RSS Feed Menu“I want insurance companies to be able to provide a return on their investment and their stockholders to benefit. I want them to continue to do their job and make a profit. But I also want them held accountable.” So explained the Vice President on Tuesday in Maryland.
His speech was the first of a series on health reform. On Wednesday, he spoke to seniors. Again, he spoke about accountability for the insurance industry.
Other senior Administration officials are also speaking from the same notes. The central message Americans are hearing these days from the White House: Washington needs to set some “ground rules” for health-insurance companies.
As the Washington Post notes: “Insurance companies have become the focus of those who favor reform…”
Indeed. Last week, the House Subcommittee on Domestic Policy held two days of hearings on health-insurance company practices. Chairman Dennis Kucinich opened the proceedings by stating: “Corporate bureaucrats may put profits before people, thereby becoming as noxious as disease itself.”
And in his address to Congress earlier this month, President Obama made promises of industry regulation front and center.
With polls suggesting declining support for the sweeping proposals of Obamacare, “consumer protection” – as Democrats have labeled such measures – are increasingly being talked up.
As I note in this week’s issue of The Weekly Standard:
The House bill tabled in July is full of attempts to expand the government’s role in regulating health care companies. There is some good in the draft legislation, including a proposal to stop insurers from cutting coverage (known in the industry as “rescission”) without clear proof of fraud and limits to “caps on coverage,” which means that a patient in active treatment for, say, cancer, can’t suddenly be cut off because of an insurance company’s preset limit on lifetime spending. But the bill also includes plenty of ideologically based rules that micromanage every health-insurance policy. It even adds a process to create more rules without congressional debate.
If Democrats pass legislation, the future of American health care could be… New York?
For almost two decades, the Empire State has been busy experimenting with various reforms to make health insurance more compassionate and equitable. Regulations, for example, require any applicant for insurance be covered (guaranteed issue) and that they be charged the same as everyone else (community rating). These are the types of regulations that, for the record, Democrats are touting in Washington.
From a distance, they seem fair, helping to end the “discrimination” – to use the White House’s word – against people with pre-existing conditions.
The experience of New York would suggest the need to think twice, however. Since the state passed guaranteed issue and community rating laws in 1993, the number of individual-insurance policyholders has dropped roughly 96%. No wonder – premiums have soared. Part of the problem is that guaranteed issue and community rating laws make it possible to game insurance, since you can wait until after you’ve contracted an illness to buy a policy. (If New York regulated home insurance like this, people could get coverage after their houses had caught fire.) It’s also true the younger, healthier New Yorkers get priced out of the market.
In a new and important study published by the Manhattan Institute, researchers Steve Parente and Tarren Bragdon look at New York State. As my colleague Paul Howard summarizes in a Washington Examiner op ed:
[Parente and Bragdon] found that these regulations help drive up the cost of private health insurance in New York, and that repealing them would lower premiums and help as many as 37% of the uninsured there to buy private, unsubsidized coverage. It would also help reserve scarce tax dollars for the poorest and sickest New Yorkers.
Parente and Bragdon make several suggestions for reforming New York’s market, including a scrapping of some of the heaviest regulations. (The full report can be found here.)
But as New York struggles to deal with the reality of its regulations, the rest of America needs to ask: is this really the model for the nation?
rbottoms // Sep 26, 2009 at 2:18 pm
A 22-year-old woman from Oxford, Ohio, died from swine flu on Wednesday. Kimberly Young graduated from Miami University in December and continued to live in Oxford, Ohio, within Minority Leader John Boehner’s congressional distrct. Reports now indicate that after initially getting sick, Young put off treatment because she was uninsured
Have a nice day.
ltoro1 // Sep 26, 2009 at 8:58 pm
I never contended that our healthcare system is not the most expensive in the world. However, no one else in the world (contrary to what you may think sftor) has been able to get a handle on the increases in costs either. This should not be a surprise to anyone, no system will eliminate scarcity. There will always be some form of rationing, whether it is based on ability to pay or willingness to wait in line.
balconesfault, I will also add that no one in the world is providing free healthcare to anyone. Someone is always paying for it. Also, a tax deduction is not the same as an expenditure form the federal government. By that logic all of a businesses employees are paid by the federal government too since they deduct costs of salaries and benefits.
SFTor1 // Sep 27, 2009 at 2:02 am
ltoro,
You are pointing to the fact that cost increases are a problem in all these countries we talk about. I agree; this is true as far as I know. You may want to consider that the first thing we must do is to find a way to get our costs much closer to this baseline that is de-facto established by the other countries in our party.
Then we can begin finding ways to beat these other countries on cost and outcomes if we can, and I would imagine we could. The private insurance industry has had about 40 years to contribute towards these objectives. They do not. They do what corporations are supposed to do: they look out for their own self-interest. This is great for shareholders, and bad for ordinary Americans. Very bad in fact.
ltoro, you do not seem to consider for instance sinz’s observation about replacement cost. A system that relies on ability to pay is inflexible in this regard. Health professionals working within the constraints of a universal care system can use it to order the queue to prioritize delivery of care.
It’s not perfect, but it’s far better.
balconesfault // Sep 27, 2009 at 1:36 pm
Also, a tax deduction is not the same as an expenditure form the federal government.
Not the same thing – but the same effect on the rest of us taxpayers who don’t receive either the deduction or a direct subsidy. We have to make up for the revenue, either forfeited or spent.
By that logic all of a businesses employees are paid by the federal government too since they deduct costs of salaries and benefits.
Employee compensation is a business expense. It is not “deducted” – because companies don’t pay corporate taxes on gross revenues – they pay taxes on profits. However, as opposed to salaries paid to employees … employees of companies which provide healthcare do not have to pay income taxes on that portion of their compensation. Thus, it is quite different in tax effect from salaries.
ltoro1 // Sep 27, 2009 at 7:53 pm
balconesfault, you have confused the exclusion of health insurance from gross income for employees with the employers costs related to employee compensation. All employee compensation, including health insurance if it is offered by the employer, is a business expense to the employer. Just so we’re clear, if an employer offers health insurance as a benefit, it is a cost of doing business to the employer the same as if the employer had paid the employee in cash. The exlusion of these benefits from an employees gross income for income tax purposes is a different issue.
balconesfault // Sep 27, 2009 at 11:01 pm
The exlusion of these benefits from an employees gross income for income tax purposes is a different issue.
Not exactly, no. Because in essence, this creates a government subsidy for a portion of the employee’s compensation package.
Think of it this way – if the government were tomorrow to announce that workers in the aerospace industry would not be subject to income tax on their earnings, would that be a subsidy to the aerospace industry? Of course it would.
Say an employer has an option of giving employee X $100K in salary, and $10K in insurance benefits, or $110K in salary. The effect on the employers’ taxes are the same. The effect on the employee is probably around a $3K difference in taxes. Given that compensation is driven by competition, a company providing healthcare for employee X has roughly a 3% advantage versus a company not providing healthcare. This 3% represents a subsidy from the government to the company providing healthcare.
ltoro1 // Sep 28, 2009 at 7:46 pm
Perhaps then balconesfault, I was confused. You refered to “220 billion annual tax break to corporations.” The exclusion of insurance benefits from gross income is a tax break to individuals not corporations/employers. That being said if your point is that the tax code provides incentives and disincentives or influences the behavior of tax payers, then I agree with that point.