the hands of government bureaucrats.

    Moreover, the ad hominem attacks implicit in the previous posts are typical Conservative Derangement Syndrome statements typical of most supporters of the so-called “Public Option.”

  • LionAslan

    you’re making us laugh PJ, your ad hominem attacks on those you accuse of ad hominem attacks are hilarious. And you can drop the “Ladies and Gentlemen” posturing too. Although maybe not, that makes a lot of us laugh too. Your presumptuousness is kind of funny.

  • Father_Time

    Facts.

    Countries with National Healthcare Systems have healthcare costs at a fraction of the costs of healthcare in the United states.

    Socialized Medicine simply does not cost as much as Capitalist Medicine. For government, or, for patients.

    NO population wants anything to do with a healthcare system like we have here in the United States, because it is not really a “system” anymore than car dealerships are part of a national transportation “system”. Its just free open range Rape the Public for all you can get medicine hiding under the guise of free enterprise. The world KNOWS this already! They also know that our “system” is many times MORE expensive while being many times Worse than virtually every other modern nation’s healthcare system out there.

    • JeffersonDavis

      You and I might actually agree on something!

      “rape the public for all you can get medicine hiding under the guise of free enterprise”

      Very well stated.

      However, we had the same situation with labor in the 1920’s and 1930’s (coal miners, steelworkers, sweatshops), where corporations raped the worker to maximize profits.

      We fixed that problem, not through nationalizing the industries and adopting socialism; but through legislation and oversight through a newly created Department of Labor. Capitalism is still alive and well in those industries.

      Similarly, socialism is not needed here. We could fix the problem through regulation and actually using the Department of Health and Human Resources for it’s original purpose: overseeing and regulating the healthcare, health insurance, and pharmaceutical industries.

      • Father_Time

        Socialism is already here and doing well in some circumstances.

        Healthcare is one area that needs full socialization in order to lower cost. We are the only modern nation that does not have national healthcare and our medicine ranks far below other modern nations, (and some not so modern), in most areas. It’s not nearly as important to save and industry than to protect our people as stipulated in the Constitution’s “provide for the general welfare” passage, not to mention simple morality. Actually under a socialized system, the only industry that would come close to being “sacrificed” would be the healthcare “insurance” industry which pretty much becomes a redundant waste under socialization. However private health insurance can be purchased in other nations. Interestingly foreign private health insurance is much cheaper than here, but it is generally a supplement for added perks that the national system does not provide.

        Also a correction on the labor movment. The labor movment started many decades before the dates you give here.

        • JeffersonDavis

          I know about the dates. Just been general. I was mainly talking about the Department of Labor portion of it.

          About the healthcare…..

          Still a little wary, man. Very wary.

          I agree whole-heartedly that the government should “provide FOR” the general welfare.
          Provide for does not mean PROVIDE.

          We have to be very careful.
          I, like the Founding Fathers, am very suspicious of government. It is not to be trusted.
          Once power is given away into the hands of government, it never returns.

          Like I said… I’m in, but with a wary suspicious eye.
          Can we also agree that the pharmaceutical corporations should also be regulated to a similar standard?
          They are the TRUE cause of most of the medical costs.

          • Father_Time

            Actually it does mean PROVIDE if private industry cannot do it effectively such as with Police, Fire, Defense, Air Traffic Control, Customs, Consumer Protection, Food and Drug Safety, or, other areas intimately associated with a government responsibility.–[Once power is given away into the hands of government, it never returns]– That is absolutely incorrect. In a Representative Democracy laws can change many times according to the will of the people. The population has power as long as every individual’s vote counts and those they elect legitimately represent their constituencies concerns based mostly on majority rule. It is the power of the government that protects you unless your majority vote is subverted by a minority interest leveraging undue power, generally done with money. You cannot vote out a corporation wielding power over you. You can vote out a politician. If you weaken government, you weaken the people’s ability to exert their collective power via law. The Bill of Rights within the Constitution provides for general protection of minority interests. Our forefathers sincerely expressed Federal Supremacy. Actually high medical costs range throughout the healthcare industry. From salaries to profits, it’s all way to high. No private industry answer can reduce cost to an acceptable level. Only socialized medicine can equitably return healthcare to all Americans. Other nations have solved this problem as we stumble around with a Capitalist system. However profit can still survive, it just has to me limited and regulated. In this respect we do lose free enterprise to a point concerning medicine, but capitalism will never die and it never will die.

  • TheMagicalSkyFather

    THe thing that gets me about the current system is that it costs so much that instead of getting wage increases we all have been getting insurance increases so the money that would have went into our pocket is being shifted to the stock holders and higher ups of insurance giants. In essence they are “spreading all of our wealth around” to wallstreet.

  • HemmD

    Patrick

    “part of the reason that overhead with Medicare is low is because the costs of treatment are high. Most people on Medicare are older and thus have more health problems, accordingly it costs less as a percentage of those costs to manage the overhead.”

    Your assertion is that due to the high number of expensive treatments, the Medicare overhead is artificially low. Medicare’s overhead of 3% is due to the fact that high cost treatments mathematically lower the percentage that overhead represents, so the make up of the participants within the group actually lowers the net overhead of the plan.

    Interesting idea, let’s apply your logic to Private Insurance. The patient pool for PI’s has a much lower incidence of expensive treatments; indeed, the large majority covered by PIs are basically healthy individuals with everyday minor medical requirements. Using your own logic, let’s evaluate the PI’s 30% overhead.

    Either private insurance is expending 30% costs for high ticket procedures or PIs must really be gouging most of its healthy clients to maintain its 30% overhead. If they expend a 30% overhead on catastrophic claims, they demonstrate no economics of scale. If they don’t have the 30% on all high cost procedures, the majority of patients must be paying at a 40-50% overhead rate for the 30% average to be maintained. So, which is it; are they ripping off the catastrophic cases or are they ripping off the vast majority of basically healthy patients?

    Thanks for your numbers game, it really helps support the public option.

    • CStanley

      Hemm, before we can play along with you, you’ll have to support your base assumptions. Even liberal proponents of public option and/or single payer who make the arguments about the differential in overhead costs, people like Paul Krugman or Jonathan Alter, are using numbers like 11.7 % (Krugman) or a range of 10-20% (Alter.)

      When you start with realistic numbers like those instead of your 30%, there are a variety of reasons that explain the difference (one of which is the one presented in this article, the fact that using a percentage basis is automatically going to favor the insurer that is covering the people who have higher medical costs per capita.)

      If you’re going to insist that the correct number is 30% for private insurance overhead, please show where you’re getting that from.

      • SteveK

        An article in Medical News Today back in 2004 quoted a New England Journal of Medicine Study that showed that between 1996 and 1999 the “The administrative structure of the U.S. health care system” is “at least 31.0%”

        Here’s the article: USA wastes more on health care bureaucracy than it would cost to provide health care to all of the uninsured

        Administrative Costs 1969-1999

        The administrative structure of the U.S. health care system consumes a large share of health spending. In 1999, administrative spending consumed at least 31.0 percent of health spending, according to a report in today’s New England Journal of Medicine. In contrast, administrative costs in Canada, which has had a national health program since 1971, are about 16.7% of health spending.

        Is smoke, mirrors and erroneous innuendo all that the anti-health reformers have left?

        • CStanley

          Sorry, Steve, but the opinion piece that you quoted is seriously misleading. Let’s go to the primary source that that article is based on, shall we?

          When you read the NEJM piece, you see that their methodology attempted to capture ALL administrative costs in the US system, which includes that which is paid by private insurance companies and that which falls under Medicare and other publicly financed programs.

          Here’s the part where they actually cite the overhead costs of private insurers (and lo and behold, it appears that this is where Krugman’s figure comes from):

          insurance overhead
          In 1999 U.S. private insurers retained $46.9 billion
          of the $401.2 billion they collected in premiums.
          Their average overhead (11.7 percent) exceeded that
          of Medicare (3.6 percent) and Medicaid (6.8 percent).
          Overall, public and private insurance overhead
          totaled $72.0 billion — 5.9 percent of the total
          health care expenditures in the United States, or
          $259 per capita (Table 1).

          Aside from the overhead costs of the insurers, the total admin costs in our healthcare system come from a variety of other sources (the article breaks them down into the other categories of employer expenses to administer healthcare plans, and the admin costs of hospitals, nursing homes, physicians, and home health agencies (these areas are actually where a lot of the hidden admin costs of Medicare are.)

      • HemmD

        CSDon’t like 30%? Fine, the logic is the same. If you wish to argue the percentage, you miss my point entirely. If PIs have fewer incidents of high cost, they must be charging higher per regular patient to maintain Krugman’s 11.5% overhead. So, writing a check for a doctor’s visit takes 11.5% of the total cost? Really. For a majority of those covered, PI’s “overhead” is a gouge. Check in the business world and tell me what other industry requires 11.5 % for simply writing checks on YOUR money. Do you think printing out SS checks requires a 11.5% overhead? You assume that the overhead you pay for normal medical needs is somehow representative of what’s “fair.” Where’s your proof of that statement?

        • CStanley

          Come on, Hemm, I’m sure you can acknowledge that tripling the correct number changes the argument quite a bit.

          And saying that all insurance companies do is ‘write checks’ is utter nonsense. If you want to seriously talk about what ‘overhead’ costs mean, then I’ll try to respond.

          • HemmD

            CS
            “And saying that all insurance companies do is ‘write checks’ is utter nonsense. ”

            I couldn’t agree more. PIs have costs to cover:

            Profit
            Department of Claim denial
            Marketing
            CEO salaries
            Profit

            If you’d care to put of percentage for each of these additional costs, I’ll be happy to tell you how much cheaper a private option would be over PIs.

  • Silhouette

    Here we go, another “why the public option won’t work” piece while 70% of the public wants it and wants goverment to make it work. These pro-anti-public option pieces run about 7 for every one pro-public that talks about how to fund that system via taxing harmful substances and so on.

    I’d like to see The “Moderate” Voice dip a little more in favor of what the real actual public wants and articles that explore how to make it work instead of being yet another media propaganda machine for the GOP’s interests. MINO..comes to mind here Moderate In Name Only..

  • CStanley

    You assume that the overhead you pay for normal medical needs is somehow representative of what’s “fair.” Where’s your proof of that statement?

    I’m not sure why I should provide proof for a statement I didn’t make. You infer that I think 11.5% is fair. I honestly don’t know if it is (I think the best way to assess that would be to look at other insurance industries, which would have similar needs to market their products, keep reserve funds, comply with state regulations and taxation, etc- but I haven’t found a source for those comparisons), and I assume that it could be driven down in some fashion by well thought out reforms. What I’m arguing against though is the false assumption that Medicare represents the correct model, or that the overhead costs of private insurance companies currently are the biggest area for reform.

    There are many fallacies in the assertion that Medicare overhead is so much lower than private insurance companies’. This article explains a lot of the discrepancies- it’s not even close to an apples to apples comparison because of the way the govt keeps the books- a lot of Medicare overhead costs are shifted to different parts of the budget.

    And, the previous NEJM article shows all of the administrative cost shifting that goes on in our entire system. If anyone can claim vindication in that argument, it would be the proponents of single payer- because it’s pretty apparent that the high costs throughout our system are at least in part due to the need to deal with multiple sets of complex regulation. Using this argument for public option makes no sense though because that plan only adds another layer of complexity to the whole system.

    • HemmD

      CS

      Your cited article backs my point nicely.

      If claim administration is roughly the same between Medicare and PIs, where do you factor in the denials, the profit, the high CEO salaries, or the marketing and lobbyist money? These are benefits you’re happy to pay to keep the public option out of the market?

      Why?

      • CStanley

        You seem to have skipped over large sections of the article, Hemm. Go to page 2, the section titled “General Administration” and read the subsection on Medicare. A lot of those salaries for people performing similar functions are not on the books for Medicare itself, but are covered under different parts of the federal budget. Since the govt doesn’t report this as Medicare admin costs, it’s impossible to tell how big the numbers are.

        As for why I’m not very concerned about profits being part of the cost, it’s the same reason that I don’t worry about my grocer making a profit, or my auto mechanic, or my clothing retailer. Profit serves a function in a market economy, and if it’s not working to perform that function than we need to figure out what is preventing that (instead of creating CEO boogeymen.) If you’re going to argue that instead of reforming toward a more competitive market, we must have a publicly administered system, then you’ll have to explain what takes the place of profits in such a system. As far as I can tell, proponents of govt run system seem to take it on faith that there’s no need for profit because our elected officials are public servants who will seek the highest efficiencies in the system for the public good. Somehow that doesn’t resemble any federal govt that I’ve seen in my lifetime, particularly in the US. I’m afraid that the elected officials will have to explain why they haven’t operated well with other programs like Fannie Mae, Freddie Mac, FHA, and yes, Medicare (which is going broke) before I can give them the benefit of the doubt to start up a new program.

  • CStanley

    Despite the snark, Hemm, it is true that those are all elements of a private company’s expenses. The problem isn’t their mere existence though, it’s that the current system doesn’t give us any of the upside from those things being present.

    Denial of claims is also known as prevention of fraud, which Medicare doesn’t do nearly enough of. When denial of claims is done honestly, it’s not a problem- but when the laws we have on the books aren’t enforced and companies deny claims that should be part of their contractual obligation, it’s a problem.

    Profits are the markets’ way of allocating resources according to the true desires of the customers. But that’s not present in our current system because no one can truly shop for the insurance product that would best suit them individually, nor do we have the power to drop one policy for another if we are dissatisfied.

    Again, it’s not the mere existence of these things that is the problem. In fact to some degree, the fact that they DON’T exist in other systems leads to other problems (no profit motivator in single payer systems is what leads to rationing, because all of the decision making about allocation of healthcare resources is made from the top down and needs are never correctly anticipated, for instance.) And as I already stated, the lack of claim denial leads to huge amounts of fraud and abuse in systems like Medicare.

    • HemmD

      CS

      “Denial of claims is also known as prevention of fraud, which Medicare doesn’t do nearly enough of. When denial of claims is done honestly,”

      PIs are preventing fraud, you have to be joking. Funny you mention Medicare fraud, PIs, doctors, and hospitals are the primary source of fraud. It’s not Granny making unwarranted claims, it’s health care systems producing false claims. Maybe a little less destructive lobbying influence that works against Medicare would help solve this problem.

      “Profits are the markets’ way of allocating resources according to the true desires of the customers.”

      Did you get this fairy tale form Econ 101? Customers want to be covered, and don’t want to be dropped if they get sick. 2nd leading cause of bankruptcy in the US is directly related to PIs giving their customerfs what they desire.

      “In fact to some degree, the fact that they DON’T exist in other systems leads to other problems (no profit motivator in single payer systems is what leads to rationing,”

      And rationing is not occurring for the profit margin now? Come on CS, the profit motive is good for nothing but perfecting risk aversion at the expense of people who are sick. If that means ruining a few people’s lives by denying coverage so profits don’t suffer; well that’s capitalism unbridled by a social conscious.

  • CStanley

    Funny you mention Medicare fraud, PIs, doctors, and hospitals are the primary source of fraud.

    And it would be happening in equal measure with private insurance policies if it weren’t policed, but it costs money- admin costs- to do so. Why is this even arguable?

    • HemmD

      CS

      “And it would be happening in equal measure with private insurance policies if it weren’t policed,”

      Explain to me why PIs would want to commit fraud upon themselves? They certainly have found benefits in defrauding the US government. Are you actually saying that Health South would defraud Blue Cross? Why, they both are too busy defrauding Medicare.

  • DLS

    Rather than correct the tiresome Constitutional ignorance or dishonesty about the “general welfare” clause or other resorts of and by failures (including the Preamble), I’ll simply note aloud that Medicare often underpays providers and results in cost-shifting to other, privately insured people. Were we to go to Medicare for All or to a “public option” intended (obviously) to replace private with public payment to providers, the cost problems will become worse, not better. Note that choosing arbitrarily (or for worse reasons, morally and economically) to lower payments to providers or to impose price controls (as Kennedy advocated in the 70s and 80s) is no solution at all — and arbitrarily taking $500B from Medicare now as part of the vague, inept “explanation” of how to pay for the current health care silliness (after deliberately avoiding the cost-payment issue at the outset) immediately made more intelligent people take notice of the mistakes or worse that are ongoing with health care.

  • CStanley

    Customers want to be covered, and don’t want to be dropped if they get sick.

    Actually a lot of them, unrealistically, want to be covered after they get sick as well, and somehow magically believe this can be done while still keeping premiums affordable for all.

    As far as dropping after people become sick, there are laws on the books to prevent this. Enforce them.

    • HemmD

      CS
      “Actually a lot of them, unrealistically, want to be covered after they get sick as well, and somehow magically believe this can be done while still keeping premiums affordable for all.”

      Huh? People who have paid premiums expect they are covered when they get sick? That’s crazy talk. What’s the point of me selling you insurance if you only plan to collect on it. You think I’m in the busin3ess for my health?

      And those pre-existing conditions are a god send. That’s what Medicare/Medicaid is for after the poor schmo goes bankrupt.

      somehow, You’re not convincing me.

  • CStanley

    Explain to me why PIs would want to commit fraud upon themselves? They certainly have found benefits in defrauding the US government. Are you actually saying that Health South would defraud Blue Cross? Why, they both are too busy defrauding Medicare.

    Hemm, please, stop and think for a moment. You wrote that PIs as well as doctors and hospitals commit the fraud. What I’m saying is that the healthcare providers would also defraud the private insurers if they could get away with it.

    In any case, I’m glad that you admit that the US govt makes itself an easy target for fraud. Can we agree that this is in part because there’s not enough expended on prevention of fraud in the Medicare program?

    • HemmD

      CS
      “In any case, I’m glad that you admit that the US govt makes itself an easy target for fraud. Can we agree that this is in part because there’s not enough expended on prevention of fraud in the Medicare program?”

      I admit that companies found guilt of medicare fraud should be held fiscally and criminally liable. Too bad they get off with a fine. Like I said, what’s the cost of FBI task forces dedicated to uncovering medicare fraud?
      How about the task force for drugs? illegal aliens? Those costs have to be figured in when calculating the cost of law enforcement. I hear PIs have their own police and legal system for prosecuting fraud. How much does that cost them?

      So the government program has to cover the cost of law enforcement and PIs don’t need to, that’s your argument?

      We’re not agreeing here, CS.

  • CStanley

    Huh? People who have paid premiums expect they are covered when they get sick?

    I don’t know if it’s you or me, but somehow you’re misunderstanding most everything I write today. Possibly it was my wording so I’ll clarify.

    I thought it was obvious, but the people I was referring to there are those who HAVEN’T been paying premiums but want to get covered after they are already sick- which would be the equivalent of calling an insurance company on the morning that you total your car and trying to sign up for a policy that will retroactively cover your accident.

    • HemmD

      CS
      “I thought it was obvious, but the people I was referring to there are those who HAVEN’T been paying premiums but want to get covered after they are already sick- which would be the equivalent of calling an insurance company on the morning that you total your car and trying to sign up for a policy that will retroactively cover your accident.”

      I never heard of anyone making this argument. If you’re talking about pre-existing conditions, I be happy to address that, but who would make the straw man argument you present?

      BTW

      It was a long weekend, maybe its me.

      • CStanley

        I be happy to address that, but who would make the straw man argument you present?

        Straw man? Are you aware that all of the plans so far proposed would force health insurance companies to insure everyone regardless of preexisting conditions? That’s one big reason for the high cost of reform- everyone wants to have their cake and eat it too.

        Now, I’m not saying that the problem of the truly uninsurable people isn’t real- but it strikes me that the current politically palatable ways of dealing with this are almost exactly analogous to the housing policies which sought to make mortgages available to those who really couldn’t afford them- and look how well that turned out.

      • CStanley

        Those costs have to be figured in when calculating the cost of law enforcement. I hear PIs have their own police and legal system for prosecuting fraud. How much does that cost them?

        I don’t see where we’re disagreeing. It costs money to address fraud- either on the front end through prevention or on the back end through law enforcement. But only in the case of PIs do we know the real cost of that- while any govt financed fraud prevention is not on the books for Medicare’s admin costs. That’s just one of many things that make the admin cost comparisons apples to oranges.

        • HemmD

          Sorry CS, but we don’t know the cost as you believe.

          Any fraud would entail arrest and prosecution. PIs don’t do those things, but you wish to calculate that cost when enforcing medicare fraud. That is not exactly equal representation. We don’t normally apportion cost of law enforcement to specific businesses in the private sector, why would you want to do that in this case.

          The case for pre-existing conditions works from the assumption that health care is a business. PIs divide your life into risk segments. If you’re in a low risk segment, we’ll be happy to take your money. They do this until one is old, then they drop you and let medicare take the hit. Of course, if you’re unlucky enough to suffer a disease out of the norm, you’re screwed. You’re either dropped or priced out of the market.

          If one looks at health care as a cradle to grave proposition, health segments have no meaning. We are all going to get sick and die eventually. That fact should be used as an advantage for the patient, not the private interest. Pre-existing condition is a fiction of the PI as a way to minimize risk.

          Mortality is the only fact you can count on, and health care that accepts that premise maximizes the health of its members.

          • CStanley

            Any fraud would entail arrest and prosecution. PIs don’t do those things, but you wish to calculate that cost when enforcing medicare fraud. That is not exactly equal representation. We don’t normally apportion cost of law enforcement to specific businesses in the private sector, why would you want to do that in this case.

            You’re still not getting my point.

            What is apportioned to private businesses are the costs of preventing criminal acts that affect their bottom line, like shoplifting for instance. Security to prevent that is part of the cost of retail, and fraud prevention in PI is a cost for them to do business. Medicare does little or nothing to prevent that kind of abuse- and the little that is done is put on the books of other govt agencies. Thus, lower admin costs for the taxpayer, but in all likelihood the costs of the fraud are far higher than they’d be if more money was put into prevention (but then the 3% admin cost would inch higher toward the 11.5% of private healthcare insurers, and add in some of the other things mentioned in the article and you see where the real spread comes from.)

          • HemmD

            CS

            So your underlying assumption is that PPIs are really good at preventing fraud. I will agree they are very good at producing fraud. As to Medicare being so inept at preventing fraud, why is it that so many PIs have been hit with medicare fraud cases?

            If you want t argue that there are many cases that the feds don’t catch, doesn’t that say more about the perps than the system? Your argument is that the feds aren’t doing enough to stop the people you want me to trust with my health care? No thanks. Arguing for the foxes in the hen house isn’t really a good way to show the upside of PIs.

          • CStanley

            If one looks at health care as a cradle to grave proposition, health segments have no meaning. We are all going to get sick and die eventually. That fact should be used as an advantage for the patient, not the private interest. Pre-existing condition is a fiction of the PI as a way to minimize risk.

            Mortality is the only fact you can count on, and health care that accepts that premise maximizes the health of its members.

            Sounds great, but who pays?

          • HemmD

            CS

            Who pays?

            Well, you currently pay for not only your families health care, but also for everybody’s care who don’t have insurance. Are you thinking a government option would not require premiums? With no pre-existing conditions, you don’t have to sell your house to pay for that re-occurring cancer or heart problem. Ask your current PI for a quote on your coverage if you have had either of the two examples I mentioned.

            CS, you rely on the illusion of good health to provide you with a sense economic security. Just pray to God you never draw that short straw, If one is healthy, they argue health insurance reform; if one is sick, one argues health care reform. You seem to argue the former until you reach medicare age, then you’ll be more concerned with the latter. Costs flatlined over one’s entire life will be more economically sound than the game of russian roulette currently being played.

          • CStanley

            CS, you rely on the illusion of good health to provide you with a sense economic security.

            As usual, we end up with the strawman argument where you guys pretend that I am happy with the status quo.

            I want reform that increases competition among health insurance providers and actually addresses the real costs of healthcare. The plans that you guys support do not show real potential to do either, which is why I reject them.

            As far as paying for the uninsured, reducing actual costs is the best way to get more people insured, especially since this ‘crisis’ of millions of uninsured people has come about as costs have skyrocketed (people being priced out of the market not due to preexisting conditions in most cases, but due to actual high prices) and as unemployment has risen.

          • HemmD

            I don’t recall supporting any known bill. I have steadfastly called for a public option, but I’ve never gone past the general discussion. This discussion was about allowing a public option or not. You seem to resist any call for that option. My disagreement with your objections have been made on a point by point basis. The only straw man arguments going on are couched in the hypothetical worries that the public option wouldn’t work, wouldn’t be affordable, or wouldn’t allow the free market to solve this crisis.

            The free market has had every opportunity to rectify the situation, and they have simply increased costs year over year. During that time, PIs have systematically lobbied against real reform and true competition – see the retail drug prices for medicare part D for one of many examples.

            So, we’re once again confronted with a proven system that expends an overhead of 3.5% and your fears that the public option available to all Americans would be disastrous. The PIs you have consistently supported have been found guilty of fraud, but you wish to keep your faith in them to make things right. The flat line costs over an entire lifetime demonstrate a mathematical and economic certainty for patient costs while the current system demonstrates wildly changing outflows that can cost people their very homes on an everyday basis.

            You say reducing costs is the best way to get the uninsured covered, but if PIs and their track record are all we are to rely on, I ask where’s your concern in that? Their profits are a direct function of the amount in play, so why would they consider lowering costs if it meant a corresponding lowering of profits?

            The argument remains a proven system that can be improved and the PI system where increased costs reward the check writers. Unless you can show that PI’s profits have dropped year after year, you’ll have a hard time convincing anyone that private industry is interested in lowering costs or improving care. They are not a solution.

          • CStanley

            The PIs you have consistently supported have been found guilty of fraud, but you wish to keep your faith in them to make things right.

            Hemm, you keep repeating this. I’m sure there are cases of PIs being intermediaries in defrauding the govt but I haven’t seen that to generally be the case at all. Can you please provide some evidence of this being the massive problem that you seem to think it is? What I see is healthcare providers forming conspiracies to defraud Medicare and other public insurers, and then the individuals defrauding both private and public providers with the collusion of unethical doctors. Where is this massive defrauding of Medicare BY private health insurance companies? I say there’s far more evidence that Medicare administrators have been ineffective gatekeepers, than there is for the private insurers acting as middlemen in fraud schemes.

          • HemmD

            Medicaid-fraud informants to be rewarded with Pfizer settlementhttp://www.miamiherald.com/business/story/12168…Medicare Fraud Strike Force Operations Lead to Charges Against 32 Doctors and Health Care Executives for More Than $16 Million in Alleged False Billing in Houstonhttp://www.stopmedicarefraud.gov/pr20090729.htmlDoctors, health care executives accused of Medicare fraudhttp://www.cnn.com/2009/CRIME/06/24/medicare.ar…There’s three from google search” medicare fraud health care880,000 hits, these came from page one.

          • CStanley

            Um, what do those cases have to do with private healthcare insurers?

            This is what I keep pointing out- these are all cases of systemic abuse of Medicare by healthcare providers, not private health insurance companies (they’re neither on the giving or the receiving end of the fraud you’re pointing out.)

            That suggests to me that the criminals who do this stuff are finding Medicare to be an easier target- and I believe that is because there are extra admin costs by the private health insurance companies to screen for that kind of widespread abuse. What is harder for the private companies to screen for is the death by a thousand paper cuts of individual fraudulent claims of the sort that GD pointed out.

          • HemmD

            CS
            I’m not going to chasae each of these down, but fr4om the first one:
            ” Pfizer agreed Wednesday to pay a total of $2.3 billion to settle allegations about the marketing of 13 drugs, including pain reliever Bextra.

            Federal authorities said Pfizer paid doctors’ expenses to attend meetings at resort locations, where some were treated to massages, golf and other activities — at the same time the company was negotiating deals on past misconduct.”

            Do you think those slick deals don’t effect our premiums or drug expenses? This is part of the entire bribes to grease the medicine wheel for profit I was referring to. Sorry if you can’t see a connection, but I’m not going to waste time assuaging your concerns. There are 880,000 hits to the google search I gave, see if you can find reason to believe that fraud isn’t part and parcel of the PI’s world.

          • CStanley

            Of course those kinds of deals are a problem, Hemm, where did I suggest otherwise? What I’m asking you about repeatedly in this thread is where you get the claim that PRIVATE HEALTH INSURANCE PROVIDERS are defrauding Medicare. I assumed when I asked for data you’d find some, because I think there probably are a few examples in the Medicare Advantage program or something where private insurers are acting as middlemen and there may be some shady dealings. Instead you came back with examples of other healthcare providers committing fraud, which was what I agreed is the case right from the first time you brought it up.

          • CStanley

            You say reducing costs is the best way to get the uninsured covered, but if PIs and their track record are all we are to rely on, I ask where’s your concern in that?

            Strawman again. I never said that PIs track record operating under the current system is what we should rely on- in fact the opposite, I’ve pointed out repeatedly how the environment needs to be reformed to restore competition to the health insurance market.

            I have steadfastly called for a public option, but I’ve never gone past the general discussion. This discussion was about allowing a public option or not.
            The general discussion was actually about whether or not it’s true that Medicare has such vastly lower administrative costs than private insurance does. And implicit in that argument (for those who say that it does) is that a publicly run health insurance option could also have these low admin costs. One thing I pointed out early in the thread is that at bare minimum, the only people who can credibly use that argument in support of their preference are the ones who support single payer- because the article I quoted much farther up in the thread showed that the admin costs throughout our system are higher than countries like Canada and that much of the reason for that is that healthcare providers have to deal with multiple complex systems. Public option as part of a mix of insurers only makes that problem worse, not better.

          • HemmD

            CS

            Our conversation started when you question my overhead for PIs. The argument I was making that you commented upon was pointing out why the public option (medicare) actually benefited from this article’s numeric analysis. I believe, despite your objections about fraud, I have made that case.

            You have also said the way to fix the problem is to increase competition. How are you going to do that? What private industry solution will increase competition? What government solution will increase competition? Again I ask, what changes is an industry willing to make that reduces costs when their profit is a function of the total cost?

          • CStanley

            I’m sorry, Hemm, but you and several other commenters seem to develop amnesia about all previous conversations we’ve had. You don’t remember any of the numerous times that I (or a few other conservative commenters like Dr. J) have posted long comments about all of the fixes we think would actually help?

            Again I ask, what changes is an industry willing to make that reduces costs when their profit is a function of the total cost? Profit isn’t a function of total cost- it’s a function of how much efficiency they’re able to squeeze on their expense side. Without competition, there’s no incentive to work toward that, but if insurance companies were forced to compete more as they did in the past, there’d be more incentive for reducing actual costs of healthcare that they pay out-and on down the line, as doctors and other providers would be forced to seek efficiencies as well.

            I have to go out for a while, but let me know if you decide to respond to my question about what role you think that private health insurers had in any of those fraud cases you cited. 😉

          • HemmD

            CSAmnesia is clearly a two-way street. I’ve commented ad nauseum how lobbyist money has systematically removed any attempts to reduce costs in the system. I even mentioned medicare part D in this thread. Why should the government pay retail drug prices when they buy in quantity? Why can’t we import drugs from Canada when they cost 40-50% less? What was your reason against this idea?

          • CStanley

            Why can’t we import drugs from Canada when they cost 40-50% less?

            What was your reason against this idea?

            Simple. If the US starts allowing reimportation, the preferential deals enjoyed in Canada will quickly disappear. Why would the drug companies continue selling the products so cheap there when they are no longer able to recoup their losses by maintaining the higher prices here?

          • “Why would the drug companies continue selling the products so cheap there when they are no longer able to recoup their losses by maintaining the higher prices here?”

            You think the drug companies are taking a loss on sales to Canada? And why, exactly, would they do that? Pharma companies sell drugs at the price they can get, but they certainly aren’t giving away the store in support of Canadian “big government” single payer health care. Are they? Well, if they’re such big fans that they give a fabulous deal to ALL single payer systems (yes, they ALL pay less than us), then I’m for joining the club. Heck yeah, I’ll take lower drug prices.

          • CStanley

            My use of the word ‘losses’ was a bit misplaced, but still, the point is that a company will bargain with a large contractor for lower prices but they’re going to keep in mind that they can make up for that with higher prices charged to other customers. You continually deny that this happens when Medicare negotiates lower provider prices and costs get shifted to other customers (but somehow then say, ‘hah, too bad if those other companies can’t negotiate as low of a price’) but that’s exactly what happens. The negotiations with the large single payers include the revenue calculations of what the company can get from other payers as well.

            I’m for joining the club
            What I’m saying is that once everyone joins the club, it’s not a club anymore. The prices then begin to rise for everyone.

          • CS, what about WalMart and $4 prescriptions? Surely THAT great deal causes pharma companies to shift costs to everyone else. Right? You can’t have it both ways. You appear to be saying that a public option will cost more, but then it would be unfair for them to actually lower costs. OK, so we owe it to someone to continue to pay over 20% more to providers and an extra 17% to insurers. That’s your plan?

          • Dr J

            It would be unfair only if the government did it unfairly, by operating at a tax-funded loss, by outlawing arbitrage mechanisms like buying cheap drugs from Canada, or by otherwise legislating how its “competitors” can do business. Of course the government does all these things already and will certainly continue. A public option would have no advantage over private insurers otherwise.

          • Dr J

            What changes is an industry willing to make that reduces costs when their profit is a function of the total cost?

            Hardly any, if you’re going at it by trying to bargain with them. It’s very hard for existing large companies to change much. They don’t want to, they’re often structurally unable to, and they’ll fight every step of the way.

            The allure of competition is that it works anyway, by feeding companies that are unwilling or unable to meet consumers’ needs to a bunch of hungry piranhas who can do better.

          • HemmD

            Dr J
            “The allure of competition is that it works anyway, by feeding companies that are unwilling or unable to meet consumers’ needs to a bunch of hungry piranhas who can do better.”

            If its worked so darn well, why do costs and profits keep going up year after year. The number of companies decreases as each of the big boys swallows more and more of the insurance pool. Funny though, profits continue to increase, not decrease. If the problem was as you imagined, costs would go down or profits would go down or both. What we do have is costs go up, the number in the pool goes down, and profits soar.

          • Dr J

            “If its worked so darn well, why do costs and profits keep going up year after year?”

            Come on Hemm, I’m sure you know my answer to that. It isn’t working because we’re not trying it. There’s precious little competition in health care.

            The barriers to entry are huge. The health care industry is paved with the bodies of dead startup companies unable to break the stranglehold the existing players have. Reform should focus on loosening their grip, for starters by breaking the employer/health-insurer/provider-network triumvirate to make room for consumers and new approaches.

  • DLS

    “Similarly, socialism is not needed here. We could fix the problem through regulation ”

    I’ve addressed this fundamental issue long ago (and been treated to poor behavior by the “defenders” of the poor legislation by the House Dems, which shouldn’t be surprising, though it has been poor). There are plenty of example reforms that in no way entail the “public option,” which simply is the incrementalist strategy for federal takeover of current choice by the current liberal Democrats (an inept “universality lite” approach versus, say, taking over Medicaid or extending Medicare to children as well as adults as “dependent care,” or to the unemployed as well as Medicaid as a “safety net” strategy, or merely to do what Clinton sought in the 1990s, acting deliberately against what must eventually happen in retirement, but which appeals to those with an entitlement mentality, reducing the Medicare qualification age to 55). The reforms would simply impose broader, “fairer,” abuse-ending or -reducing regulations on the existing system, something logic could compel anyone with any intelligence to desire or demand with or without an expansion of the federal role in provision.

    Sadly, we get junk legislation and junk behavior in its defense instead. [scowl]

  • Good discussion. CS, do you have any evidence that private insurances lose less to waste and fraud than Medicare? I have found no such evidence. But Medicare, even accounting for waste and fraud (13%) is still cheaper than private insurance.

    As for the 11-31% number, I figure it’s closer to 20-25%, but for the sake of argument, why not use the insurance industy’s own number? It’s 16.7% (overhead + profit). The insurance industry’s projection for Medicare overhead in 2010: 3.3%

    DLS, I’ve shot down your inaccurate points before. I’ll do so again. Medicare does not “underpay” doctors and hospitals. Private insurance overpays them. 97% of doctors accept new Medicare patients, and nearly all hospitals do. It’s their choice. There is NO EVIDENCE that cost shifting is occurring or is even possible. Medicare negotiates an awesome rate (-19% for doctors, -25% for hospitals v.s. private insurance). What? You don’t want those savings for Americans? Big insurers negotiate better than small ones (equally true for small private insurers), and their prices reflect negotiating power, NOT cost shifting. Hospitals CANNOT shift costs of patient A’s treatment to patient B. It is illegal. They can TRY to overcharge your insurance company, and if your insurance company has lousy negotiators, that’s YOUR problem, not Medicare’s (I thought you believed them to be better at avoiding waste). Finally, your side simultaneously claims waste and fraud are excessive in Medicare and that reducing the cost of Medicare means cutting services to grandma. Which is it? There’s fat to trim, or NOT? Medicare admits to around $40 billion a year in waste and fraud. If they can trim that, there’s no need to reduce payment to patients.

    Final note. We don’t have to use speculative numbers here. Single payer health care ALWAYS COSTS LESS. It does so in every single country on earth. NONE pays as much as we do and most have better outcomes.

  • CStanley

    As for the 11-31% number, I figure it’s closer to 20-25%, but for the sake of argument, why not use the insurance industy’s own number? It’s 16.7% (overhead + profit). The insurance industry’s projection for Medicare overhead in 2010: 3.3%

    I’m fine with those numbers as long as we also look at the bookkeeping discrepancies between what is considered an admin cost for Medicare and what is shown on the books of other govt agencies. One positive note is that you are making the distinction between overhead and profit, which Hemm seems to lump together. Profit isn’t overhead, it’s the difference between total costs (which include overhead) and revenues.

    CS, do you have any evidence that private insurances lose less to waste and fraud than Medicare? A fair question. I don’t have anything at my fingertips but will see what I can find.

  • CStanley

    Are you thinking a government option would not require premiums?

    Of course it will- in fact that’s one of the problems that will occur for the currently uninsured people who think this plan is going to rescue them. They still may not feel that they can afford the premiums, they may think they’re going to get subsidized but not all of them will, and yet they’ll be mandated to buy a policy.

    However, the govt public option insurer will have subsidization to enable lower premiums across the board than the private insurers will- which is why the plan is considered a Trojan horse for single payer.

  • OK, here’s some insurance fraud information. It is clearly NOT just a Medicare problem.

    Nearly one of three physicians say it’s necessary to game the health care system to provide high quality medical care. Journal of the American Medical Association (2000)More than one of three physicians says patients have asked physicians to deceive third-party payers to help the patients obtain coverage for medical services in the last year. Journal of the American Medical Association (2000) One of 10 physicians has reported medical signs or symptoms a patient didn’t have in order to help the patient secure coverage for needed treatment or services in the last year. Journal of the American Medical Association (2000)

    Private insurance drug fraud

    Insurance fraud is a major financier of America’s epidemic diversion of addictive prescription drugs such as OxyContin, according to Prescription for Peril, a December 2007 report by the Coalition Against Insurance Fraud.

    1. Drug diversion costs health insurers up to $72.5 billion a year in bogus claims involving opioid abuse alone;

    1. Private health insurers lose up to $24.9 billion annually;

    1. Diversion costs individual private insurance plans up to $857 million annually;

    1. Nearly half of Aetna’s member/pharmacy anti-fraud team’s caseload involved prescription benefits in 2006;

    1. Expenses of suspected doctor-shopping members of Medco Health Solutions were nearly seven times higher than the monthly cost of members without excessive prescription claims; and

    1. Abuse suspects incurred $41 in claims for office visits and outpatient treatment for every $1 in narcotic prescription claims against WellPoint.


    and this

    Nearly one of four Americans say it’s ok to defraud insurers, says a survey by the consulting firm Accenture Ltd. Some 8 percent say it’s “quite acceptable” to bilk insurers, while 16 percent say it’s “somewhat acceptable.” About one in 10 people agree it’s ok to submit claims for items that aren’t lost or damaged, or for personal injuries that didn’t occur. Two of five people are “not very likely” or “not likely at all” to report someone who ripped of an insurer. Click here for the complete study. Accenture Ltd. (2003)
    Nearly one of 10 Americans would commit insurance fraud if they knew they could get away with it. Nearly three of 10 Americans (29 percent) wouldn’t report insurance scams committed by someone they know. Progressive Insurance (2001)
    More than one of three Americans say it’s ok to exaggerate insurance claims to make up for the deductible (40 percent in 1997). Insurance Research Council (2000)
    One of four Americans says it’s ok to pad a claim to make up for premiums they’ve already paid. Insurance Research Council (2000) 

    • GD, that’s just downright depressing.

  • CStanley

    GD- I agree with PM that those stats are depressing.

    I guess my impression of fraud being more prevalent in the Medicare system is due to most reports of organized fraudulent conspiracies being committed against Medicare, not against private insurers. That suggests to me that the people who conpire to commit widescale fraud find it easier to get paid for false claims through Medicare than through a private insurer. It might also suggest that the total dollar amounts are more significant, although that depends on the number of events- and your data shows that a lot of individuals finding unethical doctors to submit smaller scale fraudulent claims could potentially add up to just as large of a problem. I’m not sure how to find the data on which is ‘worse’ overall, or if such data even exists.

  • DLS

    “the plan is considered a Trojan horse for single payer”

    As I’ve correctly noted, in this case it’s a Trojan horse with bright lights and loud alarms announcing it.

    So is any other incrementalist maneuver, even the less universalist alternatives (Medicare down to age 55; Medicare for children as “dependent care”; Medicare absorbing Medicaid and perhaps also offered to the unemployed in place of COBRA as a “safety net” enlargement). In this case (2009 and the “public option” it’s a Government Motors fake “competitor” to private parties, openly intended to “crowd out” the private parties a la S-CHIP expansion.

  • DLS

    “DLS, I’ve shot down your inaccurate points before. I’ll do so again.”

    You may begin, if that ever becomes the case. (As opposed to my demolishing your misstatements far removed from fact, such as that removing the income cap on FICA will save Social Security…)

    “They can TRY to overcharge your insurance company, and if your insurance company has lousy negotiators, that’s YOUR problem, not Medicare’s ”

    Oh, so cost-shifting is called “trying,” and if they succeed, that doesn’t count. I understand.

    Meanwhile, the ObamaCo cram-down of payments (already low) and taking $500B out of the program as part of its fuzzy, flailing effort to cobble together something resembling “paying for the public option” is a laugher to us, but not to the providers. Nor is Pelosi’s ominous “there’s more they can do” (in reducing what they accept from Medicare in the future) any more reassuring.

  • DLS

    “Final note. We don’t have to use speculative numbers here.”

    No need. Assuming that a nation-wide federal takeover were at least similar to what’s in California now, we already have an idea of what’s going on, and government programs present a worse kind of problem than the uninsured. (And perhaps underpayment isn’t just “rigging” of public “competition” with the private sector in the case of making the federal public option look better, but in making the private sector be, as well as look, worse.)

    • Cost shifting from Medicare and MediCal is substantial. If, in 2005, the revenues
    for every California hospital’s Medicare and MediCal patients would have been
    sufficient to cover these patients’ costs, then private-payer patients’ revenue-to-cost
    ratio would have declined by 10.8 percentage points, from 1.309 to 1.201.

    • Cost shifting from the uninsured is minimal. If, in 2005, the revenues for every
    California hospital’s indigent patients would have been sufficient to cover these
    patients’ costs, then private-payer patients’ revenue-to-cost ratio would have
    declined by 1.4 percentage points, from 1.309 to 1.295.

    “State health policy reforms that seek to cover the currently uninsured are unlikely to lead to significant reductions in private insurance premiums, at least due to decreases in cost shifting. In contrast, increases in public-program reimbursement rates could have an economically important impact on premiums. …

    First, cost shifting from Medicare and MediCal is substantial. Although cost shifting from these public insurance programs does not explain all of 30.9 percentage-point markup that the privately insured paid in excess of their costs in 2005, it does explain 10.8 percentage points, or about 35 percent of it. That is, if the 2005 Medicare and MediCal revenues of every California general, acute-care hospital would have been increased enough to cover these patients’ costs, then the aggregate private-payer revenue-to-cost ratio would have declined by 10.8 percentage points, from 1.309 to 1.201.

    Second, cost shifting from the uninsured is minimal. If the 2005 revenues for every hospital’s County Indigent Program and other indigent patients would have been increased to cover these patients’ costs, then the aggregate private-payer revenue-to-cost ratio would have declined by 1.4 percentage points (with an upper 95 percent confidence bound of 3.07 percentage points), from 1.309 to 1.295. …

    State health policy reforms that seek to cover the currently uninsured are unlikely to lead to significant reductions in private insurance premiums, at least due to decreases in cost shifting. In contrast, increases in public-program reimbursement rates could have an economically important impact on premiums. This is a direct result of the disproportionate share of hospital costs financed by these programs, and the fact that the programs have been bearing a declining share of their patients’ costs in California in the 2000s. …”

    http://www.cfcepolicy.org/NR/rdonlyres/46C2B526-D9BF-4556-A310-37C3A7CDF53D/30/CFCE_Cost_Shift_Study.pdf

  • DLS

    And you can always rely on your fellow Demmies, Green Dreams — they know about the problem.

    http://www.santacruzsentinel.com/ci_12566468?source=rss

    “Medicare is underpaying physicians between 10% and 25% in 175 higher-cost counties across the nation, creating a ‘public health crisis’ in which too few doctors accept the federal program, resulting in jeopardized patient care. …

    For all seven counties in the state involved in the case (Santa Cruz, Sonoma, San Diego, Marin, Santa Barbara, San Luis Obispo, and Monterey), the amount is about $340 million in underpayments, the most of any other state, de Ghetaldi said.

    California is closely followed by Texas with $246 million; North Carolina, $176 million; Minnesota, $164 million; Ohio, $159 million (all in Cuyahoga County); Florida, $150 million; Virginia, $126 million; Wisconsin, $111; Colorado, $83; and Massachusetts, $81 million, according to the lawsuit.”

    http://content.hcpro.com/pdf/content/231574.pdf

    http://www.healthleadersmedia.com/content/231576/topic/WS_HLM2_PHY/Lawsuit-Demands-Geographic-Parity-in-Medicare-Physician-Pay.html

    Or you can look here (California, New York, and Florida are suitable subjects for warning about any federal expansion to come)

    https://www.noridianmedicare.com/provider/updates/docs/SE0617_CMS_RAC_Initiative.pdf

    You probably wouldn’t believe these folks.

    http://www.aha.org/aha/content/2008/pdf/081209costshift.pdf

    http://www.aha.org/aha/content/2006/pdf/underpaymentfs2006.pdf

    • “The literature provides estimates of the extent of cost shifting in cases where it is theoretically possible. The March 2009 MedPAC Report to Congress: Medicare Payment Policy (Chapter 2A) includes a summary of such evidence. It concludes that the dominant dynamic in the market is that hospitals with strong market power have abundant financial resources. In turn they have a high cost structure (perhaps due to provision of relatively higher quality care) that causes lower or negative Medicare margins. In contrast, hospitals that are forced to run efficiently are adequately funded by Medicare payments. That is, Medicare payments are sufficient to cover costs but some hospitals run inefficiently and make it appear otherwise. Therefore, MedPAC has concluded that increased Medicare payments to hospitals would not reduce rates charged to private insurers. The primary effect would be to induce lower cost operations. “

  • DLS

    I know what Medpac is saying. But I don’t trust them fully.

    http://www.modernhealthcare.com/article/20090317/REG/303179986

    • I don’t see any reason to distrust MedPac and will remind you that this was sworn testimony, unlike the articles you cited.

      To me it makes no sense to assume “cost shifting” and it is really an ugly thing to say about private insurers. Cmon. You’re arguing that competition and the for-profit model is the way to lower costs, then suggesting that a highly paid insurance company negotiator is going to pay $1.50 for a $1 bandage because Medicare is getting it for $0.85. I say “fire the bum” and get someone decent at his job in that position. Same with that drug company salesman who apparently is giving away drugs because he’s so enamored with single payer systems.

      These arguments are just weird.

  • rfyork

    Patrick,

    There are already more than enough comments here on all aspects of your post. I’d like to suggest that you look up the meaning of “specious” as in “specious argument”. You might find your post cited as a perfect example.

    • CStanley

      Actually very few people commented on the post itself, and I noticed that the first few commenters didn’t seem to understand it at all. The point isn’t that Medicare’s reported overhead is low because of volume- instead, the point is that reporting overhead as a percentage of claims paid out is artificially lowering the reported overhead of Medicare since it pays out a higher claim per capita (due to the population that it serves.) Patrick illustrated this well with his example- the real numbers of the money spent on overhead are higher overall in Medicare, but when you report it as a percentage of the claims the number becomes smaller because the claims are so large. This hides the fact that Medicare is a very, very expensive program, and makes it look like it’s a lot more efficient than it really is.

  • CStanley

    You appear to be saying that a public option will cost more, but then it would be unfair for them to actually lower costs.

    No, not unfair to lower costs at all, but that lowering should be done through finding real efficiencies, not through price fixing (this is the same point I’ve tried to raise several times and you don’t seem to get it- price does not equal cost.)

    When the government negotiates, it often seeks a price that is lower than what the overall average market clearing price would be. The Walmart deal (and other pharmacies now doing this as well), from what I understand, is strictly a volume discount and it’s available to those large volume purchasers on a limited number of generic drugs.

    • HemmD

      CS

      Please remember that the negotiations for medicare part D were non-existent thanks to the Republicans who wrote the bill. Likewise, the blue dogs have pushed for a non-negotiated system in current reforms. It’s obvious that lobbied deals keep the US from meaningful savings.

      You keep saying that competition is your choice for lowering health costs. Most areas of the country are dominated by one company. In Mississippi, 89% of the small business market is held by Blue Cross. How do you compete out of a monopoly? The start-up costs alone preclude private sector competition, but a public option would immediately open a solely owned market

      • CStanley

        Hemm, have you really not read the half dozen or so posts I’ve written when asked (repeatedly) to explain what my solution to the healthcare problems would be?

        One of the things I’ve stressed is that monopolies/oligopolies need to be dismantled through trustbusting regulations.

        Another big factor would be allowing purchase of insurance across state lines, because many states (like mine) have more competition since we’re not as highly regulated as to the type of policies that can be sold (people have the option of buying more basic policies here since we don’t have a hundred mandates for all insurance products to cover everything from in vitro fertilization to full dental and vision.) We have seen recently, new companies and new products coming on the market here which would allow individuals to purchase affordable insurance, and if people in high priced states like NJ, NY, CA, could purchase these products we’d see some real competition.

        And of course the other major piece would be to level the tax playing field so that more individuals would be in the position of buying a policy that suits their needs, and putting pressure on the insurers to provide products that meet those needs (and to meet the contractual obligations, which would mean fewer denials of coverage for that which the company agreed to cover.)

        • HemmD

          S

          and you talk of my pipe dreams…
          “One of the things I’ve stressed is that monopolies/oligopolies need to be dismantled through trustbusting regulations.”

          Let me demonstrate why that won’t work. (I wish it would)

          When was the last trust busting measure, that would be the break up of the Bell system. Bell was divided up into regional companies. The only problem is now AT&T owns Southwestern Bell here in the mid-west. We bid contracts to all internet provisioners, and AT&T and SWB “compete.” The contracts are for connections from a site to one of our regional hubs, terminating in an aggregation circuit. All of AT&T’s bids came in lower than SWBs, so it sounds like competition is working. Except for the fact those aggregation circuits, which is not factored into the bids. The result, hundreds of AT&T’s site circuits all are a few dollars less than SWBs, but AT&T’s aggs cost $10k to SWB’s $3k. So they win contracts by mere dollars while charging 3 times as much for identical aggs.
          Sorry for the geek speak, but I want to show the sham of deregulation and anti-trust when pushed through the sausage maker that is lobbied government.

          As it is, where I work still saves our schools millions over direct customer purchases from these Provisioners simply because we are a public option. To put it succinctly, anti-trust merely invokes a false competition while a public option actually reduces cost. I’m all for anti-trust legislation and enforcement, but that legislation results in a false sense of competition that saves tax payers little.

          • Dr J

            “I want to show the sham of deregulation and anti-trust when pushed through the sausage maker that is lobbied government.”

            You’re absolutely right. Which is why cost savings from a single payer or a public option will not appear.

          • CStanley

            Hemm, first of all, one example of a process that may not have been done as effectively as it could have been doesn’t exactly prove that there’s no way to effectively accomplish the goal.

            Second, there are differences in utilities which require infrastructure like the circuits you describe, and other industries like health insurance. Simply breaking up the huge market share that the megacorps enjoy would open up the markets to smaller competitors.

            And third, I see Dr. J has responded with another point I was going to make. You seem to think that lobbying is a problem when it comes to any conservative/market based proposal, but for some odd reason you don’t see the corrupting influences when policies are created to put all the players under the ‘public’ umbrella. Why is that?

          • HemmD

            CS

            You are demonstrating that famous amnesia again. When have you ever heard me say that I was ok with lobbying of any kind? It’s hard to carry on a conversation when you keep trying to toss in partisan snipes not grounded in fact.

            “Simply breaking up the huge market share that the megacorps enjoy would open up the markets to smaller competitors.”

            And your proof of that comes from what crystal ball? my comments are based upon the gas and internet markets.
            which example do you cite for this miraculous change where smaller companies without the vast startup capital needed to compete nationally? If gas and internet need infrastructure, health companies need lots of capital. Small companies can’t compete in states due to startup costs, why do you assume they could do anything nationally?

          • CStanley

            why do you assume they could do anything nationally?

            Why would they initially have to do anything nationally? It would be better for consumers if a number of smaller companies begin locally and then the strongest competitors would begin to grow and attract customers from other states/regions.

          • HemmD

            CS
            “It would be better for consumers if a number of smaller companies begin locally and then the strongest competitors would begin to grow and attract customers from other states/regions.”

            so they spontaneously erupt in these first states like mushrooms? And they can compete with a blue cross in one state? Fat chance. The population in one state isn’t enough to make that company viable. What economic theory of markets make you believe such a fable. You may as well advocate a car company in each state.

          • CStanley

            I’m not actually saying that startup companies would have to limit their customer base to one state (with the internet, if interstate purchase was allowed, that’s completely unnecessary.) I do think that there may be a business model that could potentially focus on the customer service of serving local communities.

            But the main point is that startup companies just have to find a niche- they don’t need to start off as large as BCBS. Their smaller size and ability to sell policies based on individual need would be their main marketing tool- and in particular, there’s certainly a market for affordable, basic (not gold plated) policies.

            As for ‘springing up like mushrooms’, they’d come about just as any other business startups. Entrepreneurs see a need and decide to risk capital to meet that need because they bet that it will be profitable. Do you disagree that there’s currently a need?

        • HemmD

          CS

          “Another big factor would be allowing purchase of insurance across state lines, because many states (like mine) have more competition since we’re not as highly regulated as to the type of policies that can be sold (people have the option of buying more basic policies here since we don’t have a hundred mandates for all insurance products to cover everything from in vitro fertilization to full dental and vision.)”

          This may demonstrate the problem, but I’m all for significant safeguards to counter these problems.

          “Competition across state lines sounds great in theory. The problem is it becomes “a rush to the bottom.” Insurance Companies will move to states with the least regulations. You buy insurance thinking you’re covered, as your state requires, but it’s not required in the state where the insurance company is located. Patients get less coverage, outrageous “out of pocket” expenses, but pay the same premiums; this increases the profits for insurance companies.”

          http://tpmcafe.talkingpointsmemo.com/talk/blogs/cindy_lugo/2009/09/tort-reform-and-competition-ac.php

          The other aspect of this is once again political on the conservative side. You are advocating abolishing a states rights issue here by allowing companies to circumvent state requirements. I’m not sure you’ll find willing conservatives to back this.

          Just which state laws would be over ridden by this change? Lastly, we only need to look at the gasoline market to see how one national market actually increases consumer costs. Maybe you remember “gas wars,” I certainly miss the days when stations actually competed on price points to keep customers. Now, the city-wide price of gas goes up at the same moment, and certain regions of a state pay significantly more than others based not upon supply and demand but upon the economic status of the area. Health care, if it’s a commodity as you assert, will be manipulated just as effectively.

          • CStanley

            The other aspect of this is once again political on the conservative side. You are advocating abolishing a states rights issue here by allowing companies to circumvent state requirements. I’m not sure you’ll find willing conservatives to back this.

            McCain ran on this (and I don’t recall any opposition to it on the conservative side.)

            My congressman, Tom Price, introduced HR 3400 which has 30 cosponsors, and includes this provision (as does the corresponding Senate bill introduced by Jim DeMint.) I don’t recall whether or not HR 2520 (Paul Ryan’s bill) has this in it or not.

          • CStanley

            Just which state laws would be over ridden by this change?

            Why would state laws be overridden? This is no different than any other corporate regulations- each state determines their own rules, and then companies decide if they want to locate there. Meanwhile, customers can do business with whomever they choose.

            Besides, it’s a bit disingenuous for Dem politicians to posture as though buying across state lines would represent some kind of dangerous, Wild West, unregulated environment for health insurance when those same politicians currently have the luxury of buying across state lines through the FEHBP. Like they always say, why shouldn’t every American have the ability to get the same quality and choice that they enjoy for their own health insurance?

          • HemmD

            CS
            So a company moves to a “friendly state” with no requirements and sells coverage to a state that does have these regulations. Which state laws do you choose to ignore? I don’t believe you have clarified this little problem.

            Couch this argument as a 2nd amendment case involving concealed carry, and you see the problem. My state lets me carry, so I have the right to carry in your state. Selling health insurance originating from a friendly state to a regulated state is the same issue.

  • CStanley

    You are demonstrating that famous amnesia again. When have you ever heard me say that I was ok with lobbying of any kind?

    It’s not amnesia. I’m pointing out that I don’t think I’ve ever seen you bring up the same concern of how money influences politicians who are operating a publicly run system. Your concerns about lobbying, while well taken, are always about how this will cause any private market solution to fail.

    If I’m wrong and you’ve expressed the same degree of concern about how corrupt the GSE entities are, and how that corruption leads to the failure of those public entities, for instance, then I’ll stand corrected if you show me where you’ve ever commented on those problems.

    • HemmD

      CS

      You’ve obviously not been in any threads discussing cap and trade or global warming. Mikkel can attest to the science of politics I have ranted against.

      So, to be clear, I’m the one who offered an amendment that would limit all lobbying to be limited to $10 and no bundling. I beliece you may have actually commented upon the thread at the time.

      • CStanley

        I’m the one who offered an amendment that would limit all lobbying to be limited to $10 and no bundling.

        What you are not getting is that I’m saying that you limit your concerns to ‘lobbying’. I don’t think I’ve seen you acknowledge all of the incestuous dealmaking that goes on between incumbents and the players involved in publicly held bureaucracies.

        The money problems are there regardless of whether or not the policy involves private ventures or public ones, in other words. Do you agree with that? If so, then you can’t keep using the argument about how lobbying is a deal killer for all market based solutions, without addressing the issues of money as it affects public plan solutions.

        • HemmD

          CS

          The money problems are there regardless of whether or not the policy involves private ventures or public ones, in other words. Do you agree with that? If so, then you can’t keep using the argument about how lobbying is a deal killer for all market based solutions, without addressing the issues of money as it affects public plan solutions.”

          First, the incestuous nature of our government/business sector is legend, and if you wish to start a 20 point plan to reshape government to once again make it responsive, I’m all for it.

          BUT, that an avoidance of the problems your solution does not address. Antitrust, states rights, and lobbying are all part of what we are dealing with now. You’ve more than once accused me of pie in the sky solutions, but I submit that you are doing the very same thing now. None of your solutions have been shown to work in the past, or they run smack into logistical problems right now that you fail to solve. I like your goals, I just don’t see any real answers to the problems I’ve raised.

          Look, I’ll make a deal; you give me the public option and I’ll back the opening up of national markets. The public plan must be free to work as medicare does, and your national market strategy can use home state rules. That leaves only about ten thousand details, but do we have a deal in principal?

          • Dr J

            “If you wish to start a 20 point plan to reshape government to once again make it responsive, I’m all for it.”Certainly, here’s mine:1. While we implement the 20 steps, minimize the impact of the problem by restricting government’s power.2. Think up 18 more steps.

          • HemmD

            Dr J

            Please try to define your glittering generalities. Do you want the government to stop enforcing laws against monopolies? How about limiting the over sight of securities on Wall Street? How about food and safety issues, want to get government out of that part of your life?

          • Dr J

            “Do you want the government to stop enforcing laws against monopolies? How about limiting the over sight of securities on Wall Street? How about food and safety issues, want to get government out of that part of your life?”

            No, yes, and yes. Regulation should focus primarily on ensuring healthy competition and keeping companies from getting too big (ie, too few) to fail.

          • HemmD

            Dr J

            Yeah, there’s no need to oversee wall street as they torch our economy. And that tainted food thing really has no effect on you or yours.

            Your lack of concern for the amoral in business is noted. Laughed at, but noted.

          • CStanley

            For what it’s worth, I would have answered no to all three of your questions, although I’d qualify them. Oversight of Wall St. depends on what you mean by that, and food quality oversight should mostly mean general safety inspection and disclosure to consumers- not, for instance, banning ingredients or more nanny state taxes.

            But regardless, I find it mind boggling that we can’t all agree that there should be a freeze on govt growth (particularly creation of new obligations and programs) until the govt’s house is cleaned up.

          • “not, for instance, banning ingredients”

            Oh? You oppose banning carcinogens, mutagens and other toxins? That’s weird.

          • CStanley

            Oh? You oppose banning carcinogens, mutagens and other toxins? That’s weird.
            Overinterpreting a brief, off topic comment, GD. I was referring to banning of things like trans fats (although I also feel strongly about not eating them, personally- but the govt’s role should be to enforce disclosure of ingredients and let the consumer decide.)

          • HemmD

            CS
            ” for what it’s worth, I would have answered no to all three of your questions, although I’d qualify them.”

            Wall street – clearly cannot be trusted to look out for the benefit of the US, only their own profit lines. Here’s where anti-trust could really do some good.

            Food and drug – do you know that only through government “nanny laws” product contents must now be clearly labeled. Know anybody whose kid is allergic to peanuts? There are plenty of specific things they do now we would regret not having going forward.

            So you really sure you can make that broad statement when these examples are clearly functions someone must do. The devil is clearly in the details.

          • Dr J

            Hemm, Wall Street’s problem was the financial firms were too big and too few to be allowed to fail. Government definitely should have prevented that. See above.

            And what “tainted food thing” are you talking about? Food manufacturers have a very strong incentive to maintain quality and avoid a reputation for poisoning people. Problems are rare, and when they do happen (despite those government regulations you’re touting), they react swiftly and decisively. You will speculate that problems would be much more frequent without those government inspectors, but I haven’t seen much data on that and am skeptical.

            In any case I’m far from a dogmatic let’s-not-have-roads libertarian, but in general I think government’s role should be to make sure markets are working well so that people can meet their own needs, not to try to tend to every need directly itself.

          • HemmD

            ” And what “tainted food thing” are you talking about? ”

            Fantasy pronouncements about the food. Have you already forgotten the peanut butter of a few months ago? I won’t even include the catch of Chinese adulteration you’ve also blanked out to maintain a pure state of capitalist nirvana.

            Peanut Butter Recall Moves to Criminal Accusations
            http://www.associatedcontent.com/article/1431024/peanut_butter_recall_moves_to_criminal.html?cat=51

          • Dr J

            Like I said, Hemm, obviously that happened despite government regulation, so it doesn’t offer a data point about what would happen with less. We might see dramatically more such incidents, we might not.

            Even without the government stepping in, markets tend to evolve their own quality control mechanisms. Consumer Reports and Yelp are two examples for consumer goods and services. Or look at illegal drugs, a completely unregulated market teeming with unscrupulous suppliers. People at all stages of the distribution chain tend to work with suppliers they trust and avoid those they don’t.

            I’m not saying either of these is the right model for peanut butter, just that how much benefit we get from the regulation we have and whether that outweighs its cost are not clear to me.

          • HemmD

            Dr J

            I’m sorry to use your own words against you, but I’m dedicated to helping the amnesiacs:

            And what “tainted food thing” are you talking about? Food manufacturers have a very strong incentive to maintain quality and avoid a reputation for poisoning people. Problems are rare, and when they do happen (despite those government regulations you’re touting), they react swiftly and decisively. You will speculate that problems would be much more frequent without those government inspectors, but I haven’t seen much data on that and am skeptical.”

            Except when they can make a buck and threaten people’s lives.

            “Even without the government stepping in, markets tend to evolve their own quality control mechanisms.”

            Don’t then turn around and try to say private business would take of this problem, they are the ones that caused both examples I cited. Your glittering generalities about the noble economy fall completely flat when someone gives you two examples of why the government must watch these fools like a hawk.

            Don’t try to ignore the facts. Private business is amoral, it only sees profit by its own self-definition. The government is the only way to keep their avarice and stupidity from hurting the general public.

            Spout your platitudes about market self-regulation if it makes you feel secure, but don’t buy a ford pinto, or suvs with known roll-over problems, or milk substitute for your kid., or even dog food for your favorite pet. That damn intrusive government you want to swelch may not have the wherewithall to save you from that kool-aid you like to drink.

          • Dr J

            “Don’t then turn around and try to say private business would take of this problem, they are the ones that caused both examples I cited. Your glittering generalities about the noble economy fall completely flat when someone gives you two examples of why the government must watch these fools like a hawk.”

            Hemm, I’ve got work to do. If you’re not going to read what I’m writing, I’ll stop wasting my time.

            Again, those examples don’t vindicate government oversight, since they obviously happened despite it.

          • kathykattenburg

            Again, those examples don’t vindicate government oversight, since they obviously happened despite it.

            Dr J, I think what Hemm is telling you is that you’re contradicting yourself, because on the one hand you say that private business tends to evolve its own quality controls, and on the other you are saying, as above, that the examples Hemm gave happened despite government oversight. If they happened despite government oversight, that means they happened because of decisions made (or not made) by those private companies. Right? So then where is the evolution of quality control by private companies?

          • Dr J

            Kathy, we Americans eat nearly a billion meals every day, and 8 people dying of food poisoning is rare enough to make national news. That very small number is a credit to the controls in place thanks to some combination of manufacturers’ diligence and government prodding. I don’t know what the combination is–maybe government deserves 90% of the credit, manufacturers 10%, maybe it’s the other way around.

            That 8 people nevertheless died is obviously a failure both of the manufacturers and the regulators overseeing them, but it doesn’t give us any data about who is more to blame. It certainly doesn’t prove what HemmD is claiming, that manufacturers in general do nothing to ensure quality, while regulators do all the work. Nor does it prove the opposite, that manufacturers would do a great job on their own, and the regulators add no value.

  • CStanley

    Hemm, first of all, no state is currently unregulated and despite the clever machinations of the ‘race to the bottom’ meme, there’s no incentive for a state to underregulate- its own citizens would not allow that to happen.I’d also add that I think it’s perfectly appropriate to add a level of federal regulation mainly to mandate capital reserve requirements- and it may even make sense to have an FDIC type of program which the insurers would pay into in exchange for having their reserves insured.

    Second, you’re ignoring the fact that people DO in fact purchase across state lines NOW. The example I gave is that federal employees currently enjoy this privelege. So clearly, we’ve established a precedent that puts aside your concealed carry analogy- the regulations apply to the insurer, not to the purchaser of insurance. The appropriate analogy would be gun purchasing laws- each state can make them as lax or onerous as they wish, and consumers can cross state lines to purchase from a state that has fewer restrictions.

  • CStanley

    The public plan must be free to work as medicare doesWhat the heck does that mean? Why would I agree to a public option that isn’t required to balance its books, and that draws massive subsidization from taxpayers?And why are you so wedded to public option anyway? What is the selling point that you feel makes it nonnegotiable as part of the solution?

    I’d say, if you’re willing to take public option off the table in favor of a coop plan that is truly just a pool which helps nonprofit entities start up to compete among for profits (according to strict rules- the only govt leg up would be some of the initial capitalization, and perhaps in exchange for that the coop entities would have stronger mandates to cover high risk individuals), then it might be a go. That’s my counteroffer. 😉

    • HemmD

      CS
      “And why are you so wedded to public option anyway? What is the selling point that you feel makes it nonnegotiable as part of the solution?”

      The reason is simple. The public option is an economic gun held to the heads of companies only concerned with selling insurance, not providing health care. I believe our current economic system has demonstrated time and again that private companies quickly work in concert to rig the system for their profit margins instead of dedicating themselves to providing the service for which they are in business.

      The “proof” lies in the fact that gas prices no longer mirror supply and demand, but are tailored to fit the requirements of the company. How much did your gas go up around labor day? How about Memorial Day? The supplies at both times were absolutely normal, yet retail prices spiked. This is not capitalism, this is corporate manipulation. Other examples abound if you turn that analytical mind against the corporate mind set you are wedded to.

      Health care, as in the Mayo clinic model, can be made more effective while actually lowering costs and thus prices. There is no PI model out there that even attempts to reduce costs unless denial of care and pre-existing conditions is factored in. That may be one way to maximize profits, but it’s no way to elevate health care. Fee for service is an economic model, not a medical methodology. Health care is not a market, it’s life and death; so treating it like it was shoes or milk misses the point altogether.

      I can’t change the distorted system we have, but I can steer it in the “right” direction. If your coops and small business model works, the public option becomes superfluous. If your model is in fact the perfect solution, the public option won’t factor into the economic equation you seem to believe in. 93% of health care providers accept Medicare payments, where’s your faith in this system you defend?

      • CStanley

        The public option is an economic gun held to the heads of companies only concerned with selling insurance, not providing health care.

        How so?

        • HemmD

          CS
          “How so?”

          i’ll repeat:
          If your coops and small business model works, the public option becomes superfluous. If your model is in fact the perfect solution, the public option won’t factor into the economic equation you seem to believe in. 93% of health care providers accept Medicare payments, where’s your faith in this system you defend?

          If your faith is not justified however, the public option is there for people to get care otherwise denied them as it is today. That’s pre-existing and systematic termination for starters.

  • CStanley

    private companies quickly work in concert to rig the system for their profit margins instead of dedicating themselves to providing the service for which they are in business.

    When there’s inadequate competition in the market. Which is why I think we should reverse the trend that has led to the current conditions of inadequate competition in the health insurance industry.

    • HemmD

      CS

      Reverse the trend as you had stated, but leave the public plan as a persuader. Until you can point to where competition has grown in an existing market, you don’t have anything but hope to buoy your optimism.

      Competition is existing markets are dominated by select few that drive the price points ever higher. Where is an example of an American exception to this fact?

      • CStanley

        Competition is existing markets are dominated by select few that drive the price points ever higher. Where is an example of an American exception to this fact?

        You’ve lost me. Competition drives prices up? Huh?

        I’m guessing what you are saying is that the reality in recent history has been increasing monopolization which decreases competition and drives prices up. Even that’s not exactly true in all cases, Walmart being the most prominent example…but if that’s what you are trying to say then you’re basically repeating what I’ve been saying is a big part of the problem- lack of competitive environment.

      • CStanley

        Reverse the trend as you had stated, but leave the public plan as a persuader. Until you can point to where competition has grown in an existing market, you don’t have anything but hope to buoy your optimism.

        From what I understand, that’s what Snowe proposed as far as triggers.

        And the problem with public option is the unfair advantage it has over other insurers. You are acting as though it’s an equal competitor, so that if my ‘faith’ in private insurers is justified they’ll be able to offer products that consumers will prefer and the public option just fades away or exists side by side. But the premiums for public option insurance are automatically starting at a lower point because of the govt subsidization, no taxation, etc- and that’s even if the plan is written to prevent tapping into taxpayer funds in the future if needed.

        • HemmD

          CS

          The problem with triggers is that they have a way of never being pulled due to a sticky lobby laden requirement that never quite is hit. Let the option exist, and let privates beat it.

          “so that if my ‘faith’ in private insurers is justified they’ll be able to offer products that consumers will prefer and the public option just fades away or exists side by side.”

          So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.

          See you when disqus works for you. FYI, I’m using Mozilla and get automatically logged back in with a mouse click.

          • CStanley

            So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.

            Am I to assume you’re talking about our fantasy legislation that you and I are negotiating here? Because this bears no resemblance to the public option in the Congressional bills.

          • HemmD

            CS
            ” Am I to assume you’re talking about our fantasy legislation that you and I are negotiating here?”

            Ask any conservative on this blog, I only deal in fantasy solutions. 🙂

            In truth my feelings about any legislation is tainted by the presence of lobbying efforts to cut deals for a select few. I was hoping that we could reach a working exchange free from that “votes for bucks” government we now face.

          • CStanley

            In this case, though, the provisions that disallow the kind of flexibility that you referred to would not be the ones that would result from such ‘taint’, though- in fact quite the other way around.

            What I’m talking about is the provisions that require all companies to compete within govt proscribed exchanges, so that the rules would NOT allow private companies to find their niche to exist alongside the public option.

            The insurance companies undoubtedly oppose the legislation because of those kinds of requirements, and the legislators probably purposely set it up that way because they really do intend to starve private insurance companies out of business as time goes by.

            So, which way do you prefer it? Earlier, when we were talking about our own actual preferences, you seemed to indicate that you wanted an innocuous public option that wasn’t designed to compete in such a way that the PIs would have to fold. Do you still stand by that?

            Because if you do, then you are siding with the Blue Dogs, even though you’ve repeatedly claimed that their only motivation for opposing the public option is that they’ve been bribed.

          • HemmD

            CS
            ” So, which way do you prefer it? Earlier, when we were talking about our own actual preferences, you seemed to indicate that you wanted an innocuous public option that wasn’t designed to compete in such a way that the PIs would have to fold. Do you still stand by that?”

            There you go again, putting words in my mouth.

            A public option, like Medicare, must have the ability to “threaten” PIs into competitive bids. Currently, that is not the way it’s done. It’s as GD cited, 93% of providers take Medicare payments and nobody is broke because of that price structure. You can say this increases private insurance costs(I’m anticipating), but there is no proof that hospitals shift costs except for the people who present with no insurance at all.

            The blue dogs don’t give a hoot about fiscal conservative values, they do care about lobbyist money to help keep them in office. If they were so worried about government expenditures, where were they for Medicare part D? Nowhere because there was no lobbyist money in play to rouse their righteous indignation. Retail drug prices for a government program was just fine by them and the Republican party. Did you miss how easily the right gave up their values for that sweet heart deal?

            You keep believing the conservative talking points instead of “your lying eyes.”

  • CStanley

    Health care, as in the Mayo clinic model, can be made more effective while actually lowering costs and thus prices.

    So first off, why aren’t current proposals attempting to duplicate what they’re doing? And even if an attempt was made to do so, I think it would only have limited success. Mayo clinics can’t be duplicated in every community where healthcare is needed, for a variety of reasons (economy of scale, as well as the ‘excellence’ factor which allows them to attract the best physicians and pay them well even though they’re on salary instead of fee for service.)

  • CStanley

    93% of health care providers accept Medicare payments, where’s your faith in this system you defend?

    I don’t get the question. Faith in what system?

    But as far as acceptance of Medicare patients, it’s increasingly becoming a problem especially in certain areas. If we add more patients to a similar system, we’re going to quickly see more and more doctors rejecting new patients. The only solution to that will be to mandate them to accept all patients, which amounts to price fixing. That’s worked well every time it’s been tried, hasn’t it?

  • CStanley

    Gotta go out for a while…and anyway, Disqus is driving me batty. It takes way too long to carry on a discussion when you keep having to log back in for each comment…and then the system seems to be timing out on me too. So, I may be back later but will need to limit my commenting if this isn’t fixed (I guess I need to email TSteel and see what the problem is.)

  • HemmD, you’re a trooper. But no minds are ever changed here, especially CS and DJ. Look at how they view the unfunded obligations of private insurance (they don’t). Private insurers can’t possibly pay for the coverage they’ve promised. They gamble that they can keep more customers who pay but don’t cost them, drop those who cost them or are likely to, and they are excused by Medicare from having to pay out for the later years of their customers. What a sweet deal.

    Reform won’t happen until the crushing cost of private insurance bankrupts the country.

    • CStanley

      Reform won’t happen until the crushing cost of private insurance bankrupts the country.

      We’re at the point where we are now because Medicare and other public entitlement obligations already are bankrupting us (at least within a few short years.)

      • because Medicare and other public entitlement obligations already are bankrupting us

        CS, that is simply not true. If you add back in the money stolen by Republicans for tax cuts for billionaires, Medicare will be solvent WAY longer than private insurance. If Medicare didn’t exist and private insurance had to pay for 65+ year old Americans, they would have been bankrupt 20 years ago, or we would be paying double what we do now.

        • Dr J

          “Medicare will be solvent WAY longer than private insurance.”

          The problem is not how long either remains solvent, it’s how long it continues to operate after it’s insolvent. I think a few insurers going bankrupt and closing their doors would be a terrific development.

        • CStanley

          If you add back in the money stolen by Republicans for tax cuts for billionaires, Medicare will be solvent WAY longer than private insurance.

          And I’m the one being accused of making false statements.

  • CStanley

    So you really sure you can make that broad statement when these examples are clearly functions someone must do. The devil is clearly in the details.

    That was my point- the devil is in the details, which is why I said I’d answer no but with qualifications. It was your questions that were overly broad- and I was trying to quickly note examples of how I’d qualify my answers, without getting too far off on tangential discussions. Your example of listing ingredients which are potential strong allergens was along the lines of what I said I support- disclosure of ingredients to allow consumers to be better informed.

  • CStanley

    There you go again, putting words in my mouth.

    Not trying to do that. I’m just completely baffled at how this:
    So, the public option offers a complete health care package that privates can under cut be offering scaled down no frills offerings; or the public provides a minimal package that privates can counter with a more comprehensive package. Take your pick, privates have plenty of room to maneuver.

    Didn’t essentially mean this:
    you seemed to indicate that you wanted an innocuous public option that wasn’t designed to compete in such a way that the PIs would have to fold. Do you still stand by that?”

    What I was getting at is that you described a scenario that wouldn’t exist under the current legislative proposals for public option- one where the public option plans could offer certain things, but the private insurers could compete by offering a different array of plans. The provisions in the bills will not permit that. Instead, the private insurers will have to offer only the same kinds of plans, and include everyone, just as the public option will. But the public option does it with built in advantages of govt subsidization and no taxation.

    • HemmD

      CS

      70 million out of 320 million, that leaves 79% of the US population for PIs. Insert slippery slope argument here, but that’s not realistic when you look at the numbers.

      “What I was getting at is that you described a scenario that wouldn’t exist under the current legislative proposals for public option- one where the public option plans could offer certain things, but the private insurers could compete by offering a different array of plans. The provisions in the bills will not permit that. Instead, the private insurers will have to offer only the same kinds of plans, and include everyone, just as the public option will. But the public option does it with built in advantages of govt subsidization and no taxation.”

      Did I not say that the current legislation is a devil’s brew of special interests designed to keep real competition from the health care market? I must be getting forgetful.

      Of course the BS being cobbled together at the behest of lobbyist money doesn’t make sense. Any ideas that have a chance of making any real difference are neutered in committee. It’s almost like someone doesn’t want true health care reform to take place.

      BTW

      I’m about out the door. Don’t take any wooden credit default swaps and don’t eat the peanuts. 🙂

      • CStanley

        I really can’t explain it any better than I already did, and you’re not getting it so I’ll probably have to leave it at that. Basically you have said that insurance companies would be able to compete with a public option by providing different types of coverage. I’m pointing out that under the legislation as written, that wouldn’t be the case and I tried to get you to answer as to whether or not you were just expressing what your preferred policy would be vs. what the actual public option is going to be like.

        Now you are saying that your preference differs from what the actual legislation is because the legislation has been tainted by lobbying money (am I paraphrasing you correctly there?)

        But that makes no sense because in this instance, your stated preference is actually what the insurance lobbyists would want, and what is written in the legislation is what they don’t want.

        I hope you could follow that, but like I said, I can’t explain the point any better than that. I’ll probably have to end the discussion there anyway because I’m signing off for the night and won’t have much time tomorrow.

  • DLS

    “I don’t see any reason to distrust MedPac.”

    I do. The increasingly bad conduct of the Dems who run (and effectively define) Washington this year, and their results (including that the taken-over GM and Chrysler will probably not repay all the taxpayer money they got) generate increasing distrust as well as concern and opposition. It’s not a surprise nowadays to note that some of the more unflattering information about the future we face in this country with Social Security and Medicare (that these programs and Washington would reach historically unprecedented proportions and sizes in the future) were removed by the current people, from the Trustees’ Report Summary, for example. Treasury has been identified as needing to be more transparent about what it is doing (which is not limited to GM and Chrysler, but also with global regulatory changes being sought now, to name another example). These people are untrustworthy.

  • DJ, you need to dust off your copy of “The Jungle”. Food safety regulation is essential because business cannot be trusted with the health and safety of our food and drugs. Companies will always care more about their profits than your health, just like private insurance companies. Market forces have never been sufficient to make them behave–just the opposite. Market forces are why we have melamine in food, salmonella in chicken and coliforms in beef. It’s cheaper not to care about your customer. It boosts the bottom line. If you’re sued, you settle and include a gag order. If you’re busted you hide it, or you change the name of your company, or you say “we fixed that”.But I know believers in the supernatural power of “the invisible hand” of the market can never be convinced that oversight is needed. Your point that even with regulation they cheated and hurt people, is meaningless. We have speed limits, but people still speed. Should we just eliminate police because laws are still broken despite them?

    • Dr J

      “Should we just eliminate police because laws are still broken despite them?”In some cases, yes. If marijuana were legal, would we have more problems than we have now, or fewer? You can talk about how your stoner cousin is a slacker who wasted his life, and you can claim that but for the grace of our drug laws we’d all go the same way. Or you can claim that the drug laws are ruining society by landing otherwise productive citizens in prison, and we’d have just as many slackers either way.But the fact is no one has any data points. We know what level of social ills we suffer with marijuana laws in place and some people toking up anyway. We know how the urban Dutch get on with their laws. Maybe you can dredge up some more industrial revolution data points too. How things would change for us Americans in the 21st century under looser laws or tougher laws is still a matter speculation.

      The question about how much food safety regulation is the right amount remains, and I don’t imagine the ideal amount is none. I’d like to see us decide such questions based on the best cost/benefit analysis we can manage. You guys seem to believe any report of food illness affecting even a handful of people proves we should increase regulation, and I’m certainly not on board with that.

  • Few debate that Medicare is efficient at paying bills submitted on the behalf of “patients,” both real and imagined. The elephant in the room regarding Medicare is the high rate of fraud with little to no government eforcement. Once you factor in fraud, Medicare is even more expensive than the private sector.

    Want an idea of the scope of the problem? Have 15 minutes?

    CBS 60 Minutes
    The $60 Billion Fraud (14 minutes)
    http://www.cbsnews.com/video/watch/?id=5419844n

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