Matthew Holt

Why AHIP needs the public option

It’s been a fun week. After years of THCB explaining that neither could AHIP do genuine research nor could its venerable President open her mouth without lying, the rest of the world has caught on. I won’t rehash the blow by blow here—Jonathan Cohn is among many who’s done that already—but essentially AHIP commissioned PWC to include the half of the analysis about the Baucus bill that was favorable to them and leave the rest out. And the fall from grace has been particularly fun to watch. Even the whores from PWC who wrote the report criticizing the bill have been backing away from it. And some astute commentators think that the debacle has helped the likelihood of a more liberal bill’s passage.

Now to be fair (or overly fair as they’d never concede this to the other side), the insurers have a point. They loaded Baucus up with lots of cash and put a former Wellpoint exec in as his chief of staff. They romanced the White House and kept quiet when Pelosi and the rabble criticized them. The deal they thought they’d cut was that they would give up the way they currently make money by underwriting and risk skimming in individual-small group and being overpaid for Medicare Advantage, and in return they’d get 45 million more customers, all forced to buy insurance and subsidized by the government to do so.

But somehow along the way the Democrats, despite lots of tough talk about “bending the curve,” lost the cojones to find even a mere $100 billion a year to redistribute from the probably $1 trillion waste in our $2.5 trillion health care system.

So they had to go look for new taxes, and also decided that the “cost” of the changes had to come in at under $100 billion a year. Joe Flower eloquently asked why $1 trillion over 10 years was a relevant number, but it’s somehow become politically sacrosanct. But if you can’t find all the money elsewhere in health care, and yet you still want the uninsured to buy real insurance, you have to subsidize them.

If you decide that you have to spend less than $100 billion, you have to lower those subsidies, which means fewer customers for the insurers. And worse, in the Baucus bill, the rules on the insurers forbidding them from business as usual on underwriting are not matched by a serious individual mandate and there’s no employer mandate at all. So that was the reward the insurers got for their money and pliability. A glass they perceive to be half empty.

Employers get more or less what they want—no employer mandate. The unions get what they want, no real tax on health benefits and the maintenance of the awful employer-based health benefits system. And the poor suckers now are the insurers, especially the Blues (including Wellpoint) who stand to lose their very profitable small business and individual market business. And yet they are not going to get many more enrollees. So they can’t make it up on volume!

The insurers are terrified that they’re going to have to sell insurance to a bunch of sickies who’ll game the system (and from Charlie Baker’s story of his experience in MA they will!) and they won’t be able to use their usual self-protection techniques of underwriting and price discrimination. Soon, or in 2013 anyway, hordes of sick people will begin to buy insurance that’s effectively guaranteed issue at a regulated price, and yet no hordes of healthy people will also buy to expand the risk pool. For insurers this becomes a very difficult situation.

What then would be their way out?

Wouldn’t it be good for the insurers to find a greater fool on whom to pawn off these sickies? Someone who had by law to take all comers, who had to do it at a lower price, and who could lose money without going out of business? Wouldn’t it be good if there was that type of pool to risk shift against?

Doesn’t that sound like a government-run public insurance option?

I said a few weeks back that the liberals advocating a government option might be surprised because private insurers are very good at risk shifting against it. But it’s only recently occurred to me that AHIP and its fellow travelers not only need higher subsidies for so that poorer people can buy their products, they also really need a public pool to surreptitiously dump their bad risks into.

So it seems to me that AHIP will have to quietly support the public option. Otherwise they’re really in trouble. If they don’t they may actually have to think about trying to reduce overall costs in the system. Something historically you might say they are not best suited for.

I await Ms Ignagni’s next public pronouncements with interest.

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38 replies »

  1. Bottom line: The Hawks simply cannot keep all of their good players, so they need to cut down
    on the penalties and turn those Red Zone field goals into touchdowns.
    And a number of players who took a little longer than anyone would have preferred.

  2. Matthew: New reader here. Re Ms. Ignani: Perhaps I’ve missed it, but I’ve not heard mention that, in a previous incarnation, she was the voice of union healthcare at the AFL/CIO (where I worked with her). So, as the parable goes:
    “Miss, would you sleep with me for a million dollars?”
    “Sir, for a million dollars I might.”
    “Miss, would you sleep with me for ten dollars?”
    “Ten dollars? What sort of woman do you think I am?!”
    “Miss, we’ve already established that; now we’re just negotiating the price.”
    And, for Karen Ignani, the price was right.

  3. Wow! What a crock. Worst article related to health care reform lobbying I’ve read yet. Don’t quit your day job, especially if it involves writing/research!

  4. Wow, Nate, very progressive indeed, so I’m not going to push my luck any further…. 🙂

  5. the benefit plan requirements would depend how you worded it. If you said carriers had to offer a series if plans like medigap in addition to anything else they came up with cool, if they could only offer the government desgined plans deal breaker. Government designed plans is why Medicare didn’t have Rx coverage until 2006, unacceptable.
    Keep in mind most Americans with private insurance don’t have any insurance carrier, they are in self funded ERISA plans, this clouds discussions of what has to be offered, we don’t want an employer being forced to offer 10 different plan designs to a group of 40 employees.
    I have no issue with guarantee issue of you have mandated coverage, insurance has never opposed guarantee issue when there was a mandate, look at the group side where pre-ex is almost non existant, it is only used to protect against dishonest people.
    absolutly no chance government will be allowed to collect premium. I am less concerned about policy holders paying them I am of politicians passing it on. Government is way to inefficient and redirects way to much of the mone that passes through their hands. To work government needs removed from day to day operation, not interjected further.
    I would also oppose free insurance for the poor. If you can’t afford insurance they should have job banks that pay insurance instead of money. You need to perform so many hours of work each month to get your benefits for the following month. Davis Bacon hour bank for the po. There are to many things that need done in the country we are told can’t be becuse we can’t afford to pay people to do it, while we pay millions to do nothing. No more free handouts. Cleaning parks, sorting trash, community revitalization, on and on. When we have no waste sent to landfills and spotless enviroment we can discuss subsidizations and unemployement.
    Bet you wheren’t expecting that progressivism from me where you?

  6. Nate
    I could still counter some of your claims but I think we’ve agreed that the PWC study doesn’t add much to the conversation. There are bigger fish to fry than debating the science of policy analysis. Maggie and the others are having a much more interesting and substantial conversation.
    One day, I will tell you exactly my take on insurance companies but don’t have the time now.

  7. Nate, I think we’re making some progress here. You just agreed that covering folks cradle to grave is more economical and if you had 2-3 years you could cut coverage cost down by 15% to 20%.
    So the only thing left to debate is who should administer these plans. I have no objection to privately administered plans, as long as they are all equal in basic benefits and price and barred from excluding people. By basic, I mean FEHBP. Extra perks, should sell for extra prices.
    If you have no objections, and to assure that everybody pays premiums, I would prefer that the government collects premiums and passes them on to the plans. For poor people, the government subsidizes to the full price.
    What do you think, Nate? Would that work for you? 🙂

  8. Margalit,
    This is going to be tough to answer in a way that makes an sense. Insurance is sold on an annual basis, consider each year a coin toss. The probability of landing on heads does not change based upon what your last flip was, in this case what you previous premium was. Each year you are buying new protection for what might happen in the future. That being said not many people make it to 65 without experiencing at least a couple years where claims exceed premium. There is almost always a couple rainy days before you hit 65 and the final storm comes.
    This is where education get very important, or maybe engagement is a better word. There are to many people that are perfectly healthy that waste money over-insuring themselves. If your healthy and don’t have claims you really should be in an HSA. Off the top of my head your pre 65 lifetime loss ratio for health insurance is higher then your homeowners. And not far off auto. Without looking at claims data I would guess no more then 10-15% of the population goes 65 years without significant claims.
    Pre 1965 insurers did cover people till death and it worked far better then what we have now. But that is getting into the politics of why Medicare was passed and you asked we avoid that.
    We could insure people cradle to grave for significantly less then what is spent now. The 10-15 years people spend on Medicare far exceeds the 65 years they where in private insurance. What could we saved in fraud and waste alone would cut premiums over 10%.
    Give me 2-3 years I could administer Medicare and easily save 15-20% over the current plan and offer better benefits.
    “I described the way other developed countries seem to make this work.”
    Margalit I would ask how you define work. Almost every other industrialized country is closer to insolvency then we are. Our Public plans might collapse before theirs but our private plans are far healthier then almost every other country you think is working. No other country has had the spotlight and resources spent trying to prove how bad it is like our systems have. Now that people are starting to really investigate these other systems there are horror stories popping up every day. The grass ain’t always greener, nor is it always grass over there.
    “we have chosen to turn healthcare into a largely unregulated for-profit businesss.”
    This is the most asinine statement I have heard in a long time, no other country is nearly as regulated as we are. Not to mention half our insurance is non profit and a large portion of our care delivery.
    “outcomes for many diseases–and overall health –is better in these countires.”
    Ya ya and their apples are redder then our oranges, what’s your point? Compare like populations and see what happens to there superior system. If you want to improve our outcomes get rid of most of the minorities. If you compare similar races almost all the difference goes away.
    “their administrative costs are higher than a government plans administrative costs would be”
    BS government plan also advertises, underwrites, and markets they just move the cost under a different agency and don’t account for it. Where do you think all those CMS and Medicare commercials come from the ad fairy?
    “those adminsitrative costs make private-sector insurance “only” about $2,000 more expensive than a government plan”
    More BS private plans total admin cost is not $2000 let alone $2000 higher. Large self funded plans, majority of all people employed by companies with more then 1000 employees are in ERISA plans, pay around $50 a month or $600 a year total for admin. Are you claiming government plans somehow contribute $1400 a year in cost, they mint money now?
    “but not by making the across-the board cuts to physicians’ fees that Nate talks about.”
    That Nate links to, that is present law, Obama was in Congress for a coupel years when the Democrats controlled Congress and that is still the law. Obama has been President for 9 months and made a ton of proposals none of which eliminate the law. That crude solution is what your boy has in place, oh that’s right he gave a speech saying it wouldn’t happen so we should all just ignore the actual freaking law that is on the books and no one has made any attempt to repeal.
    Val,
    Every health insurance exchange ever created increased cost, so if you want it included then the increase would be even greater. Exchanges don’t create competition, as borne out every time it has been tried, they create cover for manipulation. Everyone offers the same bland product at the same inflated price. An exchange is just a marketing name for a regulated market, far from being efficient it adds another layer of waste.
    What percentage of cost shifting would you agree to? 75%? 90%? Every time in History Medicare has cut reimbursement their was a short period until major inflation in private insurance, this goes back to when the fair compensation provision was struck down. Once contracts come up for renewal a very substantial portion of any reduction is made up plus inflation.
    In regards to the tax that does both ways, at least PWC discussed it. If people change plans to avoid the tax then there is no tax, if there is no tax how is 3200 being paid for? Can you point to anyplace in any analysis of 3200 they account for this? To be fair PWC copied the same assumption that the government did in scoring the plan, are you up in arms about Congresses claim? If your doing an analysis of the government projections you need to make the same assumptions they did, that is my defense.
    AHIP did one study, I don’t have much respect for studies of any sort to start with, to counter 1000 pro reform studies of even less value. The assumptions contained in 3200 and those studies supporting it are far worse then what PWC did. When Robert Wood, Common wealth, and Lewin and all these other jokers that don’t know HC from their a$$ are turning out studies daily its ridiculous the left jumps all over PWC.
    I think the whole debate would be much better served if we didn’t have any of these studies, they are all propaganda.
    “since the private sector administrative costs are not being incurred by Medicare even in its current sorry state.”
    Maggie who do you think processed Medicare claims? Medicare has all the same expenses and 10% fraud thrown on top.

  9. Margalit,
    actually, I wouldn’t place the equal sign between values and outcomes. I don’t even think that we should completely eliminate the fee-for-service system. If you come to your doctor for a regular check-up, this is where it makes perfect sense. In one of my comments on an earlier post here, I said that in the future, I would expect a mix of payment models. What you are suggesting is pretty close to paying doctors a salary, which may be absolutely appropriate in some cases too, and the Cleveland Clinic makes that work just fine.

  10. In health care there is not always an “outcome”. Often it is verification…Yes, you are still old and don’t feel good, but there is nothing new tonight. Do you want fries with that?
    We overtreat because we are over-litigated.
    My fee is the same whether or not i write a prescrition or order an expensive test. The big money in medicine comes from the government, not the private insurers. But not for office work. Dialysis. Imaging. Home Health. Long term care. These were never on the radar when medicare was hatched. Neither was disability. Neither were lift chairs or scooters. Why is the government funding all of this? Stimulus? Pork?

  11. How exactly do you pay for outcomes?
    Outcomes are something that is measured over a long period of time, over a statistically significant sample of population. Are we suggesting that physicians get payed once every year or so? Do they get payed only for services rendered to diabetics that are shown to be successfully under control, and payed nothing for the other diabetics?
    It doesn’t make sense. Attorneys are paid regardless of the verdict. Sure, there are incentives for successful litigation, but the base pay, for time and materials, is a given. Almost every other professional worker is paid the same way, so why should medicine be different?
    I suggest we pay physicians the same way: pay for time spent providing care instead of CPTs, which really are payment for volume and do nothing but encourage hamster wheels and wasteful procedures.
    Sine the overwhelming majority of physicians want to, and are capable of, providing good care, let’s just pay them for time spent working.
    If CMS wants to collect quality measurements and throw in some incentives for outcomes (which are not always under a physician’s full control), that’s even better.

  12. I completely agree with Maggie that healthcare needs to be more regulated, primarily, on the delivery side. One aspect of this is that the current fee-for-service reimbursement system is perfect for accountants, but turns physicians into salespeople. When it goes about a care plan, we definitely need to pay for the value rather than the amount of care. The trick is to define that value and provide medical practitioners with some sort of decision support system that would give them moral and legal grounds to refuse patients’ requests for unnecessary diagnostic or treatment options, unless they want to pay for those out-of-pocket, or have supplemental insurance that covers them. Since a large portion of healthcare expenses is attributed to management of chronic conditions, especially at the end of life ( http://washington.bizjournals.com/washington/stories/2009/08/17/editorial3.html ), the areas where usually there is a consensus among researchers and clinicians on expectations and best practices ( http://www.healthmanagement.com/files/Chronic%20Disease%20Savings%20Report%20final.pdf ), this could be a good starting point for phasing down the fee-for-service model and reviewing the extent of the “regular” coverage.

  13. Thanks, Maggie, for the beautiful summary.
    However, what I don’t understand is why do I have to “follow the money” in the US and not in other developed countries. Surely there are big corporations in Europe that would be as willing to profit from sickness as the esteemed members of AHIP in the US. Somehow, those governments are not allowing that to happen.
    As to opening Medicare to the public immediately, I don’t think we need to wait until all the kinks are worked out and all the excess is trimmed. The premiums for younger folks joining Medicare should not be calculated based on the over 65 pool. It should be comparable to what the same person, or family, would have to pay for private insurance. I am pretty sure this will cover Medicare’s expenses with plenty to spare since the private sector administrative costs are not being incurred by Medicare even in its current sorry state.
    I know that dealing with excess diagnostics tests and expensive self referrals will take a long time to address, but sometimes a small carrot may be more effective than a big stick.
    Paying primary care docs for cognitive services at least as much as they can get for a dexa scan, or B12 injection, will accomplish two things quickly: less unnecessary tests and in office procedures, more time spent with patients, which will improve compliance, reduce specialist referrals and generally improve people’s well being and quality of care. I think you will see cost reductions almost overnight.
    People seem to be in so much awe of the magnitude of the problem that they forget that success lies in doing the little things right and doing the little things right is a very manageable task.
    We may have to invest a “few dollars” upfront in order to fix healthcare and it won’t happen in a day, or a year. It would be a wise investment and I’d rather start today then wait until the political climate is no longer conducive to change.

  14. Maggie-
    There is no “public plan” in Germany. All health insurers in Germany are private. When people lose their jobs or otherwise become unemployed, the state social security agency pays to continue their private coverage- COBRA with teeth (and funding). The destitute also receive state welfare subsidies that cover their private premiums- a far better system than multiple public payers for different entitled groups as we have here. The German government does the dirty work in constraining cost by aggressively regulating physician fees, hospital budgets and drug coverage and costs. The health plans basically pay the bills; the government determines the amount.

  15. Nate
    Frankly you confuse me but I’ll try to adress your concerns nonetheless. The study should have included the impact of health insurance exchange on premiums in its analysis. Since many people argue that the competion created by the exchange would reduce premiums,you would think that’s something worth looking at even if just for scientific rigor. There are statistical methods that allow you to pick which independent variables to include to include in your final analysis. That’s the least they could’ve done. If you want to exclude a variable that other experts think is significant, you should do it scientifically.
    Now let’s look at the assumptions:
    1. Full cost shifting- the notion that every penny cut from medicare payments to providers would be charged to corporate insurance companies. Hospitals can cut down on error and be more efficient ( i know this). Insurance companies don’t have to pay what providers charge them and they dont. I am not aware of any studies that shows guarranteed 100% cost shifting . Hence, this assumption is not at all entirely self-evident.
    2. Payment of tax on high-value plans- The PWC admits within the report that this assumption is unlikely. Many employers and individuals would simply chose less costly plan and therefore avoid paying the tax altogether, but the study chose to ignore that in it’s analysis. Here is its quote:”Although we expect employers to respond to the tax by restructuring their benefits to avoid it, we demonstrate the impact assuming it is employed.”
    You yourself have argued that excessive demand is driver of cost, which is exactly what these “cadillac” plans encourage. That’s one reason why McCain and many republicans wanted to eliminate the the tax exemption for employer-based plans. Many healthcare economist as well as the CBO have estimated the cost savings from reducing the prevalence of these cadillac plans, yet this is not included in this analysis. How do you defend that?
    To answer your question regarding drug studies. Yes. Drug studies are usually done on a randomized group that is representative of the patient population, which would account for your “6’2 134 pound women with shoulder length blond hair, a few freckles that prefer white wines over reds.” When certain types of patients are excluded from the study, it is explained and the results of the study can be assumed unapplicable to those that were excluded.
    When reviewing the quality of a study, one doesn’t need to present your own data to disprove the results or prove the opposite. Does the study ask the right question. Does it accurately/adequately, measure what is claims it does. Are the results applicable. Hence, the notion of internal versus external validity. If your study make certain assumptions, they better be self-evident and/or nearly infallible. Or else, do an uncertainty analysis to account for them (i.e best-case, worst-case, likely-case scenarios).
    Again, the PWC was asked to do a very limited study and it did it. It just doesn’t add objective information to our conversation. AHIP would have been better off just making their arguments.
    Now, if you wanna know my positions on these issues, both overall and specific provisions, that’s a different conversation…

  16. Matthew–
    Let’s try to be a little more optimistic.
    I agree that there is a danger that a public plan could become a dumping ground for the weak and the old.
    Certainly, private insurers will be trying to figure out ingenious ways to “cherry-pick” even if they cannot deny coverage to patients with pre-existing conditions, or charge them more.
    A recent WaPo story said that insurers are thinking about schemes such as having relatively few oncologists in their physician networks. This means they will attract fewer cancer patients.
    But with good regulation, insurers won’t be able to get away that. For instance, they might be required to have a certain minimum number of oncologists per 1,000 beneficiaries, a certain minimum number of cardiologists etc.
    What if cardiologists didn’t want to sign up with a particular insurer because that company always pays late? The company might have to pay doctors more–or clean up its act. One way or another, it would have to have the same minimum number of cardiologists per 1,000 patients that the public plan has.
    That’s just one example. But I would like to think that, these days, we have people in Washington who are just as smart as Karen Ignani. (Certainly, she didn’t distinguish herself last week.) And we need to make sure that insurance regulation is national, not run by the state.
    Finally, I say “it can be done” because other countries have done it. Germany has an excellent public plan as well as more expensive private sector insurance. Citizens choose which they want. (Though if you earn under a certain amount, you are required to take the public plan–I guess the idea is that they want to make sure that people will be able to afford the premiums.)
    The private insurance costs more –and offers extras like private hospital rooms (Germans don’t think private rooms are that important. There hospitals are fairly Spartan, but very, very clean. Fewer infections. )
    I have relatives who have lived in Germany for a number of years, and I also spent some hours with a pediatric oncologist from Germany who was here for a year on a
    fellowship. (He was appalled by our health care system–the fact that when children have ear-aches, we give them antibiotics–and not pain-killers.)
    What was interesting is that this 40-something doctor is in the public sector plan. He saids that the medical care is just as good, and he’s not interested in the extras.
    My relatives (who have been hospitalized a couple of times in Germany and recently had a baby on the public plan)confirm. I realize this is anecdotal, but the stats back up the stories.
    Somehow, Germany seems to have avoided letting the public plan become the poor plan for the poor, the sick and the old–even though the private plans offer the frills.
    We should look into how they do it.

  17. Margait– Peter is right. It’a all about the $$$.
    What makes us different is that we have chosen to turn healthcare into a largely unregulated for-profit businesss. (In other developed countries, much of it may be for-profit, but it is regulated. In these countries , hospitals, doctors, drug-makers etc. cannot just charge whatever they want.
    And these countries do things like putting a lid on the number of MRIs and other diagnostic tests that are done by limiting the number of MRI units that are available. Yet, outcomes for many diseases–and overall health –is better in these countires.
    Because we have turned healthcare into a very profitable industry (for some providers), a great many people in the industry are selling and selling hard. Too often, they are selling over-priced products and services that we don’t really need.
    We’re over-medicated, and as Dr. ATul Gawanade points out (The New Yorker, June 1), the number of surgeries done in this country have soared in recent years–with no improvement in our health. Many of us are over-treated.
    This is why the amount that private insurers have been paying out in reimbursements has been rising 8% a year, each and every year, for the last ten years. Think about it, compounded that’s roughly a 100% increase in what private insurers are paying out to doctors, hospitals and patients.
    Of course, they pass these higher costs along in the form of higher premiums (which is why your premiums have been sprialing) but they have had a hard time keeping up. This is why private insurers profit margins have hovered around 3% to 4% in recent years, , making private health insurance one of the least profitable industries in the U.S. (they rank 87th.)
    Yes, their administrative costs are higher than a government plans administrative costs would be–here I’m talking about the money they spend on advertising, marketing, lobbying underwriting, executive salaries, profits for investors.
    But when compared to a government plan, those adminsitrative costs make private-sector insurance “only” about $2,000 more expensive than a government plan–$13,500 versus $11,500. (Numbers from the Commonwealth Fund.)
    $11,500 a year for insurance is still more than many people can afford, unless they have an employer helping them.
    Employer-based insurance has meant that many of us think that health insurance “should” cost a family only a few thousand dollars a year. This is because one group in our society–relatively well-paid workers (earning over $75,000 )and working for large companies– are accustomed to having their employer pay an average of 75% to 100% of their insurance premiums.
    If they leave the company, and become self-employed they are shocked to discover that a family plan will cost them $13,500 –or more– even if they manage to find a group that they can join (the Authors Guild or whatever.)
    In other developed countries, the average citizen is expected to spend roughly 10% of his gross income on healthcare–before getting any help from the government. (10% is the rule in Switzerland) That 10% may be going to various taxes that fund a national health care program, or toward premiums that people pay a private insurer (only the UK and Candada have single-payer–all Western European countries have a hybrid public/private system).
    Why do people have to spend such a large share of their income on healthcare? Because they are covering everyone, poor and rich, old and young. This is the price you have to pay to live in a society where everyone has care–and where you can feel secure that you will always have care, even if you are unemployed.
    Keep in mind that people in these countries receive many fewer tests and treatments, see many fewer specialists, pay their specialists much less, take fewer drugs and pay less for the drugs–And it Still Takes 10% of the average family’s Income to fund national health care. Health care is not cheap–even in Europe..
    This means that a family in Switzerland earning $75,000 is expected to spend roughly $7,500 a year on healthcare. That may sound like a lot, but in the U.S. under health care reform, a family would be expected to pay roughly $11,500 for a public sector family plan accoding to the Commonwealth Fund. (A private sector family plan would cost them $13,500)
    Earning $75,000,the U.S. couple would be earning too much to qualify for a subsidy (even under the most generous subsidies proposed in the House bill.) Yet, $11,500 –plus any co-pays and out-of-pocket expenses is pretty steep. Why is the price so high? Again because in the U.S. we are overtreated–too many unncessary and often over-priced products and services. Reserach shows that one-third of our health care dollars are wasted on treatments that do not improve our health–and sometimes hurt us by exposing us to unncessary risks.
    We can bring that price down if we begin to squeeze the waste out of the system. In fact, we must begin to take some of the fat out of the system, and make it more efficient–or else people are not going to be able to afford mandated insurance. And we can’t raise the subsidies any higher than they are in the House bill (offering subsidies to a family of 4 up to $88,000 annual income). At the same time, that family might well be hard-pressed to come up with $11,500 in annual premiums for a public plan–plus deductibles and co-pays.
    Margait–One reason why we can’t roll out healthcare reform before 2013 is that it will take time to even begin to remove the waste that makes our healthcare so costly. The Obama administration plans to start with Medicare–but not by making the across-the board cuts to physicians’ fees that Nate talks about. That’s a crude solution.
    We need to make the cuts carefully, with a scalpel, not an axe. And we need to pay some docs (primary care physicians, pediatricians, etc.) More, while we pay some specialits Less for certain services that provide little benefit to the patient.
    Already, this year, Medicare has quietly decided to reduce fees for doctors who buy or rent diagnostic testing equipment and then do diagnostic tests in their offices. Research shows that the volume of tests increases dramatically when the doctor is “self-referring-“-ie. he decides you need the test, and then refers you to himself to do the test. (Inevitably, the doctor needs to do a high volume of tests in order to pay for that very expensive equipment.
    This is not an efficient way to run a healthcare system. Rather than having 200 doctors buying equipment for 200 offices, 40 MRI units should be available at four or five hospitals’ outpatient centers in a given city where those units would be in use all of the time.
    This doesn’t mean waiting two weeks for an MRI–but it does mean you might have to make an appointment, or wait 30 minutes when you get there. If you live in a rural area, you might have to drive to the nearest hopstial Not as convenient, but much better than watching yoru premiums double in the next 9 years–which is what will happen if healthcare spending continues to grow at the current rates.
    In additoinal to cutting back on how much it reimburses for “self-referred” tests, Medicare is trimming fees for CT scans and MRIs. Medical evidence suggests that people are being exposed to unsafe levels of radiation because we’re getting too many MRIs. Many radiologists confirm that this is true.
    Medicare is also going to being to refuse to pay hospitals for an unacceptable number of preventable readmissions.
    These are steps in the right direction. (Nate, if you paid attentoin to what Medicare is doing you would realize that it IS beginning to reduce spending before
    trying to cover everyone–just as you say it should.)
    When a new Medicare director is appointed, I expect to see more reforms as Medicare strives to pay providers not for how much they do, but for how well they do it. We know that at the very best medical ceners (Geisinger, Mayo, Intermountain) doctors do less, the final bill is lower, and patient outcomes as well as patient and doctor satisfaction are higher.(The studies that show this adjust for differences in patient population by adjusting for race, income and underlying health of the population.)
    Finally, Margait–I too would like to see people given the opportunity to buy into Medicare. That is what the public option is all about. But do you know what they would have to pay to cover the costs of Medicare today?
    If a public sector plan that covered people under 65 would cost $11,500, Medicare–which covers sicker, older peole– would cost a couple something closer to $15,000 or $16,000 a year–plus co-pays and deductibles. (That’s just a rough guess; I have seen some numbers and they are always much higher than you would suspect.) The only people who would be likely to buy into Medicare at those rates are quite affluent people in their 50s, who are pretty sick. And that would only make the pool more expensive.
    We need to bring down the cost of Medicare– by eliminating the unncessary treatments and realigning financial incentives so that doctors will collaborate, rather than working in seprate silos. Until we do this, it doesn’t make sense to invite more people to buy into Medicare.
    This is going to take time–time to educate the public that “less care can be better care” and time to use financial carrots and stocks to change the way hospitals set priorities and the way some physicians practice medicine (as Lone Rangers).

  18. “I don’t really understand why is it that we are so totally unable to figure out healthcare,”
    Follow the money.

  19. MD as HELL, I described the way other developed countries seem to make this work. I don’t really understand why is it that we are so totally unable to figure out healthcare, while others are finding ways to provide equitable solutions. Sure, they all have problems as well, but nobody seems to be bankrupting their country in an effort to provide medical care to their citizens.
    What is it that makes us different? History? Culture? Expectations? Plain bad management? Unusual lifestyle and genetic faults?
    This should not be a partisan issue and a little bit of good faith would probably go a long way.

  20. Margalit,
    You have just described an annuity. Not insurance. Just as you cannot borrow indefinitely because soon you will only be able to pay the interest, so to you cannot have the government borrow indefinitely to fund all this stuff because soon you will only be paying the interest. We are about to run out of “full faith and credit”. We are about to really go broke. And while Bush may have started it, when Obama got to the White Huse and found the credit card maxed out, he started kiting checks.
    So we had the tech bubble and the housing bubble with the subprime bubble, all bursting in air. When the government bubble bursts, there will be no social security and no Medicare and there will be a war with our creditors who want to be paid. They probably will not be so silent like the GM and Chrysler bond holders were when they got shafted. They are going to want the land we are on.

  21. Nate, I admit that I don’t have a thousand years experience in the insurance field, so the next question may sound dumb, but please try to answer it without the usual liberalism accusations.
    An average working person, with no unusual diseases and mishaps, buys health insurance from a private plan for about 40 years, paying the customary premiums. If I look at most people I know, their yearly medical expenses don’t come even close to their premiums, which is fine because, after all this is insurance for major disasters. It’s the same for car and home insurance.
    However, unlike car and home insurance, when that average person, who like most of us did not experience any major disaster, turns 65 and will most likely acquire some chronic and expensive disease, the buck is passed to the government Medicare program.
    So really, for most people, private payers just collect premiums in sunny days, but don’t have to pay out anything when the rainy days come.
    So either the private payers continue to insure folks after 65, with the same level of coverage and no ability to refuse anybody, and the government pays their premiums until they die, or everybody pays their healthy days premiums to Medicare from day one and the government provides cradle to grave coverage. Either way would be fine with me.
    The whole notion of insurance, the way I understand it, is that you pay when you don’t need it and build enough capital in there for when you do.
    I am aware of the medical loss ratios advertised by private payers and I’m pretty sure that you would come back saying that for cradle to grave coverage, the premiums would have to go much higher. Somehow I doubt that……

  22. “I’m beginning to think the real goal of Democrats is to Bankrupt the country”
    No Nate, Bush and the Republicans already did that.

  23. If your prescribing Rx I’ll assume your a doctor and not a drug dealer. To supposedly reach their desired price target congress is assumning a 21% cut to Physician fees effective 1/1/10. This is proposed every year and every year it is blocked, rightly for the most part in my opinion. This point seems a far more daming indictment of reform then any attack on PWC. There is less chance of a 21% cut then no behavior modification, why haven’t you spoken up about this aggregious failure of disclosure? 3200 is filled with such examples, all far worse then your gripes about PWC, why aren’t we dicussing those?

  24. If successful, some provisions of the bill are so far fethched even the authors don’t believe they would be successful. Why would a study include variables with little to no chance of happening? Unless of course your trying to cover up the true cost then you add unattainable provisions to get it passed, then acted shocked when they don’t materialize. Like the typical lefty I see you want to attack the study with vague vulgarities, which specific provisions of the bill do you think should have been included and if included would lead to a different projection?
    When they test drugs do they always include 6’2 134 pound women with shoulder length blond hair, a few freckles that prefer white wines over reds? Why not val she might have adverse drug reactions, do you see the error of your argument or do I need to mock it more? Do they test pouring the drug out of different color pill bottles, why not? Do they test different pill shapes and colors, if it is a blue pill I might mistake it for another and take it at the wrong time which would effect the dosage delivered which would effect the results.
    Insignificant or unlikely variables are excluded from every study, unlike liberals at least PWC was honest enough to put that in the study and tell you they where not including it, studies in favor of 3200 leave out material variables and pretend they don’t exist.
    If you doubt the PWC study how do you explain the fact the very results they project are happening in MA? If you took the time to speak to anyone that has been in insurance for more then a couple years they could share countless stories and examples of how this will turn out. This is not the first time this model has been tried, every time it has it blew up in complete failure. The absurdity of this argument is the fact the left even needs a study to be told how this will turn out. This is a common problem with “educated” people, to smart to see what is happening right in front of them unless someone writes it up and presents it to them.
    If you want to debate the merits of the study then get specific, what important factors where left out? To counter show one credible study that would meet your standards showing 3200 won’t bankrupt the country. PWC did a far more accurate and honest analysis then anything the left has pushed out there in support of 3200. Do you believe 3200 will have the outcome Obama promises? Do you think it will reduce cost, what studies do you have to back that belief up?
    Margalit in 44 years Medicare has never hit a cost estimate. For once why don’t you liberals fix it first then expand it; instead of always throwing more people into it and hoping it fixes itself? I still don’t see how your plan approaches logic, if these members are paying premiums sufficient to cover their claims as a pool the excessive administrative cost of Medicare means they would pay lower premiums under a private plan which begs the questions who is going to pay more to be in Medicare? If these members are going to be subsidized by Medicare that means you are adding to the 34 trillion underfunding already in place. Your either proposing people pay more for less or we bankrupt the country, you haven’t presented another alternative. Current Medicare beneficiaries are paying customers Part B and D has premium, A is paid by taxes, and C sometimes has a cost.

  25. Nate, these new Medicare members would be paying customers. Although I am very impressed with the “savings” realized by the private Medicare Advantage plans, I would rather put these folks in good old Medicare and work on fixing whatever issues it currently has.
    Not trying to bankrupt the whole country, just private insurance companies…….

  26. OK Nate, let’s discuss the merits of the PWC study
    1. The study analyzes the impact of 3 or 4 components of the bill on insurance premium. That’s the first problem. You cannot make a valid conculsion on the overall effect on premiums when you look at some provisions while ignoring others. The PWC admitted that some provisions would actually reduce premiums if successful.
    If a study on a new drug therapy (one drug or multi-drup regimen) analyzes the effect of some components of the drug on patients who exercise 3x/week, I couldn’t make any useful conclusion on whether to prescribe this therapy. No drug company would sponsor such a limited study and publish it, no credible medical journal would publish it, and pysicians and insurance companies would altogether ignore it.
    2. The study based its analysis on certain assumptions including full cost-shifting. The PWC admits that the tax on high-value insurance plans would alter behavior to decrease demand, yet this impact was not included in the analysis essentially assuming that absence of such impact. Even if you think those assumptions are plausible, which they’re not, you’d have to do an uncertainty analysis to account for them. Absent an uncertainty analysis, the validity of your results would be questionable.
    You present yourself as knowledgeable. You should know that omitting important factors (independent variables) and failing to account for uncertainties raises serious questions on the external as well as potentially the internal validity of your results.
    The PWC performed the analysis it was paid for, which is fine. But it does not provide credible information for any real policy analysis.

  27. Margalit maybe you missed the news but Medicare is already 34 trillion underfunded. Further Medicare loses more to waste and fraud then it cost to completely administer a private plan, even with all their evil profits and fat CEO salaries. Most of this crisis is the result of Medicare and Medicaid and you response is to add more people to those plans?
    It’s been proven in countless studies you could put people into private plans offering the same benefits as Medicare and save 2-3%.
    I’m beginning to think the real goal of Democrats is to Bankrupt the country, to what end I don’t know but your policies make zero financial sense, your trying to waste money.
    “Obama welshed on his bargain”
    Here the liberals go again,
    They promised providers Medicare would reimburse at a fair rate and even wrote it into the original law, until they repealed it;
    They promised it was an option for seniors until they started taking away their Social Security Benefits if they tried to drop out;
    They promised if passed grandma would never need to worry about a catastrophic hospitalization bankrupting her then passed a bill that capped that number of days at a couple months.
    Who in their right mind would believe any word out of a Democrats mouth after knowing the history, the lying SOBs will say anything.
    Peter that would be because after all the lies and obfuscation from Democrats and the press most American’s have no idea what the truth is and why things are the way they are. You’re a perfect example of someone completely ignorant of the facts, as such it is not really prudent to care what your opinion is. Would you hire a CPA that doesn’t know anything about taxes? Get treated by a doctor that never studied medicine? Go to a mechanic that doesn’t know how a car works? Why does your opinion matter Peter? Your to lazy to even learn the basic facts, what is your opinion worth when it is based on nothing?

  28. Frankly speaking, I don’t think that healthcare will be the main topic of next year’s elections. Democrats will be judged on economic recovery rather than anything else.

  29. I don’t think it’s an absolute given that Democrats will be clobbered next year, unless they continue on this cowardly path, but they will have to show something for all the circus taking place right now. So why wait until 2013? Do it now. Let certain people buy into Medicare in 2009. Get all Matt’s sickies and other “undesirables” go on Medicare. It will kick start something that cannot be reversed and it will look great in campaign ads.
    The rest will be up to the chief’s oratory talents, and they are ample.

  30. Actually, Matthew, underneath the venomous invective, you’ve grasped the essential problem: Obama welshed on his bargain w/ the insurers. He told them everyone would be inside the insurance envelope, and the Finance Bill only covered about half of them. Charlie’s scenario is exactly right: people will only buy insurance when they need it, and insurers will get clobbered by risk selection. You can blame them for calling Obama on not keeping his promise to them, but it’s not just politics. Obama promised to REDUCE a family’s health insurance premiums by $2500 a year, remember. To put it mildly, that ain’t going to happen.
    FURTHER, when Congress adds the deficit reduction cuts in Medicare to the “cuts” already proposed in Health Reform (really not cuts but a reallocation of subsidies for uninsured), private insurance premiums will, in fact, skyrocket. (Maybe they can outlaw risk shifting by all payor rate setting like the left wingers in the policy community are lobbyng for). Add to it the premium tax, reductions in cost sharing that Nate talks about, passthroughs of taxes on device manufacturers, and the real tax increase needed to fund this bill will come through premiums.
    So the “lying” PWC study is just ass covering. The insurers are being set up here.
    PLUS, you missed the fact that MORE than half of the increase in coverage (about 17 million) comes through a semi-funded expansion of Medicaid. So insurers will see: more Medicaid managed care (no margins), sharply reduced margins on Medicare Advantage, a whole bunch of adverse selection in their commercial insurance book and a straight jacket on underwriting. I certainly wouldn’t own their stock.
    The Democrats are going to get clobbered next year anyway, and lose their veto proof majority in the Senate and maybe thirty seats in the House. There won’t be enough votes to sustain a public option, even if one squeaks thru this time. It will be eviscerated only half way through the set-up period. It will just become a political football like MA was for the Republicans. This is a mess, dude. . .

  31. “Insurance companies have and are very capable of making money of sick people they just increase premiums to the level they need.”
    Yes and that’s why we have a problem. Insurance is not about fixing the system or providing healthcare, it’s about premium profits and returns. Have you asked yourself Nate why there isn’t a clamouring from the people for completely turning heathcare over to insurance companies? Where is the up swell of support for your “insurance will fix everything” views?

  32. if you want to debate the merits of the PWC study, what they might have missed, and how things might play out then lets have at it. Matt, Cohen, and the majority of the left aren’t doing that, they are calling PWC whores and dimissing the entire study becuase it was paid for by AHIP. These morons need called out on that. People need to know Cohen is a dumbass without working knowledge of what he speaks.
    If you want to have an inteligent debate Gary O I agree 100% that is what we need to be doing, that doesn’t mean I need to stand by and let Matt label them whores and Cohen bastardise the truth.
    FIrst off Gary well people don’t offset cost, this is a faulty argument of people that don’t understand how insurance works. Premium offsets cost, premium is determined by calculating your estimated claims then adding your fixed cost and margin. Insurance companies have and are very capable of making money of sick people they just increase premiums to the level they need. It’s actually very simple. When I land I’ll correct the rest

  33. Paul Krugman and Maggie Mahar are correct. AHIP took the final steps to self destruction late last week
    Matt- you helped too by especially exposing the lying Karen Ignagni
    A pubic option has been assured ironically by the tactics of its very staunchist opponents.
    Give evil people enough rope and they will ultimately hang themselves.
    Personally I cannot bring myself to say RIP.
    Dr. Rick Lippin
    Southampton,Pa

  34. Cutting through all of Nate’s usual name-calling and fact-free narrative, he fails to address the key assertion of this post: even if the PWC report were not tainted, it remains true that the Finance Committee bill imposes mandates on insurance companies that “are not matched by serious individual mandates, and there’s no employer mandate at all,” all of which would result in “hordes of sick people” buying insurance at regulated prices but without enough well people to offset costs. Nate has already agreed in a comment to a previous post that insurance companies do not have the ability to challenge the dominance of the hospitals to drive down costs. So, as this post posits, the insurance companies are going to be in real trouble with this bill, unless they support a public option into which they can dump some of the sick people.
    A similar conundrum occurred beginning in 1911 when states began adopting workers’ compensation laws. Legislators were worried that employers, who were being mandated to cover injured employees for medical and disability payments, would not be able to buy insurance, especially for high risk occupations. The solution was the establishment of state-run insurance companies. Many of these still exist. In California, for example, State Compensation Fund innovatively competes with private companies and occupies about 25% of the market. Just as in 1911, the public is clamoring for reform and finds legislative inaction unacceptable. Health care in this country will not reform itself. The failure of health care is, in many ways, the failure of health insurance.

  35. to be fair you are way off base and Cohen is an idiot that doesn’t understand what insurance is.
    How does a plan that is required by law to have an out of pocket below a theshhold and no lifetime maximum ever get less expensive then existing plans? It only takes grade school math to know raising someone from a $250 deductible to $1000 will not offset lowering their annual OOP from $10,000 to $4000 or moving their lifetime maximum from 1,000,000 to unlimited. Basic math….never a liberals strong suit. The new benefit mandates guarantee more expensive plans, no way around it.
    The way the excise tax would lower premium is by moving payment from the insuerer to the insured. With low OOP and no LTM all potential savings is done.
    People that know anything about insurance know 20% of your group account for 80% of your expenses, to borrow a slogan from elections past, ITS THE LARGE CLAIMS STUPID. And Democrats in all their wisdom just blew up the damn on managing large claims, between this, GINA, ADA, and EEOC your going to see large claim inflation like you never dreamt possible.
    So Cohen if your reading this, yes it will have no affect but to raise prices.
    The reason PWC doesn’t need to explain why they ignore the Medicare cost shift is becuase there is no question it is true, ask any hospital administrator, large PPO or insurer, self funded plan, or bill negiotator. Do we need to debate the roundness of the earth with Cohen, that is the problem debaing people with no knowledge of what they speak, they don’t even have the basic comprehension to carry an argument.
    PWC not known for modeling, Cohen has no sunk to complete dumbass level. In the industry of people that actually do healthcare for a living, unlike Lewn which is a policical arm with minimal knowledge of healthcare PWC has an excellent reputation for this work.
    Any first year intern at PWC could take Cohen or you to school on insurance and the money flow behind it so you just toss out some name calling and skip over the argument of facts. NO ONE ON THE LEFT has disproven or even offered a solid argument against any piece of the PWC study. Just becuase you don’t know the facts doesn’t mean they aren’t true.
    From Pilgrim and the other failed cases of guarantee issue we know where this leads, times like this is when a liberal public education comes in handy, can’t be afraid of the history they never taught you

  36. Senators who hate the idea of a public option for health insurance didn’t have any problem voting for a public option to protect the profits of insurance companies against too many flood claims. The government covers and subsidizes insurance for people living in the middle of a high risk flood region. Opponents of socialized insurance didn’t find any arguments for voting for socialized insurance when that insurance is not for the wellbeing of people but of property and insurance companies.

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