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Resist the Evil Fiction That Is Health Insurance

It has come to pass. President Donald J. Trump. Are you scared? Are you planning to “resist” the policies you imagine President Trump will pursue by tweeting furiously with clever hashtags galore? Would you prefer to move my fastidious quotation marks from “resist” to “President”? This is after all, the first President in a very long time to take office without the blessings and financial support of established “world order” leaders. It must be rather disconcerting to proceed without clear guidance from our betters, especially seeing how well they served us over the last decades, and particularly when it comes to affordability of health care in America.

Are you binge-watching the Obamacare drama playing on America’s center stage these days? Are you tweeting and retweeting every shred of information that proves Obamacare is a huge success, and its repeal will mean certain death for millions? Or are you busy proclaiming your faith in free markets, the (undemocratic) government of Singapore, or the charitable nature of Americans in general and doctors in particular?  Is President Obama your tragic hero, or your shifty villain? Is President Trump your great liberator (although he promised not to do anything you really want), or the Grinch who will steal health care (although he promised to preserve everything you really like)? Are you not entertained? Pass the bread, please.

In the latest plot twist of the greatest political show on earth, which according to all expert comedians managed to put Ringling Bros. and Barnum & Bailey Circus out of business, our newest  Republican President announced that “we’re going to have insurance for everybody”, even people who “can’t pay for it”. Sounds like some sort of universal health care to me, no? Ah, the sweet irony…  Amidst my deep joy with the ensuing gasps, grunts and groans, I have to assume that President Trump is really talking about health care for everybody, including those who can’t pay for said care, because “health insurance” is a fictional construct designed to extract profit from misfortune.

Would it surprise you if I said that most people in this country, or any country, don’t actually have “health insurance”? Medicare is not insurance. Medicaid is not insurance. TRICARE and CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs), as well as care provided by the Department of Veterans Affairs and the military, are certainly not health insurance. Even the health insurance you get from your employer is not insurance in the strict sense of the word. These are benefits, defined benefits. Obamacare extended these benefits to more people, and by essentially eliminating individual underwriting and monetary caps, it practically did away with the notion of health insurance. Good riddance.

Nevertheless, practically all our Obamacare conversations are about health insurance (or coverage), because those who sell products called “health insurance” want us to discuss health care on their terms. It’s more profitable that way. When we talk about insurance, we can talk about pools, actuarial risk, death spirals, corridors, and all sorts of obscure and complicated things that seemingly justify the need to pay health insurance companies for something. And what is that mysterious something we pay so much for? It’s certainly not “insurance”, seeing how at least half the revenues of for-profit insurers come from federal and state governments. It’s complexity. We pay insurance companies to paint a thick layer of complexity over the health care delivery system.

Price of Care

How much is a jar of pickles? Well, it depends on the brand, the size of the jar and yes, the grocery store where you shop, but one thing is certain: every person in your store pays the same amount of money for the same jar of pickles. Not so with your doctor visit. If you have traditional Medicare, your doctor gets $75 for a regular visit. If you have traditional Medicaid, he gets $40 for the same visit. If you have BCBS Super HMO, he gets $70.51. If you have BCBS Super HMO+, he gets $72.37. If you have BCBS Freedom PPO, he gets $82.86. If you have Cigna Gold Choice, he gets $90.03. If you have Cigna Liberty Sucks, he gets $65.99. If you have…. and on and on it goes, for the same exact 15 minutes, from the same exact doctor, in the same exact room. The doctor one floor up may have a completely different set of fees from the same exact complement of insurance plans. Add to that the avalanche of “value-based” payment “initiatives” triggered by the massive underbelly of Obamacare and the picture gets murkier than ever.

So what’s the real “value” of that doctor visit? Irrelevant, my dear Watson. Irrelevant. The true value is in not having a value at all. Why? Because then your doctor will need expensive software and an army of “expert billers”. The insurer will need different mega software to manage accounting across “product lines” and “initiatives”, and an army of analysts of its own. Of course contracted fees and quality initiatives change all the time, so the change process needs to be managed on both sides of the transaction. Extrapolate this to hospitalizations, diagnostic testing, procedures, a variety of specialists, and before you know it nobody has a clue what the price of anything is, except of course the number crunching data aggregators, usually owned and operated by, you guessed it, insurance companies.

Choices Galore

There is nothing America hates more than one-size-fits-all health insurance, you know, like Medicare. There are two health insurers and 23 individual “plans” on the Obamacare exchange in my county. Two are Gold, twelve are Silver and eight are Bronze. The same insurers offer additional “choices” off the exchange, and other choices for the employer market. There must be well over 50 “plans” from my health insurer alone floating out there. They vary by type and metal, and within each metal they vary by a few dollars here, a few dollars there and a few percentage points here and there. They all offer all the required Obamacare benefits. Why do I need two PPO Silver plans, from the same insurer, one with a $336.20 premium and one with a $336.91 premium, and similar earth shattering differences in deductibles, out of pocket maximum, copays and co-insurance?

I don’t, and neither does anybody else, other than the insurance company, of course. That layer of complexity must be nurtured and maintained. The more plan choices we have, the more we can agonize over each miserable and completely irrelevant detail. Furthermore, if the government pays for everything, including your deductible, the “actuarial value” of the plan means very little. If you’re not poor enough to qualify, and not wealthy enough to buy a top shelf plan, or pay your own way, you’re screwed no matter what you choose. The Ryan/Price “solution” to this quandary is to allow insurers to create many more plans that differ not only in price, but also in the benefits they cover, thus making insurance great again.

You can have plans that don’t cover pregnancy for example, or maybe they don’t cover physical therapy or expensive cancer drugs, because customers know best and government shouldn’t tell them what to buy. Well, that’s awfully nice, but what if your diaphragm malfunctions, or you shatter your tibia playing hoops, or God forbid those headaches were not due to stress, can you then switch to another plan just in time, or are you barred because preexisting conditions? This is a serious question, because if you can switch, every healthy person could maintain coverage for ten bucks a month, and if you can’t switch, then what’s the point having all those threadbare “plans” to “choose” from?

Let’s just get real

As gloriously delicious as the health insurance spectacle is promising to be, dwelling on it won’t solve anything. Whether you call it health insurance, health benefits, medical services or just plain health care, the darn thing is just too expensive. It’s too expensive for us to buy with our own money and it’s too expensive for us to buy with tax money. It was too expensive before Obamacare, it’s too expensive now, and the massive complexity introduced by the health insurance industry and its perpetually revolving door in and out of government, is making sure it will remain too expensive forever. Why? Because the more money we spend on health care, the better health insurance companies do, and they are doing swimmingly well lately.

And nothing, absolutely nothing, the GOP put forward up to this point is poised to change that. President Trump argued convincingly enough that we cannot solve major problems unless we are willing to correctly identify the problem by its proper name. I agree. If we are going to identify and refer to the main threat to our security as radical Islamist terror, then we should be brave enough to call the health care problem by its proper name. It’s not insurance. It’s funding. The question is not how we provide “access” to some fuzzy notion of health insurance to everybody. The question is how we fund the actual delivery of medical care to all Americans at a federal level or even state by great state. 

This does not necessarily mean tax funding of free health care for all. It does not mean single-payer or Socialized medicine. It also does not necessarily imply free-market fantasies, supplemented by our legendary charity. It does not mean that employers are either off or on the hook, or that pooling money to pay for fluctuating medical needs is forbidden. It doesn’t mean that insurers should all go out of business either. It just means that the American people have no obligation to guarantee empires, executive salaries, profits, earnings, and return on equity for any industry, and certainly not at the expense of their own health.

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pjnelsonBarry CarolAllanMargalit Gur-ArieSteven Findlay Recent comment authors
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pjnelson
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pjnelson

For a definition of a person’s Basic Healthcare Needs, consider the following: . a. the continuously responsive ‘medical TRIAGE’ for a person with an emergent, urgent or expectant ‘HEALTH CONDITION’ [ as in after-hours audio-visual AND stable non-holiday/weekday office hours with a Primary Physician; as supplemented by Urgent Care AND hospital Emergency Departments ] . b. the diagnosis and treatment of: ……i. any urgent or expectant ‘HEALTH CONDITION’ possibly indicating a disease for which its timely and precise treatment would be more likely to preserve a person’s ‘HEALTH,’ ……ii. any new or recurring ‘HEALTH CONDITION’ possibly associated with a new… Read more »

Margalit Gur-Arie
Member

When we say “the diagnosis and treatment of”, doesn’t it pretty much mean ALL medical care?

pjnelson
Member
pjnelson

I am aware that ACA 2010 has a requirement that each insurance company must maintain a ‘loss ratio’ of 80% or higher. Does anyone know whether or not the ‘loss ratio’ data has actually been monitored in the last two years? The origin of that amendment is connected to the final vote by a democratic senator that determined its passage.

Allan
Member
Allan

Margalit, the problem we face when thining about insurance is that we haven’t determined whether insurance is risk based or a method of redistributing wealth which is the socialist model that doesn’t fit with our type of society where the population is large and containins a large variety of ethnic, religious, etc. groups. Not only have we not decided upon the model of healthcare delivery, but we also haven’t decided upon what constitutes healthcare. A socialist intent upon the maximum redistribution might start off the question of what constitutes healthcare by adding gym memberships and trips the the Dead Sea… Read more »

Margalit Gur-Arie
Member

Allan, how would you define “basic”?

Allan
Member
Allan

Margalit, that is a tough one, something I was afraid you would ask. I think society determines what basic care is. The insurers could probably come up with a basic care package which would take into account the cost as well and that could be modified by everyone else. I would use that basic care package to compare all other insurances with. In that fashion people would have a model and that would reduce their uncertainty as to what they were getting. The insurers could then offer more or less than the basic package, but the insurer would have to… Read more »

Margalit Gur-Arie
Member

Nice deflection, Allan 🙂
Truth be said, “basic” health care must include all the expensive stuff if it’s going to have any useful meaning. We can spend years arguing if birth control or alternative medicine or any number of cheap things should be included, but if we don’t include the big stuff, all the big stuff, we are essentially condemning some people to death and/or lifelong.suffering.
I don’t think we should recoil from this expansive definition of “basic”. We have the resources to pay for it and then some. We just need to quit paying “protection” money to certain elements.

Allan
Member
Allan

It wasn’t deflection, Margalit. It was reality. There is plenty of expensive stuff we don’t do today. Take Steve Jobs type of care. Is that affordable for everyone? That is part of the “expensive stuff” you talk about and there is more of that type of care on the way. Don’t just think in present terms. Perfect is the enemy of good and it appears you look at a basic care package as the perfect package, something that can never be realized. Just trying to do so creates trade offs in other areas that can destroy an economy. You seem… Read more »

Margalit Gur-Arie
Member

I agree with you Allan on the “non-profit” status being too easily granted to institutions that have become over time anything but. I refer to those entities as “for-revenue” or “for-empire-building”. The bigger the entity, the less likely it is to be truly non-profit. As to competition, there certainly are services at the low end of the market that may get cheaper due to competition, but I seriously doubt that competition is something one can apply to, say, burn units or any trauma centers, or transplants or anything extremely complex and thus extremely expensive. There must be some other way… Read more »

Allan
Member
Allan

Forgetting about the non-profit distinction which is meaningless you have a point with “for-empire-building”. The government and insurers are working together causing tremendous consolidation which reduces the competition necessary to move prices in a downward direction and stimulate innovation. Even the laws passed make it so new innovative companies cannot enter. This doesn’t happen unless government is involved or it doesn’t happen for the long term. Many want more government intervention. That would be fine if it weren’t for politics and the fact that the support of these large corporations is what provides these companies with a springboard to super… Read more »

Margalit Gur-Arie
Member

First just a minor thing: that Lasik thing is a classic consumer product like botox or cosmetic surgery – you don’t die without it, so having non-participants in that market does not present any moral difficulties. Now about the risk rating. Some people will have higher “risk” because they were born that way, or through no fault of their own, or whatever. Should they pay more for health care? If you say yes, I’m going to turn this around and ask this: If there is a big war and a draft is instituted, should people who are not fit for… Read more »

Allan
Member
Allan

“ you don’t die without it” You don’t die with a lot of medical care. So What? Lasik is a procedure that is paid for and much of medicine is based upon procedures that are paid for. The price of Lasik has fallen while the quality has risen. That is due to a relatively free marketplace. Those procedures you seem to value more are not in a free marketplace and have become more expensive and less affordable. I would think you would want the opposite to occur. “they were born that way” I wasn’t born tall enough to become a… Read more »

Margalit Gur-Arie
Member

No Allan, I am not trying to make everybody equal. I am trying to account for natural inequality and minimize its ill-effects on all members of society. Just like we all contribute to inequality for those who are fortunate, we should contribute to helping those who are not fortunate. It goes both ways. Otherwise what’s the point of having a society? You can’t just pick defending from external enemies as the duty of all, but defending from disease is the responsibility of each. There is a moral/ethical aspect to this, but there is also a cold cash aspect as well.… Read more »

Allan
Member
Allan

“ I am not trying to make everybody equal. I am trying to account for natural inequality” Read that carefully. What is the ultimate goal of that statement? Remember, I am not one that wants to rid society of the ability to help those in need. I just want to help in an appropriate way so that the trade offs are minimized. In a perfect world or a world that we dream about your way might be best, but we live in a world where human behavior is quite different from what you would like. “Otherwise what’s the point of… Read more »

Margalit Gur-Arie
Member

Allan, perhaps my world is a fictitious dream, but so is yours. You cannot apply all the principles you espouse on top of a status quo where we have huge corporations that are not going away.
I’ll make a deal: You break all these monsters into tiny pieces first, and then we can apply the free-market principles that were developed for times when we actually had butchers and bakers. We don’t anymore. We have Walmart instead. Either you fix both sides at the same time, or we’ll be eaten alive, more so then we already are.

Allan
Member
Allan

“ You cannot apply all the principles you espouse on top of a status quo where we have huge corporations that are not going away.” Margalit, we have succeeded in mostly following the principles I suggest for about 200 years though there has been a continuous decline over the past century. These corporations get their undeserved power by going to bed with government. That is why the Clinton Foundation and the Clintons made so much money when they were in power. Take note how that money is dried up now that they are out of power. All I want is… Read more »

Margalit Gur-Arie
Member

I’m not looking for a socialist environment. I’m looking for localized markets. I think our one basic difference is just the sequence of events. You seem to want to defund/shrink federal government, assuming this weakening of government will lead to weakening of corporations and the people will be able to break free. I think it is way too late for that and we must grab control over government and use it to break the corporations first. Once that is done, we can shrink government. In reality neither scenario is very likely. Something really bad will have to happen before things… Read more »

Allan
Member
Allan

“I’m not looking for a socialist environment. I’m looking for localized markets.” That is great because the healthcare discussion doesn’t belong in the federal domain even though we have placed it there. Even Canada recognizes that so that each province functions somewhat differently. “one basic difference” I know that being wedded together both the corporations and federal government act in a fashion that is contrary to the wellbeing of our regular citizens. I want the government protecting American citizens rather than corporations which government helps grow bigger and bigger. If you wish to characterize that as a weakening of government… Read more »

Barry Carol
Member
Barry Carol

If you look at the ACA’s essential benefits package, the parts most likely to be challenged as essential by relatively healthy people who want to pay a premium that reflects their own low health risk are (1) chiropractic care, (2) mental illness, (3) alcohol and drug abuse benefits, and (4) maternity benefits (except for women contemplating becoming pregnant in the foreseeable future or who are already pregnant). Most people would probably want primary care, access to specialists, hospital based care and prescription drugs all subject to a deductible that could vary widely based on individual preference and resources. With respect… Read more »

Margalit Gur-Arie
Member

Yes, Barry that is always how we end up in a paralyzingly tenuous moral/ethical position. I would argue that this line of thought is purposely imposed on us by an industry that wants to preserve its profits. There is more than enough money in the system to pay for everything without a need to make “hard decisions” [you may remember my constant and unsuccessful railing against the “finite resources” argument in the old days… :-)]. Before we sit down to analyze when it’s the right time to push anybody off the cliff, I’d suggest we get rid of the unnecessary… Read more »

Barry Carol
Member
Barry Carol

Margalit, I think you are overestimating the profitability of the health insurance industry. It’s actually a pretty low margin business and roughly 40% of the market is controlled by non-profit insurers. Moreover, Medicare’s administrative costs are significantly understated due to functions provided by other government agencies that don’t get counted in the statistics. There is also significant fraud in both Medicare and Medicaid and per capita spending for the 65 and older population is roughly 2.2 times higher than for the under 65 population which makes Medicare’s administrative costs look much lower in comparison to commercial insurers than they would… Read more »

Margalit Gur-Arie
Member

Barry, it’s not just the profit margins, or the executive pay or the earnings. It’s the mammoth administrative costs that this complexity imposes on the delivery system, which drives the costs up for hospitals and doctors and in return it drives premiums up, which drives insurers revenues up, making the absolute value of the profit margin larger. It’s a vicious cycle and I think it is intended to work this way by design.

Barry Carol
Member
Barry Carol

Margalit, I think you’re overestimating the administrative costs too. For the non-profit Blues, those costs are in the 10%-12% range. For large, self-funded employer plans, they’re closer to 7%-8%. For properly allocated Medicare administrative costs, including work performed for Medicare by other government agencies, they’re closer to 6% at the least. Then there is the issue of more fraud in Medicare and Medicaid than in private insurance. Then there is the issue of much higher per person medical spending for the elderly than the non-elderly which makes Medicare’s administrative costs look lower. Finally, there is the documentation requirements that Medicare… Read more »

Allan
Member
Allan

Very good Barry. Administrative costs have been a tool on the left for years in the left’s desire to push socialized medicine. I won’t add to your dialogue as it adequately describes the truth, but I will add that even under socialized medicine the government hires private corporations to run the program. In my state a bunch of the executives of such a program that were blaming physicians eventually ended up in jail.

I wonder how much additional costs the ACA and its associated regulations such as EHR’s cost society.

Margalit Gur-Arie
Member

Barry, the numbers don’t add up for me. If the MLR is 80% and profits are 4% to 6% then admin costs must be 14% to 16% and not lower than that. Now, in the new era of quality measuring, a host of purely administrative busywork is counted in the MLR because it “improves patient care”. So the net amount insurers actually pay out to hospitals and doctors and such must be around 70% or so (just guessing, b/c transparency… ). Then there is the cost on the delivery side generated by all these things (yes, Medicare too… all of… Read more »

Allan
Member
Allan

My understanding is that the act of trying to prevent fraud and abuse is part of administrative costs. Therefore, any company that invests a lot of money to prevent fraud and abuse and thereby is able to lower their premiums will be in violation of the MLR.

Barry Carol
Member
Barry Carol

Margalit, the minimum MLR ratio for large groups, including Medicare Advantage plans, is 85%. The 80% number applies to individual and small group coverage and that’s a minimum number. Most insurance plans run higher than that. Regarding physician overhead, aside from a small percentage of primary doctors who practice in higher income and wealthy areas, not many can sustain a practice without taking insurance. Try asking a few cardiologists, oncologists and surgeons, how many of their patients could afford their fees without insurance. Besides, primary care doctors only account for about 6% of healthcare costs at most. Heck, even doctors… Read more »

Allan
Member
Allan

” It recently announced the acquisition of a company called SCA which operates a chain of about 200 ambulatory surgical centers. UHC claims that these ASC’s can perform procedures at roughly 50% of the cost of a hospital.”

Barry, do you know if these centers are paid the Medicare rate of a hospital or of a privately owned clinic?

Barry Carol
Member
Barry Carol

Allan, I don’t know the answer to that question either with respect to SCA or any other ambulatory surgery center for that matter. 0

It is clear that they have inherently lower total costs than a hospital just as independent imaging centers have lower fully allocated costs than hospital radiology departments. Labor costs are much lower as a result of not having to operate around the clock including sustaining an emergency department. I also suspect, but don’t know for sure, that ASC’s have an above average payer mix as compared to hospitals.

Allan
Member
Allan

Barry, though not exactly on target, I just learned something related to my question. We all know that under Medicare, hospitals are paid more for physicians and procedures than those centers not owned by hospitals. Thus corporations such as Mayo and the Cleveland Clinic that have their own hospitals are paid more for physicians services, procedures, etc. However that is linked to distance. Thus a Mayo facility off hospital grounds or too far away would be paid less for the same things as the Mayo facility on campus. Therefore, I doubt the SCA is paid at a higher rate unless… Read more »

Barry Carol
Member
Barry Carol

Yes, if I had to guess, I think the independently owned ASC’s are paid less but I don’t know for sure. I say that because the original underpinning for Medicare payment rates was to reimburse for costs. Since hospitals have higher costs, they get higher payments. I’ve said numerous times that I think services, tests and procedures that can be done in a hospital, an ASC or a doctor’s office should be paid on a site neutral basis, at least in theory. There is one wrinkle, though, that I would be interested in your opinion about. Colonoscopies, for example, are… Read more »

Allan
Member
Allan

Yes, that is always a consideration. However, hospitals make money by treating diseases which rely upon inpatient hospitalization. Therefore should a problem occur they are being paid what they normally get. I would think hospitals would encourage outpatients to get any treatment what so ever nearer to them than to their competitor. However, for some I can see some type of upcharge,but almost double the charge? I don’t think so unless all complications are treated without additional charge. This game has been played as far back as I can remember. I remember when we built an outpatient x-ray center to… Read more »

pjnelson
Member
pjnelson

The need for this level of clarity is profound.

Steven Findlay
Member
Steven Findlay

Margalit – I appreciate this anti-insurance analysis. But I’m not sure where you end up…if not in the logical place following your argument: single payer. But you seem to reject that. I heartily agree with you that health insurance is overly complex in the US; we have a major Rube Goldberg system, as I wrote about in a recent THCB blog. But you/we can’t deny that Americans have over 50 plus years consistently resisted simplifying this system. Quite the opposite. And Americans seem to love choice in all things, including health care services and insurance. Obamacare built on that cultural… Read more »

Margalit Gur-Arie
Member

I think we’re confusing the desire to have choices for care with a completely manufactured desire to have choice of “coverage” (pick your poison kind of thing). It is a bit cynical to say that people actually want cheap insurance that limits choices and availability of actual care. I think we need a different starting point. We need to figure out how we fund care, not how we fund insurance. There are four sources of funding: federal, state, employers and individuals (you can add private charity if you want to). If we look at a big enough picture, let’s say… Read more »

William Palmer MD
Member
William Palmer MD

I like your thinking. Insurance is not a sine qua non. We simply are trying to 1. get health care to those who can’t afford it and 2. trying to get it ourselves at a marginal cost that equals its marginal value to us and smooth out our costs over time so that we can afford it. Insurance is not an elementary atom in this effort. There are other ways to smooth volatility. Eg money comes from governmental general fund or provider allows long accounts receivables, or patients-providers form coops and there is pre-payment thereto. Read about the German system.… Read more »

Margalit Gur-Arie
Member

Exactly. People don’t talk about the German system too much, but it’s pretty good and also most doctors are in small private practice with fee for service and it seems less neurotic in general.

Barry Carol
Member
Barry Carol

I don’t know if people realize that Germany finances health insurance with a 14.5% payroll tax split between the employer and employee and it applies to wages up to the equivalent of $65K-$70K U.S., I believe. There is a separate 3% payroll tax to finance long term care. I think that would be pretty hard to sell to the lower half of the income distribution in the U.S. The wealthy can opt out and get private coverage but if they do, they can’t get back into the public system unless they can prove they are destitute. Most people get their… Read more »