HEALTH REFORM’S “IMMEDIATE BENEFITS”
About the same time I saw a picture of the man I voted for signing the new health reform bill, I received an email with a picture of George Bush (The Younger) waving at the camera with one of his goofier grins and the caption, “Miss me yet?” I’m hardly a Bush fan, but at the moment—God help me—I’m even missing Nixon.
One of the annoyances from having spent forty years inside the health care beast is having to endure the blatant half-truths and patent falsehoods coming from our President and his legions of economics-challenged health reform advisors and supporters. Particularly abrading are his statements about the “immediate benefits” of the new law, with no mention of the equally immediate costs that will accompany them.
Here are some of the more bothersome ones:
- Free preventive care. The journal Health Affairs and others have authoritatively concluded that preventive services almost always increase medical costs rather than reduce them. Thus, our premiums will go even higher with no net savings now or ever.
- Elimination of lifetime limits on insurance benefits. Many employers and insurers now impose such limits, most commonly at $1,000,000. Removing them will immediately increase insurance costs, and, consequently, our premiums. Only the naïve and those unfamiliar with the Dartmouth Atlas will believe there aren’t doctors and hospitals out there waiting to mine dying patients with “heroic” measures to artificially delay their inevitable deaths and drive premiums even higher.
- Prohibition of abortion coverage. You won’t have to pay the $500 cost for somebody else’s abortion. Instead, you’ll have to pay the $7,600 cost for her full-term labor and delivery.
- $5 billion for a high-risk insurance pool. Less-generous state pools already spend $2 billion annually to insure 200,000 people. The GAO estimates actual demand at 4,000,000 people, so the $5 billion should last about a month and a half. Think it will stop there?
- Automatic enrollments. Employers with more than 200 employees will now have to automatically enroll all of them in their group health plans except for individuals who specifically opt out (they currently have to opt in for coverage). Many will undoubtedly ignore the opt-out provision and just accept the coverage by default, even if they already are insured under their spouses’ insurance (which many are), thus increasing employer and employee premium costs with no incremental benefit.
- Elimination of pre-existing condition (pre-ex) reason for denying insurance to children. Individual insurers (9% of the private insurance market) exist only because of their ability to insure new members based on their future health risks and not current medical needs (that’s why it’s called insurance). It is the only insurance option available to millions of children whose parents can’t get employer coverage. Removing pre-ex effectively turns private individual insurance into a government-mandated entitlement program for sick children. If enough parents rationally wait until their kids get sick before buying insurance, premiums will soar, or worse. What could be worse? Insurers could be forced to stop enrolling children altogether to avoid financial catastrophe, thus eliminating many kids’ only insurance option.
- Elimination of rescission. I know it sounds so reasonable to make insurers stop dropping insurance for people who get sick. Actually, such rescission has long been illegal everywhere, with only one limited exception: people who lie about their health status to buy cheap individual insurance and then stick insurers with huge claims. Rescinding their coverage is a last resort that rarely happens (0.15% of all individual policies in 2006). What the new law really does is to eliminate an essential fraud-control measure that has allowed insurers to offer high-quality health insurance at some of the lowest premiums anywhere—especially for young adults who have declined their employers’ insurance because of its highly discriminatory premiums.
Individual insurers are now left with only three coping options—none of them good. First, they can decide to institute detailed investigations and medical-record audits on all new applicants to catch liars before insuring them, which will require hefty application fees, much higher administration costs, long coverage delays, and higher health insurance premiums. Second, they may decide to continue as before but risk inundation by people who wait until they’re sick and then successfully lie on their insurance applications, creating a classic death spiral as sicker new members require higher overall premiums that drive out many healthy insureds, forcing premiums even higher, and so on until insurers fail and nobody has insurance. Third, the insurers can stop writing new business altogether. Since the first option appears to be the only one that allows the individual insurance market to survive the new law, you might assume that will be the one chosen. But, then, you haven’t read the next item.
- Mandatory Medical Loss Ratios (MLRs). MLR is the percentage of premiums that an insurer actually spends on medical claims. The new law mandates a minimum 80% MLR for individual insurers (most state minimums are currently 50-60%). Because of their much higher brokerage, selling, and underwriting costs, this new burden would have been extremely difficult to bear before the new law, but virtually impossible after the above changes.
It is important to realize that these new risks and costs come on top of the already ballooning premium increases that are killing our health care financing and delivery system. Despite Administration assurances to the contrary, the new law does nothing to reduce medical costs or even to moderate their increases. The real causes of that out-of-control freight train remain untouched.
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Comments
Steve, were these mistakes or is the Obama administration and the democratic party highly skilled and really aiming at taking over the insurance of all of our health costs? Gary
Great analysis and terrifying, too! It seems to make sense to repeal this legislation, but given the filibuster rules, how can you do it without a Republican majority in the House, a super-majority in the Senate, and a Republican president?
It is time to really start to live as healthy as possible. By doing so you may be able to eliminate the need for the nationally forced coverage of Obama Nation Death coverage. I call it death coverage, because I don’t believe anyone would be able to pay for the insurance, let alone being able to see a doctor. Diane
US health care is already highly “socialized”, if that means government paid or regulated. Medicare, Medicaid, VA, and other government programs pay close to half of the healthcare bill. Only a bit more than one third is private and the balance is self paid. Of the private insurance, group policies are already highly regulated and include the requirement of non exclusion for pre-existing conditions whereas the less regulated individual market is the sector in big trouble which, as Stephen describes, is in a death spiral as premiums skyrocket causing the relatively healthy to opt out. Medicare and VA have far lower overhead, less than 5% compared to more than 20% for private insurance. Their inefficiency is why insurers dislike the 80% medical loss ratio law. For that high overhead, consumers get extremely complicated and inefficient billing, policies you won’t understand until you get a big bill & discover how much of it you have to pay, reviewers dedicated to denials and recisions and exclusions, advertising, shareholder profits, and high paid executives including posterboy, Bill McGuire, MD, formerly a Colorado Springs pulmonologist; after 16 years as CEO of United Healthcare, his board awareded him the only Billion dollar retirement package in US corporate history and a year thereafter he agreed to pay a $456 million fine for his pattern of stock fraud. Don’t you think that others on the United board, largest US healthcare corporation, were probably aware of his fraudulent activity which was post-dating stock options quarter after quarter, and do you want your health insurance managed by such an organisation?
Last summer, a survey of US doctors published in New England Journal of Medicine found that 10% favored Medicare for all, an additional 63% favored reform with a public option. Doctors on a daily basis are on the frontline of our healthcare system. While physicians are predominantly conservative Republicans traditionally opposed to government medicine, on a regular basis we see the denial of coverage that patients don’t discover until they transition from healthy premium payer to ill patient. On top of that, we watch our expenses increase as we buy the software and personnel required to deal with the ridiculous claims system. Reflecting the sad state of our insurance system, the AMA endorsed the recently signed healthcare reform bill despite their history of opposing Medicare and the many other previous reform bills.
State based insurance exchanges should include genuine competition for current insurance policies such as HSA’s as modified by Hyde and a public option. In that setting, market driven efficiency could prove attractive and begin to bend the cost curve. There are a lot of other unproven cost containment reforms including value based as opposed to volume based payment, incentives to reduce preventable hospital admissions, formation of Accountable Care Organizations. What is clear is that the system we have has produced twice the cost per citizen as our peer countries without even covering everyone and produces poor healthcare statistics. What exactly do so many of you want to protect about your current private policies? If you have Medicare, do you want to see it repealed?
Scott
[...] companies. Although these costs will be ostensibly lower, a far bigger issue is whether these insurers will actually survive at all. And the law’s generous mandated benefits, limitations on deductibles, and inadequate [...]
“About the same time I saw a picture of the man I voted for signing the new health reform bill”
Ahem. Surprised? Will you be surprised when this setup proves the insurance companies are evil and necessitates complete nationalization or a heavy VAT?
Elections matter.