David Goldhill –Affordable Care Acts Exchanges Will Raise U.S. Health-Care Costs

In the end, we have incentives for insurers not to compete, for customers not to care about price, and for insurers to drive up the cost of care. Not much of a marketplace, is it?

Read it all.


Posted in * Culture-Watch, * Economics, Politics, --The 2009 American Health Care Reform Debate, Consumer/consumer spending, Corporations/Corporate Life, Economy, Ethics / Moral Theology, Health & Medicine, Personal Finance, Politics in General, The U.S. Government, Theology

3 comments on “David Goldhill –Affordable Care Acts Exchanges Will Raise U.S. Health-Care Costs

  1. Catholic Mom says:

    [blockquote]In what may be the single greatest source of unintended consequences in the Affordable Care Act, insurers are now required to spend at least 80 percent of revenue from premiums on care. Superficially, this means that if they set premiums too high, they will have to eventually refund much of the money that they don’t end up spending on care. But let’s say you’re running an insurance company. You can find ways to spend more money on beneficiaries’ health care — say, with more generous definitions of free preventive care, more expansive rehabilitation services or higher reimbursement rates on doctors’ services — and keep 20 percent of the all money you bring in. Or alternatively, you can spend less on care and give refunds. Easy choice. [/blockquote]

    This is the number one point that the vast majority of folks don’t get about health insurance in general. We have this law in NJ and we’ve had it LONG before the Affordable Care Act was passed and we have it under a Republican Governor. It is a perverse incentive for the insurance companies to drive UP the cost of health care as far as they possibly can, because the size of the allowable premium will go up as a *percentage* of the amount that has to be spent on actual care. 20% of a trillion dollars is more than 20% of a billion dollars; therefore, insurance companies make more money when they have to lay out a trillion dollars in expenses then they do when they lay out a billion dollars.

    OTHO, there is a very important feature of the ACO that is already acting to counteract this, and that is the required transparency about what hospitals actually charge for things. The NY Times had a very well written article about this this summer when it transpired that insurance companies were reimbursing certain hospitals up to $500 for a pint of sterile salt water. Which raised the question — do insurance companies check on these things? Do they know that this is what they’re being charged? And if they do, why don’t they do something about it? And the NY Times came to exactly the same conclusion that this article does — the companies know perfectly well and they don’t care because they are incentivized to pay out more so they can keep more in premium. What is happening, however, as a result of this new information, is that companies that buy insurance for their employees (or are self-insured but let an insurance company handle the billing) are now actively demanding that these bills be scrutinized and that there be push back — in many cases by getting their own people involved. And many companies are now doing this successfully and have significantly reduced cost.

    I actually believe that we *are* eventually doing to see lower healthcare costs under the ACO and it will be almost entirely due to the requirements for greater transparency. We have already seen, for the first time, that there are tables available on the internet showing what all major hospitals throughout the country charge for certain benchmark services and procedures. This information, up until a few months ago, was completely unattainable.

  2. Jim the Puritan says:

    Here, we’re warned that insurance premiums are going to go up 44% on average.

    On the local healthcare exchange, only the two largest insurers, that already control about 90% of the market, opted to participate. The smaller insurers said they couldn’t compete.

    When you go the exchange website, you are only given a phone number to call for each insurer. The insurers say they won’t post their exchange premiums because they’re “confidential” and they don’t want the other insurer to know. So it is pretty much a complete joke here, and is just going to serve to drive the smaller insurers out of business and increase rates and costs.

  3. Mitchell says:

    What state are you in?