One of the central selling points used by President Obama to push the Democrats’ health care plan is the notion that a comprehensive overhaul of the health care system will reduce costs. But costs to who, and how? Let’s step back a minute and try to figure out how Obama’s cost-cutting argument could possibly be so.
Prologue: Tax That Man Behind The Tree
First, a quick reminder of two reasons why cost-cutting is such an important selling point.
Number one, the core of what the Democratic base, in particular, wants from health care “reform” is universal coverage. You often hear statistics thrown around about there being 30 or 35 or, last I heard, 47 million people without health insurance, and the implication that these people are receiving zero or negligible healthcare. Debunking those statistics and assumptions is itself a cottage industry, but let’s leave that aside for the moment, because the fact of the matter is that in a country of 300 million people, when you strip out the people who (1) already have health insurance and expect to continue having it, (2) don’t especially want to buy health insurance, (3) are only briefly without health insurance and not worried about it, or (4) don’t or can’t vote, what you end up with is a very small slice of the electorate that would benefit from getting health insurance they currently lack or fear lacking. Now, voters don’t only vote their own self-interests on any issue – but the fewer people who benefit directly from legislation, the harder it is to drum up public support for a bill that may threaten the self-interest of others. So, it becomes politically necessary, if the bill is to be as sweeping and ambitious as most of the versions circulated have been, to sell it to the public on the basis of some argument above and beyond insuring the uninsured. That’s doubly so because if your goal was solely to insure the uninsured, much of what is in the various bills would be unnecessary.
Second, specific to the issue of saving money for the federal government, the Obama Administration and the Democrats have already severely tried the electorate’s appetite for massive expansions of federal spending, especially deficit spending. The explosion of new spending, most notably the pork-laden “stimulus” bill, makes prior complaints about spending under Bush look like complaints about the deck chairs on the Titanic and flatly contradicts Obama’s read-my-lips pledge during two of last October’s debates that his proposals would result in a net reduction of federal spending. The voters have noticed that they’re not getting anything resembling what they were promised. Thus, Obama has repeatedly pledged, with the same assurance as his campaign pledge on spending, that the health care bill would be “deficit neutral.” The Congressional Budget Office, typically a liberal redoubt, has repeatedly thrown cold water on the claim that any of the proposals on the table would be deficit-neutral. Clearly, to get there, cost savings would need to be found somewhere to completely offset outlays.
How’s that gonna work?
Let’s review the options. The Democrats’ main argument is that restructuring the entire health care sector will reduce the nation’s total (public and private) outlay for health care. When you boil it down, though, there are only three variables you can cut: reduce the amount of medical care provided; reduce what providers of medical care earn for their products and services; and reduce intermediary costs. All are problematic.
I. Less Medical Care
The most obvious way to cut spending on medical care is to buy less of it. That’s at the crux of the public’s worry about “death panels” cutting off care, about rationing; it’s why so many of the people showing up agitated at town halls are senior citizens worried about getting less medical care.
The “death panel” phrase was shorthand, of course, but it neatly captured the core of the problem: government already rations care, albeit not very efficienctly, in programs like Medicare and Medicaid (see, e.g., here – then again, the failure to do more rationing explains those programs’ exploding, budget-busting costs) and the end-of-life consulting procedures criticized by Palin and subsequently dropped by chastened Democrats are not the only way in which government incentives could or would be brought to bear on physicians to push patients from consuming health care to preparing for death or assisted suicide. More here, among many other places. But you don’t have to be looking at the end-stage to see that any plan premised upon cost-cutting by reducing the amount of care provided would, well, reduce the amount of care provided. And if the costs being cut are taxpayer costs, the power to do so would end up being vested in some sort of governmental entity, likely a panel of government-appointed “experts,” as Mickey Kaus notes was alluded to by President Obama himself back in April:
THE PRESIDENT: So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right?
I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.
LEONHARDT: So how do you – how do we deal with it?
THE PRESIDENT: Well, I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place. It is very difficult to imagine the country making those decisions just through the normal political channels. And that’s part of why you have to have some independent group that can give you guidance. It’s not determinative, but I think has to be able to give you some guidance.
One argument advanced by proponents of the various plans is that costs would be reduced by providing more care, because preventative care would prevent more expensive care from being needed. Even leaving aside the grim fact of human mortality (i.e., preventing heart disease at one age can just leave you to die slowly of cancer or suffer prolonged dementia later), Charles Krauthammer notes that studies in reputable medical journals have concluded that the need to offer preventative care to so many people to make sure you catch health problems early means that more widespread preventative care is more, not less expensive:
Think of it this way. Assume that a screening test for disease X costs $500 and finding it early averts $10,000 of costly treatment at a later stage. Are you saving money? Well, if one in 10 of those who are screened tests positive, society is saving $5,000. But if only one in 100 would get that disease, society is shelling out $40,000 more than it would without the preventive care.
That’s a hypothetical case. What’s the real-life actuality? In Obamaworld, as explained by the president in his Tuesday town hall, if we pour money into primary care for diabetics instead of giving surgeons “$30,000, $40,000, $50,000” for a later amputation — a whopper that misrepresents the surgeon’s fee by a factor of at least 30 — “that will save us money.” Back on Earth, a rigorous study in the journal Circulation found that for cardiovascular diseases and diabetes, “if all the recommended prevention activities were applied with 100 percent success,” the prevention would cost almost 10 times as much as the savings, increasing the country’s total medical bill by 162 percent. That’s because prevention applied to large populations is very expensive, as shown by another report Elmendorf cites, a definitive review in the New England Journal of Medicine of hundreds of studies that found that more than 80 percent of preventive measures added to medical costs.
Whatever else can be said for more preventative care, it is likely to offer no great cost savings.
Moreover, reducing the total amount of care provided contradicts one of the central premises of the entire project, which is that it will result in providing more care to tens of millions of people not presently receiving it. As Bob Hahn notes, if this is the case, it won’t just drive up costs but will create shortages:
If we added 47 million more people to the health care system, there would be lines. We wouldn’t even know how to send 47 million more people to McDonald’s without causing lines.
I’m unfamiliar with the details, but apparently there is some provision in Obama’s plan that expands the number of doctors, nurses, hospital beds, etc., to instantly accommodate 47 million more people. It usually takes eight to ten years to school a new doctor, so whatever the Democrats are doing here is a major advance.
The Democrats can’t have it both ways. One way or another, they either need to sell the public on the idea of sharply curtailing the amount of medical care provided, or stop claiming cost savings that can only come from less care.
II. Medical Care For Less Cost
The issue of shortages brings us to the problem with the second option: rather than reducing the amount of care provided, reduce the amount paid to the people who provide it: doctors, nurses, and pharmaceutical and medical device companies. Certainly on the Left there is a fair amount of sentiment for making it less profitable to provide care. But there is really no getting around the basics of supply and demand: if we make it less profitable to become a doctor, we will end up with fewer doctors. If we skimp on salaries for nurses, home health aides, and less-skilled care providers (e.g., people who work in nursing homes), we will exacerbate the existing shortage of nurses and other providers, which is likely to become more acute in years to come as the population ages. And if labor responds to financial incentives, capital is even more sensitive: slash the profit margins of drug companies and medical device manufacturers, and inevitably there will be less investor capital for those companies and less coming out of the pipeline in terms of drugs and devices that save or improve lives. The net effect will be the same as rationing care directly: cost savings will come only by reducing the quantity and quality of medical care.
III. Cutting Out The Middleman
With open advocacy of government rationing of care largely politically infeasible and reducing the profitability of health care providers economically impractical, the debate logically falls upon the middlemen, mainly insurance companies. Pretty much everybody hates insurance companies, whose business model by nature involves collecting more money than they lay out. And there’s empirical data to support the idea that we’re spending proportionally more of our health care dollars on insurance, rather than care, than we used to spend. To shift the discussion away from rationing care, Democrats are desperately trying to paint the insurers as somehow siphoning off more money to enrich themselves than they “should,” an effort that’s now leading to an especially vindictive crackdown by panicked Congressional liberals:
House Democrats are probing the nation’s 52 largest insurance companies for lavish spending, demanding reams of compensation data and schedules of retreats and conferences.
Setting a deadline of Sept. 14, the letters demand extensive documents for an examination of “executive compensation and other business practices in the health insurance industry.”
The main idea here, other than simply intimidating the insurers, is to try to sell the Democrats’ plan on the theory that the insurers are artificially inflating their overhead. The fact that they have to subpoena 52 companies suggests that this will not be as easy a case to make as in the case of a monopoly industry…and of course, a monopoly is the preferred solution of Democratic policymakers, elected officials and even Democratic base voters who essentially see the long-term goal as using a “public option” to plant the seeds for replacing this patchwork of private companies with a single-payer system of government monopoly insurance.
But let’s unpack here a little further the elements of the expense of a middleman. First of all, there’s the question of why have insurance at all. Most of us pay for other life essentials – food, clothing, shelter, transportation – directly, rather than buying, say, grocery insurance to make sure that an insurance company or government agency will give us groceries every week on terms acceptable to the insurer plus a premium. Now, unless you are seriously wealthy, insurance against truly catastrophic health care costs makes economic sense, so that the pool of the insured absorbs the individual occurrences of massive spikes in one person’s health care costs. But pretty much all the proposals on the table go far beyond purely catastrophic coverage.
The entire rationale of the Democrats’ proposal is to get more people to buy insurance or have it bought for them than is currently the case, thus increasing the proportion of our health care that is paid for through intermediaries rather than directly. That’s true of people who currently buy no insurance and get little or no care, or pay for it out of pocket; it’s true as well of people who currently get their care from emergency rooms. That’s exactly the opposite direction of where you want to be moving if cutting intermediary costs is your goal.
And in the existing health care market, Democrats (with the help of big-government Republicans) have been driving up costs for the past two decades by piling on mandates and “patients’ bill of rights” legislation that ever increases the number of procedures that the insurers have to be involved in. The Medicare prescription drug plan likewise expanded the scope of health care products and services paid for through a public intermediary rather than directly by consumers. And of course, subsidizing preventative care that may be presently paid for out of pocket does the same. So, not only are the Democrats proposing to have more people use health care intermediaries (public or private), but their proposals will inevitably continue the trend towards having more types of health care paid for through intermediaries.
Well, say Democrats, we will use more intermediaries, but we’ll be much more efficient in doing so, because the public plans won’t have a profit motive and expensive executives. Which is true. But it’s also true that government programs, even ones that start out fairly simple, tend only to grow and expand over time and grow less efficient as their competition is eliminated and the political power of those who draw salaries and contracts from them grows. Will unionized government workforces necessarily be less expensive than non-unionized private insurer workforces? History doesn’t suggest so. As one National Review reader posed the question:
If we can cut a half-trillion dollars from Medicare and Medicaid to pay for health insurance reform but if, as looks to be the case, healthcare reform won’t pass, why not just cut a half-trillion dollars from Medicare and Medicaid anyway?
The fact that it hasn’t happened and won’t happen should remind us that replacing a competitive private marketplace with a colossal, Washington-run bureaucracy is a bad bet to produce savings. The conservative answer in this situation is not to throw out the entire existing system on the hope that things will work out better than they ever have before.
The elephant in the waiting room is the other big cost driver of intermediaries besides the scope of coverage and the cost of having shareholders and executives: lawsuits. Precise figures are again a subject of intense dispute, but a goodly chunk of what drives the amount of ‘unnecessary’ care provided, the cost of providing services and the cost of intermediaries is the need to protect against and pay for the cost of medical malpractice and denial of coverage litigation. None of the Democratic proposals, however, seek to make any practical inroads against this source of costs. Replacing a private system with a public one could arguably do so if the trial bar is effectively precluded from bringing against the government many of the kinds of lawsuits now used against private insurers – but aren’t liberals in favor of keeping those kinds of suits viable? And how likely is it that in the long run they won’t provide other mechanisms to keep one of their vital constituencies in business?
We have pretty much exhausted the options for cost-cutting: less care (at a steep political price, at the cost of giving frightening power to the government, and at odds with the goal of providing care where none is now given); less money to caregivers, which would amount to the same thing; less use of intermediaries (which is likewise contrary to the whole thrust of the project); or less cost in using intermediaries (which is impractical and unlikely to pan out).
There will be no cost savings. There’s no sense in pretending otherwise.
It is amazing talking to liberals about this you can 1) point out to them the ballooning costs of every social/entitlement program over time and how what was promised and the projected costs were never similar to reality 2) the failures/problems with socialized medicine the world over 3) the successes of the American health care system and 4) ask them the logic of a new massive govt program with 2 trillion dollar annual deficits and a 57 trillion dollar projected short fall for Social Security, Medicare and other programs and all they will say, with glassy eyes, is we need government health care.
Liberalism is truly a mental disease that results in otherwise intelligent people dismissing history, experience and common sense for utopian dreams that will never, ever bear fruit.
Actually Charles Krauthammer is correct if you dismiss common sense and basic business logic from his argument.
As a male in prostate and colon testing range every few years there is no price I would not pay to have these killers detected early. Reality be dammed since Obama is behind it it has to be wrong.
These preventative tests if every man took the test would cost more if only all the money was controlled by one pool of money. His point is not a true indicator of how insurance companies pay Doctor’s for services rendered. Just read your current health care plan, you are allotted X amount of dollars for various preventative care (use it or lose it). Every policy spells out certain services and how many visits you get and if your Doctor is in network the price is already agreed upon and factored into the total cost of the insurance you and your employer pays. If you do not use it it is pure profit for your insurance carrier. The part he left out was this money is already factored in what you pay for insurance.
A simple example if you have vision plan you get one yearly visit with a basic subsidy for eye-wear (contacts and/or glasses). Whether or not you go see the Eye Doc or not you have already paid for the service you just do not realize it.
Please stop with the Death Panel crap. Your opposition to this aspect makes me question your judgment as a Lawyer. Your opposition to that provision says I should get a Lawyer and Estate Planner to set up my Will. But I should not include a doctor in the conversation to ensure the proper disposition of my estate and my wishes. Please do not run for the Schiavo card
1. “there is no price I would not pay to have these killers detected early”
That’s not really an argument for why this would cut costs. The question here is, would Obama’s plan in any of its iterations cut costs.
Krauthammer is examining the total cost to the system of running tests vs the total cost of later illness – exactly the same thing Obama is talking about. You are just throwing red herrings.
2. My concern on the ‘death panel’ issue is what I mentioned here and in the prior essay: I don’t want the government deciding how to ration care, and I don’t want it incentivizing doctors to push people towards assisted suicide or the like. I don’t even know what you are talking about.
So a Red Herring is explaining how something works versus giving an opinion of an opinion? That is rich!
Actually, Krauthammer point is flawed and since he is a doctor it is very disappointing. Some test do not cost much at all and are included in the price of a physical. This is not al-la-cart medicine. A routine prostate exam only cost you a few moments of dignity and that is b/c it is part of a standard physical for men over a certain age (no additional costs).
Why use facts and logic when you have a conservative flag to wave.
Are you taking issue with the two medical journals Krauthammer is citing?
Crank,
Do you mind if corporate bureaucrats decide how to ration care?
As one of your astute readers pointed out to me in the past: The business of America is (monkey) business.
Crank,
You obviously have no need for help with health care costs, so as true rock-ribbed conservative can’t imagine why anyone has difficulties under the current system.
I’m a bit perplexed why healthcare workers would ever support “reform”. It will come out of their purple shirted hide.
The history of such “cost-cutting reform” in NY states is very simple: closed hospitals (especially in small towns or minority neighborhoods); closed wards, and reductions in workforce.
And don’t think the likes of Zeke Emanuel don’t have the Catholic hospitals in the ole crosshairs
This would be one way to ensure whatever “recovery” we get from the recession proves to be jobless. But don’t worry—the big metropolitan hospitals the yuppies tend to use are kept open after the budget cuts. It’s the working stiffs who get the service cuts.
I notice that neither Berto nor Magrooder sees any point in pretending that the Democrats’ plans would cut costs.
You notice very little then.
Of course, we have to limit the use of unnecessary tests, etc. How are you going to pay for it? Cut taxes?
Notice how no one will talk about all the enormous and failed social spending plans we already have that have grown at ridiculous rates and have not delivered and
why do the purposely distort/confuse cutting tax rates with cuts in tax revenues?
Crank,
Who cares if they cut costs anyway?
Liberals should leaver it to you and the other Conservatives to whine about costs.
Just like you did when you were promised a $15 billion bill for the Iraq War. Crank, you railed and railed for the past 7 years about the ‘high costs” of the war. You had those 3 weeks of daily posts about pallets of $9+ billion missing in Iraq, and how much that bothered you.
Ooops. My bad. That wasn’t you, Crank. That was absolutely NO CONSERVATIVES who railed about costs of war.
I’ll chalk that up to you just pretending that you care about government costs, while the real reason you’re harping about costs now is that you’re deathly afraid the poor and minorities might get access to healthcare.
dch, Do you really want people pointing out that programs like Social Security and the GI Bill built this nation’s middle class?
If not, and you’re just soliciting for massively expensive and failed programs I’ll be glad to meet you for a cup of coffee and teach you everything you need to know about movement conservative. We’ll start with the fact that the US pays more than twice what other industrialized nations pay for healthcare (per capita), we rank 37th as a nation in healthcare results, and that 30+ US citizens/ day file for bankruptcy protection due to healthcare costs.
Berto, as a former member of the ABI I think I can respond to the “medical bankruptcy” canard.
The folks who had money in the bank or equity in their home don’t file BK after getting big medical bills
The folks who kept taking vacations to Aruba on plastic and HELOC’s, well, they did.
If the real concern is BK, it would make more sense to address the financial end of this. (A TARP for unpaid hospital bills?; Title XIX liens?)But then you don’t get to impose state-run health care, now do you?
Where Are The Cost Cuts Going To Come From?
Oooh, oooh, Mistah Kottah, I know the talking points! “Waste, fraud and abuse”.
Crank,
I agree. I don’t think the main proposal bandied around by the Obama administration is going to be effective at controlling costs.
I continue to hang my hat on this CBO study, which is some ways a meta-analysis, incorporating its own research while also surveying the field of private research regarding health care spending. The main driver is the increase in advancements in medical technology, which is not something we want to stop.
https://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-TechHealth.pdf
On the other hand, blaming the rising costs on tort litigation and defensive medicine seems wildly overblown. Look at the discussion and the survey of research in the CBO paper. It is barely measurable as a contributor to rising costs.
Conservatives are right that this health care proposal is flawed, but if they are suggesting tort reform as an alternative, they get nowhere with me.
Social security built the middle class????? LOL. A program created to prevent elderly people from living there last few years as destitute- created the middle class.-okaay. What social security was created to do and what it hasmetamorphosed into are two very different things. Also are you going to address the 13 trillion and growing projected deficit????? how about the FDR himself said it should be privately funded???? ???? ????
The GI Bill is pretty much the exact opposite of welfare. The GI Bill provided for people who had all ready given service, years of their lives and suffered greatly for their country.
BTW-I worked for a NYC social services agency for 7 years. I represented my NYC agency at over 3000 fair hearings and lost…..18. I guarantee you that I know a lot more about the welfare mentality and total failure of the welfare system than you or your 100 closest friends put together. The percentage of people who truly need help because of situations beyond their control is very, very small. The overwheling majority are people that are 1) irresponsible 2) lazy 3) don’t want to work 4) made and continue to make bad life choices 5) want to get stuff for free and most importantly 6) have gone through life with a bunch of liberal enablers “explaining” to them that nothing is their fault and that the governement will take care of every thing.
So trust me this will be like a Bruce Lee movie with me as Mr. Lee and you as some nameless flunkie-if you are going to “teach” me about failed social programs.
Ironman.
People are working harder and more efficiently, yet their wages have stalled and can’t keep up with inflation.
Your Aruba vacation stories are like those about the majority of Americans gambling themselves into bankruptcy or welfare queens driving Cadillacs. They’re made up and propagated by the haves so they can justify looking down on the have nots.
dch,
Working class Americans not having to care for their destitute elderly parents allowed them to work their way into a middle class life.
As for the $13 trillion deficit number you pulled out of your ass, I’d solve that by taking the cap off SS taxes.
Regardless, we’ve already settled the “deficit” story. The people whining about it didn’t say a peep about the cost of war and didn’t raise ANY objection to pallets of cash ($9+ billion) disappearing in Iraq. They don’t care a whit about deficits. They care about the poor and minorities having the same access to healthcare that they have.
Tell us about those lazy, irresponsible, black GIs who couldn’t move to suburban Levittowns on the GI Bill in the 50’s and 60’s.
Unlike their white counterparts, they didn’t get the suburban homes that increased in value to such a point they could be borrowed off of to send their kids to college and end the cycle of poverty.
Finally, regarding your story about working with welfare recipients. Do you propose that the government should have more oversight to root out waste and fraud? Watch how you answer that obvious question. Conservatives are against oversight and regulations.
“The “death panel” phrase was shorthand, of course”
No, it was a lie in how she and subsequent people have used it, having no basis in reality where you could point to something and say ‘here’. I also note that you refuse to mention that it would not impact her private plan. Shame, that.
“and subsequently dropped by chastened Democrats”
Do a google search for “GOP backs away from end-of-life counseling”. Republican Johnny Isakson will be sad. More sad will be people without families or loved ones they can rely on to help make these decisions. But hey, when crazy rears it’s head like Putin, you just gotta react.
“If we added 47 million more people”
Yawn. It means no such thing, unless you think that every healthcare worker is at maximum capacity and near burnout. The only ones that truly fit this right now are ER (and ICU) sections, both of which would most likely face drops in usage over time – for a basic reason of not having to be used as primary care. And insurance really wouldn’t increase the load here.
The one big thing to add into this is for RNs, the biggest reason they leave (and don’t advise people to come in) is working conditions, specifically paperwork. This could be addressed in the bill. By the way, the bill also offers incentives to primary care doctors/nurses/PAs. Hey, did you know we have a Nurse Reinvestment Act? You should totally put out a call for more money for that.
Sorry man, but you need statistics and usage patterns before this flies. Are we at 50% non ER capacity? We’ll do just fine then. Have no data? Well, just random guessing then. Here’s one thing, we’re likely to be short on primary care doctors(in general) because going into other specialties help them pay off their loans faster. This bill helps to change that.
“if we make it less profitable to become a doctor, we will end up with fewer doctors.”
I thought we just added 47 million new people. More potential supply means more potential income. Before, private plans+medicare+random people paying in cash(10-20% billed amount). After, private plans+medicare+(new). Seems like it could be more profitable to me, if someone wanted it to be.
“If we skimp on salaries for nurses, home health aides, and less-skilled care providers ”
You really need to talk to some nurses about why they leave the industry. And then ask them about their feelings on why the business that employ them have moved to LPNs and aides, who are paid by business (not ‘we’) – and not very well.
“slash the profit margins of drug companies and medical device manufacturers”
Unless, of course, they make more overall profit due to the (previously discussed) greater supply. And who says they won’t make greater margins on this greater supply? Never sure – do Republicans want the government to negotiate drug prices in Medicare?
“keeping those kinds of suits viable”
Most lawsuits are not against the health insurance industry, they are against doctors’ malpractice insurance. Don’t worry, lawyers always get to have a job.
Malpractice is a tiny, but annoying, source of costs. And limiting payouts has neither lowered premiums or changed practices in the states that have done it.
Most of your arguments are based on a flawed and incorrect principle – that there will only be the public option. Fear it for the future, fine. But it just doesn’t hold true for right now – and your conclusions are flawed because of it.
“insurance against truly catastrophic health care costs makes economic sense”
Yes it is, and yes it does. And this is the best part of your post.
But here’s the thing. Let’s say the plan changed, to one where the government picked up truly catastrophic health care costs (accidents, ER work). And moved to a more sensible system, where you are the payer of your own health care – which most people believe is the single biggest unsolvable problem, as it would take a generation to transition over to.
Does anyone believe the Republicans would work with Democrats on this? I don’t.
Republicans and conservatives in general have put forth plenty of ideas on how to reform health care, many of which are based on the very principle and idea you just articulated in that last paragraph. Why don’t Democrats work with Republicans on getting those ideas put into law?
Javaman,
You raise an interesting point concerning how preventative care is already considered in the cost of insurance. But doesn’t the insurance company take the fact that hardly anyone gets preventative care into consideration when they price their products? If everyone started getting all the preventative care they could, wouldn’t that cause the insurance companies to raise the costs of their products exponentially, thus causing the overall “cost” to raise as well? Those questions aren’t meant to be rhetorical or sarcastic. I don’t know the answers.
They already factor how much of the preventive care is being used by the customer in to the price. The insurance companies spend millions on calculating and predicting these things to project profit and to price the insurance plan.
Lets say a company has 1,000 employees covered by their insurance. The insurance company sets the price for a physical at 1000.00, that is 1 million laid out for physicals yearly. Now, you factor in how often physicals are recommended, how many people had physical in the last couple of years and a few other variables and only 250 people get a physical for the period that is covered. The insurance company is pocketing about 750k. Some years they will make huge profits on unused benefits other years not so much. But it is worth the gamble.
another way to look at it is, every office has one person that lives at the doctor and about 80%of the office that never really go to the doctor.
The only thing that can break a Health Insurance company would be a pandemic. Just look at what happens to smaller insurance companies during Hurricanes when they have to start making payments.
I had a longer post caught in the filter, but I agree, Obama’s proposal is not going to generate enough savings to account for the costs of his plan.
On the other hand, the claims about tort litigation seem wildly overblown. In the 2008 CBO study I cited months back, the CBO found, after a review of literature, that defensive medicine and tort litigation accounted for less than 1% of the rising cost of health care. I’m not surprised.
Sorry about the filter, I have been trying to go in and approve some of the stuff that’s been stuck there.
I’m not sure CBO is the best source on an issue like that that’s outside their area of expertise (cost of govt programs), but I would argue that if you are looking specifically at what volume of healthcare dollars are going to (1) overhead, i.e., not the bottom-line profits of health care providers or (2) the provision of care that is not necessary – in other words, things you could cut without cutting needed care – you’d find that litigation-related costs are a large percentage of that subset.
“Why don’t Democrats work with Republicans on getting those ideas put into law?”
There are any number of real and imagined reasons. I can definitely see this coming, but I understand why the Democrats are passionate about extending health care to millions first. Going my preferred route still leaves gaping holes in the system, and could open up more as we change to a new framework. Then you’re left with something we’ve heard of over the past 8 years, ‘elections matter’. If it does matter to get more people insured, rescission punishments, control on payments, national standards – then Republicans really have to make concessions towards this. Beyond this point – why bother considering a majority if you are just going to work on their bill alone no matter the election outcome?
If it truly mattered to the Republicans, they could unite behind a plan and have it scored by the CBO. There is no plan they have done this for, there are only vague ideas and free market platitudes (remember – in a free market, things can also get much more expensive), nothing approaching a generation of making changes. Roy Blunt gave up on his attempt, last I heard – but we’ll see. And Republicans, as a whole, have not attempted to work with Democrats on this – and have used lies to work against them. Knowing that the Democrats do have priorities including those mentioned above, they could easily say ‘hey, you know what – we think you’re wrong, and we want this other plan to work. We’ll vote for it, but if it goes pasts certain limits – ours kicks in’.
As of right now, there haven’t truly been proposals which fill gaps or improve the system, even as simple as Medicare drug price negotiation(lobbyists are going make sure this never happens).
In addition to having none of their proposals been officially put forward, scored by the CBO – I have this feeling Republicans won’t be putting forward any plan like what I described, and still doesn’t actually move towards having consumers be payers.
“But doesn’t the insurance company take the fact that hardly anyone gets preventative care into consideration when they price their products?”
You can’t really assume everyone is going to do something when this has never happened before. If you want to assume a best case scenario, sure – but there is no evidence this is going to happen. The realistic position is to assume wellness proposals slowly drive the usage up.
If everyone went home at 1AM and fired up their lights and air conditioning for a week, it would likely crush several small power companies. Usage patterns and deviations are important.
“I’m not sure CBO is the best source on an issue like that that’s outside their area of expertise . . ”
The CBO does a literature review on that point (and many of their other points; it doesn’t just rely on its own expertise. I don’t think they found any study that found that litigation costs/defensive measures were more that 1% of health care cost increases. There may be other reasons for tort reform, but as far as the rising costs of health care, someone is going to have to prove that one to me. It looks like a non-starter.
The WSJ made an interesting suggestion: make some level of health insurance mandatory for everyone in exchange for portability and no denials of coverage.
javaman-
Every policy spells out certain services and how many visits you get and if your Doctor is in network the price is already agreed upon and factored into the total cost of the insurance you and your employer pays.
That’s the whole point!
My “current coverage” will be illegal in 5 years- because it doesn’t pay “first dollar” for preventitive testing- yet Obama is still saying I can “keep my current plan”.
Fletch,
Your coverage changes every year, guess you never noticed the yearly enrollment periods. Try this go back five years and compare what you got back then to what you get in coverage now. Also, a physical is preventative care and an eye exam is preventative care. When you get a prostate exam as part of a physical or your blood pressure checked that is preventative care.
“My “current coverage” will be illegal in 5 years- because it doesn’t pay “first dollar” for preventitive testing”
The false rumor I have points to Hr3200.section1711, which is under the heading dealing with payments to States under Medicaid and SCHIP. Not private insurance. And even this doesn’t mention anything about first dollar, and still allows for deductibles or copays.
Care to point out where this is happening?
“If we added 47 million more people”
Yawn. It means no such thing, unless you think that every healthcare worker is at maximum capacity and near burnout. The only ones that truly fit this right now are ER (and ICU) sections, both of which would most likely face drops in usage over time – for a basic reason of not having to be used as primary care. And insurance really wouldn’t increase the load here.
The one big thing to add into this is for RNs, the biggest reason they leave (and don’t advise people to come in) is working conditions, specifically paperwork. This could be addressed in the bill. By the way, the bill also offers incentives to primary care doctors/nurses/PAs. Hey, did you know we have a Nurse Reinvestment Act? You should totally put out a call for more money for that”
You know, I forgot more about the health care system than you know. If you think that nurse burnout is a problem now, just wait.
Perhaps the increased number of medical errors from stressed staff is a fair trade-off, you think?
One thing I noticed two decades ago is nurses moved from Ontario to CT to practice; not the other way around. Why? Working conditions in Canada!
As for utilization rates, yes, Canada may look more “efficient”. Now if you are like Natasha Richardson and get a head injury in a small town, the fact Canada saves money by not buying CT scanners for rural hospitals is not very helpful, now is it? Time can be more than money
American medicine often seems less efficient because it’s more accessible, Which is Crank’s point.
“Ironman.
People are working harder and more efficiently, yet their wages have stalled and can’t keep up with inflation.
Your Aruba vacation stories are like those about the majority of Americans gambling themselves into bankruptcy or welfare queens driving Cadillacs. They’re made up and propagated by the haves so they can justify looking down on the have nots”
BK’s in CT are way up since Foxwoods and Mohegan Sun opened. No one disputes they’ve increased the problem.
Wages were pretty low in the 1950’s and people had less in material goods. They were less able to buy stuff they couldn’t afford because of what we would now call reactionary credit policies. That and a society that was embarrassed about failure; not big into blaming someone else for one’s own bad behavior.
Java and Dave,
Thanks for the responses. But I think you’re making my point.
Obama wants everyone to flock to preventive care (i.e., go home at turn all the lights on). He thinks this will greatly reduce costs.
Now I think java’s original point is true: preventative care is *already* factored into our insurance costs. But insurance companies factor in the cost of preventative care (here’s the critical point) on the assumption that very few people actually pursue it–because very few do.
Now, if Obama has his way by everyone saturating the preventative care market, that will actually cause the total costs of the health care system to skyrocket, and according to the journals Krauthammer cites, those skyrocketing costs will exceed any savings reaped from 100% of the population pursuing 100% preventative care.
pe14,
The only problem is right now most people do not take advantage of most preventative measures that are afforded to them. It would take quite a few years to change current medical habits in order to overrun the system. The 100% is a number that would never be reached. As Dave points out “Usage patterns and deviations are important” this is why the things Krauthammer cites is not based in reality.
As it stands now if everyone under your employers insurance plan maxed out all of the benefits the carrier would jack up the prices for the next year or tell your company they need to go elsewhere for service b/c yopu guys cost them money.
“I’ll chalk that up to you just pretending that you care about government costs, while the real reason you’re harping about costs now is that you’re deathly afraid the poor and minorities might get access to healthcare.”
Take it easy – you seem to be getting emotional and you’re definitely flying off the handle a bit. If it could be set up so that everyone could magically get Grade-A health care at no cost, nobody would have a problem with it – and would in fact thank their god of choice. “Conservatives” know that it can’t be done; in fact, most proponents of the plan up to and including the president likely know it too – hence the big rush to pass the bill. It was never going to stand up to scrutiny, but if it could only get done the details could be worked out later. Or not. Now it’s Plan B.
Incidentally – I’d actually be in favor of the myth version of the Death Panel. Ain’t nobody going to live forever and it might help put off the Social Security blow-up we’ve got coming.
Crank,
Characterisitically, you have included a simplistic — and erroneous — assumption built into the logic of your argument that allows you to reach the conclusion you intent to reach.
In this case: “When you boil it down, though, there are only three variables you can cut: reduce the amount of medical care provided; reduce what providers of medical care earn for their products and services; and reduce intermediary costs.”
There is a fourth and it is at the heart of the healthcare reform effort — change the incentives throughout the system for healthcare professionals to push people to the more expensive forms of care. We currently have one of the most expensive health care systems and get worse results than many countries who spend far less. One basic reason is that there are too many incentives to push for the “new and improved” treatment option that invariably costs much more.
Is this the dreaded “rationing”? Perhaps, but if there were any honesty on the GOP side of the debate, there would be the acknowledgement that rationing already exists and not just by government. The most basic form of rationing is money; those with more money get more and better care.
“If it could be set up so that everyone could magically get Grade-A health care at no cost, nobody would have a problem with it – and would in fact thank their god of choice.”
Unless the insurance companies were against it. Then “everyone” would quickly get played by the corporate media into being against it because it’s un-American.
You know the corporate media. They were the ones who wouldn’t report on the millions of people who were against the Iraq War (other than to call them “terrorist lovers”), but think the hundreds of who confuse Nazis with socialists need to be heard daily.
BTW, the “teabaggers” think the Nazis were socialists because they called themselves “National Socialists”. They probably think the People’s Republic of China is a Republic. Jeniuses with a capital J.
Berto, try reading theNazi Party Platform some time. Pay attention to points #11-21. Obviously, some of what is in the platform would be regarded as right-wing today, but quite a lot, especially the stuff on economics, health care, education, etc., is inarguably of the liberal-left-socialist variety. Turns out those “teabaggers” know their history much better than you do.