RSS Feed MenuMost of the discussions regarding insurance companies have made them out to be irrelevant cost centers in the healthcare system. The single payer plan for the elderly, known as Medicare, after all, has an overhead cost of 2% so why do we need plans that have overhead costs of anywhere from 10 to 20%? In fact why does the healthcare marketplace allow these plans to exist?
Like everything about the American health care system, there is a good explanation for how things are organized and great difficulty in changing them. Most of the business of health insurance companies is in managing employer based health plans. In a very large fraction of that business, the employer is actually the party assuming the risk for the healthcare costs of the employees- the insurance company implements the rules of the plan set by the employer but if healthcare costs are greater than the premiums collected, it is the employer that loses money, not the insurance company.
The horror stories regarding patients losing coverage or being denied insurance because of pre-existing conditions relates to the individual insurance system. While both the Democrats and Republicans have called for reform of this aspect of healthcare insurance, the group or employer based system is not really burdened by these unfortunate problems. Their problem is escalating costs.
A large national company like Aetna, for example, may administer many hundreds or even thousands of such plans – some for which Aetna is at risk and some where the employer is at risk. Each plan has its own rules, its own subscribers, its own benefits. The amount of data that must be handled is enormous in order to pay the proper claim and attribute it to the proper patient and provider. At one point, Aetna was one of the largest developers of software in the United States in order to handle all the information generated by the individual plans. Thus one cannot expect the administrative costs of these very heterogeneous plans to be as low as Medicare’s costs since Medicare is a single plan with a single set of rules. If there is to be a continuation of employer based insurance, then there must be companies to keep track of all this. President Obama needs them more than he knows if he is to keep his promise about employer based insurance.
But there is a much more important cost-controlling function of insurance companies, an activity that physicians generally hate but one that has controlled healthcare costs in the past and will likely be utilized in the future. Unlike Medicare which exerts absolutely no control over the volume of services provided, insurance companies with HMO products actually have to pre-approve services and can have a rather impressive effect on the cost of care. In the mid-1990’s when HMO membership rose, the cost of healthcare fell so that the rate of growth was less than the general rate of inflation. This was the real “bending the curve” that Peter Orszag has proclaimed as a goal of the Obama plan. Subsequently, an HMO backlash led to a reduction in strict cost controls and a rise in healthcare costs. While several factors control overall healthcare expenditures, this was a key issue.
Massachusetts is considering another form of cost control- prospective payments for care with hospitals and physicians managing costs without the insurance companies approving any procedures or therapies prospectively. This approach can also work but is really another example of managed care. It also requires the extensive information systems and organizational structures that insurance companies — but hardly any other component of the healthcare system — possess.
Medicare is a low-cost insurance plan since it does so little. It pays claims but does nothing to control growth in expenditures. If it were to control utilization like insurance companies do, its costs would skyrocket. The answer to this conundrum has been to simply reduce payments to doctors and hospitals. Maybe this will work but it never has up to now. Volume of services has to be controlled as well. If Medicare ever gets around to controlling utilization, doctors would hate it as much as they dislike insurance companies.
There are several ways to structure a healthcare system to control costs but each of them will make someone unhappy. They all probably require someone or some agency to “come between the doctor and the patient”. When the President tells us his plan can control costs without making anyone unhappy, we appropriately reject this notion as absurd. While a decentralized model using multiple insurance plans with the possibility for prior approval of treatments, hospital admissions, high cost medications, and referrals to specialists, has been anathema to physicians and hospitals, it has worked to control costs. To implement any model in which there is a control of utilization, there must be health insurance companies.
balconesfault // Aug 10, 2009 at 4:17 pm
“That’s all Obama really cares about–helping the poor and the blacks, who put him in office. ”
Ah Sinz man, you sound reasonable for awhile … then one of these lines comes out and makes me think you’re channeling Hannity or something.
ottovbvs // Aug 10, 2009 at 4:19 pm
sinz54 // Aug 10, 2009 at 4:10 pm
“But what Obama’s liberals have always wanted, is to provide generous health care coverage to the poor and disadvantaged”
……….And provide economically priced access to healthcare for those suffering from serious long term illnesses (Sinz would be a good example)
“That’s all Obama really cares about–helping the poor and the blacks, who put him in office. ”
……….Actually he was also put in office by a majority of women, the under 30’s, those with college degrees, and those earning over $150k a year
ottovbvs // Aug 10, 2009 at 4:23 pm
balconesfault // Aug 10, 2009 at 4:17 pm
“Ah Sinz man, you sound reasonable for awhile … then one of these lines comes out and makes me think you’re channeling Hannity or something.”
……….Do you think it’s his meds…..and I’m serious……I’ve never seen mood swings like it
…. one moment total sense then off the wall…..very odd
ottovbvs // Aug 10, 2009 at 4:40 pm
…….Here’s a link to a classic bit of healthcare buffoonery at IBD (Baarking’s favorite reading) in which they claim the severely disabled scientist Stephen Hawking “Wouldn’t have had a chance” if he’d been in Britain…..a death panel would have deemed him unfit apparently…….Readers might be surprised to learn Hawking was born in the UK, has lived, was educated and has worked there almost his entire life while receiving much of his treatment at the world famous neurological unit at Addenbrookes NHS hospital……….this is the sort of lies to which the right have been reduced
http://www.ibdeditorials.com/IBDArticles.aspx?id=333933006516877
midcon // Aug 10, 2009 at 5:14 pm
21 liv&win // Aug 10, 2009 at 3:27 pm said “The hospital side of the equation is even more obsurd. A friend of mine went to a hospital for surgery. Unfortunately for him, that hospital was not in his network and the hospital billed $55,000 for his 4 day stay and ancellary surgical costs.”
liv&win. could you explain something for me. I am assuming your friend made the decision and went to an out of network hospital and that it wasn’t a result of an emergency of referral by an in-network authority. Is that correct? If so, then he knew that walking in the front door that there were severe limitations to what would be covered by his insurance because he went out of network. Was the bill a surprise to him? I assume he made a decision to go to that out of network hospital because in some way it was more beneficial to him – so he made cost vs benefit decision, but it doesn’t sound like he knew what the cost was likely to be on his way out the door. Am I getting this right?
barker13 // Aug 10, 2009 at 5:34 pm
Re: Balconesfault // Aug 10, 2009 at 3:53 pm (#22) –
“Huh?”
Balc. PLEASE tell me you were just being a wiseass – busting balls. PLEASE!
Now I’m not attacking you here, but if you SERIOUSLY weren’t aware the roots of the “employee provided” health insurance system we have today then two points:
1) Your parents should try to get all their school taxes back.
2) You (and/or) your parents should demand a refund from whatever college you attended.
Hell… let me add to those two… 3) Where the hell have you been over all the months we’ve all been blogging together? Numerous posters have referred to how we got ourselves into this position more times than I count!
balconesfault // Aug 10, 2009 at 4:17 pm (#26) –
“…then one of these lines comes out and makes me think you’re channeling Hannity or something.”
So let me get this straight: Sinz throws out a line that is arguably downright racist and instead of attacking Sinz for it you… er… attack Sean Hannity out of the blue?
(*SNORT*)
Gotta love libs!
(And I frigg’n detest Hannity! It’s just that fair is fair…) (*SIGH*)
BILL
balconesfault // Aug 10, 2009 at 6:23 pm
“You (and/or) your parents should demand a refund from whatever college you attended.”
Eh – I was a Chemical Engineering major, and actually didn’t take any history or government courses in college. And get real – the roots of our employer-based insurance system is pretty damned deep in the weeds for any HS history program. Maybe your HS taught that, and if so, kudos to them.
And yeah – Hannity was out of the blue. I could have expected some line like that to come from Beck, or Limbaugh, or Coulter, or any number of conserva-pundits who treat their listeners like rubes these days.
sinz54 // Aug 10, 2009 at 11:23 pm
balconesfault sez: “Might that have had more to do not with wage controls – but with government providing employers with tax incentives to carry such policies?”
I sort of implied that, but I’ll state it more precisely:
During WW2, wages (the actual paychecks) were controlled, but not fringe benefits. So employers could compete for workers by offering generous fringe benefits. Except the employers couldn’t pass those expenses on to consumers, because prices were controlled too. So the Government also allowed these benefits to be tax-exempt, to ease the burden of offering generous health care packages while price controls were in effect. So health care became a tax-exempt perk.
After the war ended, and wage-and-price controls ended, employers again started to compete for workers on competitive wages. So in 1953, the IRS tried to rescind the favorable tax treatment of health care offered by employers. Congress overruled them, and the tax treatment that had been started in wartime became permanent. And thus was born the current system of tax-excluded group health insurance.
And this wasn’t a bad arrangement, back in the days when giant companies like IBM and General Motors and even some defense giants like Raytheon offered virtual lifetime employment to talented workers. We’re not living in that kind of an economy anymore.
liv&win // Aug 11, 2009 at 3:19 am
Just a clarification on the tax issue. The cost of health insurance is a business expense (offsetting income) to the company and the value of the benefits is non-taxable income to the employee. I am not sure where I stand on this from a system/society perspective, but I know that if I was recieving medical benefits worth $10,000 a year and got a tax bill on that at the end of the year, I might be pretty darn pissed off. In fact, I would wonder why the Medicare crowd is not being taxed on their benefits too?! Afterall, I would be paying taxes for their benefit, and being taxed on my own benefit. F&*K That!
Of the uninsured, we think we know a little about them. Many are counted who are uninsured for 1 day. The figure includes illegal aliens. There is also a signficant percentage who are eligible for government programs currently in place, but are not enrolled for whatever reason. And then the uninsured includes young men 18-35 who don’t think they need it. After all is stand and done, we think the real uninsured which have a serious problem is about 15 million or less. their problems are typically that they either can’t afford coverage but also don’t qualify for current assistance or work at a place where insurance is not covered, or they can afford, but can not get coverage because of health conditions.
If you want the current system to work better, out reach and a subsidized coverage one one hand, and insurance reform on the other. Mandating insurance coverage while adopting AB1672, as mentioned above , could be expanded to individual coverage and lower costs.
I also talked about the differences in the health care continuem, primary care, specialty care, hospital care, physical therapy, pharma therapy…but do you also think about dental health and vision health?
But as a mandatory pre-requisite, we need to fully understand supply and demand. Here is one part of the dilemma:
Since reform began in 2006, the Massachusetts health care system has been inundated with almost half a million new, previously uninsured, patients, and the demand for medical services has rapidly outpaced physician supply. The wait to see a new primary care doctor is almost 2 months, leading patients to use the emergency room more often for routine visits. In fact, since the universal coverage law was passed, Massachusetts emergency rooms have reported a 7 percent increase in volume, which markedly inflates costs when you consider that treating simple conditions in the ER can be exponentially more expensive than an office visit. It’s no wonder that the plan has placed significant fiscal strain on the state’s budget, which is struggling to contain soaring health spending. http://www.kevinmd.com/blog/2009/07/primary-care-before-guaranteeing-universal-health-coverage-my-address-at-the-national-press-club.html
On my list of solutions:
expand the scope of nursing to include more areas of patient care
subsidize education costs for doctors who go primary care for at least 5 years
reform malpractice on primary care dramatically
Whatever we do, lets keep the end in mind: we want reasonable access to quality healthcare at an affordable price. We also demand to be free from government or insurance company intrusion into private and personal medical care issues and we want to choose our own doctors. With consumers and providers at the table, we each need to ask, what do I need to give up? what do I need to change? and what do I need to do to make this a reality? Afterall, this is a wonderfully symbiotic relationship…consumers want and need doctors to care for our health, and doctors want and need patients to care for. What can we do for them, so they can do for us? It can’t all be about money!
midcon // Aug 11, 2009 at 4:04 am
liv&win, You may have missed it but my post #30 asked you a couple of questions regarding your earlier post, in case you wanted to address them.
I’ve been paying Medicare taxes since Reagan instituted them for federal employees back in oh, the 1800’s or something like that. So if I choose to move under Medicare, I do not believe I should receive a 1099 for it as I have paid those taxes. I probably won’t choose Medicare when the time comes but at least I have choice contrary to all the Social Security taxes I am paying now and will never collect a dime.
Finally, as sinz pointed out the need for companies to offer health insurance as an employee retention tool is no longer necessary. I remaining in favor of being able to shop for my medical insurance benefits in a fashion similar to how I shop for other insurance, with some government regulation to insure stability of the industry.
balconesfault // Aug 11, 2009 at 8:13 am
“And this wasn’t a bad arrangement, back in the days when giant companies like IBM and General Motors and even some defense giants like Raytheon offered virtual lifetime employment to talented workers. We’re not living in that kind of an economy anymore.”
Well, it certainly wasn’t a bad arrangement for people who worked for government or for those giant companies, for sure.
And as I said – that arrangement is almost certainly the reason why we don’t have a single-payer healthcare system in America today. Eliminating it would almost certainly be the fastest pathway to America having a nationalized program, if one wanted to achieve that political result.
ottovbvs // Aug 11, 2009 at 9:15 am
balconesfault // Aug 11, 2009 at 8:13 am
“Well, it certainly wasn’t a bad arrangement for people who worked for government or for those giant companies, for sure”
……..Basically Sinz’s telling of it is as I understand it……during the war healthcare was used as recruitment/retention tool because of wage controls and received preferable tax treatment…..after the war govt tried to return things to normal but by then the system was so entrenched it wasn’t politically possible to reverse it……paradoxically if it had been I like you suspect we’d have had a universal system in the sixties along with medicare…..but we are where we are
ottovbvs // Aug 11, 2009 at 9:17 am
midcon // Aug 11, 2009 at 4:04 am
“I probably won’t choose Medicare when the time comes ”
………So what’s your alternative?
liv&win // Aug 11, 2009 at 1:16 pm
midcon // Aug 10, 2009 at 5:14 pm & midcon // Aug 11, 2009 at 4:04 am
As I understand it, he didn’t “know” (a) the plan limitations or (b) the cost of the care. It was not an emergency referral. The cost of the care was the shock, the ease of the “write-off” was the awe.
My point on taxes is this, they want to tax my benefit and a tax me for medicare. Bollocks to that!
Also, Medicare is the best deal for the older folks that ever came down the pike. You have paid pennies to get the dollar in benefits. With an Advantage plan or a supplement, you have very comprehensive low cost coverage. The only problem with Medicare is that (a) it is woefully underfunded, passing huge deficits to the next generation and (b) its reimbursement levels are artificially low creating reimbursement pricing pressure on private plans (cost shifting).
Obama is on the tube right now at a “town hall” except he is reading from the teleprompter, so I have the volume muted.
barker13 // Aug 11, 2009 at 1:22 pm
Re: Liv&Win // Aug 11, 2009 at 3:19 am (#34) –
“Just a clarification on the tax issue. The cost of health insurance is a business expense (offsetting income) to the company and the value of the benefits is non-taxable income to the employee.”
Correct.
Just as an aside… I’m against “business taxes” and thus logically against tax offsets for “business expenses.” I believe individuals should be taxed. Whether we’re talking taxing income only… taxing spending only… a combination of both… I’m not set in concrete on any one specific “method” of taxation to raise necessary government revenues, but my point is that as with most things, I concentrate on the individual and his or her rights and responsibilities both to his or herself and to society.
This isn’t the thread to get into the above… I just note it to ADD a “clarification” to L&W’s clarification.
(BTW, thanks for your clarification, L&W – it never hurts to make sure we’re all on the same page definition wise.)
“I am not sure where I stand on this from a system/society perspective, but I know that if I was recieving medical benefits worth $10,000 a year and got a tax bill on that at the end of the year, I might be pretty darn pissed off.”
OK. I understand the visceral reaction and I commend the honesty to lay it out there. That said, of course you do understand – appreciate the fact – that the whole “employer paid health insurance/healthcare” loophole is just that… a loophole – an artificial construction originally meant to be a “carrot” for attracting/keeping workers in a wartime industrial economy with wage/price controls in place.
It’s “artificial” in the sense that let’s say you make $60,000/year. (That’s pretty close to median income for a American family of four I believe – give or take.)
So… you “make” $60 grand a year. Your company throws in another $10 grand to pay or pay towards your health insurance/healthcare and that of your wife and minor children if any.
Really your COMPENSATION is $60K +$10K – right…??? (With me so far…???)
Now… returning to your original “salary” component of your total compensation package, out of that $60K let’s say you spend $15K on housing (shelter)… $5K on food… $5K on transportation…
…and so on and so forth.
Now shelter is a necessity. Food is a necessity. Transportation (to get to work for example) is a necessity for most. Etc. Etc. Etc.
For the sake of argument let’s just stick to food and shelter. These two necessities come to $15K +$5K with our simplistic model. Right…??? So we’re talking $20K. We’re talking $20K in absolutely necessary expenses out of $60K salary.
Well… if it makes “sense” (economic, ethical, pragmatic… however you wanna cut it) to say out of a total COMPENSATION of $70K ($60K+10K) we’re gonna set the $10K used to purchase health insurance/health care aside as non-taxable to the individual/family, why wouldn’t we follow this same logic with the other two necessities I just noted?
Why should your (the example person/family) “salary” be viewed for tax purposes as $60K? Why not $40K – which is the original $60K “salary” minus housing and food expenses? After all, health insurance is only really absolutely necessary when you get sick, whereas you need food and shelter basically every day of your life.
(*SHRUG*)
See what I’m saying about “artificial” separation? I mean if it makes sense for the employer to “provided” – at no tax liability for you – the percentage of your total COMPENSATION that goes towards health insurance and healthcare… why not shift the “burden” of food… shelter… transportation… clothing… etc… to the employer?
Again… my point… we’re created an artificial distinction which benefits not everyone of us equally, but benefits on a sliding scale of 100% to 0% those who have totally employer paid health insurance/health care vs. those who don’t get one red cent towards it from their employer.
And, no… to anticipate… the way to erase the unfairness is not to require ALL employers to provide ALL employees with health insurance/health care… because if that’s your logic we’re back to why not have employers also responsible for OTHER aspects of their employees spending requirements – necessities such as food, shelter, clothing, transportation…
(*SHRUG*)
Anyway… that’s my position.
BILL
ottovbvs // Aug 11, 2009 at 1:52 pm
liv&win // Aug 11, 2009 at 1:16 pm
“Also, Medicare is the best deal for the older folks that ever came down the pike. You have paid pennies to get the dollar in benefits. With an Advantage plan or a supplement, you have very comprehensive low cost coverage. The only problem with Medicare is that (a) it is woefully underfunded, passing huge deficits to the next generation and (b) its reimbursement levels are artificially low creating reimbursement pricing pressure on private plans (cost shifting).’
……..You may consider it pennies but since I’ve paid hundred of thousands of dollars in FICA and taxes over the years I’m afraid I don’t and I think most seniors would agree with me
……….Medicare is underfunded because of the cost of providing care….advantage programs add to the problem because Medicare is being overcharged for them
…….And who say’s Medicare reimbursement levels are too low?…..doctors?….hospital systems?……drug companies? …….some of whom have practised huge frauds on Medicare……well they would wouldn’t they?…… rather like drug dealers complaining about the effectiveness of detection methods at airports
balconesfault // Aug 11, 2009 at 2:24 pm
Bill – you and others ignore one other reason why companies provide healthcare.
Not simply because it attracts employees … but also because companies want their employees to have high quality healthcare … since high quality heathcare facilitates someone being a better employee.
Interestingly, if you go back to the late 1800’s/early 1900’s “Company Towns” that did take care of housing and transportation and food, etc, were the rage not among marxist/socialists … but among American businessmen. It actually took the labor movement to break the requirements that employees live in these controlled environments.
Companies that pay employees $x/hour to do complex tasks want to maximize the likelihood that those employees produce $x+y/hour in value. They see providing healthcare as a tool for achieving this goal. In that sense, healthcare is more a business investment than it is a “benefit”.
Coverage to families? That’s arguably more on the benefit side.
But as someone who would like to see a public option, I applaud any initiatives to strip tax benefits from company provided healthcare. Next April 16 we would see the biggest groundswell for a nationalize system that we’ve ever seen.
barker13 // Aug 11, 2009 at 4:06 pm
Re: Balconesfault // Aug 11, 2009 at 2:24 pm –
“Bill – you and others ignore one other reason why companies provide healthcare.”
(*HEADACHE*) (This I’ve gotta hear…)
“…ecause companies want their employees to have high quality healthcare … since high quality heathcare facilitates someone being a better employee.”
(*HEADACHE TRANSFORMED INTO A MIGRAINE*)
As opposed to…???
As opposed to desiring homeless, starving nude employees with no cars…???
Balc. How do you function at work?
Seriously… I know a LOT of engineers. I’ve never known an engineer who was as thick headed as you.
It’s like what I wrote went totally in one ear and out the other and the only thing that stuck was that my name was attached.
(*SIGH*)
Balc. If you wanna have a conversation with yourself go right ahead; if you want to go back and forth with me… engage brain prior to laying fingers on keys on keyboard.
Liv&Win… Midcon… even Sinz… do any of you have any constructive additional comments or criticisms to make regarding my logic in Comment #40?
How’bout you, Stanley? It’s your thread after all!
Sdspringy…??? You still checking in here on this thread? Any thoughts?
Anyone and/or everyone else who’s been lurking but not commenting…???
BILL
barker13 // Aug 12, 2009 at 8:45 am
Re: Barker13 // Aug 11, 2009 at 4:06 pm (#43) –
See… (*SIGH*)… this is what I mean.
The issue at the heart of the health insurance/health care debate – namely, who should pay – is ducked in favor of endless blather, thread by thread, day in and day out.
Specifics…?! Nah… no one wants to debate specifics or even come down on one side or the other.
Philosophical discussion? Nope. Only if it’s dumbed down to “I’m on the Right and I say” and “I’m on the Left and I say.”
My #40 Post is what Obama/Pelosi/Reid and McConnell/Boehner/etc. should be talking about. No… not exclusively, but it is the crux of the issue.
(*SIGH*) It’s so frigg’n depressing…
BILL
sinz54 // Aug 12, 2009 at 10:46 am
“no one wants to debate specifics or even come down on one side or the other….My #40 Post is what Obama/Pelosi/Reid and McConnell/Boehner/etc. should be talking about.”
Obama never wanted any debate at all. His original timetable called for health care reform to be rammed through Congress in about four months, so he could have it passed and ready for his signature by August. That doesn’t leave much time for real debate.
The only “debates” on this particular form of health care reform have been going on between liberals and ultra-liberals, in the liberal think-tanks and Dem party meetings. And the usual vague, soothing generalities from Obama during his 2008 campaign, which were designed to obfuscate all the real issues: Cost? Who pays? Who benefits? Who loses? How much of a role for government in health care? Single-payer someday?
BTW: Some companies do give support for these other necessities. If you work at Wal-mart or J.C. Penney, you can get an employee discount on clothing you purchase at the store.
sinz54 // Aug 12, 2009 at 10:50 am
barker13: At the time I worked at Raytheon, Raytheon owned Speed Queen, Amana, and Magic Chef. And Raytheon offered a 20% employee discount on the purchase of any products of those brand names.
So a lot of us Raytheon employees took the opportunity of the discount to put all new applicances in our homes. I bought Amana air conditioners and a Speed Queen washer and dryer. I found the best price I could at a store, then I sent the bill to Raytheon and they gave me an additional 20% off.
barker13 // Aug 12, 2009 at 11:19 am
Re: Sinz54 // Aug 12, 2009 at 10:50 am (#46) –
Sinz… what are you responding to…???
Did you post on the wrong thread by accident. (Been there, done that!) (*GRIN*)
Anyway… please clarify.
BILL
P.S. – Did you happen to know Ron Bushey – or know of him? He was pretty high up the food chain, missile systems. Retired and passed away a few years ago. One hell of a guy.
balconesfault // Aug 12, 2009 at 2:21 pm
“…ecause companies want their employees to have high quality healthcare … since high quality heathcare facilitates someone being a better employee.”
(*HEADACHE TRANSFORMED INTO A MIGRAINE*)
Yes, I know it’s disorienting hearing noises from things that are outside the field of vision that those blinders you wear limit you to. And when one has become ossified, turning your neck can certainly cause pain.