Please explain what I've got wrong

[rockymountaindem]

Here's the post I was thinking about writing last night. I'm going to write it now because there are enough posts out here saying that this health care reform (HCR) bill is still worth passing that I figure maybe I don't have the facts right. If any of you out there can disprove my reasoning, nobody would be happier than I. Here goes...

The Senate is proposing an HCR bill without a public option or any other means of cost control, such as caps on premiums. It will mandate that individuals have health insurance, but in turn will prevent insurers from being able to turn down anybody with a preexisting condition. It will, however, as noted by Howard Dean last night in Rachael Maddow, allow insurers to charge those with a preexisting condition three times more. Furthermore, there is a provision saying that insurers cannot turn anybody down except in cases of "fraud". As another poster here suggested, this means that insurers will probably wind up taking a lot of people to court accusing them of fraud just to tie them up in a legal swamp which individuals will not be able to navigate without the help of a costly attorney. Let's just say I wouldn't put that past our insurance industry.

Of course, not everyone will be able to afford what it may cost for them to procure insurance. To help, the bill contains generous subsidies for low and middle-income individuals and families. This seems like a bitter pill we would have to swallow. I mean, who among us wants to see hundreds of billions of dollars shoveled at private health insurance firms? Especially if they're the same firms that have been gouging us for years, denying coverage to those who need it and fighting real reform. It kind of seems like we're rewarding atrocious behavior, no? But okay... if we're committed (perhaps in both senses of the word) to making this reform strictly through the private market, that's how we're going to have to go. So we have subsidies in place to help those who need them. What about people who make just a little too much to qualify? Then they are expected to shell 15% out-of-pocket for insurance, I hear. What's the difference between doing that and just raising their taxes by 15%?

Furthermore, and here's the real problem, I think, there are no ways to staunch the fast rise of costs. So while whatever subsidies we set aside today might be sufficient, the continually rising cost of insurance will eventually make them inadequate. But, because of mandates, everybody will still have to be insured. So they will either need to make up the difference that emerges over the next several years out-of-pocket, or we will have to increase our subsidies to those who need them to allow them to afford the mandate coverage. Essentially, the private insurers will be able to get whatever price they ask for, whether they get their money from us individually or as taxpayers. All this, and the Senate also removed the provision against lifetime limits on coverage, so we don't even get that benefit anymore.

I might be able to put up with all this if there were some kind of precedent-setting public option that could be continually expanded to cover more people until it covered everyone. At least with the mandate in place, if we had a public option we might be able to avoid forking our money over to private firms if we didn't want to. Even the Medicare expansion would have made this palatable, because it would set a precedent for making Medicare available to more people until maybe someday we could have made it available to all. Of course, this is why Joe Lieberman says he's now against it after he was for it. But we get neither of those things. People who defend the Senate bill say that this bill will still set a positive precedent because it will make health insurance into a right, not a privilege. Maybe so. But look at the other precedents it will set:

1) It will make us totally committed on the federal level to our inefficient private health insurance system. It will essentially merge the public mandate for universal coverage and the private system which has been ripping us off for so long. It will not restrain rising costs of care. So essentially, it sets us off on the road of being forced to perpetually prop up the likes of Wellpoint and Aetna now and forever, because they will be the only type of delivery system in this country. That will further empower them to block future reform, and there will be nowhere for individuals to turn.

2) It rewards bad behavior. We are at this juncture today because enough people have finally once again become fed up with the practices of the insurance industry. I don't need to describe them to you, we know what they are. This Senate bill will reward the insurance industry for this past behavior. It will guarantee them an endless income from yet more subscribers in what is essentially a government-backed promise of money in the form of subsidies. It will require people making about 89k for a family of four (I think that's what I read) to pay 15% of their income to a private insurer whether they like it or not. That sounds like a big, wet kiss for everything the insurance industry has done previously.

3) It leaves us in a terrible position. What are our alternatives as of this morning? We are told to either pass this bill or be stuck with the system as it is. So we have the choice of shoveling more money than God has at the insurance industry through subsidies and mandated premiums (with no cost controls, remember) or maintaining our decrepit system that everybody hates for however long it will take to generate momentum for new reform. This is like hearing from the insurance industry, "Give us billions in subsidies and mandated premiums or we will continue to kill 44k people a year". I hate to put too fine a point on it, but that sounds like something from a bad western movie, and we're tied to the tracks.

Those of us who still favor this bill say that "something is better than nothing". It is true this bill will cover many of those who currently have no care. But at what cost? At the cost of enshrining the private system with NO alternatives and no cost controls? How will we pay for this new coverage ten years from now? Twenty years from now? This seems unsustainable to me. Furthermore, how is it a positive thing to force people to pay for something they can barely afford, especially if they don't get subsidies? While universal coverage is a necessary goal, it seems to me that achieving it by putting further financial stress on the middle class is not the practical or just means of achieving this. We are also warned that this is a "once-in-a-lifetime opportunity" that won't recur for decades if we pass this up now. Maybe it won't.

But I put it to you: Is this the kind of system we want to enshrine in law for the same number of decades? I maintain it is not.

Prove me wrong.

[county worker]

1. I can't argue with your logic.

So far I have not heard those who support this bill do as good a job of stating why it should pass as you have stating why it shouldn't.

I don't think they really have a good argument other than that it will insure those who do not now have insurance, but all things being even, if they had a choice once this bill was passed I think they would still chose to remain uninsured.

[OneGrassRoot]

8. That really says it right there:

"but all things being even, if they had a choice once this bill was passed I think they would still chose to remain uninsured."

Sad, but true. I'm one of those uninsured people, and I view this bill -- given the mandates and other details we know of now -- as a detriment to my situation, not a benefit. I realize it's not all about me, nor the millions like me, but they should have been able to come up with something that benefited -- even slightly -- the majority, rather than benefiting some and hurting others. I think it's pretty evenly split.

[sandnsea]

2. The 2004 Kerry & Dean proposals were - subsidized insurance

But now they're shoveling money to corporations. It just goes to show how fickle people are.

There are problems with this bill, but there is also just as much propaganda coming from the left as the right. The most important thing is whether people can afford a monthly premium and out of pocket.

As for the pre-existing condition, there is an interim pool being created that will be immediate. That's where the 3x rate is placed. Once the exchange is in place, then the rates will be based on age and not health. People have got this bill so mixed up that it's almost impossible to separate fact from fiction.

[rockymountaindem]

3. Thanks for your reply. I didn't know about the deal with the "interim pool"

However I would argue that there is a difference between "subsidized insurance" and what I referred to as shoveling money at the ins. corporations. I think I expressed in my post that while I wouldn't exactly be thrilled with subsidies, I could live with them if there were some kind of cap on costs, or any sort of cost control measure. I could also live with them if there were a public option to compete with the private sector which would keep costs down and allow people to avoid dealing with private industry if they so chose.

The "shoveling" aspect comes in because I see no means in this bill to keep costs down. Therefore, we will be giving the insurance companies more and more money every time costs go up, which will essentially mean any time they decide to ask for more. That's where I have a real problem.

[hayu_lol]

5. Just think of the bountiful bonuses...

that will be paid to the executives of the insurance companies.

You are right on.

[sandnsea]

11. There was no public option in 2004

I can't recall any caps on costs. The cost savings were to come from technology savings and having an affordable plan so the majority of people could have coverage. Kerry had a plan to pull out catastrophic cases and have them insured at the federal level. That would reduce premium costs. But if that were proposed now, people would scream about a pool of sick people being stuck in one plan. There's always people out there willing to say anything to further their own agenda, even single payer and PNHP. We'd have been far better off to skip the mandates and the public option, propose some mesh of Dean-Kerry 2004, and get it passed and move on.

[regnaD kciN]

4. You're off on a few points...

1) Despite what Governor Dean says, insurance companies cannot triple premium costs for preexisting conditions. They can vary premiums based on age, I think by a 2:1 margin, so it doesn't take much imagination to guess that older consumers (who are more likely to have preexisting conditions) will be hit with the higher premiums.

2) It's not true that there are no cost-controls -- the medical-loss rule (requiring that insurers pay out 85% of premiums on medical costs) will be a significant barrier to insurance companies jacking up premiums to give bigger salaries to its CEOs and higher profits to its investors.

3) The Senate did not remove lifetime limits on coverage. They allowed "reasonable" annual caps, but, the way it's written, it will be a lot harder than insurers simply saying "we feel like cutting off care" -- they'd have to go through a procedure to prove that their limit wasn't unreasonable in the given case, and would mainly apply to elective procedures rather than medically-necessary ones.

I personally think that, if this passes, further steps (including a public option) will be instituted in four or five years, as soon as the main parts of the bill go into effect and people see where the problems lie. But there's no guarantee of that, of course.

[rockymountaindem]

6. So the 85% rule is in the bill?

I kept hearing about how a 90% rule was being kept out of the bill so I thought there was no such provision. Having something like that is a definite plus. That's why I posted this thread.

However, I still think that enshrining this private system as the only means of delivery and accepting that only 85% of costs will go to care is still a net loss when Medicare has the lowest overhead of all. That needs to be made available.

[jberryhill]

7. "a significant barrier to insurance companies jacking up premiums"

...and a substantial incentive to vertically integrate with health care providers in order to jack up those "costs".

[kenny blankenship]

13. Exactly! People do you think they don't know how to work providers to run up costs???

Holy Carp! This legislation proposes to cast in bronze the most perverse incentive imaginable. Forever.

COST PLUS PRICING is how Halliburton ran all of their Iraq scams.

[rockymountaindem]

15. Could you please explain what that means? n/t

[jberryhill]

16. Sure....

I run a dairy processing plant. Farmers bring their milk to me, I process it, bottle it and sell it. They sell to me at fifty cents a gallon. I sell at a dollar a gallon.

You tell me that you are going to pay me to sell milk to everyone in town, and you are going to make everyone in town buy from me. The only catch is that I can only charge 25% above my costs.

I say "Great!".

We sign a deal. You figure I'm now going to sell my milk to everyone in town for about 63 cents per gallon.

I now go and buy a farm and some cows, or I form another company to buy a farm and some cows. I milk those cows, and then sell to my dairy plant at four dollars a gallon. Now, I can sell my milk at five dollars a gallon (25% over my cost of getting the milk).

When you go to a "fixed percentage over cost", then you incentivize vertical integration schemes to create "costs".

Alternatively - I don't buy a farm. But I no longer care what the farmers charge me, since the more they charge me, the more profit I make.

Figure. If I buy at fifty cents per gallon, I have to sell at 63, and make a profit of 13 cents. But if I buy at a dollar a gallon, then I can sell at $1.25, and make 25 cents.

A guaranteed 25% over cost means that I want my cost to go UP!

This is why oil companies make record profits when the price of crude goes up, because their pricing structure is tuned to a percentage over cost. They WANT the price of crude to go up. They make more money that way.

Why on earth would you, as a health insurance company, want to impose cost controls on health care providers if you were guaranteed 25% over cost?

[rockymountaindem]

17. Excellent point

Wow, this bill is :puke:

[ljm2002]

10. About that 85% rule...

...it seems to me that only tends to drive costs up, not down. That is, the insurance companies will still pay their executives the same as they are now. In order to get that out of the 15% they are allowed to use, they will have to charge more to begin with. I do not see how the 85% rule keeps costs down, I really don't.

[JVS]

14. The 85% rule is not a cost-cutting incentive. What it does is set a limit on how much...

the companies can benefit by collecting premiums and denying care. Of course it is prone to some serious abuse as you point out.

[jberryhill]

19. It is an incentive for increased costs

Higher "costs", higher percentage.

One could argue, "Oh, but there will be competition."

What there will be is a "cartel".

[JVS]

20. It's defintely a two edged sword.

The positive side is that it means that insurers are less inclined to screw people by denying treatment, but the negative is just as large because it incentivizes making no effort to reign in costs.

I've posted on this before.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x6978253

[JVS]

9. It's an awful bill

[grantcart]

12. The only other thing thta is missing is that they were talking about controlling the

medical loss ratio.

From the current 65% to 85%. On paper this would seem to be a good thing but again it doesn't do anything to control costs and instead gives insurance companies an incentive to spend wildly.

[Scipio the Elder]

18. And still, no one talks about the 10-year Gov't Bonds

Why a bunch of non-economists are convinced that a pile of career bureaucrats will commit themselves to silver bullet cost-cutting strategies will always astound me.

You could jack taxes up 20% and it still won't provide enough profit for government to consistently outperform market forces.

You could streamline the entire industry under the most efficient, modern business tactics known to man with simply enforcing the laws that are already on the book and it still won't turn a profit for the government that will allow them to outperform market forces.

If the HCR refuses to make private insurance illegal, then there is only one long-term option left: Do what America has always done... fund the damn thing with Treasury Assets.

What the government is going to do is do what they have ALWAYS done since 1945: Issue 10-20 year Treasury Bonds to foreign nations to flip the bill for a share of interest yields. It is FAR easier politically to float T-Bills into the future and manage it supply-side (AKA inflation) than to convince people they need to be taxed more or need more government intervention according to the dogma of yet ANOTHER Leftwing Moral Crusade.

And yet, not ONE person in this entire debate is bringing this up.