“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?
32 responses so far
1 Churl // Sep 25, 2009 at 9:39 am
“…help as many as 37% of the uninsured there to buy private, unsubsidized coverage.”
The uninsured who don’t have pre-existing conditions, anyway.
2 sinz54 // Sep 25, 2009 at 9:52 am
Mr. Gratzer:
That’s precisely why you have to have a mandate that each citizen must purchase insurance as soon as each citizen has reached the age when he is no longer a dependent of his parents. That way he’s not allowed to wait till he’s old and sick to purchase insurance and game the system that way.
Mr. Gratzer’s criticism would also have been applicable to Social Security–Why don’t you wait till you turn 64 and THEN join the Social Security program–except that Social Security is mandatory for every worker as soon as he starts working.
Mr. Gratzer: I wish you would come down here to the Comment area and actually discuss your ideas with us. Because some of them are flat wrong, and I don’t know if you even bother to read our criticisms of your ideas. Do you???
3 MFarmer // Sep 25, 2009 at 10:00 am
There’s an idea among progressives, which is not being refuted properly by Republicans — if they can squeeze profit from healthcare services, and if they can stop business practices which assure profit and viability, then healthcare can be made affordable — the whole concept of progressive healthcare reform revolves around this idea of taking profit away from businesses and using it to pay for universal coverage, plus regulating away business practices which lead to profit and viability.
Businesses can’t succeed without profit and reasonable business practices — not unless they are subsidized by the government, like GM.
There are no defenders of capitalism in government at this point, at least none with influence. So, whatever reform is passed will eventually destroy private businesses and transfer profit to the cost of bureacracy. The main decision we have to make is whether we want government to run healthcare with a “system” or whether we leave healthcare services to the free interactions of consumers and providers. Everything else is babble, diversion and intellectual dishonesty.
4 sinz54 // Sep 25, 2009 at 10:00 am
Mr. Gratzer:
I am going to tell you the same thing I’ve been telling the advocates of single-payer: Your ideas, however brilliant you may think them, have ZERO chance of being the basis of any health care reform package likely to pass the Congress and get signed into law by Obama.
If your goal is to kill health care reform entirely as long as the Dems control the Federal Government, then be honest enough to admit this. (RedState.com has been quite open about this being their goal.)
But if you want to offer any ideas that have a chance of making it into health care reform within the coming year, then you’re going to have to work within the current Dem-proposed hybrid system: There will continue to be private insurers. (Sorry, single-payer fans.) But those insurers are going to be much more strictly regulated than they are now. (Sorry, Mr. Gratzer.)
Now that’s the reality. You may not like it, and I may not like it, and the single-payer fans may not like it, but that’s what is on the table. We can choose to work within that reality, or stand athwart it and shout “No!” as WFB said in another concept.
5 sinz54 // Sep 25, 2009 at 11:17 am
MFarmer:
As I’ve said before, the “free interactions of consumers and providers” must NECESSARILY lead to consuming far more resources than the providers have. That’s because 99% of people will price their own lives as if they’re infinitely valuable. Almost no one is going to volunteer to die just because their health care is costing too much.
So you’re going to have skyrocketing health care costs (based on supply always exceeding demand), providers refusing to treat anyone whose health care costs too much. You’re going to have insurers refusing to insure anyone with a pre-existing condition (which will soon include identified genetic predispositions to illness). You’re going to have people dying because their cancer treatment exceeded the lifetime cap they paid for with their premiums.
Nobody wants to live in a society like that. It will be in social agony.
As I’ve said before: We can slough off BOTH the free-market purists and the single-payer socialists, because they are BOTH being totally unrealistic. They both wave slogans around but they haven’t given 10 minutes of actual thought to what is really driving up health care costs.
6 sinz54 // Sep 25, 2009 at 11:28 am
The reason why health insurance is NOT like auto insurance or homeowner’s insurance, is that there is no concept of replacement cost.
If I total my car in an accident, and the insurer doesn’t reimburse me enough, I can still buy a replacement car with my own funds out of pocket. If my mortgaged home is destroyed in a fire, and my insurer doesn’t reimburse me enough, I may have to file for bankruptcy. But that’s not the end of the world; I can start my life and finances over again.
But if my insurer doesn’t pay enough for my cancer treatment, and I can’t get the funds from elsewhere, I can die of cancer. And unlike the car and the house, there is no coming back from that. Once you get a life-threatening illness, you can’t walk away from it the same way you walk away from a house on fire or a car that’s been totaled.
An authoritarian society would have no problem with this. Nazi Germany simply euthanized anyone with a chronic disabling illness. And that was that.
I don’t want that solution in America.
So no matter how much someone’s health care costs, we’re going to find a way to pay for it somehow, even though the free market says otherwise.
7 ProfNickD // Sep 25, 2009 at 1:31 pm
sinz54,
I fail to see the difference between your position and a mugger on the street demanding the livelihood of his victim because you seem to think that the lives and wealth of others (taxpayers, physicians, cancer treatment centers) are yours to dispose of.
By the way, what are you going to do if the above do not sanction your attempts to loot them and they simply… quit? That is what if physicians stop providing services, taxpayers go overseas, and cancer treatment centers close?
8 ottovbvs // Sep 25, 2009 at 2:02 pm
…..The notion that healthcare is on the ropes is a total delusion…….there’s no question a bill is going to pass and it will look fairly like the one the President wanted.
profnickd // Sep 25, 2009 at 1:31 pm
“By the way, what are you going to do if the above do not sanction your attempts to loot them and they simply… quit? That is what if physicians stop providing services, taxpayers go overseas, and cancer treatment centers close?”
………Since the medical profession in the US make 3-4 times what they do in Europe this seems unlikely…….however the comment does demonstrate the unreality that is the hallmark of most of your utterances
9 MFarmer // Sep 25, 2009 at 2:06 pm
Sinz,
You only make claims, but you have no way of proving these claims — the truth is that you don’t know what would happen if healthcare was left to the market, and you’re also throwing the problem of poverty in with healthcare — they are two separate problems — but, dealing strictly with healthcare, consumers and providers dealing freely with one another is the only route that avoids the destruction of healthcare.
10 MFarmer // Sep 25, 2009 at 2:08 pm
Otto believes the slaves will love their new masters — they would be so much worse off without them.
11 balconesfault // Sep 25, 2009 at 2:48 pm
lol – are we currently slaves to the insurance companies? Or are we “free” because we can choose between different insurance providers?
12 ProfNickD // Sep 25, 2009 at 3:07 pm
ottovbvs,
So you are assuming that people will tolerate being looted in order to pay/serve the medical needs of others… forever? That *no* physicians will stop practicing, that they will work for nothing? That taxpayers *won’t* increasingly go overseas but will just allow their wealth to be taken? That cancer clinics won’t close, that they will save lives for free?
If you do assume these things, then how do you explain, for example this:
http://www.doctorsonstrike.com/
13 balconesfault // Sep 25, 2009 at 3:24 pm
Yeah yeah. Tell us about “Going Galt” too, profnickd.
Then read this.
http://www.npr.org/templates/story/story.php?storyId=112818960
Randian fantasies are juvenile.
14 Oneon1isto // Sep 25, 2009 at 3:56 pm
re: MFarmer // Sep 25, 2009 at 2:06 pm
“…the truth is that you don’t know what would happen if healthcare was left to the market”.
Actually the current insurance system is pretty dang close to free market. Unless you’re falling into the silly trap of lumping the entire bio/medical/pharmaceutical/physician/hospital/insurance industry into what we know as “health insurance reform”. Either way neither of them are that far from a free (though regulated) market.
“the whole concept of progressive healthcare reform revolves around this idea of taking profit away from businesses”
Unless, of course, you consider the idea that progressive healthcare reform revolves around the idea of allow US business (especially small business) to be more competitive by reducing their employee health care costs.
15 SpartacusIsNotDead // Sep 25, 2009 at 4:45 pm
Sinz wrote: We can slough off BOTH the free-market purists and the single-payer socialists, because they are BOTH being totally unrealistic.”
Except for the fact that you call single-payer advocates “socialists” when you probably don’t call supporters of public schools or local police socialists, you make a fair point regarding what is politically feasible. And that fair point leads to two other problems with reform:
1. As we’ve discussed ad nauseum on NM, there is NO proven method for controlling costs on a large-scale basis without a public option or similar government intervention. Conservatives say a PO will ruin the private insurance market, but they are ignoring the example of the CA Workers Comp insurance market as well as the health insurance systems in Singapore and the Netherlands.
A PO means rationing, but not necessarily in a way that is harmful to health outcomes. Instead, we’re going to have to ration what we pay for those services that produce either no health benefit or only health benefits that could be achieved for less money. Quite simply, we need an open and honest debate on this issue that is free of demogoguery.
2. Why is a discussion about a truly unregulated free market or a single-payer system off the table? I realize it’s a very wonky topic, but neither approach should be excluded from the discussion on ideological grounds. In the case of single-payer, it seems to me that people are ignoring the potential benefits of an alternative system merely because it offends their ideology – not because it doesn’t produce the same or better outcomes at a lower price.
16 MFarmer // Sep 25, 2009 at 6:36 pm
“Actually the current insurance system is pretty dang close to free market.”
Thanks, I needed the laugh.
17 MFarmer // Sep 25, 2009 at 6:40 pm
“Unless, of course, you consider the idea that progressive healthcare reform revolves around the idea of allow US business (especially small business) to be more competitive by reducing their employee health care costs.”
Why not allow our “free market” to be competitive by first removing government regulations which limit competition — that seems to be a rational first step. Government intervention through the years has caused a collective mental disorder which prevents people from seeing how involved government already is in healthcare.
18 ltoro1 // Sep 25, 2009 at 8:32 pm
You know, I kind of like that I don’t get a chance to look at the comments on this sight until I get home from work. Then I can react to different comments as I see fit.
1) Sinz, I think you got you accidentally got it backwards. If supply were to always exceed demand costs (everything else held contant) would decrease.
2) I’m not sure that 99% of people truly have a value on their live that is equal to or approaching infinity. I think this could be checked by looking at how much like insurance one is carrying. Personally, I have written my advance care directives so that they do not eat up all of my families financial resources just to keep me alive one more day.
3) This still addresses the value one places on his or her life. Honestly the value place on your life, is not always what we are insuring. I would submit that, in fact, we are insuring against different events such as a broken leg, sore throat, cancer, etc. The risks (which is a function of likelihood and costs to treat) are different for each. In a completely free market (I know it’s not completely realistic) we would be able to insure against whichever event we were concerned with.
4) Since we do not live in above mentioned unrealistic world, I believe, if we are to get the government involved in any of this, it should be limited to catastrohic events (those events that would normally bankrupt you). I firmly believe that, if you do not have insurance that covers it, you should be willing to pay for some things yourself.
I would love to go on, but I need to put my 2 year old to bed.
19 SFTor1 // Sep 25, 2009 at 9:09 pm
It is rare that I read a series of comments from Sinz and find myself accepting the logic. I do, in the following sense: I’m a single-payer advocate, but I know the country is not there yet. So Sinz, you are probably right: we will mainly get reform that reins in private insurer practices, and makes a bid to bring down costs. If that can be had in this round I suppose it’s better than nothing.
MFarmer maintains that the insurance market is not free. That may be so, but it misses the point: the system we have is the system insurers want. It makes them lots of money.
It makes lots of money, yet fails the essential benchmarks of access, affordability, and transportability.
The objective for the health care debate going forward must be to beat competing countries on cost and quality. We are not having that debate yet, but we don’t have very long before we need to.
20 SFTor1 // Sep 25, 2009 at 9:12 pm
David Gratzer, everyone is also touched that your sources at the Manhattan Institute have found a concern for the poorest and sickest New Yorkers. Would it be possible to find past writings from these gentlemen where they advocate reforms to improve the lot of these unfortunates?
21 ltoro1 // Sep 25, 2009 at 11:40 pm
Sftor1, what makes you think a single payer or “reforming” insurance practices will bring down costs without reducing quality of healthcare? How do these systems circumvent the concept of scarcity?
I would like to point out that healthcare costs in nations that are closer to a single payer are also increasing at a rate higher than the rate of inflation.
22 SFTor1 // Sep 26, 2009 at 3:37 am
Well, ltoro, everyone else seems to be able to do it.
And ltoro, let’s recognize that our system is the most expensive in the world, but falls short of delivering the expected results. Is this news to you?
23 balconesfault // Sep 26, 2009 at 6:50 am
And ltoro, let’s recognize that our system is the most expensive in the world, but falls short of delivering the expected results. Is this news to you?
And again – it bears repeating on every thread here on this topic.
In the US, we’re already spending more per capita in taxpayer funded healthcare services than any other country in the world.
Per the HHS, we spent 1.04 trillion on publicly funded healthcare in 2007 … that increases to 1.24 trillion if you include in that total the 220 billion annual tax break to corporations for providing insurance. That put us at $4,100/person on publicly funded healthcare (including federal, state, local) … slightly above Norway’s $4,000/person, which provides universal healthcare.
And then we spend another 1 trillion (subtracting out the tax reduction) in private funds.
So yeah – a lot of those countries who are spending less than what we do on publicly funded healthcare DO have longer waiting lines for procedures, etc. They’re also spending half, or less, than we spend per capita combined public and private. Of course they have longer lines.
But with the same amount of per capita public spending that we have here in the land of the free – they’re providing free healthcare to all.
If we can’t figure out how to do that – provide universal care to all at the same cost that other nations do – then allow private parties to spend that extra trillion or some portion of it to purchase expedited services that we can’t manage to provide on the public nickle … then we’re screwed in the long run.
24 MFarmer // Sep 26, 2009 at 7:26 am
“MFarmer maintains that the insurance market is not free. That may be so, but it misses the point: the system we have is the system insurers want. It makes them lots of money.
It makes lots of money, yet fails the essential benchmarks of access, affordability, and transportability.
The objective for the health care debate going forward must be to beat competing countries on cost and quality. We are not having that debate yet, but we don’t have very long before we need to.”
Yes, I am definitely missing the point. So, you’re saying that the system we have, which government intervention has created, is not working and it’s the system insurance companies like because it’s making them money, so government must make changes so we can compete against other countries re: quality and cost.
First of all, the government has created a system which gives monopolies to certain companies — I’m sure BCBS loves the current system — however, it doesn’t matter what companies like. In a free market, companies have to compete to get business — this competition improves quality and costs. Sure, once government starts intervening, companies lobby for favor and advantage. The government feeding trough then attracts the worst in business — those who seek favor and advantage — those who are political and know how to play the game. Why do you think that because the current system gives an unfair advantage to certain businesses, an advantage only government can provide, that another government system will be any different? Why not propose free market solutions where all companies compete and the consumer has choices?
25 balconesfault // Sep 26, 2009 at 10:14 am
Nice words. Want to tell us exactly how it is that government intervention has caused this mess?
And you might note that the two most popular proposals on the Republican side – tort reform, and passing federal law to superceed state law and allow health insurance to be sold nationally – would both require government intervention.
I’m also not following your monopoly thing. How does government give a monopoly to BCBS?
26 rbottoms // Sep 26, 2009 at 2:18 pm
Have a nice day.
27 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.
28 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.
29 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.
30 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.
31 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.
32 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.
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