Over the weekend, the trade group America’s Health Insurance Plans released a study saying Baucus’ plan would hammer the middle class with huge increases in premiums and taxes. The study has stirred things up because it makes a case resting on acknowledged facts. You might call them the iron laws of insurance.
One of these is that the extension of coverage to a higher-risk group will raise costs for everyone, because the average level of risk in the entire pool of insureds goes up. Another is the law of large numbers: The more low-risk people you can get in your pool, the lower you can set your premiums. Another is adverse selection, the inevitable tendency of the highest-risk people wanting your insurance the most, and the lowest-risk wanting it the least.
These laws are, in effect, walls that Congress and the Obama administration keep hitting in their efforts to make health coverage universal without breaking the bank. Their idea is to get as many people as possible ”” especially the low-risk young and healthy ”” into the insurance pool as premium payers. In this universal system, adverse selection is no longer a factor, and insurers can cover the high-risk folks along with everyone else.
That’s the theory. But when it comes down to drafting laws, there’s always an insurmountable hurdle….
The ideology behind the move in Congress to impose a health care ‘solution’ on the American people has become a secular quest for the Holy Grail.
Those riding off on that quest have no patience for facts and figures and logic based upon the ‘real world,’ they want their impossible ideological goals to be fulfilled and they ‘want it NOW.’
Circa 1950-1990, the area I lived in had affordable insurance plans for workers and retirees because all the local industries and businesses subscribed to “community rating.” That is, everyone bought insurance from the same pool of insurers and pretty much if you worked you were insured. I think something along the line of 94% of the people in the area had health insurance as late as 1992.
In the go-go ’90’s companies started to pull out of the system seeking savings by only insuring their healthy workers or self-insuring, and by transferring their retirees into more restrictive out-of-area plans (or dropping them altogether). Prices went up as there were fewer and fewer bodies in the market for insurance and as the health insurance business went into a mix of merger and competitive expansion into other markets. Competition meant that large companies could have savings by shopping around, but smaller businesses were shut out of such savings. Now that area is like the rest of the country with about 80-85% coverage and more expensive (in terms of out-of-pocket expense and what small businesses pay) at that.
I’m glad the healthy can afford the risk of not buying insurance or deliberately underinsuring themselves. But once upon a time in these United States it really worked well when everyone played together in the same sandbox and didn”t live like it was every man for himself.
The two most well known systems that have achieved universal-ish coverage without single payor (Switzerland, Massachusetts), both operate on a real individual mandate with real penalties for non-participation. It is, for better or worse, the only way to avoid adverse selection. To propose the elimination of pre-existing condition restrictions without a corresponding individual mandate is economically illiterate.
Love the IBD. Long on concepts, short on numbers.
Since the government began meddling in health care the costs have skyrocketed. The only real solution to lowering health costs is to get the government out of health care and return it to the free market. Polls show 55% of the people believe America is headed in the wrong direction. The reason being, I believe, is that we are hurtling at an ever faster pace into the abyss of socialistic corporatism and the people do not want this. Americans still revere the belief embodied in the Declaration of Independence in our rights granted by God to Life, Liberty and the Pursuit of Happiness all of which we are losing at a dizzying pace. This is frightening to the people as it should be. The health care scam is just one facet of this death spiral America is being put into by the government and its corporate masters. The American people must wake up and realize that this country is being deliberately destroyed by vain and venal people and to survive as a free and prosperous America they must become aroused, take back their country and return the government only to the functions granted it in the Constitution and they must do it quickly. Time is short.
RE: “But once upon a time in these United States it really worked well when everyone played together in the same sandbox and didn”t live like it was every man for himself.”
Blue Ontario, I think you’ve got the order — and thus the correlation — mixed up. It was with the horrific rise of health care costs — due to any number of issues including skyrocketing malpractice premiums [with a resulting departure of physicians from markets, as well as decline in charitable care], advances in medical technology, massive and hugely expensive FDA regulatory expenses, government forced monopolies on health care [ie, the certificates of need boondoggle and the Medicare government monopoly], and general monstrous load of regulations [the list is endless — and includes lab regulations that forced private physicians away from offering many services and bundling those services into the monopoly — the local hospital], price controls [Medicare again, which forced health care providers to subsidize the losses of Medicare on the backs of private insured], and on and on and on . . . it was with those rapidly escalating costs that led private businesses to do all in their power to control those costs by then opting out of the system that you liked so much, but which inevitably led to those sky-rocketing costs.
It’s true that “smaller businesses were shut out of such savings” . . . but all of that could have been fixed by decreasing the regulatory load on health insurers as well as breaking the monopoly that large health insurers have on the market. To requote from an earlier comment of mine: [blockquote]That’s why I can’t understand why people would be opposed to decreased regulations on companies dealing with health insurance [ie, crossing state lines, ie allowing those companies to offer bare-bones policies, etc, etc] so that the monopoly of the piggies can be broken by the free market and so that there is ease of entry into the piggy industry. Nothing makes “avaricious corporations†more disturbed then to see their profits eaten away by innovative fresh upstarts.[/blockquote]
There are three types of health care – and the insurance needs for each are different.
1. Primary Care. This is every day care – physicals, routine tests such as mammograms, ordinary illnesses such as cold or flu or minor infections that do not require hospitalization. This care is not something that insurance was designed to cover and it could be delivered at a much lower cost with two conditions – first the transaction is between the provider and the patient and there is no insurance to file or follow up on – and second malpractice reform and tort reform.
2. Chronic Care – this is care for life long illnesses that can be very expensive to treat. Cancer followup, diabetes, asthma, some mental illnesses etc. This should be covered by insurance because the cost of not covering it is astronomical. It is actually cheaper to provide 100 diabetics with insulin than it is to amputate one foot. It is cheaper to provide inhaled steroids than it is to treat people at the emergency room.
3. Catastrophic/emergency care – This is what insurance was designed for. Insurance was designed to indemnify you if you had a catastrophic loss that you could not absorb yourself. This is what shared risk is about.
If we are going to have some form of national insurance it should be for catastrophic (and possibly chronic) coverage. You do not have home owners insurance to pay someone to cut your yard. You do not have car insurance to pay for oil changes.
YBIC,
Phil Snyder
Phil, what you say makes sense. We are clearly misusing insurance to cover routine payments that we know we are going to make.
What do we do with people who do not want to/are not willing to/cannot – or say they cannot – pay for routine care? These people become catastrophic claims. Do we as a “country” have a responsibility to protect people from themselves?
I thought [url=http://www.slate.com/id/2232310/pagenum/all/#p2]this[/url] was fascinating:
[blockquote]What happens if we [i]don’t[/i] pass health reform?
That’s where the Price Waterhouse Coopers study gets [i]really[/i] interesting. Health reform would, according to the report, raise premiums 32 percent over the next 10 years. But [i]without[/i] health reform, the study says, premiums would [i]still[/i] rise—by 79 percent! In other words, the cost of health reform (probably exaggerated by Price Waterhouse Coopers) is paltry compared with the cost of out-of-control medical inflation and the health insurers’ own overhead and profit.
…
The most recent stark illustration of the government’s superior ability to curb health costs came when Sen. Rockefeller got the finance committee to amend the health reform bill to put 14 million low-income children who were going to be shepherded into the new private health insurance exchange into the State Childrens’ Health Insurance Program instead. The cost? There was no cost. The change will [i]save[/i] the government “somewhere between $30 billion and $35 billion,” according to Edwin Park of the Center For Budget and Policy Priorities, a nonprofit that tracks budget issues affecting low-income people.
[i][emphasis in original][/i][/blockquote]