Insurance Adds Negative Value

Ezra Klein has a nice post beginning with the proposition that the health insurance industry adds negative value to health care -- that is, they make it worse. For those conservatives who go on about how competition always makes things better, he offers, "Competition among drug dealers does not aid the neighborhood, and currently, competition among insurers does not aid the ill. Indeed, their inattention to actual care is startling."

Bravo.

Barry Keene, a businessman who is vice-president of Health Care for All Colorado, often sounds sincerely sympathetic to the plight of the insurance industry -- something with which I can't quite empathize, although I understand the argument. Ezra puts it like this:

It is actually counterproductive for insurers to compete on giving us the best care. It's not simply that they're not doing it, but given the structure of the marketplace, they shouldn't do it. Imagine insurer X creates the best damn diabetes protocols in the country. And they begin advertising this fact. What happens on Day Two? Well, they're flooded with individuals suffering from diabetes, or individuals who fear they will one day be suffering from diabetes. These people, in the current system, are a bad deal. Not only is it near impossible to insure them at a profit, but pooling their costs (which is what insurers do, after all) raises premiums for all the insurer's other customers. When the average customer of an insurer gets sicker, prices go up for all their customers. So the healthy folks contracting with that insurer quit the pool, and go find a cheaper deal, which forces the insurer to raise premiums again, driving out more healthy folks, which forces them to raise premiums again, which drives out more healthy folks, and so on. It's what we call an insurance death spiral, and it ends with the collapse of the insurer.

Risk Equalization in Eire

For Americans, reading about "risk equalisation" in the Irish insurance market can only evoke a snort of disbelief. It's a concept so foreign I'm not even going to Americanize the spelling.

So what the bloody hell is "risk equalisation" you ask?

According to Medical News Today, risk equalisation is how competition in the health insurance market works to the benefit of all health insurance subscribers. It operates alongside community rating, open enrollment and lifetime cover. Here are the definitions:

• Open Enrollment entitles persons of all ages, irrespective of health status to avail of health insurance.
• Community Rating ensures that younger and older subscribers pay the same amount for similar health insurance cover and that subscribers pay the same amount for similar cover throughout their lives. This means that people can continue to afford health insurance right into those decades of their lives when they are most likely to need it.
• Risk equalisation payments involve transferring funds from insurance companies which have a disproportionate share of young, healthy subscribers to companies which have a disproportionate share of older people who are more prone to illness.

Crazy.

"This allows for an equitable market, enabling companies to compete on a equal basis, but also protecting customers through removing the incentive to engage in preferred risk selection," according to the story.

Crazy.

This would protect individuals and families at the cost of profit. It's nuts. Probably communist.

Most EU countries have supplemental insurance that a lot of people buy -- about 50 percent in Ireland. (And yes! Those private insurance costs are factored into the total costs you read about where the U.S. looks so bad.) Evidently the EU court doesn't want to model their insurance market on ours. Odd, eh? Ours is so robust. Very profitable industry.

No doubt the insurance industry will continue its assaults on the notion of protecting the consumer in this wild-eyed manner. Sooner or later, by hook or by crook, "risk equalisation" will be a boogey-man of the past.

Two Kinds of Health Reformers

Brad Warthen says this well:

We continue to concentrate on the wrong thing -- getting the uninsured into the present system -- when we talk about health care reform.

Increasingly, those of us who are privileged to be in the system find that we can't afford health care, either. The whole system is rotten, wasteful, too expensive and too inefficient. We pay more money to be sicker than folks in any other advanced nation.

There are a lot of problems with our system, but the biggest is the basic premise -- employer-based health care through for-profit (and we're talking for HUGE profits) private insurance companies.

If private health care coverage weren't so expensive for all of us, the 1 in 7 who remain uncovered would be in it. But it is, and will be, expensive by definition. A profit has to be made.

A single-payer system is the logical way to go.

So what kind of health reformer are you? The kind who is trying to get the uninsured into the system, or the kind that is trying to change the system? Mother Teresa or Archbishop Romero? Charity or justice?

My Next Life

Kevin Drum posts Friday cat pictures. Maybe I'll start posting Wednesday sailing pictures.

Denver Post vs. the Governor

What is it with the Denver Post and Colorado Governor Bill Ritter?

I'm even seeing this when I basically agree with the criticism. Today it's a good health care story about a 53-year-old guy with seizure disorder who can't get insurance. Me, basically, except I've managed to keep my coverage.

Cover Colorado said they'd insure the guy for $500 a month. Only $100 more than I pay. The one private insurer who agree to take him on had a plan that cost $650. Pretty standard, if you're talking about decent coverage for someone with pre-existing conditions. And how many of us reach 50 without a few?

Katy Human, their health care reporter, writes:

While some Coloradans can't afford health insurance and others have inadequate coverage, Sullivan falls into another problem group — people who are generally healthy and middle-class but can't easily get insurance because of pre-existing medical conditions.

Colorado lawmakers, who promised last year to make health reform a priority this session, are rapidly backing off health-reform ideas after realizing it would cost roughly $1 billion to get insurance to the state's 790,000 people without it.

She didn't mention the fact that Health Care for All Colorado's plan would save the state $1.4 billion annually, and that people like this guy with the seizure disorder would be covered -- but again: Pretty standard fare.

Then comes this quote that provides the pullquote and jump tag that the paper uses. It's from the guy's wife:

"When a government cannot respond to the needs of the people, then there is a real problem," Patty Sullivan said Tuesday. "Gov. Ritter is not our friend on this."

What? It's a great quote, and I agree with the basic premise -- politicians are not providing the leadership that they could on this. Ritter himself told me in front of a crowd that the time isn't right, that the pols need us to do more educating. Standard fare, fair enough. Probably even right by many measures.

So on the one hand, I agree that the governor, as the highest elected official in the state has a special responsibility to lead. On the other hand, the Post really viciously attacked Ritter for his support of unions. So I wonder.

Ritter has a press conference today on health care. He referenced cost-shifting the other night on a public television call-in show, a misleading diversion from real solutions. Reducing cost-shifting due to the uninsured has very little potential for saving money under health insurance mandate schemes. If Ritter goes in that direction it would be a great disappointment.

The last part of Human's article was great. It referenced the phased approach to single-payer that Rep. Claire Levy of Boulder hopes to introduce.

Sullivan said she's pinning hope on the few state lawmakers still interested in universal coverage, including Rep. Claire Levy, a Democrat representing parts of Clear Creek, Gilpin and Boulder counties.

Levy said she is looking to introduce a late bill to start building a universal health insurance system in the state by creating an agency to draw up a benefit package and calculate costs.

Eventually, a single-payer system would probably need voter approval.

Startup costs could be high, as much as $15 billion by one estimate, though a nonprofit insurance program would lead to savings for most Colorado families, businesses and health care providers, Levy said.

"I keep hearing people repeat as if it's a received truth that the voters won't pass it," Levy said. "But I hear the same people saying they support a single-payer system. And businesses — especially small businesses."

Imagine No Insurance Industry

It's easy if you try.

Kevin Drum has a fabulous post at Washington Post on living without the insurance industry. One of the reasons that both Kevin Drum and Ezra Klein are so great is the quality of the comments they inspire. Scroll down and admire how smart people are.

Drum links to an LA Times article on Blue Cross/Blue Shield sending a threatening letter to physicians, telling them they'd better tell all about their patients' conditions so that the insurer can deny treatment by any means possible.

He asks -- what good are insurance companies? "They cherry pick clients, add huge administrative costs to the system, and do nothing to drive innovation or bring down costs."

Next he muses on a column by right-winger Tyler Cohen, who thinks that all we need to do is set up a massive new federal bureaucracy forcing the insurance industry to be more accountable. Drum's responds,

But if it's price signals and competition you're after, why not cut out the middleman and have consumers pay doctors directly? For example, imagine a national healthcare plan that paid 75% of all medical expenses but required you to pay the other 25%. Your maximum out-of-pocket expense each year would be capped at, say, 5% of income at low income levels, 15% in the middle, 30% at the next level, and 50% for the rich. Or something like that. It covers everyone, it limits catastrophic medical expenses, and it eliminates insurance companies and their bloated administration costs. But the copay is high enough that it gives consumers an incentive to shop around and doctors an incentive to compete.

This kind of single-payer system obviously requires lots of government funding, but on the regulatory front would probably be more conducive to competition and innovation than desperately trying to bring down ever-bigger hammers on private insurance companies who are gaming the system. And since the government would basically just be in the check writing business, not the spending business, deadweight costs would be fairly low.

I didn't have to go far before finding a commenter pointing out that high deductibles are counter productive to preventive care.

The internet is a wonderful place. Thanks Al Gore.

Canadian urban legends and realities

Every single-payer supporter should take a look at the Urban Legends Reference page on an email that purports to be from a Canadian talking about the problems with the health care system there.

[from the inaccurate viral email]What they don't tell you is how much we pay in taxes to keep the health care system afloat. I am personally in the 55% tax bracket. Yes 55% of my earnings go to taxes.

[in reality...]The highest federal income tax rate in Canada is 29% (for persons with annual taxable income over $120,887), and the highest provincial income tax rate in British Columbia is 14.7% (for those with annual taxable incomes over over $95,909). The typical upper-income level Canadian taxpayer is not in a 55% tax bracket.

By way of comparison, a typical upper-income level American taxpayer residing in California pays a roughly equivalent share of his income in federal and state taxes, even though the U.S. has no national health insurance program.

On the other hand, the Canadian system is not perfect. There are waits, and in a recent Commonwealth Fund report, Canada scored fifth out of six nations in terms of overall system adequacy. (The U.S. came in sixth.)

And so people do have complaints. They rarely take into consideration what the alternative is to guaranteed health care for all, and they get some things just plain wrong, but we need to be aware that Canada is not a panacea. We're not selling snake oil. We're simply arguing for a better way.

U.S. Medicare is already better than Canadian Medicare. There's no reason an expanded U.S. Medicare couldn't also be better.

Mass Gov Looks to Single-Payer

The Berkshire Eagle reports that regarding Massachusetts' mandated insurance scheme, Governor Deval Patrick says:

"the rate of increase in premiums is a serious problem for the state system and for private individuals, families and businesses as well. . . and there's a view out there that as long as private insurance is a part of health-care reform, we're never really going to break the back of the pattern." He called for serious consideration of a single-payer universal health care solution by the next administration in Washington.

The paper cited a series from the Boston Globe outlining the state's problems with their new system, which forces people to buy private insurance. In particular, the Berkshire paper noted,

Patrick inherited inaccurate assumptions about the cost of state-subsidized health insurance from the Romney administration, which created the program along with Beacon Hill lawmakers. (It's laughable whenever the presidential flunk-out blasts "Hillary Care" as socialized medicine, since it's based largely on "Romney Care.") Patrick's budget proposal for the upcoming fiscal year includes $400 million in extra health care spending — taxpayers would be responsible for nearly half of that, with the federal government counted on to supply the rest.

With the Bush administration now seeking massive cuts in health-care and other non-military spending, the immediate prospect of relief from Washington looks bleak. A McCain presidency would amount to a Bush third term when it comes to domestic spending. A Clinton or Obama administration would produce a sea-change, but it's unlikely the federal government will be in a position to bail out Massachusetts if health care insurance spending spirals out of control.

#

The state program is run by the Commonwealth Connector, which hooks up uninsured residents with the appropriate coverage. Jon Kingsdale, head of the program, told The Globe in no uncertain terms: "This is not sustainable if we don't deal with affordability." Proposed solutions are vague or half-baked at this point, ranging from a $1-per-pack increase in the cigarette tax (a great idea anyway) to help fund the state's health program to plans by a pharmacy chain to put affordable clinics in its stores to deal with basic maladies (a highly-debatable idea). Down the road, tighter regulation of hospital fees and insurance rates may have to be considered.

To put it simply, unless and until the cost of health care — much of it administrative, tied to the bureaucratic jungle of dealing with private insurance carriers — is contained and reduced, the Massachusetts reform program is in jeopardy. And this would bode ill for any universal health care program, with or without mandates, nationwide.

Polish lobbyists call for private insurance

The Polish Insurance Chamber is calling for private insurance that would compete with their government programs. They say, "The PIU assumes the cost of the additional health insurance would be around zł.50 per month. Assuming a take-up of 15%, this would mean an extra zł.3.5 billion for the Polish healthcare system."

If the system is underfunded, wouldn't an increase in taxes do that more efficiently?

Already on Our Way

The libertarians are right about one thing -- we already are well on our well to universal health care. When you add up the veterans, active duty military, government employees, the elderly, the incarcerated, the poor on Medicaid, the disabled, etc., a large percentage of U.S. citizens do already receive health care paid for by the government.

This writer from an Oklahoma College paper thinks it's 60 percent. I think that figure actually is how much of the $2 trillion price tag is paid for by our tax dollars, not the percentage of people getting care. Remember that 80 percent of the cost is eaten up by the sickest 20 percent of the people -- many of whom are indeed already getting subsidized care.

What we're fighting over is whether the rest of us should not only have to pay for that, but pay through the nose to get substandard coverage for our own families through extortionary private for-profit health insurance.

The Oklahoman writer posits that this is a fiscal and moral crisis -- a good way to put it.

And the sad thing is that we're already paying for universal health care. We're just not getting it.