The Business of Health Care

Employers and Health Reform

“Change, before you have to…” Jack Welch

We live in a society that loathes uncertainty – particularly the unintended consequences that sometimes result from a catastrophic event or in the case of PPACA, landmark legislation. Wall Street and the private sector crave predictability and find it difficult in uncertain times to coax capital off the sidelines when the overhang of legislation or geopolitical unrest creates the potential for greater risk. Despite our best energies around forecasting and planning, some consequences, particularly unintended ones – only reveal themselves in time.

In the last decade, employers have endured an inflationary period of rising healthcare costs brought on by a host of social, political, economic and organizational failures. There was and remains great anticipation and trepidation as Congress continues to contour the new rules of the road for this next generation’s healthcare system. Optimists believe that reform is both a way forward and a way out of a mounting public debt crisis and a bypass for an economy whose arteries are clogged by the high cost of medical waste, fraud and abuse.  Cynics argue reform is merely a Trojan Horse measure that offers an open invitation for employers to drop coverage and for commercial insurers to “hang themselves with their own rope” as costs continue to spiral out of control — leading to an inevitable government takeover of healthcare.

Meanwhile, leading economic indicators are flashing crimson warning signs as recent stop-gap stimulus wears off and long overdue private/public sector deleveraging results in reduced corporate hiring, lower consumer confidence and increased rates of savings.  The symptoms of a prolonged economic malaise can be felt in unemployment stubbornly lingering around 9.2% and a stagnating US economy that is struggling to come to grips with the rising cost of entitlement programs.  Across the Atlantic, the Euro-Zone is teetering as Italy and Spain (which represent more credit exposure than Greece, Portugal and Ireland combined) stumble toward default.  Despite these substantial head winds, US healthcare reform is forging ahead – – right into the teeth of the storm.

Closer to home, states have begun to debate and propose legislative amendments to their own versions of reform as they attempt to reconcile a declining tax base with the soaring obligations of Medicaid and collectively bargained pension and long term care.  Should Congress finally agree to allow an estimated 28% of fee reductions in Medicare provider reimbursement to become law, the private sector could see as much as a 400bps increase in core medical trends resulting from cost shifting – pushing trends back into the mid-teens. Hospital systems, providers and healthcare agencies are bracing for cuts and potentially looking to the private sector as a source for more dollars.  All of this is building at a time when certain industries are nearing a “point of failure” – – an inflection point where healthcare spend as a percentage of revenues and operating profit will either consume earnings or completely erode employee take home pay.

Many are looking ahead to 2012 as a “burning bush” year – a seminal presidential and Congressional election where political results will help clarify the direction of reform – pivoting toward the reinforcement of employer sponsored healthcare as catalyst for market based reforms or merely a cementing of the incentives that seem to encourage the deconstruction of employer based coverage.  With 33 Democratic Senate seats up for reelection and 10 GOP spots up for grabs, the entire composition of our government could change – or perhaps not.  In the interim, the fiscal year 2012 will continue to show 44 states projecting budget deficits totaling $ 112B.

A recent controversial McKinsey study forecasted that as many as 30% of employers or 54m individuals covered under private healthcare would be “dumped” into public exchanges as of 2014.  This number is in sharp contrast to the 12.6mm assumed by the CBO (approximately 7% of 180mm privately covered individuals.)  The influx of 41.4mm unbudgeted insureds – all eligible for federal subsidies of as much as $5,000 – would upend the initial CBO estimate of $ 140B deficit reduction over 10 years and result in an increase in public debt in just six short years.  The ensuing debt arising out of PPACA over the periods 2020 to 2030 could easily eclipse $ 1T of additional public debt.

Any economist can confirm that all unsustainable trends eventually end.  Rising premiums, public to private cost shifting, perverse and unaligned incentives for care, rationing and a host of other stop-gap issues are all doomed to be replaced by a system that either drives efficiency through market reform or through the single payer procurement of healthcare.  It will take at least five more years and three election cycles for this marine layer of debate to lift.  Unlike 1996, there is graveyard silence arising from the private sector.  Employers seem to be stuck in one of the several stages – – often attributable to the dead and dying.

Denial — “This can’t be happening, not to me.” One could argue that this generation of business leaders has drawn the short straw when confronting the decisions we will need to make to keep our businesses viable in a period of sustained high unemployment and economic stagnation.  Many larger employers are nervous regarding reform but somehow feel that reform is more likely to happen to other people – smaller employers and the individual marketplace.

These firms do not want to believe that the myriad unintended consequences associated with reform could impact their bottom line. Denial has been a principle ingredient and willing accomplice to healthcare cost inflation in the last decade.  For many employers, the inability to confront the fact that many of their own business practices – insistence on open access PPO plans, less medical oversight and utilization review, limited appetite for employee disruption, inability to dedicate the time or resources to assess the health risks embedded within their own population of employees – – has them resigned them to a cycle where premiums are increasing faster than wages and corporate earnings. While costs continue to rise, many employers have simply focused on stop-gap year over year cost shifting.  Others prefer to abdicate to commercial insurers who have failed to drive affordability and improved access. It comes down to believing you can make a difference and a willingness to confront the hard choices – choices that could fundamentally drive market-based reforms.

Anger — Many find themselves simmering with resentment, hunting for villains whose feet they would seek to lay all blame: “It’s those damn insurance companies!” “It’s that Socialist in the White House!”” It’s the failure of regulators to do their job in managing the complexities of the healthcare delivery system. “It’s the big hospitals!” “It’s the drug companies!” It’s the rich and their lack of empathy” “It’s the poor and their lack of personal responsibility” The list of culprits could fill a thousand postal office walls.

A polarized Congress, pariah hungry media and a workforce unwilling to understand that access does not equal quality means that change cannot happen without some noses getting out of joint.  Yet, we understand clearly that if we want to reduce our exposure to the coming storm of public to private cost shifting, we must engage and move on from our own anger.  As 35m additional Baby Boomers increase the double the ranks of Medicare to 70mm by 2030, total health spending will near 30% of the GDP and Medicare costs are expected to eclipse $ 32,000 per enrollee up from $12,000 in 2010.  Facing the magnitude of these suffocating entitlement costs, we will either embrace private sector, market-based reforms that fundamentally realign the current delivery system or we will default into a more regulated, lowest common denominator system that will rely on rationed access and reimbursement as a means of controlling cost.

Bargaining —”I’ll do anything for a few more years.” The third stage involves the hope for postponement.   The lion’s share of stakeholders in healthcare can be found milling in this no man’s land of indecision.  While hope is not a strategy, a surprising number of firms are clinging to the dream of “repeal and replace” legislation. Others are merely expecting Washington to do what it does best – prolong debate and delay implementation long enough to afford them enough altitude to pass the problem on to someone else. The tea leaves do not look promising for fundamental legislative intervention that would disrupt the momentum of reform.  Repeal is unlikely. Employers must understand that 2014 will require certain decisions.  Fundamentally employers will have one of four choices:

Take the Money And Run – Do I drop coverage, pay the penalties associated with moving employees into the public exchange and pocket the difference?

Drop Them But Ensure A Safe Landing – Do I drop coverage, grossing all employees up to my current level of subsidization so all might afford coverage in the public exchanges?

Create a Consumer Plan of Your Own – Do I move to a private exchange or defined contribution approach to financing my medical benefits to cap expenditures but remain involved as a sponsor of my benefit programs?

Control Your Own Destiny – Do I continue to offer group based private insurance believing that employer sponsored health coverage is more likely to experience lower trends if properly managed and that medical coverage remains a fundamental part of my company’s ability to attract and retain employees.

Depression — “What’s the point?” The problems we face as a nation and in business can feel overwhelming.  We have the misfortune of having to confront $38T in underfunded Medicare liabilities, $ 14T in public debt, and a potential double dip economic recession arising out of any number of black swan events – – credit defaults abroad, domestic hyper-inflation or a slowing of Chinese GDP.  It seems inevitable that we must head into a period of profound austerity.  Facing the potential of sustained uncertainty can burden any decision maker to the point of inaction.  While some period of reflection is healthy to any organization, people must take a position, plan around the certainty of change, grieve over the passing of an epoch and move forward with a renewed conviction to address the challenges that lay ahead.

Corporate depression may manifest itself in a lack of willingness to engage in the discussions or conduct financial modeling required to understand what scenarios will best benefit your organization.  It is a strange period where we express grief knowing that the traditional employer/employee social contract has changed forever in a hot, crowded, global marketplace.

The sense of urgency to explore alternatives to traditional employer sponsored coverage will led by retail, agriculture and hospitality while professional services, technology and collectively bargained public sector plans may feel more obligated to remain on a course of employer sponsored coverage.  Planning prior to 2014 is essential to be position a firm to react to opportunities that may present themselves.  Should a key industry competitor choose to discontinue coverage and use operating overhead reductions to drive down prices, what will you do?  Many have promised to not be first but not be third in line to change.

Acceptance — “I can’t fight it, so I better prepare for the inevitable.”  2014 will mark the beginning of a movement toward or away from employer-sponsored healthcare.  It is more likely that most will be carefully weighing election results, the first two years of public exchange performance and the actions of their competitors to determine a course forward.

2014 is forcing discussions over the will of the private sector to drive market-based reforms, and the review of decades-old beliefs regarding direct and indirect compensation plans.  Employers that have navigated these phases of change and are now aggressively accepting the new normal of healthcare and will most likely end up as self insured, in touch and aware of their own population risks, directing patients to primary care based system that reward providers based on quality and efficiency and are committed to driving healthier behaviors and personal compliance with to reduce chronic illness.  Employers will realize returns on these efforts as aggressively managed plans will likely experience lower single digit medical trends.  These firms will be reticent to abdicate management of healthcare costs to a public exchange but instead focus on educating and activating their workforce to the personal and corporate dividends of change.

Some employers may convert to defined contribution plan designs such as cafeteria plans to allow for a more diversified workforce to allocate finite dollars to purchase coverage that make most sense for their unique needs.  Health benefits may become part of an overall defined contribution approach to retirement and benefit planning – affording each employee to allocate their dollars to their circumstances and in doing so, accept their circumstances more freely because they have choice in where they spend their dollars.

Reform is a process and like many of the vagaries in life, every person and each business will react differently to the stimulus of change.  Every problem is a disguised opportunity and with it, comes the added dividend of using change as a catalyst for reassessing your strategies to attract and retain employees. It’s about making decisions by commission rather than omission.  And, the sooner an employer navigates these stages of change, the more likely it is that healthcare reform will happen for them – instead of happening to them.

Michael Turpin is frequent speaker, writer and practicing benefits consultant across a 27 year career that spanned assignments in the US and in Europe. He served as the northeast regional CEO for United Healthcare and Oxford Health from 2005-2008 and is currently Executive Vice President for Benefits for the New York based broker, USI insurance Services. He writes at Usturpin’s Blog.

70 replies »

  1. Margalit and Nate –

    Germany is the country that lets the wealthy opt out of the public system and roughly 10% or a bit less of the population chooses to do so.

    I would love to be able to buy a $10,000 or even a $20,000 deductible policy despite my cardiac issues as long as I thought that the price was sufficiently lower than a more traditional policy to make it worth my while to assume the additional financial risk. I would also expect to be eligible to pay the insurer’s contract reimbursement rate for any services, tests or procedures that fell within the deductible. That said, from a societal point of view, I think it would be reasonable to require me to demonstrate that I have sufficient financial resources to assume that risk just as I would need to demonstrate a certain (high) level of net worth before being allowed to invest in a hedge fund.

    At the other end of the spectrum, I think many, if not most, advocates for the poor think they should have no deductibles and no co-pays for any services they might need because they’re too poor to afford the co-pay and might be inclined to avoid necessary care as well as unnecessary care. At the same time, a recent letter to the editor of the NY Times from a pediatric ER doc with inner city hospital experience said she saw many instances where poor people thought nothing of calling an ambulance for a diaper rash. Also, 30% of the time they don’t show up for appointments which then makes scheduling difficult. While I can empathize with the poor and the often stressful and chaotic lives they lead, I think many of them could make more of an effort to uphold their end of the social contract than they do.

  2. You should not. I don’t remember which European country it is (Barry should know), but I believe they let rich people opt out of the national program (upside down means testing of sorts).

  3. I have numerous professionals asking for higher dollar HSAs and in most parts of the country you can’t buy anything over $5000, soon to be $2500. If a lawyer for example wants to buy a $10,000 deductible policy why should we stop them?

  4. Whats an unreasonable expectation? To not want to wait hours or months would seem fair and reasonable. Not wanting to wait and not wanting to pay for the capacity now would be unreasonable. I think our private insured population pays more then enough for our expectations. I would question our Medicare and Medicaid beneficiares and rather their expectartions are reasonable for what they contributed. Obviously I don’t think they are.

  5. “On the liberal side, there is a concern that the 25% for whom these plans are not suitable, is the same sicker and poorer 25% that we are trying to help.”

    Honest question but this was discussed in the past, the sickest and poorest people have the most to gain from HSAs, the much lower out of pocket means they are incurring substantially less cost under an HSA then they would under a normal plan.

    “which means that HSAs require that the individual assume some level of risk.”

    What is the risk they are assuming, if they are really sick they pay less, if they are really healthy they have money in the bank at the end for future cost. Only people that don’t come out ahead are the small bank of people that have moderate claims that fall under the deductible year after year. This would be someone that has lets say $3000 of claims every year. They would pay $2500 every year. Under a $500 80/20 plan they would be paying $1000 a year. We are talking $1500 annual difference for a small group of people, its not exactly a large risk.

    Boy this is going to come back to bite me…..

    “including you, sometimes make false statements due to either lack of knowledge or misunderstanding.”

    I make very few of these, if I lack the knowledge I don’t comment or find the facts then comment, somerthing many people would be well advised to learn to do. With the internet there is no excuse for the majority of false statements made. 2-3 seconds people could have the correct information. Which goes back to something I use to say, if someone doesn’t care enough about their comment to spend 3 seconds getting it right why should we?

    I love arguing with you, I even love Maggie’s post becuase it motivates me to research and prove how full of it she is. Its very easy to get lazy in our beliefs, like you say if they aren’t challenged we never evaluate them and reconsider them. Be it factual or partisian, for example the more i discuss politics the more I can’t stand republicans.

    Don’t know about you but this was very refreshing, it would get old if it was every day but its cleansing to blow things up now and then

    pcp’s dig at my editing on the other hand was just hurtful and mean spirited

  6. “I’ll argue government systems (not U.S.) are actually more efficient”

    How are you measuring efficency? Is it like Price is right your not allowed to go over? Most government systems under deliver, see NHS for all its examples. if they deliver 30% less care that is needed and the US delivers 30% more care then needed is one more efficent then the other?

  7. Come on Nate, if you take away their talking points they won’t have any thing to talk about any more! It’s a condition/response thing – when you hear ____ you need to say ____. HSA is one of the trigger words – it doesn’t matter what you say after uttering those three letters, the liberal brain goes into talking point mode and meaningful discussion ceases.
    It is not possible to have an intelligent discussion with someone who believes in fairness of outcome. They believe with all their heart that it is possible to have a good and fair outcome for everyone. It doesn’t faze them to point out that every time this has been tried it has resulted in a mediocre to poor outcome for all instead. If you say, “Government healthcare necessarily results in rationing” they will reply, “But our current system results in rationing also.” They cannot accept a system in which the poor have government rationing, while the wealthy have rationing based only on their ability to pay. They believe that what is accessible to the rich should be available to the poor and so they design a system they believe will give great care to all but that instead results in government rationing for all (i.e. the end result if Obamacare is allowed to stand). Revamping medicaid to allow for co-pays and deductibles would have been much more affordable (or do they really not believe that government overhead is less – they must not as they want taxpayers to subsidize the purchase of private insurance instead). And true insurance reform – why is it I can buy a fairly affordable individual policy, but when I try to get insurance for my small business, suddenly my individual premiums go through the roof. Obamacare might seem like a blessing to a small business like mine, but I am certain I will be forced to purchase an insurance policy that is more expensive than what I want or need. What I want is an HSA, and I want to help fund one for my employees, but that is currently very difficult to set up, and only gets more difficult after 2014.

  8. “If the “collective”, as you put it, in a democracy decides that the level of funding is inadequate then they can vote to spend more, and vote for higher taxes as well, or as is sometimes the case, more debt.”

    Peter –

    While I can’t speak for other countries, in the U.S. there is a severe disconnect between the cost of services people want and expect from government and the taxes they are willing to pay to fund them. By people, I mean primarily the broad middle class.

    The UK periodically claims to put more money into its healthcare system but not a lot. Canadians are willing to wait longer than we are for imaging or elective surgery. Japanese are willing to wait several hours in the waiting room of the more popular doctors for a visit that lasts no more than five minutes. As I read more and more comments from doctors, I conclude that patient expectations in the U.S. are the most unreasonable in the world by far. It’s not just defensive medicine that drives three times more imaging per 100,000 people in the U.S. vs. Western Europe. Many patients want and even demand these tests and they’re not happy if they don’t get them.

  9. Nate, taking my own medicine as directed, here is my reply.

    The argument for and against HSA is based on that 75% you quote. On the liberal side, there is a concern that the 25% for whom these plans are not suitable, is the same sicker and poorer 25% that we are trying to help. Furthermore, whether one falls in the 75% or 25% can be dependent on sheer luck, which means that HSAs require that the individual assume some level of risk. You may be OK with that. Generally speaking poor and sick people are not well suited to take financial risk.

    Most people, including myself and including you, sometimes make false statements due to either lack of knowledge or misunderstanding. This is a very complex subject. Instead of assuming that folks just lie, which is rather simplistic, why not explain things again dispensing with the preamble? You will advance your opinions much better this way. I usually disregard your jabs and concentrate on the content and several times have learned new things and even changed my opinion. Most people are thin skinned and cannot get past the abrasive introduction.

    There will always be people trying to advance politics. The best way to counteract that is to steer away from the politics and bring the debate back to solutions. However, you need to understand that we all come from different starting points. Holding certain views about the world (i.e. liberal, conservative) does not necessarily correlate with party politics. It does correlate with defining goals and constraining solutions. I personally love the fact that we disagree and that you bring to table a perspective that I tend to ignore or at least disregard with the obvious result of making my views less rational. I hope you can find similar utility in my arguments.

  10. Margalit –

    My knowledge of the Swiss healthcare system is limited and incomplete to put it mildly. Most of what I know came from an article published in Health Affairs last summer.

    Regarding rationing, I don’t know what the wait times are for elective procedures and imaging as compared to the U.S. I’m also not sure how they determine what services to cover and not cover. I’m pretty sure that they don’t use QALY metrics but I don’t know how drug prices are determined or whether or not a particular drug will be on the formulary and to what extent, if any, formularies vary among insurers.

    I do know that there is no public option or health plan in Switzerland, even for the elderly. I know that they have less obesity and less poverty than the U.S. does. I know that they pay considerably less for drugs and, probably, per procedure than we do in the U.S. but I don’t know why. I suspect but don’t know for sure that defensive medicine is less of an issue in Switzerland and I suspect, but don’t know for sure, that they deal with end of life care more sensibly than we do.

    From my trip there last summer, I can tell you that it’s a very expensive country for just about everything including meals in ordinary restaurants and items sold in supermarkets. Gasoline is far more expensive than in the U.S. Housing is expensive as well. For some reason, though, healthcare is cheaper but their fully private system is the 2nd most expensive in the world as a percentage of GDP after the U.S. Since last year, the Swiss franc appreciated more than 20% against the dollar so now it’s an even more expensive country, at least for Americans to visit or do business there.

  11. “So, the collective wisdom might decide that the people in a particular country should not spend more than, say, 9% to 11% of GDP for healthcare. That number has nothing to do with the actual health needs or wants of the population.”

    Barry, I guess the U.S. 17.9%(2009) would then cover the actual needs or wants of the population, since you say government systems chock utilization and regulate prices while private systems provide to all that want it? I’ll argue government systems (not U.S.) are actually more efficient (they have to be) since they have less capacity to hide inefficiencies in billings and un/under insurance. If the “collective”, as you put it, in a democracy decides that the level of funding is inadequate then they can vote to spend more, and vote for higher taxes as well, or as is sometimes the case, more debt. But we seem to have the worst of every system, high prices, less than universal access and high debt – welcome to the better system?

  12. then what purpose does clearly inaccurate and misleading arguments lend to this solution finding?

    If we are having a discussion about healthplans and someone for months or even years continues to repeat the claim that HSAs are terrible health plans becuase all they do is shift cost to the employee and everytime people thoughtfully reply no HSAs actually reduce liability for 75% of people is the person repeating this incorrect argument not just as bad?

    At what point is a liar a liar and called as such?

    Making astuff up is not contributing to a solution or conversation it is degrading to them. Lets take this comment of yours;

    “I can assure you Nate that an universal system will not be paying for massage therapy, so let’s just stay with the subject.

    How can you assure us universal coverage wont cover massage therapy when a handful of states already require such coverage. If Universal coverage was enacted via state enchanges then it would already require such coverage.

    Obviously you can’t assure us of this and most likly were not aware that states already mandate this coverage. What benefit did your obviously false statement lend to finding a solution? Finding a solution should probably start with why massage therapy is a mandated benefit, far from fostering this movement to a solution you try to kill it;

    “so let’s just stay with the subject.”

    I was trying to ask if I may create my own fantasy future, since you seem to assert the right to do so.”

    These comments seem neither respectful, to the benefit of solution finding, or well thought out since they were clearly wrong.

    Which none of that is a big deal until the hypocrisy starts. Maggie calling everyone on the right fear mongers, sexist, racist, and everything else isn’t a problem until she want’s to start censoring people for doing the same thing. You don’t care about factual debate and furthering the discovery of a solution, you and Peter throw out some of the craziest BS on THCB.

    If you want productive conversation the first step would be to stop the private sector demigoding, start discussing real numebrs and fact not DNC talking points.

    Think how many bytes have been spent on;
    Insurance companies make 30% profits

    50% of all bankrupties are from medical bills

    Medicare has 3% admin compared to 30% for private insurance so moving everyone to medicare would save money

    only 42% of doctors are sued so medical malpractice is no big deal

    PPACA will save money

    You can keep your insurance

    The entire debate has never been about solutions, its always been about politics. Since Medicare the politics have always trumped the solution and thus nothing has been solved. You claim you want solutions but offer nothing but politics…..

  13. “That being said how do you counter politically partisan attacks without also resorting to political partisian attacks? And whats wrong with paritisan attacks, are you saying there is never a place for them?”

    You counter them with respectful, well thought out and well explained logic and facts.
    There is never a place for blind, rabid partisan attacks. They contribute nothing to the conversation and even less to finding a solution.

  14. “It can take the form of extended wait times for non-life threatening elective procedures or QALY metrics to determine what will be covered and paid for or explicit age based rationing or some combination of all of those.”

    Is this the case in Switzerland, Barry?

  15. I also don’t get the benefit of comment editing and protection from the higher powers. That being said how do you counter politically partisan attacks without also resorting to political partisian attacks? And whats wrong with paritisan attacks, are you saying there is never a place for them?

    To make the argument clear lets take this overseas to Europe and assume I was making such attacks on communism. Most people agree communism is a failed ideology that has killed millions. How do you discredit and destroy communism without being partisian?

    Bring that back here, how do you show Liberalism is a failure of an idelogy and should be discredited without attacking liberalism? Any effort to diminish it is obviosuly partisan.

    No in regards to the ad hominem attacks issue. I don’t see this. First where is the personal attack? I have never meet a liberal that took it as an insult to be loabeled a flaming liberal. Next part of an ad hominem attack is to discredit something he said, Peter did take a fraction of a benefit plan, the deductible, and ignore the rest, the co-insurance, to make an argument. How is this an ad hominem attack?

    If I had said you can’t trust Peter he’s a commi that would be an ad hominem attack.

    What’s wrong with my editing i missed one capital letter for co-pay and a semi colon between pocket and but. By internet standards thats a solid A-

  16. Nate:

    Do you realize you’re the mirror image of Ms. Mahar, i.e., a complete inability to edit a post combined with a love of politically partisan ad hominem attacks?

  17. I get it Peter your a flaming liberal that cherry picks facts and misuses data to make up arguments.

    Why don’t we give everyone a zero dollar deductible plan, it will have 80% co-insurance and no limit on out of pocket but according to Peter’s logic would be the best healthplan possible. co-pays, co-insurance none of that matters the lower the deductible the better.

    We need a special plan for special people like peter no deductible and 100% member co-insurance, watching his head spin as he tries to figure out why he owes so much will be priceless.

  18. “HSAs as constructed use HDHPs, high(er) deductibles are less coverage”

    Ok Peter then what is lower out of pocket? If a $250 deductible plan has $5000 OOP max and a $2500 HSA has $2500 OOP max your claiming that is less coverage?

  19. Peter –

    First, for the record, I have long advocated taxing the value of employer provided health insurance as ordinary income though I would reduce marginal income tax rates and increase the standard deduction to ensure that the government does not collect any more net revenue than it does now.

    Second, in Switzerland, insurers, all of which are non-profit, negotiate with providers as a group in each canton so that every insurer pays the same price for a given service, test or procedure in that canton.

    It may surprise you to learn that I do think that a public monopoly over health insurance may result in a less expensive healthcare system but not because the public sector is more efficient than the private sector or better negotiators with providers. It would achieve lower cost through the use of dictated prices and a collective political decision with respect to how much the society is prepared spend for healthcare. So, the collective wisdom might decide that the people in a particular country should not spend more than, say, 9% to 11% of GDP for healthcare. That number has nothing to do with the actual health needs or wants of the population. Since healthcare needs and wants are likely to cost more than the political process will allow, they devise a system that imposes rationing. It can take the form of extended wait times for non-life threatening elective procedures or QALY metrics to determine what will be covered and paid for or explicit age based rationing or some combination of all of those. In the end, though, since the quality of healthcare that one has access to is a relatively small factor in determining life expectancy, the approach is acceptable to many. Personal behavior, genetics, socioeconomic status and environmental factors are all more important than access to quality healthcare when it comes to life expectancy.

    While I think there is plenty that we in the U.S. can do to reduce healthcare costs from tort reform to price and quality transparency to tiered insurance networks, moving away from fee for service payment in favor of capitation, bundled pricing for surgical procedures, shared risk and shared savings, and a more sensible approach to end of life care, I believe the U.S. healthcare system will always be the world’s most expensive because of our culture and our values.

  20. “HSAs are different coverage and majority of the time they are more coverage.”

    HSAs as constructed use HDHPs, high(er) deductibles are less coverage, or “different” in your sales pitch and benefit higher income insured who have a better capacity to weather a high deductible event.

    “Hispanic and African American Adults Are Uninsured at Rates One-and-a Half to Three Times Higher Than White Adults”

    Gee Nate, why would they cost us more, we insure them less.

    “Dying For Basic Care
    For Blacks, Poor Health Care Access Cost 900,000 Lives”


  21. “HSAs are less coverage. Anyone can cut patient benefits to achieve less cost.”

    No Ezra, or Peter, or whichever illiterate liberal is repeating this BS lie. HSAs are different coverage and majority of the time they are more coverage. First off, while the deductible might be higher, 90% of the time the maximum out of pocket is much lower. They are providing greater coverage then the plan they replaced. Up until PPACA they also covered wellness at a higher rate and greater dollar amount then non HSA plans.

    Why can’t you liberals pick up a policy and learn the facts before you go running your mouths? You can find thousands of them online, are you really incapable of reading to yourself?

  22. Tell me about african american culture Nate.

    Except for African Americans 20-24 years old, African American women are more likely than White women to get breast cancer before age 40.

    African American women are more likely than White women to die from breast cancer.

    New cases of certain cancers occur more often in African American women, including colorectal cancer, pancreatic cancer, and lung cancer.

    The death rate from colorectal cancer and pancreatic cancer is higher among African American women than other racial groups.

    In 2001, African American women were 2.6 times as likely to have been diagnosed with stomach cancer, and they were 2.3 times as likely to die from stomach cancer, compared to non-Hispanic white women.

    African Americans are 29 percent more likely to die from heart disease than non-Hispanic whites. This occurs despite the fact that 9.6 percent of African Americans have heart disease vs. 12.2 percent of whites. Some 26.7 percent of African Americans have hypertension compared to 20.1 percent of whites.

    3.2 million, or 13.3 percent of all non-Hispanic blacks aged 20 years or older have diabetes. After adjusting for population age differences, non-Hispanic blacks are 1.8 times as likely to have diabetes as non-Hispanic whites.

    Although African Americans make up only 13 percent of the total U.S. population, they accounted for 50 percent of HIV/AIDS cases in 2003.

    African American females had more than 25 times the AIDS rate of non-Hispanic white females.

    In 2002, African Americans aged 65 and older were 30 percent less likely to have received the influenza (flu) shot in the past 12 months, compared to non-Hispanic whites of the same age group.

    In 2002, African American adults aged 65 and older were 40 percent less likely to have ever received the pneumonia shot, compared to non-Hispanic white adults of the same age group.

    Although African American children aged 19 to 35 months had comparable rates of immunization for hepatitis, influenza, measles, mumps, rubella ( MMR ) , and polio, they were slightly less likely to be fully immunized, when compared to non-Hispanic white children.

    In the United States, prematurity/low birthweight is the second leading cause of all infant deaths (during the first year of life).

    During 2000-2002 (average) in the United States, preterm birth rates were highest for black infants (17.6 percent), followed by Native Americans American Indians (12.9 percent), Hispanics (11.4 percent), whites (10.7 percent) and Asians (10.2 percent).

    In 2002, African Americans had 2.4 times the infant mortality rate of non-Hispanic whites.

    African American infants were over 4 times as likely to die from causes related to low birthweight, compared to non-Hispanic white infants.

    Lupus is more common in African American women and other minorities than in White women.

    The Centers for Disease Control and Prevention (CDC) reports that between 1979 and 1998, 70 percent more African American women (between 45 and 65 years old) died from systemic lupus erythematosus (SLE).

    Being overweight or obese increases your risk of heart disease, type 2 diabetes, high blood pressure, stroke, breathing problems, arthritis, gallbladder disease, sleep apnea (breathing problems while sleeping), osteoarthritis and some cancers. Fifty percent of adult African American women are obese.

    African American women were 1.6 times as likely as non-Hispanic white women to be obese.

    Would you like more Peter?

  23. “Why would we pay taxes on a healthplan?”

    Why would you pay taxes for a company supplied vehicle you use for personal use? Why would you pay taxes on a company bonus? If you want tax free employer healthcare then let all of us deduct healthcare from our taxes – not just the actual amount spent for care that’s above the wage threshold.

    “Your argument for public control is education?”

    Show me privately run education with a better track record and less cost in inner city (poor) schools. Show me a charter school that does better teaching inner city kids with the same burden as public schools; take all comers (not just cherry pick or lottery), large student/teacher ratio, unmotivated parents, dysfunctional families, learning disabilities, dilapidated facilities, hunger, (african americans?) etc. What does your little mouse tell you about “adjusting for hundreds of variables” in education?

    HSAs are less coverage. Anyone can cut patient benefits to achieve less cost.

    “So your a fan of shutting down public schools and going 100% voucher?”

    Only you Nate would extrapolate that conclusion from my post.

    “Why don’t you introduce a 17% african american culture into the swizz system and see how that changes things.”

    Tell me about african american culture Nate.

  24. “the Swiss pay quite a bit less than we do, but more than virtually everybody else. And that’s despite the fact that everybody else has lower, rather than higher, out-of-pocket payments. This seems to be evidence that substantially public systems hold down costs much better than substantially private systems, like the Swiss system, or more starkly, the American system.” Ezra Klein.”

    The mouse outside my office says swizz cheese is more expensive then american so obviously America must be more efficent. Granted the mouse is 100 times smarter then Ezra Klien, the same “expert” who called HSAs sexist, but he is still a mouse, why would you listen to him? Ezra doesn’t have the data, experience or inteligence to even start comparing the two systems. Why don’t you introduce a 17% african american culture into the swizz system and see how that changes things. Or better yet 20 million illiegal south americans.

    You can’t compare the cost of our system to others without adjusting for hundreds of variables you lazy liberals have never bothered to adjust for. Until you do the math right your just blowing hot air….and insutling HSAs as sexist, whats with you people and your cheap attacks?

    “tax free to you”

    Why would we pay taxes on a healthplan? I now need to pay your liberal government for the right to be healthy? Anything you liberals wont tax?

    “but if like education, you view healthcare as a basic necessity that is key to an even chance at success, then private sector control of healthcare should be as little as possible.”

    Your argument for public control is education? The massivly failed educztion system, thats your best argument? Most inner city schools don’t even graduate 50% of their students, thats the success we should model our healthcare after?

    “I would agree with government hands off of healthcare if, as with most other products and services, you could access and choose less expensive options (no Nate, not less coverage) that could get you to the same place and participate evenly in the economy.”

    So your a fan of shutting down public schools and going 100% voucher?

  25. “When it comes to healthcare, less government is better though some,”

    “…. the Swiss pay quite a bit less than we do, but more than virtually everybody else. And that’s despite the fact that everybody else has lower, rather than higher, out-of-pocket payments. This seems to be evidence that substantially public systems hold down costs much better than substantially private systems, like the Swiss system, or more starkly, the American system.” Ezra Klein.

    Barry, if like yourself, you are getting a great (maybe even Cadillac) healthcare plan paid by your company and tax free to you, then it’s tough to contemplate how the government could do better. But your Swiss example shows that the more the private sector controls healthcare the higher the costs – counter intuitively. Why general costs of living here in the U.S. are less than other countries is our reliance on low wages, low margins and low benefits for a large part of the population, while the gap between rich and poor gets larger and larger.

    If you view healthcare as just another product/service the private sector is entitled to control and ration while you get the cream of health care subsidized by your employer, then the system works great, but if like education, you view healthcare as a basic necessity that is key to an even chance at success, then private sector control of healthcare should be as little as possible. I would agree with government hands off of healthcare if, as with most other products and services, you could access and choose less expensive options (no Nate, not less coverage) that could get you to the same place and participate evenly in the economy.

  26. If wishes were horses then beggars would ride.

    Someone’s money or work is paying for someone else’s care. That is either theft or charity.

    Inject the government and you have legalized theft and called it society, redistribution, developed, or some other delusional concept.

    It is theft.

    Dr. Walker,

    You are out of touch with economics. The only equity gap that will close with Obamacare is the equity gap between you and a slave.

  27. Did not Clinton get a $200 haircut? He did. Shut down LAX for 2 hours while he got it, too.

    I will take cash at his barber’s rate.

  28. “Maybe mandatory individual purchse of insurance that is tightly regulated, like Netherlands/Switzerland?”

    PCP – Lower income employees in Switzerland can’t afford to buy health insurance on their own either. This is why health insurance premiums paid by individuals themselves cover only about 35% of Swiss healthcare costs. About 40% of the population is eligible for a subsidy to cover the difference between what the insurance costs and what they can afford. Switzerland covers part of hospitals’ operating costs out of general tax revenue. The Swiss also pay a relatively steep 30% of their healthcare costs out-of-pocket.

    Not surprisingly, I generally side with Nate in this argument. I find it incredibly frustrating to keep hearing the liberal attitude that the private sector generally and corporations in particular are inherently evil and just care about profits and pleasing shareholders and maximizing executive bonuses. Companies that don’t please enough customers enough of the time go out of business because they’re subject to market discipline. On the other hand, we’re basically stuck with government no matter how expensive and inefficient it is. There are some functions like defense and law enforcement that are best handled by government. When it comes to healthcare, less government is better though some, related to regulation and, perhaps, financing subsidies to help low income people buy insurance, is probably necessary.

  29. would you rather have an onerous task that cost you $2000 per employee that you can control or an onerous tax that cost you $3000 per employee and you have no control over in good times or bad?

    Any tax for healthcare would be based on number of employees not profitability, that means in bad times your expenses would not drop at all, in fact if unemployement went up the government cost to insure then would stay the same so they would need to increase the tax on those that are working, its quit possible in bad times it would actually increase.

    Then again all business owners are rich so we shouldn’t care right Margalit?

  30. To get back to Ms. Gur-Arie’s question, I’m also surprised that the large employers aren’t pushing for something that will get them completely out of the insurance business. Maybe mandatory individual purchse of insurance that is tightly regulated, like Netherlands/Switzerland? I know that, as a small business owner, buying health insurance for my employees is an onerous task.

  31. Well when big pharma is forbidden by law from lowering their prices, it is hardly good old consumerism. Just because the government “pharmacy benefit program” is unimaginative and constrained by the politics that influenced its creation does not mean that there are not free market mechanisms that could be tapped to significantly lower costs.

  32. and us worthless payors figured that out Margalit, we send our members to their website to sign up then raise the co-pay for just that drug by the amount of the co-pay card. Would be a lot easier to do stuff like that if we weren’t bvuried under so much regualtion.

    To change a co-pay any idea how much it can cost in legal complaince, postage, and notification? a lot of times more then the savings we are trying to achieve. A small self funded plan actually has an advantage sometimes in cases like that. But as you continue to rail for univerasal coverage and government to save us from the evil employers that have failed to do anything of value try to realize how much government has created this mess.

  33. “I can assure you Nate that an universal system will not be paying for massage therapy, so let’s just stay with the subject.”

    LOL, we are staying with the subject, this is a pretty funny comment after you just said;

    “employers in general don’t seem to be doing a good job at controlling costs,”

    One of the reasons employers can’t control cost is they are required in some states to cover things like massage therapy. Isn’t it funny to blame employers for failing to control cost AND cover things like massage therapy so your solution is to replace them with a Universal plan that would never do something as silly as covering massage therapy? If its required coverage now how can you be so sure it won’t be required by Universal Coverage? Seems very on subject.

    “where do you think your much less better off employee will locate that extra $500,”

    How do you figure employees are less better off? In this recession employees are still getting paid to work, I myself and countless other business owners not only went without paychecks but had to put personal money into the business to cover bills. Despite your partisian worldview not all bsuiness owners are wealthy millionaires that wipe their bottoms with $100s.

    Further even you liberals agree that 30% of healthcare is wasted, and should be eliminated. Why now in the middle of a recession is it unthinkable to ask employess to eliminate a fraction of that 30%?

    “How do you know what will happen 10 years after universal is instituted? Gut feeling? The tired old story that government screws everything up?”

    20+ years experience. Daily involvement so I see how the changes have already effected the system. Having already made the mistakes they are repeating and knowing how they turn out. Hardly fantasy future Margalit. We have already been right about most of our predictions of what Obamacare would do. When you do this every day for decades is not that hard to figure out what all these mistakes in Obamacare will lead to.

  34. Sadly big pharma figured this little game out, as I am sure you must know. They have coupons to cover the high copay, forcing insurers to foot the bill for the expensive drugs. All based on good old consumerism.

  35. Yes, but that is only half of the equation. If you don’t involve the consumer in the cost discussion you will never achieve the greatest savings. Please do not translate that to mean “make the patient pay” because there are a variety of ways to make the cost transparent to the patient whilst subsidizing the cost greatly. Simply having a two or three tiered pharmacy benefit plan helps some, but even these hide the cost of some drugs as sometimes the patient ends up paying more than if they had no pharmacy benefit at all (ie co-pays higher than the $4 cost at Walmart).

  36. Mike, as strange as it may sound to some, I actually share your doubts and your hopes. I grew up in a country with a single payer and several sick-funds administering the tax revenue. Providers were mostly owned by sick-funds, but some hospitals were private. When I was old enough to make my own decisions, I never ever set foot in a sick-fund clinic. Not because the doctors were not the best, they were. I went to the same exact doctors but during their private practice hours at their private office, where the floors were covered with thick carpet and the lights were nice and elegant and there was classical music in the waiting room. And lo and behold, I could afford that on a student income. In all honesty I was pretty unusual, since everybody mostly goes to the clinics, even very rich people. I think you described a similar experience you had with the NHS. I want a system like that here. Granted that was a minuscule country and perhaps not everything is applicable and they are also facing raising costs now, but there’s got to be a better way and maybe if we just stopped locking ourselves in preconceived notions, we could come up with something workable.
    For example, maybe we have a universal system where we leverage employers to provide wellness programs and results by providing them with tax rebates commensurate with their success. Or maybe we allow states to experiment with a handful of integrated systems (like the sick funds) and fund those like other European countries do. I’m no expert, but I sort of think that there is no interest in creative solutions anymore. Just partisan ones.

  37. Dr. Mike, do you think that if Medicare were allowed to negotiate part D prices with manufacturers, it could do much better than any individual senior trying to get a deal from a pharmacy?

  38. I can assure you Nate that an universal system will not be paying for massage therapy, so let’s just stay with the subject.
    If you as an employer find things are though in a recession, where do you think your much less better off employee will locate that extra $500, particularly after his salary was cut?

    Running up debt to invest in infrastructure and raising taxes for those who seem rather comfortable recession or no recession, is probably the best way to get out of recession, right after a World War of decent magnitude.

    I was trying to ask if I may create my own fantasy future, since you seem to assert the right to do so. How do you know what will happen 10 years after universal is instituted? Gut feeling? The tired old story that government screws everything up?

  39. Margalit, i think your point is well taken that healthcare does not appear to be any one’s core competency. I also would include the government in that list of less of the indicted. For an estimated 30m+ Americans, reform will mean a significant improvement in their circumstances. For 180m currently covered under private insurance, it remains to be seen whether a single payer would help or hurt them. Many fear that even a plan with generous benefits will have to ration access through a donut hole design – great preventive and catastrophic benefits but a donut hole purgatory of access in the “elective” middle. I also think a single payer fundamentally realigns the system which is upside down with tertiary services in charge and little primary care. As Don Berwick stated, his vision of health reform was ” empty hospital beds”.

    We could malign CMS all day, attack Medicaid and eviscerate the practices of private insurers – particularly those that impact our most vulnerable populations – the indigent, uninsured, individual and small group markets. However, I continue to be nagged by a belief that the private sector has never really made an effort to solve this problem.

    Employers that have shown a commitment to step up and manage their population risk have much to show for their efforts. There is empirical data that shows how the private sector — companies committed to the health and productivity of their employees have literally reduced their year over year costs to zero. Dr Dee Eddington of the university of Michigan and grandfather of corporate wellness solutions would tell you “Zero Trend” is infinitely possible.

    These savings are achieved not by rationing access to care or peanut butter spread cost shifting of contributions but through targeted interventions to find the asymptomatically ill, help chronically ill get/remain stable and keep the at risk from becoming tomorrow’s chronically ill.

    It requires a level of commitment that many firms have not demonstrated a stamina to tackle. I am torn between my disappointment with the private sector and how they have managed these risks up to this point and my serious doubt that the government – who shows no backbone around difficult issues such as pallative care, personal health improvement or compliace and who presides over $100B of fraud each year ( a full 10% of their $1T spend ) – lacks the will and skill to do this. Being a consultant and subscribing to the notion that there are no bad students, only bad teachers, I hold brokers and agents accountable for their lack of knowledge and transparency as well.

    In the end, i believe the private sector will not step up as they secretly really want out from underneath this burden which is not core to their competency. However, when the slow, inevitable slide towards single payer occurs, do not be surprised by the sucking sound you hear. It will be the rapid movement of talent and capital migrating to other industries that promise a greater return on their investment. I would suggest at this point, we all get gym memberships and lose that 20 lbs that we have been threatening to lose because the consequences of chronic illness in a single payer society are a tad different than those who love their open access PPO plan today.

    Contrary to the pundits on both sides of the argument, it’s not clear to me what solution is best long term. However, I am one of those guys that does not want to wave the white flag until we have given the private sector every incentive to heal itself. In this case, I fear the patient is not just willing.

  40. Margalit thats how you turn a 6 month recession into a decade of stagnation. As a business owner if I can’t cut cost then I cut jobs. Instead of a $500 deductible with all sorts of frills they have a bare bone $1000 plan for 12 months and thats less attractive then losing their job? Fertility treatment, massage therapy, etc there is no coverage we can afford to lose in tight times?

    “but government has no such constraints ”

    really? so in a recession government running up debt or raising taxes doesn’t have any negative effects?

    I don’t understand what your trying to say in the last paragraph, are you questioning why business should plan 10 years down the road? Or are you questioning that Obamacare is going to cost far more then they project?

  41. Healthcare’s greatest myth:
    We have a market based health care system. This has not been true for many years. Paying someone else to pay your bills never has and never will be subject to free market forces. This is the great fallicy of Obamacare – it will not (cannot) make care more “affordable” because it extends this psuedo-free market third party system to 30+ million more. Costs will go up for everyone – they have to. Just like Medicare part D in which the total cost for providing the medications has increased over and above what would have been spent if the seniors paid for the medications themselves (not that assisting the seniors is a bad idea, just that having the pharmacy bill the government instead of the patient guarantees the program is more expensive – and there are many ways to assist the patient other than paying on their behalf and thus hiding the true cost from the consumer).
    Employers are starting to figure some of this out. They are making the insurers offer plans that are more appropriate to their workforce. They are giving employees more responsibility for their own health – premiums are lower if they participate in their wellness (I fill out those forms all the time for patients). They are starting to work with providers to reduce absenteeism due to illness. Do you really think absenteeism would not increase dramatically if employees were covered by medicaid-like insurance?
    It seems duplicitous to me to argue that employers will not choose to pay a fine (tax) and just let their employees go the exchanges, but those same employers should be happy if there were universal coverage for all.

  42. I’m sorry Nate, but I don’t understand how and why the employers’ needs in a recession override the employees’ needs for medical care. Surely people don’t become healthier in recessions, and surely health is not dependent on market conditions.
    Reducing benefits in a recession is exactly what I want to prevent. I can see how a saintly employer may be forced to reduce benefits in order to make it through a recession with an acceptable profit margin, but government has no such constraints (despite the completely deranged notion to the contrary in some circles).

    Why should I calculate taxes 10 years from now based on a doomsday scenario for universal care? May I also calculate employee out of pocket amounts in employer sponsored health care, based on my own contrived doomsday scenario for that eventuality?

  43. Take a look at what happened to Russia’s healthcare system when they collapsed.We will be no different.

  44. not only control cost but change year from year. If your in a recession and need to reduce benefits until the market improves, under Obamacare you can’t do that.

    “employers in general don’t seem to be doing a good job at controlling costs,”

    By who’s measure and what measure? For all the cost shifting government does I think they have done amazing. They have achieved what they have inspite of givernment roadblocks, just imagine if government was working with business instead of against it to lower cost and increase coverage.

    “Did anybody calculate the amount of tax that an employer would have to pay to support universal care?”

    Tax to covers today’s cost or the tax 10 years from now when it all goes horrably wrong? Look at Medicae cost for an example of how badly things can spin out of control. When Medicare started blowing through budgets did they shut it down and restore the free market or just raise taxes?

  45. Good points, Nate. Perhaps it depends on one’s interpretation of the same set of facts – eg., to some, Roosevelt and the New Deal were heroic and saved the nation; to others, it was the beginning of our downfall towards outright socialism. I must say I support Medicare’s existence; but I must acknowledge there are undoubtedly valid facts such as those you quote that argue against it. As I have said many times, although I am an ardent supporter of Obamacare for the reasons I have cited, I would leave it in a heartbeat if someone were to propose an alternate, superior plan. I just have not seen such an alternative described that would be valid for the key use cases I come across on a daily basis, or for the country at large as I see it; and given no alternatives, I continue to believe that the way to preserve our republic is to shift to the left in the healthcare sector. But I continue to be open-minded and would hope for a better plan – either wholesale, or fine-tuning the PPACA’s core elements. If not, though, I think 2014 will be a good year for everyone – except for perhaps, the national debt. Would I pay 10% or more higher income taxes to see everyone have access to affordable healthcare, yet avoid a single-payer system? Yes, I would. But how welcome it is that folks are still investing time in this most important debate…let’s keep it going – on both sides of the ideological spectrum.

  46. tim & Nate,

    So the problem from the employer side is that they believe that they can control costs better than the government can, and therefore spend less than whatever taxation is, or will be, levied for health care.
    I do understand this argument, particularly since included in the tax will be implicit support for health care services provided to the unemployed.

    However, as things stand now, employers in general don’t seem to be doing a good job at controlling costs, and I don’t consider dumping an increasing financial responsibility from employer to employee as successful cost control.
    Did anybody calculate the amount of tax that an employer would have to pay to support universal care? If not, how do we know it’s more than what they spend now?
    It seems to me that the objections are ideological and not factual.

    As to externalizing costs, Tim, I think Patrick’s example above is a good one.

  47. Like you say terrible decisions need to be made and not everyone will get care they need. There always has been and always will be suffering. My problem with socalism is it promises to smooth these differences but seldom does. If we could legislate the outcome of your goal I would be all for it. Unfortunetly history shows we attempt to legislate rules a small group of people with little to no experience think will achieve the desired goals but seldom does.

    Medicare is the perfect example, at a time 13% of seniors had trouble paying for some healthcare services we were promised Grandma wouldn’t lose the shirt off her back if we passed Medicare. We know have 30 trillion in unfunded promises and 19% of seniors can’t pay their medical bills. While the goal sounded great and everyone wanted to achieve it the failure ended up being far worse then if nothing had been done at all.

    Public housing and 1980s welfare are two more examples of socialism working on paper but causing far more harm then they did good.

  48. Not sure which cash price you are referring to. 7 out of 10 times if I call a hospital and offer to write a check on the spot I can get a deal as good as or better then any insurance company.

    I can’t recall the name of the Rx off the top of my head but recently there was a common compund drug, I think something to do with pregnancy maybe, that got FDA approval to be made by some pharmastuical company. The cost of the new Rx is substantially higher then the cost to compund prior. There have been a number of Rx that when moved from Rx to OTC dropped substantially in price.

    No insurer has as much clout as the market as a whole. Any insurance company is going to have a fraction thus only a faction of the clout.

  49. Nate-

    “Any time you pay for something with insurance it increases the cost of the item. $100 of birth control will now cost $120, thats a minimum increase.”

    How do you explain the fact that the price of hospital services negotiated with an insurer are nearly always lower than the cash price of that service?

    I disagree that paying for something with insurance automatically increases the cost — it is often the large negotiating clout of insurers that drivers down the cost.

  50. Nate, I do see your valid points made. Few would question the economics of what you assert I believe correctly regarding making certain items government requirements, removing the market incentive to drive costs downward for those items. I also struggle ideologically with the principally correct notion that the answer to the ills of socialism is not more socialism. However, I believe in healthcare (and I do speak with some authority as a full-time family physician), it is the market-based system that has caused much of the problem we are seeing with increased costs. The same market-based system that incentivizes amazing, miracle drugs and cures that we all enjoy in the US unfortunately has the downside of a current alignment of incentives towards healthcare taking up an unsustainable proportion of the GDP. To me, it is simple why this is the case: the US standard of excellent healthcare (attracting dignitaries worldwide for surgeries, treatments, etc.) is bound by our system of ethics to be offered to every single human being who winds up ill within our borders. Thus, we have a choice: ration this (indeed, that’s what we would be doing) to those able to pay for it based on the market, and not worry about everyone else; or ration it based on redistribution, and make a certain basic standard available for everyone. Your idea about relegating select services to the public sector makes good sense in principle; but is very hard when you are looking into the eyes of a minimum wage worker who needs expensive biologic injections every 2 weeks to treat severe inflammatory arthritis that would otherwise be horribly painful, disfiguring, and disabling – potentially totaling somewhere in the ballpark of $200k per year. Or another poor person who could live another 5 years if they had a liver transplant. The point is that our American ethics demand a significant degree of equity, such that our free-market base cannot produce in the case of modern healthcare. Thus, I feel the Obamacare attempt at an amalgam, split-the-difference approach between the extremes of socialism and capitalism is germane to the times, and should be attempted. The inherent problems you describe notwithstanding (no, it’s not perfect), it would close the equity gap, while incentivizing a major sector of the public back into the working, secure middle class – which is arguably the only real solution to our long-term fiscal crisis. Hence, ironically, if we don’t migrate a little towards progressive economics, the entire federalist republic may sink us right into overt socialism or communism.

  51. Here is a great example of counter productive socialism driving up cost and the number of uninsured.

    “Virtually all health insurance plans could soon be required to offer female patients free coverage of prescription birth control, breast-pump rentals, counseling for domestic violence, and annual wellness exams and HIV tests as a result of recommendations released Tuesday by an independent advisory panel of health experts.”

    Any time you pay for something with insurance it increases the cost of the item. $100 of birth control will now cost $120, thats a minimum increase. Once an item is covered by insurance the consumer is no longer price sensitive so they can charge even more then they could in a free market. Not only does socalism needlessly increase cost but that increased cost leads more people to decide insurance isn’t worth the cost and go uninsured. Socalism is the illness not the cure.

  52. From my experience its the socialism that’s creating the problem. Its very hard for firms my size to compete becuase of all the regulaltion and liability created by government. Every time government has tried to fix healthcare the cost and number of uninsured has increased. In my opinion we haven’t had a federalist approach since 1964.

    This has been seen all over the world all through time, millions of people have starved to death from socialist/communist efforts to redistrbute. Socialism takes a small problem that might be effecting 5 million people and turns it into a national crisis effecting 50 million. I don’t think more socialism is the answer to what socialism caused.

    I would be ok with more public health centers, especially for mass services. i.e. if mamograms should be provided to every women over age X then it would make sense to have non profit mamogram centers providing them as chealy as possible.

  53. RE: the earlier comment that taxes always go up, never down is fundamentally untrue. GE by its own admission has paid $0 federal income tax in recent years. Prior to that GE paid a lot more than $0. The effective rates now being paid in most categories are much lower than in earlier decades.

  54. Apt question, Nate. Honestly, it is a point of degree, not ideology, and you are certainly right to note the hole in my ideology, per se. Employer-based coverage is certainly a more market-based solution ideologically, and more along the lines of federalism; government-based, progressive, redistributive, or whatever you might want to call the PPACA/Obamacare approach is more technically socialistic, ideologically. But what I fear is that – although most of us (me included) favor federalism to socialism – we will pursue our ideology off the cliff if we don’t moderate it and respond to the times. Clearly Margalit’s points are true – the current federalism approach to healthcare is favoring an increasingly small percentage of the public, and the middle class is disappearing (forgive me if I misinterpreted her comments, but that is how I understand the points made). To preserve the benefits of a free market healthcare system, ironically we must move now a bit towards socialism – and ensure that any worker can get in at whatever level they happen to be income-wise. This necessarily requires a redistribution scheme if everyone is going to have access to the standard of care (which is more expensive than the lower to low-middle-class can afford on a purely market basis). The top-tier of the income scale depend on the middle and bottom-tier to be productive; and it is only just and fair that they be healthy, too. Further, the lower income classes who are sick would have much more incentive to join the workforce in the PPACA scheme, rather than maintain their disabled status within the current system (to keep their insurance, they can’t work). To summarize, Nate makes a good point – mine is not a purely ideological argument, but a choice of which values to follow above others. Either way, there is ‘robbing Peter to pay Paul’. I prefer one which at least at this point seems to ensure more equity.

  55. James do you advocate this also apply to governemnt? Why do Social Security Benefit require you take Medicare? For some reason liberals never seem to take issue with this?

  56. “Employers are paying a smaller fraction of coverage as the Members pay the greatest share of those expenses.”

    Gary you might want to check some facts before you go to far into the deep end. member OOP has been going down for 40 years.

  57. Becuase you can’t control your taxes. Why would a business want to pay $3000 in taxes to replace a $2000 cost?

  58. That is possible if you go back to selling goods and services at barber rates.

    Otherwise, you will find that throwing 300 million people under the bus to protect a few wealthy men, is not an optimal solution in this century either.

  59. “With all this complexity and expense and risk, why don’t employers support tax-funded universal care?”


    I’ll have to assume you actually don’t know the answer to this question. So I’ll offer you a paragraph or two from the conservative world-view, realizing that you might not agree with it, but you seem to be asking an honest question about what other people are seeing when they look at what you are looking at. .

    Because employers are double taxpayers. The same people who advocate universal care are the same people who demonize them day after day, decade after decade as “greedy corporations”.

    They are also are smart enough to look back at history, and understand that any tax that starts small at the individual level today will morph over time, getting larger and more complex, until the individual voters shift it to the available abstractions. (Abstractions don’t vote, but do have money.)

    Margalit, you talk about these things as if reason is the test — as if something can be written down in a law today and actually look that way a generation later. No discussion of social programs and taxes can make sense that does not take into account the universal, permanent tendency of humans to externalize costs by coercion. (Steal.)

    The progressive mind is always puzzled that people are not spontaneously altruistic, then always argues that force is needed to make the population sufficiently altruistic, and then always is amazed when the same population is not eager for more, because, well, the first wave of recipients declared it to be Edenic.

    We are puzzled that you all are puzzled.

  60. Wow! Thank you for sharing this though provoking entry. I love how you used the stages of grief to show and get your message right through. And got your message loud and clear hear. 🙂

  61. Just how would it be government’s core competency? Their core competency is waste, fraud and abuse. Getting rid of employer based insurance should put more money in the employee pockets.

    The citizen who makes any money should keep all they can.

    It will be every person for themselves.

    Save your money and pay cash for care.

  62. Ditto, Margalit; and great post, Mr. Turpin. I have always thought it is fundamentally unjust to align one’s employment with one’s healthcare – especially in the current / old system, wherein a major illness or a pregnancy means the employer becomes the taskmaster and the employee with no real options to change jobs. In 2014, the economy will become much more responsive to natural market forces when people are free to work multiple part-time jobs to sustain their middle-class wage needs, rather than one full-time job that has decent benefits for their surgery or chronic illness financing.

  63. Business and the Health industry is so complacent that they are Happy to run the country into the ditch. Thus they will derail any Health Care system that shares the Burden versus shifting the cost on the Insured.

    Kill it before anyone wants to keep it or experience the right to Health Care. Oh ,I have heard the self rightious dimn witted Morons explain that Health Insurance covers too much! It wasnt intended to cover basic Health Care like Doctord and then these self proclaimed Profits claimed to have lived in a bygone era and they alone have been annoited to deny everyone from having anything. These are the most diguesting ,self serving individuals of Hatred and unapproachable people that believe they speak for everyone!

    They don’t speak for anyone but their envy,jealiousy,and Hatred for everyone they meet. Totally unprovocated exchanges of denial and targeted aggression of Those whom have every right to provide for themselves and Love ones. Employers are paying a smaller fraction of coverage as the Members pay the greatest share of those expenses. Still Today the Member has Little rights to go after Insurance but Employers want Control! Why ? You Know dont you!

  64. Love your stages of grief analogy 🙂

    Here is what I don’t understand, Mike: With all this complexity and expense and risk, why don’t employers support tax-funded universal care?
    Why not get out of this health care and wellness business, which is not anybody’s core competency, and let it be between a citizen and his/her elected government?