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Insurance Is Not the Problem. It’s Also Not the Solution

Most everyone is talking about Healthcare lately and I just can’t take it anymore and had to send out a primer, because there is so much bad information being floated.  I don’t like the ACA replacement because the idea is still based on the premise that you can give-away insurance as an entitlement program.  The problem is that you can’t “give-away” insurance, it’s an oxymoron, if there is no skin in the game for the insured they’ll never care.

I’m an insurance guy and Trump voter.  I only point this because I want you to know that my healthcare recommendation is heartfelt and I offer it with no real bias other than offering my experience and expertise on the matter.  My idea is just an independent thought and many Republicans, Libertarians and Democrats would hate it, but I think Trump (the Independent) would love it.  And I feel it’s the only way for Trump to try and “solve” the healthcare problems in the U.S. and keep his commitment that “all” would be covered.

I’ve worked in the insurance business for about 17 years at three of the top five health insurance carriers.  I’ve worked with both small businesses and multinational large employers, I no longer work in health insurance, I left when Obama got in thinking it was over.

I’m not sure of your opinion of insurance companies, but I imagine it’s negative. The problem with Healthcare in the U.S. actually has very little to do with insurance.  Don’t get me wrong, it’s not like I’m saying that insurers are filled with a bunch of Eagle Scouts, but anyone who thinks that they are the primary problem doesn’t truly understand the problem.  Insurance as a concept is probably one of the most noble and ingenious thoughts man has ever had.

Who holds the risk?

Most large health plans are self-insured, the health insurance Company is basically just a computer, and often they hold no liability for the claims risk.  This is something that I think most average people and even many politicians would be learning for the first time.  So whenever I hear anyone blame a health insurance company, I know right away they don’t know what they’re talking about.  One quick example is the 26 dependent ages.  Insurance companies’ love that idea, a 26 year old or younger is just about the best risk you could have from an underwriting perspective.  The ones who didn’t want it were the large employers; around 90% of large employers are self insured.

When self-insured, they are the ones holding the risk and having to add more people onto their company paid medical plans.  Pre-ACA, any large company that wanted to, could have included dependents till age 26, I’m sure some did, ACA just mandated it.  There are some large employers that cover all sorts of things that people have no idea about, the insurance companies don’t care, they just program the computer to either pay or not. So if you hate an insurance company because they didn’t cover your claim, t could be that your employer didn’t include that service in your plan.

Take fertility treatments for example, some companies include it, and most do not.  How is it the insurance companies’ fault that your company didn’t want to cover it, but people don’t know, they just blame the insurance company, its easier that way.  Its important to note, that most of the government insurance programs are fully insured, the most profitable type of coverage for an insurer, they actually do want to hold the risk, but often they are just an administrator.

Selling Across State Lines

Let me educate you quickly on another aspect of the solution of selling insurance “across state lines”.  I know a lot about insurance and every time I hear this from a politician, I cringe. Health Insurance companies probably spend more on lobbying than any other industry, so any decisions politicians make about insurance is suspect, from either side.

Not to beat up on Blue Cross, because they are group of good companies, but unless you break up the Blue Cross and Blue Shield Association (BCBSA), selling insurance across state lines will never work. The Blues, by Charter, can’t compete against each other.  And BCBS covers about 45% of all people for commercial Health insurance in the U.S. and they are trying to buy CIGNA.  On their website, they boast that they “cover one-in-three Americans”, are the largest processor of Medicare claims and “hold the world’s largest privately underwritten health insurance contract — the 5.4 million-member Federal Employee Program (FEP).”

For example, Blue Cross in Pennsylvania can’t compete against Blue Cross in New York because they are both Blue plans.  They also both have over 60% market share in their respective markets.  So you can try and sell across state lines all you want, but you’re basically asking a company to compete against itself.  You would need to break up the Blues association for this to even have a chance at working toward any savings through competition.  The simple fact is that Health care is local, that’s why the Blues model works so well, and the others have a tough time competing, they have a local model.

The Blues also have the best discounts of all the top carriers because they are typically the most politically tied into the local Hospital systems.  Most often the local Hospital system owns the local Blue Cross plan.  People think it’s the other way around, but the health systems tells Blue Cross what it’s going to charge and what they are going to pay in EVERY major market.

You’ll never get costs down or increase competition unless you break up how these negotiations go between carriers and hospitals.  The secret sauce to any savings in health care is in the discounts between hospitals, doctors, pharma companies and the insurance companies.  Super transparency needs to happen immediately on all medical pricing; this should be a part of any law and should be at the federal level.

Follow the money as they say, there should be discount uniformity for all carriers in any given local market.  I don’t like the government forcing things in the private market, but either make this part of the law or outlaw all health care lobbying, I’d be for either.  If you are forcing insurance companies to cover people with pre-existing conditions, then how is this manipulation and bastardization of a typically “market-driven’ concept any different?

Lets look at the numbers…

My numbers may not be perfect, but pulled from the internet and rounded from what I could find; basically, there are only five Health Insurers in the U.S.   (NOTE: There are about 318 million people in the U.S.)

  • Blue Cross – Covers about 140 Million People
  • UnitedHealthcare – Covers about 70 Million
  • Aetna – Covers about 24 Million
  • Humana – Covers about 13 Million
  • CIGNA – Covers about 12 Million

And the VA Covers about 15 Million People, but there are about 22 Million Veterans eligible for VA Medical Coverage.

Now that you know some of the numbers, only a Health Care Bill that makes more business people want to get into the health insurance business would be a good bill.  My test for any health care legislation (or any legislation) –

Unless you create legislation that has entrepreneurs and venture capitalists rushing in to create a new health insurance business, than your legislation stinks and is just more regulation.  UBER had to be created first, then legislated, but there is not one entrepreneur that wants to disrupt the health insurance business because the barriers to entry are too great. It’s too regulated already. There a couple trying to do it, Google ELAP services.  They deal directly with the hospitals and get sued to force hospitals to show their pricing.  They are the UBER of the Health Insurance world, in my opinion.

Who this is all about…

So there’s about 44 million people left who are on smaller health plans, Medicare, Medicaid, etc.  or not in the system all together.  The number not in the system altogether is what ALL of this hoopla is about, right?

The number is probably around 15-20 million totally uninsured and NEVER will be “insured” because these are the heroin addicts etc, who don’t give a crap about a subsidy, tax credit or even signing up for Medicaid, even if its free, they don’t have the mental capacity to do ANYTHING.  You could make car insurance $5 a year and guess what, they wouldn’t buy it.

That’s where my idea comes in, the number of totally uninsured or number of incapable is about the same number who are covered for the Veterans Administration.

In the simplest terms my idea starts with a question.  Why, if we republicans/conservatives don’t believe in universal medicine do we have our best citizens of this Country under government controlled medical care?  I’m talking about the Veterans Administration.  Of course, we didn’t put it in, it was the Democrats, but why would we keep it this way if we control all of Congress?  The spend on the VA was about $170 Billion in 2015, that’s a lot of money.  They have a network of about 200 government run hospitals and almost 2,000 facilities nationwide.

The crux of my plan is to put all veterans on private medical plans that the government pays for like any other business.  The large insurance carriers could compete for the business, like they do for Tricare.  Then Veterans would have access to all the best private market hospitals and doctors.

If you have to “give away” anything in a civilized society… Don’t give the poor insurance, give them health care.

The second big part of my plan would be to then convert all the current VA hospitals/facilities and doctors into the government direct health care system, not insurance.  The main problem with these other entitlements is trying to have government buy insurance for other people – that will NEVER work.  Thinking you can give away insurance is the same thinking like Medicare or Social Security entitlements, it will be insolvent, just a matter of time.

Even if you let the hospitals be privately run government funded, I’m fine with that, but you must take the insurance industry and the 95% of Americans held hostage and who won’t use this health system, out of it.

I know it might sound crazy, because it might be considered “universal healthcare” and cost would become the topic, but if we had direct care Government funded hospitals and doctors for “the rest” where we could control the costs; I know we could make it work.

As for the cost, I’m not the CBO, but I’m confident if those wonks looked at it, the money we would save by eliminating all other programs that subsidize insurance, Medicaid, etc would more than cover the cost of the VA to Poor transformed health system, hospitals and doctors by paying them directly.

This is honestly the only way we’ll ever be able to “fix” healthcare in our country. And if we don’t do it this way, when the Democrats get back in they will do it as it is Europe and Canada where its universal for ALL, which I’m totally against.   Boom – 100% covered, liberals happy, conservative sad, but wait…

How would this cut costs and improve the lives of the other 95%?

It would create savings because there would now be incentives to work and be on a private plan.

Currently we give away the best medical insurance coverage money can buy and the math just doesn’t work and will never work.  It’s like having a program where you want the less fortunate to go to a baseball game, then giving them front row tickets, while the people who paid sit in the nosebleeds.

I’m one of eleven children and my dad who was a cop got MS and went blind at 37 years old.  My mom had to work and she chose a job as a meter maid only to get the best Blue Cross coverage there was, it was that important to her to have the best coverage.  That incentive is gone.

Everything in life is about incentives, and there is currently more incentive to get a subsidy and not work then there is to try to receive coverage through your place of work.  This is true currently with ACA and won’t change under the RyanCare bill.  It’s the government competing with the private market employers for the in the most important employee benefit, health insurance.

If we convert the VA system, into the system of public hospitals and doctors for the poor then we could control the healthcare and therefore reduce costs of those who are less fortunate.

Costs would be controlled through coordinating preventative care, there may be waiting times and reviews for certain procedures that may not be covered if not life threatening or medically necessary, but at least at that point we could restrict some services.  Right now, it’s a free for all.  If you are on the “government plan”, then you also would have to register and be registered in the government system.  We could then track the care that these folks would get and if they didn’t like it, well, then they could work to get off the government plan to a private plan.

It would create incentive for people to want to be on a private plan, but the converted VA would still be better than nothing at all or people ending up in Emergency Rooms when they need care.  As for Emergencies, if a member on the public health plan has an emergency they can continue to go to ANY private hospital, but once stabilized, they will be safely transported back to a government run hospital.  I also think we could help new student doctors pay back their loans if they agree to do four years in a “government run” hospital.  They would get great experience, take lower pay, but we may also repay their loans.

The last benefit that I’ll mention to my plan is that it would keep the private insurance market private.  It would allow insurance to work the way it’s supposed to, we would have to reduce regulations 90% and let it work like Life Insurance works. Where the actuarial tables mean something again and not just pay for every medical cost because it’s heartless otherwise.

Go back to letting the companies’ offer the employee benefits (Insurance) they want to attract and compete for the best workers.  The private market could then create creative plans that could even cover cosmetic procedures and all sorts of innovative plan designs because the government would not be regulating them as much and the costs would go down because they would not have the burden of covering everyone.

Hospitals would also reduce costs because they would not have to take a loss on taking care of people who don’t have insurance, they would have to go to the public (privately run) hospitals.

The only way you can control health care costs is through network limits (why HMOs worked well), discounts (hospitals take less), or limit services.  And it’s against the law to limit any services, hell people in prison get sex change operations for free!

So, there it is in a nutshell.  There is a lot more I could offer on implementation and details, but too much to go into now.  I know it’s a monumental task, but no more difficult than going down the same road we’re going down now.  I follow this stuff closely and if I’m being honest, I’ve not heard one good idea to fix it another way from either side of the aisle.  Even if you don’t like my whole idea, you must admit that it’s unique from all the other ideas out there currently.

And to my fellow republicans, if you don’t like, let’s debate it if you think I’m wrong.  I understand some of you have these iron clad “conservative” principles that say NOTHING should be government run.  But we need uniform roads, military, public water, gas, and I believe basic direct health care for all, even if it’s not the level you and I would expect when we pay for it.  My opinion is its worse to give away insurance, than to have nothing at all.

I would love to live in Ayn Rand’s gulch, but the fact is that sort of libertarian utopia will never exist.  In America, I believe you should be able to pay and receive better, not pay and receive the same or even less than someone else gets “for free”.  I’m actually more conservative than most, I’d rather not have the Medicare or Social Security programs either; they have ballooned into something unrecognizable.

My last point is then fine, don’t let it be a government run, fund the Churches and let them find volunteers to do it.  That’s why there were so many Catholic health systems, because they would take anyone.  There is a solution in my comments somewhere, but all the crap the politicians are talking about is just crap, moving around the deck chairs on the titanic.

I want government OUT of all health insurance, but I do believe that the government should take care of the poorest at their own hospitals, if they want to do it at all.  Please debate me.  Why is the direct care system good enough (or bad enough) for our Veterans’ but not for the poor?

Thanks for reading.

Joseph Wood is an Insurance Executive with 17 years of experience in the Insurance industry.

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comologiaraulcibelespjnelsonAllanSteve2 Recent comment authors
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pjnelson
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pjnelson

The annual Federal deficit began to worsen steadily beginning around 1997 and has leveled out at @ $500 Billion annually in the last 8-9 years. Since then the annual increase in the cost of our nation’s healthcare has annually risen 1-2% faster than the growth of our nation’s GDP. The other developed nations spend 13.1% or less of their GDP on healthcare. Depending on your economic view of all this, the excess cost of our nation’s healthcare is still the most prominent contributor to our nation’s deficit annually. . I propose that the major determinants of each citizen’s HEALTHCARE and… Read more »

Allan
Member
Allan

“worsening maternal mortality ratio” correlates with our increased drug use and other social problems more than it does with America’s healthcare outcomes which are quite good compared to the rest of the world.

comologia
Member

I completely agree that health insurance is not insurance in the car/house sense. But it’s not “an income subsidy, ostensibly designed to help the sick pay for medical care” either. If it was, each person would get X number of dollars to directly pay for care. Instead, they get X number of dollars to put in a big pot where risk is shared. It is this notion of shared risk that makes people call it insurance. And it is the size and nature of the pot that makes it fail every single time. Why? Because no matter who (conservatives, liberals… Read more »

comologia
Member

Also, The public schools in my inner city pay on average 16k per student, and they have less than a 50% graduation rate. plenty of money to pay a private school instead.

Peter
Member
Peter

You can’t fault public schools for graduation rates unless you also compare the home life, parental involvement/support, and even if the students have adequate nutrition among a lot of other factors. Private schools get to cheery pick their students and here in NC they don’t even have to be judged by the same success/fail rules as public schools.

Teachers can’t be miracle workers in underprivileged neighborhoods carrying the burden of the very real social problems surrounding them.

Jwood
Member
Jwood

Fact check .org, really? no bias there… ha! I don’t need a website to tell me what is factual when I can look up the information myself. I honestly don’t want to go down the rabbit hole of the Clinton Foundation in this healthcare discussion… but c’mon, now I know who I’m dealing with as well if your going to defend them. Here are the “FACTS”, from Their own website. https://www.clintonfoundation.org/sites/default/files/clinton_foundation_report_public_2015.pdf Please see page 24 of their 2015 report, they spent $109 million on Salaries and benefits and 18.8 million on travel in ONE YEAR. Yeah, sure, where do I… Read more »

Steve2
Member
Steve2

Unlike most charities which send the money out, the Clinton Foundation hired the people to do the work directly. This has been covered pretty well. As an example, rather than send grant money to work on malaria to an outside group, they hired their own internal people. The organizations that rate charities understand this and give the Foundation high ratings. http://www.politifact.com/truth-o-meter/statements/2016/aug/25/reince-priebus/reince-priebus-false-claim-80-clinton-foundation-c/ As to the VA failing, how is it failing? AFAICT, nearly every study I have seen suggests that they have outcomes about on par with private hospitals. Yes, individual hospitals have issues, but that is also true with the… Read more »

Jwood
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Jwood

Steve, Peter said the VA was bad, not me. I’m saying we convert that into a system for the poorest of the poor (for only about 5% of our population) and subsidize the Veterans with the Blue Cross that congress is “earning”. I don’t want people “dying in the street”, my opinion is truly sincere in that regard. Also, you both should have known where I sat politically by reading my post, I didn’t hide it. Why is it a surprise that I’m not a Clinton fan? And we could go round and round on the CF, but on page… Read more »

Peter
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Peter

“Peter said the VA was bad”

No I didn’t.

Steve2
Member
Steve2

Just to be clear, I didn’t vote for Clinton either, or Trump. I am long time financial supporter of our Republican congressman, have known him for many years, but generally lean more to the left. While i agree to an extent on the consolidation and size, I would hope you realize that this is largely being driven by market forces. Think of it as WalMart closing out the little mom and pop stores (and I do shop at WalMArt and don’t hate them). Not all of this is bad. My network has bought up several smaller hospitals. They were pretty… Read more »

Allan
Member
Allan

“By your theory, the competition from having multiple hospitals should have made them better. It didn’t.”

In reality, based upon what you say, these were lousy hospitals. Competition doesn’t guarantee success, but it permitted your netowork to buy them up and hopefully make them better.

Peter
Member
Peter

“I don’t need a website to tell me what is factual when I can look up the information myself.” Just picking a number from a financial report does not make a case. I have looked this up a lot, on many sites, and even though I understand foundations/charities can be nothing more than fronts for salaries for their own board of directors, there is no smoking gun for the Clinton Foundation – despite what Rush Limbaugh says. Education is complicated because a child’s success depends on so many factors, many not controlled by teachers. We’ve come to expect teachers to… Read more »

Jwood
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Jwood

Thanks for commenting Peter. Sorry to answer a question with a question, but how do we currently ensure that the VA system has quality care and why would it be any worse if it was focused on the poor instead of the Veterans? As far as education, I don’t like the analogy because they were separating (separate but equal) based on race which was obviously a disgusting thing to do. Private schools exist perfectly fine and compete well next to public schools, so why can’t there be a private (insurance based) healthcare system along side of a public one? I… Read more »

Steve2
Member
Steve2

1) I have looked up the Clinton charity. You are wrong. Probably too complex for you to understand if you don’t want to understand. 2) You get major points for creativity here. The first problem is doing away with VA hospitals. As a vet, and as one who worked in a VA hospital, albeit a long time ago, a lot of vets really like VA facilities. A fairly high percentage of VA employees are veterans, about 1/3 IIRC. Kind of hard to describe unless you have been there. Would also require civilian hospitals to add on care they don’t do… Read more »

Peter
Member
Peter

“but how do we currently ensure that the VA system has quality care and why would it be any worse if it was focused on the poor instead of the Veterans?” Because veterans have a special place in our hearts, the poor not so much. Even with our “thank you for your service” attitude we’ve seen the VA can fail badly with veterans. “I don’t like the analogy because they were separating … based on race” The “race” was also poor, which made it easier. But we still separate by race and poverty. Inner city black neighborhood schools get less… Read more »

Allan
Member
Allan

jwood, I agree with many of your points and I have looked a lot of them up as well, treated people at the VA and privately in my office despite the fact those people belonged to the VA. You are right in looking for a smaller government and one that follows the Constitution instead of treating it like toilet paper to be replaced as needed. Just look at how much increased spending has occurred in healthcare everytime the government pushes deeper into the healthcare sector. Look at what has happened in our schools. Look at our universities where there is… Read more »

Jwood
Member
Jwood

Thanks Allen! I was beginning to think that this blog was all one sided. It seems people on the left either want single payer or don’t want to talk at all. I’m tired of hearing that Insurance companies are the absolute bad guys. If you look at the world from their view, they are one of the only responsible parents in the room. They have to tell people no. They have to price and create medical policies to either pay or not for every single medical service, device, drug, new technology available. And they can be (and are often) sued… Read more »

Allan
Member
Allan

Jwood, we just have to accept that some people do not relish Liberty and Freedom as much as we do and accept what the media tells them and what they wish to believe. I think Milton Friedman once said something similar to this, ‘Given the choice of a private monopoly or government run entity I would choose the private monopoly. Government is forever and private monopolies run their course’. Healthcare in this nation has been destroyed by too much government interference. The anecdotes we hear on these blogs frequently don’t represent reality even though the one’s providing them think anecdote… Read more »

Jwood
Member
Jwood

Thank you! Yes, Just as Kim Jong whomever feeds all his people plain rice. When you have a system where all get the same no matter what they contribute, you CAN do it cheaper. But the value and quality goes down for all too. Imagine the economies of scale we could reach if only we all drove the same car, had the same cell phone, and the same computer. We wouldn’t have to worry about different parts to fix the cars, different cables to charge the phones or different OS for the computers. Wouldn’t that really be the best way… Read more »

Peter
Member
Peter

I have a problem with relegating the “poor” to public hospitals that will invariably provide substandard care. I’m not against publicly (community) run hospitals, in fact I’d prefer it as they are our biggest cost centers, but unless we’re all in the same system there’ll be no support to give good and accessible health care to the poor (ish). Why is this different than separate but equal education? We know that there was never any equal due to underfunding. And my understanding is Medicaid was created so southern whites wouldn’t have to sit in the same waiting rooms as blacks.… Read more »