Healthcare Spend at Historic Low

Healthcare Spend at Historic Low

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In a rare bit of good news for the Obama administration and budget policymakers,  health care costs increased last year at their slowest pace since the advent of Medicare and Medicaid in the mid 1960s.

The new analysis, released on July 25 by officials at the Centers for Medicare and Medicaid Services, the agency that administers the two programs, showed health care spending grew last year at a “historic” low  3.9 percent rate, which is slightly below 2009’s record-setting low of 4.0 percent. Health care spending as a share of the economy remained stuck at 17.6 percent, a welcome change from most years when it increases its share of total economic activity.

At a time when the White House and congressional leaders are worried about rampant long term growth of the government’s major health care  insurance programs for seniors and the poor, the new data will allow government actuaries to project growth in  Medicare and Medicaid over the next decade will be less than previously feared. This could potentially ease the task of the Obama administration and congressional leaders somewhat when they finally negotiate an agreement for slowing the growth of entitlement programs to help reduce the deficit.

Moreover, CMS actuaries are now saying the cost of insuring 30 million previously uninsured Americans under the president’s signature health care reform bill will add only a sliver to overall spending, and that increase is about half the projected growth rate of a year ago.

Looking ahead through 2020, CMS says health care spending will grow by 5.8 percent a year on average, which is about 1.1 percent faster than the rest of the economy. But only 0.1 percentage points of that growth will be due to the health care reform law. A year ago, CMS was projecting reform would raise health care spending an additional 0.2 percent a year.

Since nothing of substance has changed in the reform legislation, its lower projected cost is largely a byproduct of the overall reduction in health care spending, which health care economists said is being driven by a number of factors, including changes in consumers’ practices and more aggressive government oversight. “It’s too early to say that the Affordable Care Act will have a small effect on costs overall despite the coverage gains, but this is an optimistic sign,” said Alan Garber, an economist and physician at Stanford University.

Garber cited a number of factors beyond the recession that is lowering the average American’s propensity to consume fewer health care services. About one in seven privately insured Americans now belong to high co-pay, high-deductible plans, which force them to think twice about non-emergency care. “It makes people more aware,” Garber said. “It’s not play money. It’s your money. That may be having an effect.”

There have also been highly publicized crackdowns on Medicare fraud in areas of the country like Florida where costs and utilization rates are high. CMS is now projecting health spending on the elderly will only grow to $636 billion in 2014 from $525 billion in 2010.

That’s $35 billion less than what had been projected for 2014 a year ago. Moreover, CMS’s projection for Medicare spending in 2020 is $922 billion, whereas a year ago the actuaries were anticipating spending of $978 billion in 2019.

The actuaries cast cold water on the idea that delivery system reforms included in the new health care insurance legislation were driving the changes. “There is hope that research into innovative ways of delivering care will lead to slower growth,” said Richard Foster, CMS’s chief actuary, “but until those kinds of innovations have been designed and tested, we won’t have a sense of how large those savings will be.”

CMS’s projections for Medicare – last year or this year – do not include the so-called “doc fix.” Every year, Congress appropriates enough money to avoid a scheduled cut in pay for physicians who treat the elderly.

“If, as is far more likely, the 29.4 percent cut is avoided and the out-year cuts are eased, then spending levels and growth rates will increase significantly,” said Joseph Antos, a senior fellow at the American Enterprise Institute. “Under these more realistic assumptions, NHE [national health expenditures] will easily exceed 20 percent of GDP in 2020, and perhaps even earlier.” CMS currently projects health care spending will reach 19.8 percent of  the Gross Domestic Product by 2020.

Antos also pointed out that there will be a one-time spike in health care spending in 2014 as the 30 million newly insured Americans purchase drugs and physician services that they previously did without, and those costs will become embedded in overall costs.

But Garber, who has chaired a Medicare advisory committee that makes coverage recommendations, said that could actually lower costs. “There’s new research that says Medicare Part D (the prescription drug benefit) by making drugs more affordable is lowering costs elsewhere in the system,” he said. Lowering blood pressure with affordable generic drugs is a lot cheaper than paying for treating heart attacks.

A growth rate that falls to just 1.1 percent faster than the rest of the economy grows has its own implications for the health care  reform legislation, which created an Independent Payments Advisory Board to make recommendations for Medicare cuts whenever its growth exceeds GDP plus 1 percent. If the projections pan out, IPAB’s task will be much easier, and its recommendations to future Congresses and the elderly easier to swallow.

Republicans have charged the IPAB will lead to government rationing of health care, and have attacked the idea of the board, which hasn’t been appointed as of yet–a central talking point it their efforts to repeal reform.

In a rare bit of good news for the Obama administration and budget policymakers,  health care costs increased last year at their slowest pace since the advent of Medicare and Medicaid in the mid 1960s.

The new analysis, released early Thursday by officials at the Centers for Medicare and Medicaid Services, the agency that administers the two programs, showed health care spending grew last year at a “historic” low  3.9 percent rate, which is slightly below 2009’s record-setting low of 4.0 percent. Health care spending as a share of the economy remained stuck at 17.6 percent, a welcome change from most years when it increases its share of total economic activity.

At a time when the White House and congressional leaders are worried about rampant long term growth of the government’s major health care  insurance programs for seniors and the poor, the new data will allow government actuaries to project growth in  Medicare and Medicaid over the next decade will be less than previously feared. This could potentially ease the task of the Obama administration and congressional leaders somewhat when they finally negotiate an agreement for slowing the growth of entitlement programs to help reduce the deficit.

Moreover, CMS actuaries are now saying the cost of insuring 30 million previously uninsured Americans under the president’s signature health care reform bill will add only a sliver to overall spending, and that increase is about half the projected growth rate of a year ago.

Looking ahead through 2020, CMS says health care spending will grow by 5.8 percent a year on average, which is about 1.1 percent faster than the rest of the economy. But only 0.1 percentage points of that growth will be due to the health care reform law. A year ago, CMS was projecting reform would raise health care spending an additional 0.2 percent a year.

Since nothing of substance has changed in the reform legislation, its lower projected cost is largely a byproduct of the overall reduction in health care spending, which health care economists said is being driven by a number of factors, including changes in consumers’ practices and more aggressive government oversight. “It’s too early to say that the Affordable Care Act will have a small effect on costs overall despite the coverage gains, but this is an optimistic sign,” said Alan Garber, an economist and physician at Stanford University.

Garber cited a number of factors beyond the recession that is lowering the average American’s propensity to consume fewer health care services. About one in seven privately insured Americans now belong to high co-pay, high-deductible plans, which force them to think twice about non-emergency care. “It makes people more aware,” Garber said. “It’s not play money. It’s your money. That may be having an effect.”

There have also been highly publicized crackdowns on Medicare fraud in areas of the country like Florida where costs and utilization rates are high. CMS is now projecting health spending on the elderly will only grow to $636 billion in 2014 from $525 billion in 2010.

That’s $35 billion less than what had been projected for 2014 a year ago. Moreover, CMS’s projection for Medicare spending in 2020 is $922 billion, whereas a year ago the actuaries were anticipating spending of $978 billion in 2019.

The actuaries cast cold water on the idea that delivery system reforms included in the new health care insurance legislation were driving the changes. “There is hope that research into innovative ways of delivering care will lead to slower growth,” said Richard Foster, CMS’s chief actuary, “but until those kinds of innovations have been designed and tested, we won’t have a sense of how large those savings will be.”

CMS’s projections for Medicare – last year or this year – do not include the so-called “doc fix.” Every year, Congress appropriates enough money to avoid a scheduled cut in pay for physicians who treat the elderly.

“If, as is far more likely, the 29.4 percent cut is avoided and the out-year cuts are eased, then spending levels and growth rates will increase significantly,” said Joseph Antos, a senior fellow at the American Enterprise Institute. “Under these more realistic assumptions, NHE [national health expenditures] will easily exceed 20 percent of GDP in 2020, and perhaps even earlier.” CMS currently projects health care spending will reach 19.8 percent of  the Gross Domestic Product by 2020.

Antos also pointed out that there will be a one-time spike in health care spending in 2014 as the 30 million newly insured Americans purchase drugs and physician services that they previously did without, and those costs will become embedded in overall costs.

But Garber, who has chaired a Medicare advisory committee that makes coverage recommendations, said that could actually lower costs. “There’s new research that says Medicare Part D (the prescription drug benefit) by making drugs more affordable is lowering costs elsewhere in the system,” he said. Lowering blood pressure with affordable generic drugs is a lot cheaper than paying for treating heart attacks.

A growth rate that falls to just 1.1 percent faster than the rest of the economy grows has its own implications for the health care  reform legislation, which created an Independent Payments Advisory Board to make recommendations for Medicare cuts whenever its growth exceeds GDP plus 1 percent. If the projections pan out, IPAB’s task will be much easier, and its recommendations to future Congresses and the elderly easier to swallow.

Republicans have charged the IPAB will lead to government rationing of health care, and have attacked the idea of the board, which hasn’t been appointed as of yet–a central talking point it their efforts to repeal reform.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect, The Washington Post and Financial Times. You can read more pieces by him at GoozNews, where this post first appeared.

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67 Comments on "Healthcare Spend at Historic Low"


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Nate Ogden
Aug 7, 2011

“But Garber, who has chaired a Medicare advisory committee that makes coverage recommendations, said that could actually lower costs. “There’s new research that says Medicare Part D (the prescription drug benefit) by making drugs more affordable is lowering costs elsewhere in the system,” he said. Lowering blood pressure with affordable generic drugs is a lot cheaper than paying for treating heart attacks.”

This would explain why Medicare projections are always so far under reality, the people making them really have no idea how things work.

A lifetime of controled blood pressure means a lifetime of Rx cost then at some point cancer, dementia, or some other equally expensive illness that does kill them. 30% of people that have a heartattack die within a year. Probably a higher percent of the poor. Its a good thing to prevent death but don’t be an idiot and claim its going to save us money. Another 20 years of SS and medical care is obvilsly without doubt and question going to cost more then treating a heartattack.

Guest
Doc Brown
Aug 14, 2011

I think you are looking at this the wrong way.

Consider patient A and patient B. Both get hypertension at age 35.

Patient A gets diagnosed with hypertension and is put on medications that prevent him from getting a heart attack at age 40. He gets other diseases and survives till the age of 80.

Patient B doesn’t get diagnosed and has a heart attack at age 35. He has an expensive surgery to unclog his arteries, then is put on medications (more than those of patient A because of the heart attack) and he gets other diseases and survives to the age of 80.

So the only differences in cost is the 5 years of medications that patient A takes before he would have have had at age 35, compared to the cost of heart attack surgery for patient B minus the lack of medication use the five years previous plus the additional lifetime cost of the additional medications because of being post-heart attack.

So as you can see the costs for patient B who goes without care and gets the heart attack will be much greater than for patient A who prevents the heart attack due to medication therapy.

The only way you have cost savings is if patient B dies from the heart attack, since there will be no downstream costs.

So if you are saying that it cost less to not treat patients and let them die from a heart attack, you are absolutely correct. But I doubt that is what we want as a hearlth care reform to save costs.

Guest
nate ogden
Aug 14, 2011

“somewhere around 30% of all people die from their first heart attack. That alone destroys your projections.

Once you have a heart attack subsiquent ones are more likely.

Additionally majority of heart attacks are lifestyle, that means the conditions that caused the heart attack to start with means its very unlikely the person would live to 80 like the healthy person.

While its possible A person could cost less long term if treated early with Rx at a reduced price, its impossible;

“Lowering blood pressure with affordable generic drugs is a lot cheaper than paying for treating heart attacks.”

“So if you are saying that it cost less to not treat patients and let them die from a heart attack, you are absolutely correct. But I doubt that is what we want as a hearlth care reform to save costs.”

Then what do we want to do to save cost? Should we continue to sacrafice kids and young adults so Medicare beneficiaries can live 1-2 extra years? Ideally we could extend every life to the last possible moment, thats not reality. When people make false claims to support one treatment over another they are taking one life to save another.

Guest
Doc Brown
Aug 14, 2011

So if I understand you correctly, your health care reform plan is to let old people die so when can spend more money on kids and young adults. Wow!

Does that also mean we let all newborns with health problems die as well, so we can free up even more money? Since we spend more on the first year of life and the last year of life, than anywhere else?

Instead of just letting millions of newborns and elderly die, so we can save money, why don’t we just focus on decreasing the cost of health overall by going to a single payor system. If nothing else, this would get rid of a ton of administrative cost that is wasted. Plus, since all of the health insurance and drug companies would have to compete more for business, this would encourage them to find ways to decrease cost while keeping quality high.

Guest
Nate Ogden
Aug 15, 2011

no you don’t understand, it’s not my plan nor am I the one suggesting any changes. I am merly pointing out the dishonesty of someone claiming we will save money by keeping people alive longer.

I see you subscribe to this dishonest ideology and a healthy case of projection.

If someone proposes changes to a system already unsustainable that are going to drastically increase cost they should be called out on it if they are claiming those changes will actually save money when any bit of common sense shows they won’t.

“why don’t we just focus on decreasing the cost of health overall by going to a single payor system.”

Why don’t we just save our tooth fairly money and plant more money trees while we are at it? If we all rode unicorms that would save billions to.

Medicare is single payor and its the most inefficient health plan in the world. How does increasing inefficency save money doc?

You want to save $1 of administrative cost and replace it with $10 of fraud and waste and claim we will save money, your not better then Garber. I would be more impressed if you promised to pay for it with magic beans.

Guest
Doc Brown
Aug 15, 2011

Nate Ogden says:
August 15, 2011 at 4:49 am
“no you don’t understand, it’s not my plan nor am I the one suggesting any changes. I am merly pointing out the dishonesty of someone claiming we will save money by keeping people alive longer.
I see you subscribe to this dishonest ideology and a healthy case of projection.
If someone proposes changes to a system already unsustainable that are going to drastically increase cost they should be called out on it if they are claiming those changes will actually save money when any bit of common sense shows they won’t.”

I see that you are attempting to use “common sense” to formulate your opinion on this subject, rather than actually knowledge. The issue of health care cost is far more complex than you make it out to be. I don’t have the time or space to give you an entire lecture on Health Care Economincs, but let me address a few things that you are not considering.

The first is that a better health care system would keep people healthier, would be focused on keeping people healthy rather than waiting for them to get sick so we can charge them an arm and a leg to be treated, and this would result in such a dramatic decrease in cost due to decreased Emergency Department visits, hospitalizations, and surgeries, that we could keep everyone living to be 100 or more and we would still be saving more than what we are spending now. For example, let’s say that right now, the average health care cost per person was $1000/yr and the average person lived to the age of 80. That means they had $80,000 in cost over the lifetime. So we would only need to decrease the average cost per year to $800 to break-even if we kept people alive till the age of 100. However, a healthier population where the number of ER visits, hospitalizations, and surgeries (which are the most expensive part of health care) were reduced dramatically, you could easily reduce the average health care cost by half or more. And that is without decreasing the irrationally high prices that we pay for medicines, hospitalizations, surgeries, etc.

“Why don’t we just save our tooth fairly money and plant more money trees while we are at it? If we all rode unicorms that would save billions to.”

Even though your question is a rhetorical one, the answer is because tooth fairies, money trees and unicorns don’t exist. However, changes to the health care system that improve health and decrease costs do exist. The fact that those changes would be difficult to make, does not mean they are impossible as your comment implies. Why should America be scared of putting in the hard work to help people stay healthy? We are the greatest nation in the world after all.

“Medicare is single payor and its the most inefficient health plan in the world. How does increasing inefficency save money doc?
You want to save $1 of administrative cost and replace it with $10 of fraud and waste and claim we will save money, your not better then Garber. I would be more impressed if you promised to pay for it with magic beans.”

Please show me the statistics that prove Medicare is the most inefficient plan in the world, or even one that proves it is less efficient than the for profit plans in the US. Find me another health plan in the US that covers 40 million people and has as low of an administrative cost than Medicare. You can’t And obviously, you don’t know that the majority of Medicare fraud and abuse is perpetrated by the providers of care (doctors, hospitals, etc) not by the patients who are receiving care. And while fraud, waste, and abuse are problems that need to be addressed, they only account for a fraction of the total costs to Medicare.

It’s my view that America is a great country comprised of great minds. I think we are up to the task of creating a health care system that prolongs life while spending less. Obviously, just spending a lot of money has not done us any good. We spend far more on Health Care than other countries and yet have worse results. America has put people on the moon, sent rovers to Mars, created technology that has revolutionized the world, but yet we can’t fix health care? I don’t buy it.

My vision is not a dream of unicorns and magic beans, it is one where take this challenge head on as another opportunity to establish the greatness of our country.

It seems that you are a person that believes in the greatness of our country, yet you have deemed health care reform to be beyond our capabilities. That just doesn’t seem to be consistent.

Guest
nate ogden
Aug 15, 2011

I hope your a doctor of medicine and your hard work learning the healing arts is why your so clueless about economics. I hjave forgotten more about healthcare economics then you will ever know. My argument that keeping people alive is more expensive then when they die is passed on 20+ years paying the claims and manageing the plans. I know how much a dead person and how much a live person cost from experience thank you.

” So we would only need to decrease the average cost per year to $800 to break-even if we kept people alive till the age of 100.”

If you were a simpleton that didn’t know anything about economics then you would be correct. That is why people like you come up with such stupid ideas that always fail.

Your first failure of inteligence is assuming that an average healthcare spend of $1000 is spread eveninly over all people. Those in the 70-80 bracket actually spend 5-10 times more then those in the 18-28 bracket. If you keep people alive from 80 up to 100 you can expect their cost to pull up the average cost of everyone to the degree that you increased cost substantially offsetting your meaningless $200 savings.

If the average cost for everyone was $1000 then the average cost for your new super goldens would be close to or over $2000 depending on your population mix. Saving $200 to pick up $2000 that’s usually how people like you come up with plans.

“However, changes to the health care system that improve health and decrease costs do exist.”

Changes that allow everyone to consume as much healthcare as they want, live as long as possibly, and not consume 200% of our GDP do not exist. No one said is or saying we shouldn’t improve healthcare where it saves money and even when it does not save money. We shouldn’t make changes we know will increase cost though and claim it will reduce cost. Thats how we got in this mess in the first place.

” Why should America be scared of putting in the hard work to help people stay healthy?”

We shouldn’t be, we should be scared of politicians and academics promising us savings from things we know will increase cost though.

“Please show me the statistics that prove Medicare is the most inefficient plan in the world,”

Its common knowledge Medicare has a 10%+ fraud rate. At $7000+ in expenditures per person thats $700+ per member per year just in fraud and waste. No plan comes close to that. Medicaid does as a % but their expenditures per member are so much lower. With enrollment fraud its actually much higher then Medicare since few people get fake IDs claiming to be 65 when they aren’t.

“as low of an administrative cost than Medicare.”

AGain your showing you know nothing about healthcare administration. A low administrative cost is a false measure of efficency, back to common sense, or so we would hope. I could use EDI and auto adjudication with EFT back to the provider and my cost per claim would be $.50, blowing Medicare away. I would also be the laughing stock of the payor community and out of business in a matter of weeks. Doctors and crooks claiming to be doctors would use me like a free ATM. Anyone that has the slightest idea what they are talking about knows paying claims cheaply is not something to brag about. You need to look at total cost, including claims expense to determine true efficency.

If Medicare spent $6 PMPM on case management for their highest 5% population they could easily see an ROI of 10 to 1. The $6 would blow up their low admin ratio but their total cost would drop, which one is more efficient?

” And while fraud, waste, and abuse are problems that need to be addressed, they only account for a fraction of the total costs to Medicare.”

Fraud and waste 10%+ unnecessary care 30%. All numbers are a fraction of the total, claims are only a fraction of the total cost, about 95/100s should we be cutting need care and provider reimbursement before the 10 and 30%?

“and yet have worse results.”

BS, post your worse results and I’ll take you to school there to.

“America has put people on the moon, sent rovers to Mars, created technology that has revolutionized the world, but yet we can’t fix health care? I don’t buy it.”

Not everyone demanded a free trip to the moon or mars. Problem with healthcare is everyone demands world class care, thanks cleveland clinic, and wants the bill sent to their grandkids.

“yet you have deemed health care reform to be beyond our capabilities.”

I have given plenty of ideas on how to reform healthcare in other post, they aren’t popular on this blog because I acknowledge everyone isn’t going to get everything they want and it aint going to be free. People will die earlier then they had to becuase not everyone can live as long as possible.

Guest
Doc Brown
Aug 15, 2011

Nate,

For the record, I have a Doctor of Pharmacy Degree, as well as a PhD in Economics and Health Policy.

I am an academician, but not one that just throws nonsense out there. If you are not capable of putting your emotion aside so that you can actually listen to what I am saying, then there is no need to continue this discussion.

As to your points:
“My argument that keeping people alive is more expensive then when they die is passed on 20+ years paying the claims and manageing the plans. I know how much a dead person and how much a live person cost from experience thank you.”

This is a ridiculous point which seeks to confuse the issue. Of course, with all things being equal, a live person cost you more than a dead person. But that simplistic view has never been the point of the discussion. The point was that it is possible to change the health care system such that it wouldn’t cost you more than we are paying now to keep someone alive till the age of 80, to keep the population alive to the age of 100.


“Your first failure of inteligence is assuming that an average healthcare spend of $1000 is spread eveninly over all people. Those in the 70-80 bracket actually spend 5-10 times more then those in the 18-28 bracket. If you keep people alive from 80 up to 100 you can expect their cost to pull up the average cost of everyone to the degree that you increased cost substantially offsetting your meaningless $200 savings.
If the average cost for everyone was $1000 then the average cost for your new super goldens would be close to or over $2000 depending on your population mix. Saving $200 to pick up $2000 that’s usually how people like you come up with plans.”

Okay, it seems you have a problem understanding basic math. If a person has $80,000 in health care cost over their lifetime, that means they have an average yearly cost of $1,000. Being that it is the average cost, that means the difference in yearly costs, based on age, has already been taken into consideration. That’s why it is called an average. Plus, even given the increase in cost of the elderly, there is no reason to believe that the actual yearly costs of a person between the age of 80 to 100, would be any higher than the current actual yearly costs of a person between 70 and 80 years old.

Changes that allow everyone to consume as much healthcare as they want, live as long as possibly, and not consume 200% of our GDP do not exist. No one said is or saying we shouldn’t improve healthcare where it saves money and even when it does not save money. We shouldn’t make changes we know will increase cost though and claim it will reduce cost. Thats how we got in this mess in the first place.”

At no point did you ever hear me make the argument that we should continue to have unbridled consumption. That doesn’t mean rationing of care, but rather allowing patients the ability to make evidence-based decisions regarding their care.

“We shouldn’t be, we should be scared of politicians and academics promising us savings from things we know will increase cost though.”

I agree that you should always question politicians and academicians, but don’t forget that there is a difference between not wanting to or not being able to understand the logic behind a statement and the statement actually being a false one. The fact that you “can’t believe” something is true is different from it actually not being true. And please don’t talk to me about “common sense”, that’s one of the most misused phrases in the English language. At one point in our history, common sense said the earth was flat, that man couldn’t fly, that you couldn’t fit a computer into something as small as a cell phone. Common sense changes over time when people make the impossible possible.

Its common knowledge Medicare has a 10%+ fraud rate. At $7000+ in expenditures per person thats $700+ per member per year just in fraud and waste. No plan comes close to that. Medicaid does as a % but their expenditures per member are so much lower. With enrollment fraud its actually much higher then Medicare since few people get fake IDs claiming to be 65 when they aren’t.”

You still did not address the fact that Medicare fraud is done largely by health care providers, not the patients. Do I think that more should be done to cut down on All Medicare fraud? Absolutely. I just don’t want people to come away with the opinion that patients are the reason for rampant Medicare fraud.

“AZGain your showing you know nothing about healthcare administration. A low administrative cost is a false measure of efficency, back to common sense, or so we would hope. I could use EDI and auto adjudication with EFT back to the provider and my cost per claim would be $.50, blowing Medicare away. I would also be the laughing stock of the payor community and out of business in a matter of weeks. Doctors and crooks claiming to be doctors would use me like a free ATM. Anyone that has the slightest idea what they are talking about knows paying claims cheaply is not something to brag about. You need to look at total cost, including claims expense to determine true efficency.
If Medicare spent $6 PMPM on case management for their highest 5% population they could easily see an ROI of 10 to 1. The $6 would blow up their low admin ratio but their total cost would drop, which one is more efficient?”

Anyone who knows what they are talking about would know that administrative costs are not just made up of claims expense, personnel and infrastructure costs are also included and make up a large part of administrative costs.

Fraud and waste 10%+ unnecessary care 30%. All numbers are a fraction of the total, claims are only a fraction of the total cost, about 95/100s should we be cutting need care and provider reimbursement before the 10 and 30%?
“and yet have worse results.”
BS, post your worse results and I’ll take you to school there to.

BS. Really. Show me one report that doesn’t demonstrate the fact that the US pays more and gets less. I’m not talking about the individual results of the surgery or care, but rather overall measures like infant mortality, life expectancy, preventable drug related morbidity and mortality, preventable hospital readmissions, etc.

“Not everyone demanded a free trip to the moon or mars. Problem with healthcare is everyone demands world class care, thanks cleveland clinic, and wants the bill sent to their grandkids.”

Your over generalizations negate your point. Do we have a culture of wanting something for nothing? Sure. But that’s not everyone, and it’s not the way America has always been. If we can change for the worse, we can change for the better.

“I have given plenty of ideas on how to reform healthcare in other post, they aren’t popular on this blog because I acknowledge everyone isn’t going to get everything they want and it aint going to be free. People will Hdie earlier then they had to becuase not everyone can live as long as possible.”

Your premise is based on lazy thinking. Just because you aren’t capable of divsing a way to have people live longer while still paying less than we do today, doesnt mean the answer isn’t out there.

And if your goal is only to save money, all you have to do is outlaw all health insurance. If you can’t pay out of pocket for care, then you don’t get care. Do away with Medicare and Medicaid as well. We would save trillions of dollars. Of course, we would also soon regress to a third world country. Not only would our life expectancy soon drop to less than 50′ but most companies would go out of business since you wouldn’t have a sufficient number of healthy Americans to keep the businesses running.

As David Mirvis and Cyril Change have concluded, The health of the population is the economic engine that keeps our country going.

As you said, dead people don’t cost you anything. But also, dead people can’t make widgets, work in the service industry, or healthcare, or academia, or K thru 12.

Guest
nate ogden
Aug 15, 2011

“The point was that it is possible to change the health care system such that it wouldn’t cost you more than we are paying now to keep someone alive till the age of 80, to keep the population alive to the age of 100.”

Myself, 20 years of claims experience, and every actuarial projection around disagrees with you. If you treat every condition X with anything and that keeps those people out of the ER or hospital for condition X but they die 20 years later from anything else you will have spent considerably more money. The increased cost per unit of life between 80 and 100 makes this impossible. Further the debilitative illnesses one is likely to incur between 80 and 100 are far more expensive then those conditions treated between 65 and 80. Once people start getting dementia or anything that puts them in a nursing home any savings is gone 10 times over.

You would need a revolutionary treatment or change in cost structure to achieve what your talking about. When you get into nursing homes and such your talking labor, how are you going to cut labor cost 30% without robots?

“Plus, even given the increase in cost of the elderly, there is no reason to believe that the actual yearly costs of a person between the age of 80 to 100, would be any higher than the current actual yearly costs of a person between 70 and 80 years old.”

How do you contain emotion when supposedly college educated people make statements like this, how many letters do you have behind your name again? So Inflation doesn’t exist? And all the actuarial tables showing cost increase with age are imaginary?

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/

“Per capita lifetime expenditure is $316,600, a third higher for females ($361,200) than males ($268,700). Two-fifths of this difference owes to women’s longer life expectancy. Nearly one-third of lifetime expenditures is incurred during middle age, and nearly half during the senior years. For survivors to age 85, more than one-third of their lifetime expenditures will accrue in their remaining years.”

Let me repeat that
For survivors to age 85, more than one-third of their lifetime expenditures will accrue in their remaining years.

And your arguing keeping people alive from 80 to 100, passing that 85 marker won’t increase cost?

“The oldest group (85+) consumes three times as much health care per person as those 65–74, and twice as much as those 75–84”

Again how many letters do you have after your name?

Guest
Doc Brown
Aug 15, 2011

When you’re right, you’re right Nate. If we continue with the same health care system and do nothing differently, keeping people alive longer costs us more money.

But I’ve agreed with that from the beginning.

My point is that by revolutionizing the health care system, even the cost of keeping people alive for 20 extra years can still be outweighed by the cost savings.

And yes, I have a bunch of letters behind my name. And during the long process of getting those letters, I was fortunate enough to be trained how to examine a problem from multiple perspectives, and think critically for the purpose of finding solutions to problems rather than just whining about them.

As an actuarial, even you would have to agree that your tables are based on historical trends, and those historical trends are based on a society that has suffered under the current health care system. But if you change that system, from cradle to grave, to one that decreases morbidity and disease prevalence, your current actuarial numbers would be of no use. You would have to throw them all out and start again.

Are you really telling me that if we could decrease the prevalence of prevtable chronic disease conditions by 50%, we wouldn’t save far more money than we would spend extending the life expectancy by 20 years?

Come on. As an actuarial with so many years of experience, even you can crunch those numbers.

And as for emotion. Yeah I can see how you would get mad when you hear people say that keeping people alive longer will save us money, if you are looking it from the perspective of business as usual. But that’s not what I’m saying.

I’m talking about making substantial improvements to the health care system; utilizing health care providers to the maximum of their abilities; changing the way we do business in health care.

And yes I know that is scares a lot of people, because we are talking about doing things differrent than before. But mostly it scares the health care companies and workers who profit so much by having patients get sick and diseased, than by keeping them healthy.

The sicker a patient is, the more money hospitals, doctors, and pharmacies (just to name a few) make.

We have a broken system. And we need to fix it. I hope that we can agree on that.

It’s been enjoyable debating with you.

Guest
nate ogden
Aug 15, 2011

if you have two PhD do you write it
Brown PhD PhD or
Brown PhDs?

This would be much easier if we had a public white board to draw on.

Lets work with heart attacks, they can strike early, fairly deadly, and preventable. Lets eliminate all heart attacks and assume they live to 100, what kills them at 100? You don’t normally get into gun fights or drug over doses at 100. While we are very capable of keeping the body going we have not perfected the same longevity for the brain. Old age comes with considerable assistance cost.

Further lets say we do keep the mind in working order what about the joints? They just aren’t made to last 100 years.

Even if you solve all that what about 20 years of colds, accidents, and routine care?

I don’t recall the exact figure but healthcare for the most part is a service industry, most of the money goes to labor. Its one thing to say we can develope cheaper imagining or lab test but thats not going to save enough money. Lets say we developed every drug and they went generic tomorrow even that would only reduce total spending 10-12%.

You ask if we decreased morbitity by 50% could we pay for an extra 20 years of life. We can actually solve that problem with current data. What morbitities aer you eliminating, and this is the important part, what are you replacing them with? Thats the tricky part, the number of deaths stay the same you just want to change the cause and date of occurance.

I will give you, if you want to suspend reality, if we lose all cancer and parkenson, etc and replace it with drowning, then we could achieve your goal. We aren’t all eskemo though so I don’t think we can send our centurians out into the ocean on their 100th birthday.

I don’t see a reasonable trade off, There is nothing so prevalant and expensive that can be replaced with a cheap death to make the numbers work. The fact that deaths later in life tend to be more expensive makes it even harder. 20 years of wage and inflation in general makes it even worse.

Another overlooked problem is we are talking medicare expenses, if you increase life 20 years you also just added 20 years to Social Security which really blows the budget out of the water.

How do you feel about war? If we had an all senior citizen army, those between 90-100 and invaded some third world country ever other year that would work.

I’ll agree we do have a broken system and it needs to improve, we also need to know our limits, know what those limits are upfront, and be honest about what happens when we reach them. The worst thing about the intrusion of politics into healthcare and so many other parts of our lives is politicians love to overpromise. Its one thing if you grow up knowing you won’t get something, its a huge problem when your told all along you will then you don’t.

We can’t be promising people healthcare we can’t afford to deliver.

This has been a very enjoyable and challenging debate, any time you and all your letters want to mix it up just let me know.

Guest
Doc Brown
Aug 16, 2011

Nate, the correct title for a Doctor of Pharmacy is PharmD,, not PhD. The title of PhD stands for Doctor of Philosophy degree.

But it’s become obvious that you lack the imagination or will to be a part of the solution to our health care problem. In fact, you are so entrenched in your belief that it could never work, you woulld never believe otherwise. You’re so proud of how you are, in your mind, so much smarter than the politicians and academicians, but in reality you are just sad. How pathetic to spend your life using what intellect you have To be nothing more than close minded.

We have had several posting exchanges, and in each one you have talked down to me, called me names, etc. I have refrained from making similar comments, because that’s not how I engage in discussion. But since are discussion has ended, I can speak my peace.

I knew from the beginning that you were a person who couldn’t be convince. My main reasoning for the interchange was to help show those reasonable folks that a more inficcient and less costly health care system is possible.

You keep retorting with one specific change to the health care system, and why that could never give you the cost savings you need. Such an argument, of course, is just meant to sound like a logical retort to my points, when it is nothing of the sort.

A major change to the health care system, would mean increased efficiencies and decreased cost through multiple means and at all levels, not just keeping a person from getting a heart attack, or whatever singular example you come up with.

So Nate, while you continue to spend your life telling everyone who will listen that it’s not possible, me and others will spend our lives making it a reality. We’re not afraid of a little hard work. And we’ll even do all we can to extend your life expectancy.

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nate ogden
Aug 16, 2011

“to help show those reasonable folks that a more inficcient and less costly health care system is possible.”

Your suffering from a sever case of liberalism, writing more efficcient and less costly healthcare system on an impossible plan is not achieving anything. Just becuase Obama called it the affordable care act doesn’t mean anything got cheaper.

I have given specific obstacles that need to be overcome to aqchieve what your talking about. All you have in return is your going to waive your magic wand and revolutionize or modernise, or reform healthcare and cost will drop 50% and we will all live 20 years longer. Granted most liberals would jump all over the chance to vote for that but reasonable people would call BS.

You have jumped from false statement to false statement, you never did mention again that 80-100 years olds don’t spend more then 70-80 year olds, and you offer nothing solid ofg how your going to achieve anything.

Your attacking my specifics with generalities and calling me uncreative. Your the Obama of THCB, put something on the table then attack others for being closed minded.

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Nate Ogden
Aug 7, 2011

“Republicans have charged the IPAB will lead to government rationing of health care, and have attacked the idea of the board, which hasn’t been appointed as of yet–a central talking point it their efforts to repeal reform.”

Actually Republicans and Democrats aree opposed to IPAB, why did that get left out?

http://thinkprogress.org/health/2011/06/08/239660/what-is-driving-dems-to-oppose-the-ipab/

“Antos also pointed out that there will be a one-time spike in health care spending in 2014 as the 30 million newly insured Americans purchase drugs and physician services that they previously did without, and those costs will become embedded in overall costs.”

Will this be a one time bump like most people think of one time…meaning like one time, or a Medicare one time bump that will last 45 years and blow through all projections of cost? Assuming the government misses the cost of covering 30 million like they missed the cost of covering the initial Medicare population what will happen? Can we afford that sort of mistake?

Guest

So we have a sure way to lower health care expenditures: shifting costs to people already impoverished by a recession, while everybody from Kaiser to hospitals to insurers are posting record profits.

This also works well for CMS since both seniors and Medicaid beneficiaries are now having trouble coming up with copays which they could barely afford before the recession struck.

Judging by financial forecasts and the “need” to keep unemployment high and markets low until after the 2012 election, things will only get better for health care costs. As long as we can keep the economy in the gutter, we should be OK.

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Nate Ogden
Aug 7, 2011

then shortly after that in 2014 Obamacare kicks in which will really bankrupt the system and drive unemployement up. The provision outlawing carriers from selling high deductibles alone should cost a few million people their coverage and increase deductibles and co-pays for a few million more

Guest

I don’t think “Obamacare” will either bankrupt the system (what system?) or drive unemployment up. However, I will take your word for the coverage losses prediction, since more than likely insurers will be raising premiums, whether they need to or not.
This is exactly why we need at the very least another option, but that’s water under the bridge now.

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Nate Ogden
Aug 7, 2011

so ignore the stated reason coverage will be lost;

“The provision outlawing carriers from selling high deductibles”

and blame it on carrier greed. Almost as useful as BobbyG there Margalit.

Why do we need another option when self funding basically allows for infinit options now until Obama started placing all the restricitons. If you want options stop passing so many mandates dictating coverage and how its delivered.

Guest

I would be fine with no restrictions whatsoever. None at all. As long as there was a nice and safe public option for people to buy into. Insurers can have as much rope as the want. Hopefully they will put it to quick and painless use….. or play along.

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Nate Ogden
Aug 8, 2011

This nice and safe public option, safe to whom?

Would your public option have to be self sustainable, getting by on just premium collection or would it be heavily subsidized by tax payors?

Would this safe public option have to reimburse providers a fair amount sufficent to cover cost and some profit or could it under pay and drive up cost on everyone else?

Would this public option have to operate under the same rules as the carriers it competed with or could they continue to dictate business pratices to their benefit? Secondary payor, CMS reporting, take backs with no time limit, etc etc.

You mention giving insurers as much rope as they want so they will hang themselves, will your public option also be subject to this or would it just be medicare for all, run as far over budget as it likes, screw up the entire system, and live like a parasite on the private insurers?

Private insurers have survived inspite of government and public plan failure, Medicare and Medicaid wouldn’t be here without private insurance.

Guest
Aug 7, 2011

Guest
Aug 7, 2011

Nate can take it from here, y’all.

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Nate Ogden
Aug 7, 2011

thanks for contributing BobbyG, how long does it take you to come up with these gems?

Guest
Aug 7, 2011

Less time than it takes you to spell words correctly.

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Barry Carol
Aug 8, 2011

“I would be fine with no restrictions whatsoever. None at all. As long as there was a nice and safe public option for people to buy into.”

Margalit –

Switzerland doesn’t have a public option even for the elderly. Within Medicare, MA plans continue to gain market share even as government payment rates are squeezed and PFFS products are phased out. Humana, one of the two largest insurers in the Medicare Advantage market, is doing very well insuring that population. Each year, it resets its bids to target a 5% pretax margin which means profits above that level are reinvested into a combination of greater benefits and/or lower beneficiary premiums which are exactly what we should expect from a rational competitor.

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Barry Carol
Aug 8, 2011

As Nate outlined very well, the opposition to a public option was based on a lack of trust that it would be forced to operate as a level playing field competitor with private insurers including covering its expenses solely from premium revenue and paying fair fees to doctors and hospitals. Opponents also feared that even if it started out as a level playing field competitor, it wouldn’t stay that way if it started to falter.

The large Medicare Advantage insurers are highly confident in their ability to compete with standard Medicare. In Medicaid, the states are accelerating their effort to move beneficiaries into managed care because it saves money vs. unmanaged Medicaid.

Too many liberals think that health insurers are inherently evil and mean while government is good and fair and can provide health insurance for less because it doesn’t need to make a profit. While there are a relatively small number of people, perhaps 4-5 million, for whom the private underwritten insurance market doesn’t work, high risk pools could address their needs without subjecting everyone else to a monolithic one size fits all unresponsive government run monopoly which is what the single payer crowd wants.

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Nate Ogden
Aug 8, 2011

we wouldn’t have the healthcare crisis we do today if Democrats had passed the catostrophic plan for seniors they said they were. If they had helped the 13% that needed it instead of creating this disaster that effected everyone we wouldn’t be here discussing any of this.

Guest

Barry,
The Swiss insurers are regulated much more than ours, so there is no public option per se. We came up with a lightly regulated (by comparison) private market, plus a big safety net. Obviously, this arrangement is not working well.
Nate’s solution to the problem, if I understand it correctly, is to relax the regulations on the private market and minimize the safety net, in the belief that the safety net is too big and the free market will solve the problem.
I believe the solution is exactly in the opposite direction, but in lieu of increased regulation, I would settle for a free market plus one highly available and highly regulated option, which may or may not compete fairly with the market based alternatives. As long as tax payers agree to fund it, it shouldn’t matter because the goal is not fair competition. It is fair health care.
As to managed care, this is a different debate, but all in all, I believe managed care may work very well if the goal is solely to benefit the patient, i.e. truly patient centered the way Dr. Berwick defines the term. Otherwise is just another money hungry HMO deja vu.

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Nate Ogden
Aug 8, 2011

By what measure are they much more regulated and US lightly regulated? Fairly subjective argument and impossible to agree or disagree with when you don’t even say how you derive at this conclusion.

” Obviously, this arrangement is not working well.”

What arrangement, the part that is not working is Medicare and Medicaid, the public options, so your argument is due to the failure of our public plans we need to institute public plans?

And in order to fix these failing public plans we need to destroy the functioning private plans?

” As long as tax payers agree to fund it, it shouldn’t matter because the goal is not fair competition. It is fair health care.”

Can you define fair healthcare?

And when you say tax payers agree to fund it, do you mean they agree to actually pay it or they agree to incur debt so future generations can pay for it? The left is great at selling bumper stickers, how about an actual working plan for a change? Medicare is the perfect solution to your request. As long as you’re not a future generation forced to pay for it. A sustainable plan that doesn’t collapse in financial catastrophe would be preferred.

Was it fair thousands of people lost coverage so a few could get IVF treatment?

Was it fair millions will lose coverage so a few can spend an unlimited amount?

I’ll be very interested to see how you square fair healthcare and agreement to pay taxes.

Guest

Fair health care means that everybody gets needed and beneficial care according to their personal preferences, and everybody is able to purchase whatever other care they want according to their financial abilities.

Millions will not loose coverage just because there are no life time caps. People are not going to get sicker just because you added a paragraph to your regulations document, certainly not catastrophically sicker to the tune of many millions of dollars. Your risk calculations should not change, unless you were dumping folks out when they exceeded a rather small and realistic cap.

Plans with unlimited life time caps today don’t seem to cost more than the ones with a couple of millions cap. The main difference in plan costs lies in the size of the deductible and coinsurance.

Here is a question for you, Nate. What is the percent spent by insurers on people exceeding, say, 2 million dollars in cumulative charges?
Keep in mind that at 65 they are all out and that most people don’t stay with one given plan for their entire pre-65 life.

Guest
Nate Ogden
Aug 8, 2011

“Fair health care means that everybody gets needed and beneficial care according to their personal preferences”

So your fair plan will cover my daily massage and you don’t see how this will be unsustainable? We can’t deliver needed and beneficial care now for those that are insured and your complaining about cost. How do you want to deliver this same level of care to an additional 50 million people and spend less? Your still talking bumper stickers, wishing everyone had a unicorm so we could reduce global warming is not a solution, its an hallucination.

“everybody gets needed and beneficial care according to their personal preferences” is an hallucination, you can’t even begin to lay out a plan that would make this possible. Apparently you have no problem spending trillions of your grandkids money to find the obvious out though.

“Millions will not loose coverage just because there are no life time caps.”

Really and you know this how? Lets apply a little logic to this question. Why does PPACA offer waivers of this rule? They knew that people would lose their coverage if this law was applied to everyone. Ok so how many people are covered by waivers?

“GAO says in the report that about 3 million people were covered in approved plans and about 153,000 people were covered in denied plans.”

What? 3 million, but Margalit said millions of people wouldn’t lose their coverage if the limits where forced on everyone?

OK Margalit why did Obama grant waivers covering 3 million people then? I’m guessing you won’t have an answer for this becuase once again your running off making statements you know nothing about. Can’t wait to see you try and spin this though.

“Your risk calculations should not change,”

Then why do they? 3-13% increase to eliminate the annual cap depending on the carrier. What do you know that none of the professionals who job it is to calculate these numebrs knows? They aren’t paid to increase premium they are paid to get the numebrs right, this isn’t the CBO but real actuaries.

“What is the percent spent by insurers on people exceeding, say, 2 million dollars in cumulative charges?”

Doesn’t matter, rates are based on what is going to happen not what did happen. Last year a hospital couldn’t spend 5 million, now they can, how do you factor this in? When the max was 1 million people hardly ever hit it. When it was raised to 2 million they hardly ever hit that. 5 million hardly anyone ever got there. Now no limit what do you suspect will happen, who do you think is going to pay for all those new hospitals?

“Keep in mind that at 65 they are all out ”

No margalit they are not always out at 65, I cover many 65+ and they are usually the large claimaints year in and out. Again if you don’t understand the basic facts how can you hold such strong opinions?

Guest

Starting from the bottom up:

I’m afraid you are assigning causality where one may not exist. Just because costs of care increased in parallel with increased caps on life time expenses, does not mean that one is a result of the other. Do you have any research showing that plans that have unlimited caps have larger expenses?

“rates are based on what is going to happen not what did happen”
Rates are not based on experience? They are based on best guess?

Risk calculation should change if and only if your previous caps created underisurance to the degree that significant numbers of sick people reached their limits and were terminated. Have numbers for how many were placed in that situation?

I suspect waivers were granted as part of the overall cave in policy approach.

Finally, “needed and beneficial” does not include massage. I could go into an explanation here, but I know that the Liverpool thing will by definition come up in your response, because if the government denies you a massage, it is necessarily a death panel, but if you as a payer want to not cover the same massage, that is free market glory.

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Nate Ogden
Aug 8, 2011

“Do you have any research showing that plans that have unlimited caps have larger expenses?”

I don’t have research but I do have cashed checks made out to hospitals showing they are getting paid much larger amounts then they did before. I also have 10+ years of claims data at my finger tips and another 10 years of memories of hospital contracts and what different per deims were and how much conditions would usually cost.

I do know a back surgery use to run 90K and if you shop around you can still get them for 90K but for some reason certain hospitals are comming in at 300K+ now.

If a hospital isn’t going to be paid they are less likely to perform the service, i.e. they wont try to slip[ in 120K of hardware where they use to us 40K on a back surgery.

Unlimited caps are less then 12 months old by the way, what sort of research study do you expect?

“Rates are not based on experience? They are based on best guess?”

Predictive modeling, if someone has condition X its priced at y dollars. This was another of your liberal throw away statements, use a little common sense. Are you really saying auto, homeowners, life, and all insurance is best guesses? Why do you soil conversation with these?

“Risk calculation should change if and only if your previous caps created underisurance to the degree that significant numbers of sick people reached their limits and were terminated.”

If you don’t collect the premium beforehand to pay the claims how do you write the check?You can’t pay the claims then hope to collect enough to cover them after the fact.

““needed and beneficial” does not include massage.”

My doctor says I need massage to relieve stress and relax tight muscles that are causing back pain. It is both medically necessary and beneficial. Why won’t you cover it?

I bet you cover IVF without a second thought, which is not treatment of a medical condition but a solution to a medical problem.

Guest

“Unlimited caps are less then 12 months old by the way, what sort of research study do you expect?”

Nope. I have never had insurance with caps and I’m pretty sure I’ve been around for more than 12 months. There should be numbers out there, if anybody cares to compile them.

Also I am pretty sure that hospitals gauging prices has been around for more than 12 months and I have no indication that they are checking the plan caps before they charge out. Besides you are not paying them what they charge anyway.

“My doctor says I need massage to relieve stress and relax tight muscles that are causing back pain.”

Great. Go get one, or see if you can use your natural charms to get a free one. If the doctor recommended a hot bath, you wouldn’t bill me for the bubbles, would you?

Guest
Nate Ogden
Aug 8, 2011

“If the doctor recommended a hot bath, you wouldn’t bill me for the bubbles, would you?”

If it was your public option or Medicare sure, and I am positive they would pay for it

Guest
Barry Carol
Aug 8, 2011

Margalit –

Two differences between Swiss regulation and U.S. regulation of health insurers are (1) the Swiss insurers cannot make profits on the sale of policies covering the basic benefits but they can from supplemental benefits and (2) Swiss insurers negotiate with providers as a group so all insurers pay the same price for a given service, test, procedure or drug in a given canton. I note that the average blended after tax profit margin of U.S. for profit and not for profit insurers is probably 3% at best which suggest minimal price differences based on whether insurers are for profit or not for profit.

Also, your comment that it’s OK if a public plan competes unfairly with private plans including the availability of significant subsidies to supplement premium revenue would likely drive insurers out of business and result in a single payer system of healthcare payment. The lack of choice alone coupled with a probable slowdown in medical innovation and the general unresponsiveness of a monopoly government payer would result in most Americans paying higher taxes for less coverage even net of the insurance premiums they used to pay assuming employers raised (taxable) pay by the amount that they previously paid for health insurance. It would not be an American solution consistent with American values and culture. We can do a lot better.

Guest
Aug 8, 2011

“an American solution consistent with American values and culture.”
___

Yeah, they’re on such stellar display these days.