Bending the Cost Curve Up

December 11th, 2009 at 9:33 am | 27 Comments |

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It’s a deal.  With a compromise reached in the Senate, the White House has scored a political win and Democrats took a giant step toward passing sweeping health-care legislation.  But, assuming a Rose Garden signing ceremony in the months ahead, we need to ask a simple question: would the nation be the better for it?

In a recent New York Times’ column, Paul Krugman argues that fiscal responsibility demands the passage of Obamacare, literally arguing that this is our last best hope.

Health care reform hangs in the balance.  Its fate rests with a handful of “centrist” senators — senators who claim to be mainly worried about whether the proposed legislation is fiscally responsible.

But if they’re really concerned with fiscal responsibility, they shouldn’t be worried about what would happen if health reform passes.  They should, instead, be worried about what would happen if it doesn’t pass.  For America can’t get control of its budget without controlling health care costs — and this is our last, best chance to deal with these costs in a rational way…

Prof. Krugman writes on a major speaking point – no, obsession – of the White House since Inauguration Day: the imperative of cost control.  Presidential speeches have tied America’s economic recovery to future health-care savings; he mentioned the word cost 71 times at a press conference.

In recent days, Administration officials are pushing hard on the theme that healthcare costs are unsustainable and that proposed legislation would help tame costs.  White House Budget Director Peter Orszag and Director of the Office for Health Reform Nancy-Ann DeParle have both conducted interviews to argue that the Senate bill would “bend the curve.”

The message is not lost on Senate allies.  While debating the Reid bill, for example, Senate Jeff Bingaman (D-NM) bemoaned health inflation in a speech from the Senate floor, and held up a chart noting the future rise of health spending.

And Prof. Krugman isn’t the first columnist to consider the issue; Ronald Brownstein’s 2,600 word essay in the Atlantic Online trumpeted the proposed reforms as a “milestone” – the piece was required reading at the White House.

Prof. Krugman continues:

Are we talking about real savings, or just window dressing?  Well, the health care economists I respect are seriously impressed by the cost-control measures in the Senate bill, which include efforts to improve incentives for cost-effective care, the use of medical research to guide doctors toward treatments that actually work, and more.  This is “the best effort anyone has made,” says Jonathan Gruber of the Massachusetts Institute of Technology.

For those of us on the right, the argument could have purchase: costs are rising too quickly in health care.  Health-insurance premiums have more than doubled since 2000 – would even the slickest Washington lobbyist attempt to make the claim that health care is twice as good as it was earlier this decade?  Health costs have gobbled up wage increases, leaving median family incomes to stagnate long before Lehman Brothers collapsed.  Looking forward to a world without Obamacare, corporations would need to allocate more and more to pay for health benefits, while state and federal governments would need to draw heavier from the treasury for Medicare and Medicaid.

But as every good physician knows, it’s not enough to get the diagnosis right, you need to offer the patient the right treatment.

It’s too early for serious work to have been done on the Reid bill, but others have looked at its Senate and House predecessors.  Start with the different analyses themselves.  The nonpartisan CMS, a federal body, considered health spending if the House bill becomes law, concluding: “In aggregate, we estimate that for calendar years 2010 through 2019 [national health expenditures (NHE)] would increase by $289 billion, or 0.8 percent, over the updates baseline projection that was released on June 29, 2009.”  The reforms would bend the curve – up.

While the CBO scored the Senate Finance bill, the Director declined to comment on the potential legislation’s effects on total health spending.  Others have: the Lewin Group, for instance, felt health costs would continue to grow, hitting 25% of GDP by 2029.  Again, it’s too early to judge the Reid bill, but its core assumptions are similar to Finance’s.  (Lewin also looked at one of the House bills earlier this year, predicting a rise in costs.)

These analyses are crude, drawing on numerous assumptions.  But even the analysts close to the Administration concede that costs are likely to rise in the future.

Prof. Krugman quotes Jonathan Gruber.  But is he correctly representing the MIT economist’s view?  Prof. Gruber, an informal Obama advisor, has said that proposed legislation “really doesn’t bend the cost curve.”  Though he added (perhaps tepidly): “The alternative is doing nothing.  Relative to doing nothing, I think we are a lot closer to bending the curve.”

Prof. Gruber joins many doubters, including the Washington Post’s Robert Samuelson and Harvard Medical School Dean Jeffrey Flier.  Dr. Flier writes in The Wall Street Journal: “In discussions with dozens of health-care leaders and economists, I find near unanimity of opinion that, whatever its shape, the final legislation… will markedly accelerate national health-care spending rather than restrain it.”

Why the potential increase in spending despite the White House’s stated intentions?

James Capretta, a former Associate Director of OMB under President George W. Bush, explains:

Both the House-passed bill and Senator Reid’s proposal would put in place the most costly entitlement expansion in more than four decades. They would add millions of households to the Medicaid program and promise all Americans between about 100 and 400 percent of the federal poverty line – some 127 million people under the age of 65 in 2008 — that their health insurance premiums will not exceed a certain percentage of their incomes. They would also extend subsidies to small businesses offering insurance coverage. The Congressional Budget Office expects the combined federal cost of these new commitments to reach about $200 billion by 2019 and to increase eight percent annually every year thereafter.

Mr. Capretta makes a solid argument, and reaches a solid conclusion: “So the bar for what constitutes credible ‘bending of the curve’ potential should be set very high indeed.”

Let me expand on his points.  One of the reasons that healthcare is so expensive in the United States is because, paradoxically, it’s so cheap – with Americans paying just 13 cents on every health dollar directly, they tend not to economize.  They opt for a brand-name drug when a generic is as good; they get the extra test when it isn’t indicated; they demand specialist consults when good primary care would suffice.

Obamacare does little to address this fundamental economic problem.  It would allow millions of Americans to join Medicaid (essentially, a zero-dollar insurance) and lavish subsidies on millions more; it would demand first dollar coverage for many health services and dictate the size and scope of insurance.  In other words, it would address a system plagued by subsidies and regulations with more of the same.

The White House touts various aspects of the legislation as being consistent with future cost savings.  Director Orszag, for example, is a big proponent of “game changing” new ways of delivering health care.  He is particularly excited about the House and Senate bills including the rewarding of Accountable Care Organizations.  ACOs are the flavor of the month – even a New Yorker essay waxed poetic about their potential – but little evidence supports the benefits of their widespread implementation.

Of course, the White House pushes other “pillars” of cost saving.  Director Orszag writes about them in a recent Washington Post essay.

First and foremost: deficit neutrality.  But the House and Senate bills are effectively gaming CBO scoring – both bills collect tax for years before actually achieving program implementation, thereby skewing the numbers to look more responsible than they are.  It’s difficult to see how this actually has anything to do with “bending the curve” for a sixth of the national economy.

Next: a tax on high-cost insurance plans.  A tax on “Cadillac” plans, as they have become known, isn’t necessarily a bad idea and does have the potential to encourage people to get lower-cost insurance policies; the basic proposal is not unlike what President George W. Bush proposed in a later State of the Union address.  Follow the logic: if the issue is that people are over-insured, in part because the tax code allows employer-sponsored health insurance to be paid in pre-tax dollars, we’ll target the gold-plated plans.

But Obamacare has a gross limitation: it also sets up a bureaucratic structure to define what is a basic insurance policy.  In the House bill, for instance, all insurance policies will have to cover orthotics.  Mandated services and providers push up the cost of coverage.  In other words, yes, the tax on Cadillac plans would encourage people to shop for more basic coverage, but would basic plans really exist?  Looking at states like Massachusetts and New York, the answer seems to be potentially no.

Finally, Director Orszag favors the idea of a commission to temper and steer Medicare spending.  He originally called it IMAC (The Independent Medicare Advisory Commission); the Senate bill establishes IMAB (The Independent Medicare Advisory Board).  Semantics aside, the Commission would use a “comparative effectiveness analysis” to direct how doctors prescribe treatments, restraining health inflation by imposing cost-cutting decisions on doctors.  IMAC will have the power to reject treatments, devices or drugs for Medicare coverage unless specifically vetoed by Congress.  In theory, IMAC’s guidance on Medicare costs will then be adopted by other government agencies and the private sector.

IMAC sounds bold; both the Senate and the House have been busy watering down the idea.  See, for example, the excellent article by Time’s Karen Tumulty – among other exemptions that Senators have been working into proposed legislation: hospital funding would be untouchable before 2019.

There’s a larger issue here, though: is the IMAC idea even practical?  It assumes that government management results in cost savings.

Now, granted, it’s long been established that countries with government-run healthcare systems have ended up with rationed care.  On a per capita basis, for example, Canada has half the number of CAT scanners and a third the MRIs of the United States.  One result: waiting lists for practically any health service.  And the quality of care suffers, witness the superiority of American cancer outcomes.

But do these systems actually restrain costs?  Historically the answer has been yes.  Countries like Canada and Britain spend a fraction of their GDP on health care, compared to the United States.  But, in recent years, the spending trend has been quite similar – government-run healthcare, like American healthcare, has seen significant health inflation.  Between 2000 and 2006, the average real annual growth rate for health expenditures for OECD member countries was 4.9%; American health inflation over the same period was 4.95%.  Thus, the general point about cost control is debatable.

Britain is a good example.  Even with top-down management, the annual budget of the National Health Service grew 5% to 10% faster annually than inflation through most of the decade.  Here though is a more important observation: government planning committees are exceptionally unpopular and impractical.  Britain, for instance, tried to contain the surge by creating NICE – the National Institute for Health and Clinical Excellence, an agency empowered to save money by delaying or rationing “cost-ineffective” treatments.  The White House hopes to cut countless billions from Medicare with the same approach, passing tough decisions to an independent commission separate from Capitol Hill.

Unfortunately, sick patients have a funny way of ignoring tidy lines on government charts.  Time and again, NICE ruled against drugs, only to find doctors and families were more persuasive than its reports.  An anti-blindness drug – rejected unless patients had already lost one eye – was later approved after a public outcry; NICE dismissed a life-extending kidney drug until a PR campaign forced a reversal.  American lawmakers are familiar with such reversals: Congress has often overturned Medicare cuts it enacted.  NICE – or an American version like IMAC or IMAB – can’t restrain costs because people rebel.

Many of us who study American healthcare will acknowledge that we need to “bend the curve.”  At this point, though, the Obama White House has engineered a reform package that would seem to bend the curve – up.

Recent Posts by David Gratzer



27 Comments so far ↓

  • MI-GOPer

    David G, the entire Obama WH discussion about reforming health care insurance to get at rising medical costs was a pure politically-motivated fiction from Day One. They never intended to address rising health care insurance costs nor address rising medical costs.

    They took BigPharm off the hook and literally invited them into the WH for a sweet slip between the sheets and a promise of greater campaign contributions in the future.

    They took BigHosp off the hook and literally invited them into the WH for another bedroom bouncefestival that screwed America royally given that BigHosp are some of the biggest drivers of medical care cost increases in the last 2 decades.

    Obama’s WH never intended to address medical cost increases or health insurance increases… the latter was just a convenient whipping boi (and mostly GOP supportive industry) for Obama to get the health scare reform bus moving down the road.

    Americans know that. It was classic bait & switch. It’s why most Americans do not support Obama on Health Scare Reform. It’s why most Americans think this exercise to be a waste of time –and tag it nearly last as important issues for the Obama Messiah to tackle.

    When you got a guy in the WH who’s spent his entire life lying to people, faking out voters, saying “A” but working to secure “Z”, you can’t expect his duplicity to remain hidden forever.

    Trust is a fragile thing. Buyer’s remorse isn’t. And the democrats are almost set to learn how both of those come together for their undoing in 2010.

  • sinz54

    There’s no magic solution here.

    If you want to reduce the cost, you have to reduce the care.

    Britain’s NHS has strict rationing. They won’t pay for any drug or treatment that extends the life of a patient by less than six months, period. Instead, the patient can go to a hospice and wait to die.

    You can reduce the care by government rationing as the NHS does it. Or you can insist that patients have more “skin in the game” by raising their out-of-pocket costs: Higher co-pays, higher deductibles, less of a tax deduction.

    Americans have gotten used to nearly “free” group health care from their employers, who in turn pass the cost to taxpayers indirectly as a tax-free fringe benefit to their employees. That “system” removes all responsibility from the stakeholders, resulting in skyrocketing costs.

    But I don’t know how to change it. It seems that no health care reform has a chance of passage unless it assures Americans who already have such group health insurance that they can keep it. Yet it’s tax-free group health insurance that is the root cause of America’s health care problems.

  • RioRancho

    How can you possibly cite the Lewin Group without mentioning that they are wholly owned by UnitedHealth Group, one of the nation’s largest insurers, an orginaization fundamentally opposed to HCR because they are making a packet off of things the way they are now?

  • MI-GOPer

    Sinz54, we can restart the discussion in DC with meaningful reform efforts targeting the rise in medical care costs. We can help provide greater access to medical care for more people by enacting several GOP-authored reforms addressing access, portability, multi-state exemptions, etc. We can begin having the Fed Govt pay it’s share of health care costs for the poor and elderly instead of cost-shifting and shafting all of us.

    And we can plead with the democrats to put down their health scare reform pencils in favor of addressing the real issues of concern to America: the economy, lending, real jobs –not fake ones like in the Stimuli Spending Spree.

  • MI-GOPer

    RioRancho asks: “How can you possibly cite the Lewin Group…” with a manufactured outrage that is nearly worthy of indictment.

    Easily, the same way liberals can cite a CBS poll applauding Obama when everyone knows it’s a fiction. The same was liberal can cite a NYTimes poll or CNN poll pumping Obama’s Surge-to-the-Center when Americans still oppose his War of Necessity. The same way Obama can travel to Brookings to provide his special egg-headedness with some saliency and credibility.

    Bias isn’t just for the Left, afterall. Or is it?

  • sinz54

    MI-GOPer: Sinz54, we can restart the discussion in DC with meaningful reform efforts targeting the rise in medical care costs.
    By “meaningful,” the GOP means giving up on expanding coverage.

    You can’t bring 20 million (or 40 million by Dem estimates) more Americans into the health care system and expect that the total spent on that system will decline. It’s a logical absurdity.

    Everybody is scuttling around trying to find a magic formula to put 3 pounds of stuff in a 1 pound bag. Not gonna happen.

  • hormelmeatco

    “Not gonna happen.”

    The other countries Gratzer mentioned as rationing care have found the formula. Atul Gawande found the formula. Several healthcare organizations in the United States, like Kaiser Permanente, have found the formula.

    The formula is spending less money on things that people don’t need.

    The countries Gratzer disparages cover their entire populations, spend less of their GDPs and have higher life expectancies. It’s not impossible to spend less money and better coverage for more people. Several countries already do it!

  • sinz54

    hormelmeatco: The formula is spending less money on things that people don’t need.
    I already explained that the British NHS won’t spend much money on treatments that won’t extend a patient’s life more than six months.

    So the formula is telling patients that they don’t “need” to live another few months.

    If you had a loved one who had a terminal illness, you might think differently about that one.

    The countries Gratzer disparages cover their entire populations, spend less of their GDPs and have higher life expectancies.
    They cover them with rationed care–patients there don’t get the luxurious care that affluent Americans have come to expect for free.

  • LFC

    MI-GOPer said… We can help provide greater access to medical care for more people by enacting several GOP-authored reforms addressing access, portability, multi-state exemptions, etc.

    Actually, the last GOP list (you can’t call it a bill) of so-called reforms did not address access, completely ignoring pre-existing conditions as their health insurance masters told them to.

  • hormelmeatco

    Sinz: you missed something I said: their life expectancies are all higher. I actually did have a family member who died of a terminal illness recently. They and the rest of us decided that getting more treatment to buy another 2 months wasn’t worth the grief or diminished quality of life, as they were already close to needing a ventilator when they died. The British, French and Canadians don’t get what Americans expect, and they’re healthier and in better financial shape for it.

    You’ve mentioned a few times that you require dialysis, right? Under whose system are you or would you be better off?

  • LFC

    Guess what LFC? Since 2005, there have been 211 bills –yep, actually written out legislation– that deal directly with health care reform and specifically medical cost containment.

    AWESOME! That means that the GOP has all the legislation they need to propose already written out and ready to roll. That’s why they produced a bill in the past 6 months so easily.

    Oh, wait. They didn’t produce a bill. And they whined that they couldn’t debate healthcare reform in such a short time. Why not? They thought about it enough to produce 211 bills, right? Right?

    Republican Healthcare Reform = EPIC FAIL

  • garlic

    MI-GOPer — do you have links to the bills, or at least where you got the stats on the number of republican submitted bills? Are those 211 republican bills, or 211 bills total?

  • ottovbvs

    MI-GOPer // Dec 11, 2009 at 12:57 pm

    …….it’s fortunate for you gopher that most people here are committed to reasonably civil discourse

  • balconesfault

    Finally, Director Orszag favors the idea of a commission to temper and steer Medicare spending. He originally called it IMAC (The Independent Medicare Advisory Commission); the Senate bill establishes IMAB (The Independent Medicare Advisory Board). Semantics aside, the Commission would use a “comparative effectiveness analysis” to direct how doctors prescribe treatments, restraining health inflation by imposing cost-cutting decisions on doctors.

    Death Panels!

    There are three paths to achieving close to universal coverage (not necessarily mutually exclusive):

    1) current mixed public-private insurance system, with government providing some level of subsidy to uninsured to assist in affordability, and provisions requiring insurers to accept pre-existing conditions

    2) current mixed public-private insurance system with government option added. government option could incorporate means based pricing, to give a bridge for those who cost out of Medicaid to purchase coverage at below-market rates, and either provisions requiring insurers to accept pre-existing conditions, or government option being “insurer of last resort” for those priced out of regular insurance market because of their medical conditions

    3) scrap it all, and go to single payer system

    Under 1, both public expenditures and private insurance costs will definitely go up more rapidly

    under 2, private insurance costs would go up (if insurers are required to accept pre-existing conditions), or will follow current track, or perhaps decline if government acts as insurer of last resort, lifting burden of more costly coverage from private insurers. Government expenditures will go up.

    under 3, private costs will disappear for base coverage – although it’s likely that a lot of treatments will end up being paid for via private insurance riders. Interestingly, studies show that when you consider all levels of government, including tax incentives, we’re spending more per capita right now on healthcare than many nations that provide universal care. So total net tax burden on society to pay for this would actually not necessarily increase.

    For what it’s worth, there are 3 pathways to reducing societal costs of health care coverage

    1) rationing. either via price, or by edict

    2) reduce number of healthcare dollars spent on administration (including executive compensation)/advertising/profits

    3) pay doctors less

  • ottovbvs

    balconesfault // Dec 11, 2009 at 1:24 pm

    “For what it’s worth, there are 3 pathways to reducing societal costs of health care coverage”

    1) rationing. either via price, or by edict

    2) reduce number of healthcare dollars spent on administration (including executive compensation)/advertising/profits

    3) pay doctors less

    ……..Basically correct since you can only contain costs where they occur and 75% of them occur in the “delivery” area of hospitals, doctors, drug sourcing etc…… not that that doesn’t mean the insurance companies don’t have to be squeezed too…….The US healthcare industry is built on a business model that is both grossly inefficient and overcharges for it’s services (excellent though some of these may be)………Most advanced western societies have contrived to provide universal healthcare for their their citizens at costs ranging from 6.5% (Japan) to 10% France……..we meanwhile have achieved the incredible management feat of providing healthcare to only about 83% of our citizens at a cost of 17% of GDP……hardly material for the Harvard BS excellence list is it?

  • balconesfault

    let’s face it – the insurance industry exists to manage claims. and they profit by denying claims, or making it so cumbersome to deal with them that claimants go away. Some hospitals report that about 1/2 their administrative hours are spent billing and re-billing insurance in a way to finally get payment for services, or to establish that the company won’t pay for services so they can bill the patient.

    So not only does our current insurance model create an administrative burden on the insurance company side of the equation – they have created the need for bigger and bigger bureaucracies on the medical provider side of the equation.

    in essence, their primary value to society these days (besides providing a lot of jobs, and agents paying advertising for little league kickball teams needing uniforms) is to pay about 80 cents in coverage for every dollar in premiums they take in.

  • ottovbvs

    balconesfault // Dec 11, 2009 at 2:00 pm

    …….while all this is true and a 20% plus gross on such a low downside business is ridiculous it’s not where the bulk of the fat is concentrated…….I mentioned Japan above which does the best job of containing costs (actually almost too much so) and there the govt publishes annually a giant book where they list what they will pay doctors for every known procedure (well the Japanese are probably the most process oriented people in the world)…….I’ve seen one of these books and currently I believe they put the cost of a cat scan at around 90 buck versus over 1000 bucks here……..doctors don’t like it of course and there is some merit to their case but there is far less income differential between front line physicians and specialists…….another point about cost effective Japanese therapies which I saw made on a public tv program a few weeks back is that this in turn forces manufacturers of diagnostic and other equipment to do it very cost effectively and the resultant products are more price competitive in export markets for the Japanese……it’s all self reinforcing circle of virtue

  • MI-GOPer

    BlankHead weighs into the echo chamber of far left trolls with some perfected DailyKos nonsense: “let’s (sic) face it – the insurance industry exists to manage claims. and they profit by denying claims, or making it so cumbersome to deal with them that claimants go away.”

    No, BlankHead, the insurance industry exists to make a profit off underwriting insurance policies and keeping customers happy, subscribing and even buying other insurance products from the company.

    You speak like one of those community activist patient rights agitators who usually get most things wrong about business, about life, about responsibility and shirk away from any reform that rewards healthy life styles.

    Insurance execs have long held that they lose money when they deny claims because the cost of litigation by fast-penned, greedy and sleazy democrat trial lawyers make denial without valid cause an expensive proposition for insurers. It also ticks off the company’s HR office that picks which insurance company the business will be hiring… not a good thing, that.

  • MI-GOPer

    This is like Whack-a-Troll… I know you guys can generate lots of fake names and posters, but could you try raising the level of your intellect in the process?

    BlankHead and OttoBS’er ping off the walls of their special echo chamber and offer: “let’s face it – the insurance industry exists to manage claims. and they profit by denying claims….”

    Well, that democrat activist talking point comes str8 from the democrat shill group called “Health Care for America Now”. It shows up in all their TV ads –usually targeted to the 18-25 demographic and almost always on low end, repeat haven cable TV.

    The line, BlankHead and OttoBS’er snatched is “Supporters of health care reform have portrayed insurance companies as insensitive and too quick to deny claims. In a recent television ad, Health Care for America Now, a group supporting the Democrats’ health care reform bill, says insurance companies get wealthy by denying those claims.

    The group’s ad mockingly explains “how to get rich” by showing a “book” written “by America’s health insurance companies.” Chapter 3 reads, “Deny 1 out of 5 treatments prescribed by doctors.” A news release issued by HCAN attributed this statistic to a study released Sept. 2, 2009, by the California Nurses Association titled, “California’s Real Death.”

    Guess what?

    PoliFact looked into the “claim” that BlankHead and OttoBS’er float again here and PoliFact denied it –it ain’t true.

    PoliFact writes: “The independent state agency that collected the data used in the nurses’ study has raised significant doubt on the group’s interpretations of that data. Many “denials” that were counted were not really what most people would consider a denial. And studies by other groups show much lower denial rates. So we rate this claim False.”

    http://www.politifact.com/truth-o-meter/statements/2009/sep/18/health-care-america-now/tv-ad-overstates-health-insurance-denials/

    Ouch, it hurts when Truth has to Whack-a-Troll in every single thread.

  • balconesfault

    Insurance execs have long held that they lose money when they deny claims because the cost of litigation by fast-penned, greedy and sleazy democrat trial lawyers make denial without valid cause an expensive proposition for insurers.

    And thus, the need for tort reform, so that they won’t risk losing money when denying claims without valid clause?

  • balconesfault

    One does not need a 20% denial rate to make it quite profitable. If you consider the huge sums of money pouring through the system, even a 1% denial rate would mean about 10 billion dollars a year.

    Yes, the insurance industry profits hugely just from the overhead and profits that they tack onto each premium bill they send out. But they also profit from denial of claims. Obviously, they are smart about who they piss off – thus, as the Politifact article notes a lot of the denied claims that the nurses survey noted represent claims that are later paid, no doubt after HR directors are paid off.

    That said, insurance companies are not providing for innovation in our healthcare system. They are actually incentivized to see the cost of providing healthcare grow every year, since their cut is essentially a percentage of the take, and taking from a bigger pie means a bigger slice. They are disincentivized by the nature of the marketplace from seriously investing in preventative care, because preventative care costs money, and in a free market the person you’re spending that money on today might end up with another provider tomorrow … allowing your competition to reap the benefits of your investment.

    It is a fundamentally flawed system.

  • ottovbvs

    MI-GOPer // Dec 11, 2009 at 5:16 pm

    …..gopher how about a bit of substance for once in your life instead of all this troll bs…..you forget a) a couple of my friends are execs in the insurance industry b) I’ve heard a lot of insurance company presentations because I was once signing off on a policy for nearly four thousand people c) a brief review of the Fortune 500 list of healthcare companies shows that traditionally the loss ratio (that’s what they call paid claims) is around 80% d) a close friend of my old lady from her church actually works as a claims denier…..er…adjudicator…..and occasionally speaks out of school

  • ottovbvs

    balconesfault // Dec 11, 2009 at 5:16 pm

    ……tort reform is a total irrelevance……premiums and pay outs consume less than 1% of annual healthcare expenditures……in absolute terms it’s not chump change but it’s not material in the overall system……and malpractice insurance is actually a profit center for many doctors who form insurance coops to whom they pay their premium……the risk is hedged with a re-insurer…….and they usually take a div at year end…..only naifs like gopher don’t understand this

  • COProgressive

    “But, in recent years, the spending trend has been quite similar – government-run healthcare, like American healthcare, has seen significant health inflation. Between 2000 and 2006, the average real annual growth rate for health expenditures for OECD member countries was 4.9%; American health inflation over the same period was 4.95%. Thus, the general point about cost control is debatable.”

    But what I don’t see in this entire article is the discussion of what is driving the costs.

    What I see is a healthcare system that requires the policyholder/patient to support two seperate “For-Profit” industries. We have the “For-Profit” healthcare providers generating services for patients and sending the bill to the “For-Profit” Sickness and Injury Insurers to pay. The “For-Profit” providers set a Profit goal for their company and set patient cost to meet that mark. It is in the desire to meet the corporate Profit Goals that individual items and services are priced. The markup of some items is excessive, asprins for $20, box of tissues $8, just imagine the markup on CAT scans and MRI’s.

    All this excessive markup for corporate profits is passed along to the S&I Insurance companies who have their own corporate Profit Goals to make to keep investors pleased with the stock and multimillionaire executives well feed. So as the provider bills with their markup come in to the S&I Insurance companies, the S&I Insurance companies add their industry markup of 25-30% to cover their corporate Profit Goals and spread that cost over the small pools of policy holders (Groups in insurance talk).

    So, for each dollar of healthcare we are spending, we are only getting something less than $0.70 worth of “true” healthcare value.

    Now it someone were smart they might ask themselves, “Why are we paying a 30% premium to an insurance company for a single year of coverage only to lose coverage and all the money we’ve paid in at the end of each year?” Would it not be better if we all pooled our money into a healthcare Trust Fund were the money paid in would not just disappear each December 31st? That if this Trust Fund would be self sustaining and would provide healthcare for ALL Americans from birth to death, would that not be a better idea than the yearly expense of having to purchase an insurance policy for you and your family that leaves you with NOTHING but the outlook of having to purchase another yearly policy each December 31st?

    We need to put a stake in the heart of the predatory, obsolete, yearly S&I Insurance industry. Let it go the way of the Buggy Whip and Slide Rule industries!

    Have the CBO score Universal Single Payer Healthcare. Let’s at least eliminate one of the two “For-Profits” that are dragging down our nation.

  • sinz54

    hormelmeatco: Sinz: you missed something I said: their life expectancies are all higher.
    There are MANY factors that go into life expectancy, and the U.S. differs from Europe and Canada on many of them.

    First, we have an underclass of millions of Hispanic immigrants who get almost no care.

    Second, we have far bigger problems in America with auto accidents, drug addiction, single parenting (which is a one-way trip to poverty), crime, etc.

    From what I have seen, life expectancy among comparable subpopulations (say affluent suburbanites in America versus affluent suburbanites in Europe) is roughly equal.

    Ask anyone who knows anything about public health, and they will tell you that if you really want to improve life expectancy, you have to do something about poverty, and all the social pathologies that go with it.

  • sinz54

    COProgressive:

    Single-payer is off the table. It’s a political non-starter that even Obama won’t touch with a ten foot pole.

  • sinz54

    COProgressive:

    In all your railing about “profit,” you ignored all the NON-PROFIT health care plans we have in America like Harvard-Pilgrim (in MA where I live), Kaiser Permanente, etc.

    Yet even these NON-PROFIT health care plans are faced with rapidly rising costs.

    They tried in good faith to control costs with HMOs and managed care. The result? Patients revolted against all the restrictions. If a patient is sick, he wants the absolute best, most luxurious care for himself, cost be damned, he’ll figure out how to pay for it later.

    So tell me: What do you have against these NON-PROFIT private health care plans?

    The problem isn’t profit. The problem is the fee-for-service medicine model, in which patients pay for services rather than to treat specific problems.

    Here in MA where I live, one world-class hospital is proud of giving every patient his own private room with Internet hookup. But what on earth does THAT have to do with treating the illness that the patient was admitted to the hospital for? It’s a useless luxury.