Piecemeal Economics On Health Care

[ Posted Tuesday, August 18th, 2009 – 16:01 UTC ]

Whenever I talk about economic matters, I always make sure to admit up front that I (mostly) have no idea what I'm talking about. I see far too many in the punditocracy who pompously pronounce on prices, percentages, or profit margins as if they really were an expert in the field -- but who, for the most part, are merely parroting partisan politics or promoting perceptions fed to them by "conventional wisdom" popinjays. OK, that was a mouthful, but you get the point. I'm not one of these self-proclaimed "experts," is all I'm saying here.

I have a few questions about healthcare reform, even if I don't have solid answers. Solid answers, when looking at the economics of the insurance industry, quickly lead you to the equation "insurance equals discrimination." Insurance, by its actuarial nature, has to discriminate, or else it couldn't survive. But that is really a topic for another day. My questions today are about the costs of healthcare discrimination, and what reform will do to alter this equation.

Some reasonable-sounding politicians have been saying through this whole debate that healthcare reform ought to be handled piecemeal. In other words, separate legislation for the different problems in healthcare, which would (the argument goes) be more popular piece by piece, and therefore some good reforms would pass, while the broader reforms might take a while longer.

But is this premise really true? I don't support the idea, but I'd like to take a look at one part of it -- one of the ideas that everyone seems to support, or (at the very least) isn't actively fighting against. President Barack Obama, since he refuses to support any specific idea contained within any of the bills moving through Congress, has instead of late been focusing on the worst problems of the healthcare system as it stands today: pre-existing conditions, caps on coverage, and being denied coverage. Some Republicans have countered with some version of: "OK, let's just fix those problems without totally changing the system." But is this a feasible idea economically?

It's tough to take the health insurance industry's position in the midst of this heated debate, but I have to look at it from their point of view here, to examine the economic consequences of incrementally improving the healthcare industry in this fashion. Starting with the point that the health insurers are in business to make profits -- and without getting into decrying the obscene nature of those profits -- their business plan seems to be working (for them). All three problems (for the end user) are actually designed to increase the insurer's profits. Denying insurance to those with pre-existing conditions means cherry-picking your customers on the actuarial notion that you can predict who will get sick and who will eventually cost you more money. Caps on coverage are there so that, even if one of the cherry-picked customers does have major health problems, your financial position as a health insurance company is limited to a finite dollar amount per sick customer, allowing for better risk assessment as a business (and, it needs pointing out, to the insurance business risk assessment is everything -- their entire reason for being). Denying people coverage when they get sick -- by rescission, for instance -- also helps to keep costs down, by charging those same people premiums for years, before they discover their insurance is worthless when they need it.

OK, now imagine yourself with a magic legislative wand you can wave to fix all of that. Zoop! Now all these things are illegal. Insurance companies can't deny people with pre-existing conditions, can't cap people's lifetime insurance coverage, and can't deny coverage on a whim. This would go a long way towards solving the most egregious problems with the industry today, which is why Obama's been focusing on them. But what would happen to health insurance as a result, once these problems were solved?

The short answer is that it would get more expensive. There may be a solution for this, but we'll get to that in a moment. If insurance companies had to insure everyone, and if they were barred from charging sick people more for the same coverage, and if they had to pay out everything it took to treat people no matter how long it took, then it's easy to see the insurance companies would be paying out more money overall. And the money they brought in as a result (from new customers signing up) wouldn't cover it -- because one assumes that most of the new customers are all the people who have been shut out by these practices, and are going to cost more money than they pay.

The only answer, for the insurance companies, is to raise rates. That seems to me (who, remember, fully admits he doesn't know what he's talking about), to be a pretty simple economic equation. Actually, they have three choices. They can either raise rates, decide altruistically that they're going to forego profits and convert to being a non-profit organization, or they can go out of business. Which means the first choice is going to be the one they take, for obvious reasons.

There may, though, be an answer to this quandary. And Obama has already supported the idea, first promoted by Hillary Clinton in the primary race. The solution may be to require everyone to carry health insurance, the same way states require you to carry auto insurance if you want to drive. This solution is anathema to a lot of people, both on the left and the right (for various reasons, of course). But it appears to me, at least, to be the only way to balance this economic equation on a piecemeal basis (other solutions such as single-payer, or even the public option, being off the table here, for the purposes of this piecemeal discussion).

There are 50 million people in this category and they are a pretty wide pool, so this new influx of money could provide the health insurance industry with enough new revenue to offset the loss mandated by outlawing the existing practices such as pre-existing condition denial. Maybe. I don't really know, but it seems to be a somewhat reasonable assumption. The uninsured in this country are as diverse as any group of the public, but there is one large group which tips the scales a bit -- young people. Young people don't pay a lot of attention to healthcare, because they are young and healthy and consider themselves indestructible (just ask one, you'll see). Many of them don't really care whether they get insurance through their job or not, and they are the age group which does a lot of the jobs in this country which do not provide healthcare to their workers (both of these are generalizations, I realize, but think of the guy just out of high school doing some grunt counter-work dealing with the public, and then ask yourself if he has health insurance or not). These are exactly the type of customers the insurance industry loves because, actuarially, they are going to pay a lot into the system before they start taking large bites out of it.

Now, I am not advocating here for such a scheme, or indeed even advocating for such a piecemeal approach to healthcare reform. But every time I hear politicians say they want to end the practices of pre-existing conditions, lifetime caps, or denial of coverage, I have to wonder -- if it's that easy to change the system for the better, without radically altering it overall, why hasn't it been done before now? If it would lead to equal (or even better) profits, would the insurance industry support such a move? How much would this cost, since subsidies for those unable to pay would likely be part of the bill? And, since it really doesn't do anything about the future cost inflation in the healthcare industry, would it eventually bankrupt the government to do so?

The danger of this idea is that it sounds so eminently reasonable. The argument is easy to make: "Since everyone is fighting about these radical reforms, why not instead concentrate on the serious problems we all agree need fixing right now? We could support fixing just the worst problems, and we think complete overhauls of the system can wait until we see whether these targeted reforms have a chance to work. Let's get together to pass a bipartisan bill to end pre-existing coverage denial, rescission, and lifetime caps; while at the same time requiring everyone to carry insurance, the same way we do for drivers."

I'm not saying this is where the debate in Congress is going to wind up. But as "Obamacare" (which has to be in quotes, because Obama simply does not have a solid plan he has attached his name to, one way or the other) gets nibbled to death by ducks, it is at least a possible outcome of the political fray. Which means it deserves examination, hopefully by someone with a better grasp of economics than myself.


-- Chris Weigant


56 Comments on “Piecemeal Economics On Health Care”

  1. [1] 
    Michale wrote:

    "Dammit, Jim! I'm a doctor, not an economist!"

    "Bones, how is DunselCare?"
    "It's dead, Jim"



  2. [2] 
    fstanley wrote:

    The problem is that society sets no limit on profit and in fact many industry sectors demand ever increasing profit each year if not every quarter. Since I do not see the insurance industry, nor any industry, doing the right thing and setting a limit on profits I don't know how healthcare costs can be reduced enough to be affordable to everyone. There is nothing wrong with making money but do they really have to make so much when it is at the expense of the health of an entire nation?


  3. [3] 
    Dorkfish wrote:

    Excellent blog. You are hitting on the key points. It is no secret that I am associated with insurance so let me address some of your issues and ideas. I believe that the biggest issue of the one's that you mentioned is the issue of pre-existing conditions. This has to be addressed. The question is what is the best way to do it. A huge misconception that many have is that if the government, instead of private insurers were to insure these people, that somehow this would solve the problem. It won't. The cost of the care, is the cost of the care. The government will lose money just like the private sector, so in the end someone will have to pay. the government's solution has been to ration care, cut payments to doctors and lower coverage. So how is this issue solved? The first key finding a solution is to understand the problem. If it costs 80 cents to produce a loaf of bread, you can't sell it for 60 cents and stay afloat. This applies to both the public sector and the government. In most states, group insurance (generally defined as more than 2 employees) doesn't get declined for pre-existing. The problem largely lies with single people or single with a family. Today the single pool of risk tends to be so skewed to those with health issues, so the pool can't sustain itself. Requiring everyone to carry coverage (not always popular with my fellow conservates) would be a solution. The largest health insurer here in CT has come forward with that very proposal. Those that can prove that they can't afford it could then take advantage of a government contribution. This would also cause overall rates to decrease. Another option to look at is allowing people to buy coverage through pooling arrangements. I would disagree with your idea about becomming a non-profit as even non profits must be able to sustain themselves.

    The reason why I am deeply opposed to the current govenment approach is that the numbers don't work. The politicians on both sides of the isle have done little to address the ever rising cost of the care. They are in fact proposing ideas that will not work and will in the end raise the cost of care. So here's the solution as I see it in a nutshell. 1. Competition has to be introduced to the healthcare system. The farther we have moved away from it, the faster the costs have risen. 2. Tort reform. The current administration has for the most part left that off the table. 3. Insurance company standardization. The property and casualty industry has a lot of common standardization so it can be done in the health insurance industry although it may take legislation to do it. The companies have to stop dumping mounds of silly paperwork on doctors as well as difficult process'to get coverage issues resolved. 4. Government mandates need to stop or be better thought out. In our state we have over 50 unfunded mandates that have directly impacted rates each and every year. Unfunded mandates and government cuts to medicare have had a giant impact on private insurance rates. Every time the govenment cuts payments to docs, the docs begin contract negotiations with private insurers by first seeking those lost payments be made up by the private sector. The government has added a very large amount of cost into the system through the years.
    The arguement that this issue is driven by company profits lacks the understanding of the underlying costs. The insurance system is very competitive. Grabbing at too much profit only leads to the loss of customers. You are on to the key point, it does come down to the economics. Thus far the govenment's record in handling healthcare economics has been dismal. I strongly believe that we need reform, but the govenment has proven that their "coverage" actually has far more limitations and cost overuns than the private sector. I am amazed that so many in Americans are out of touch with this fact.

  4. [4] 
    Dorkfish wrote:

    One other point, insurance companies don't deny coverage on a "whim." It just doesn't work that way. We process thousands of claims each year and the coverage denial is the exception, not the norm. Our industry has to answer to the state insurance department's oversight. When the government denies coverage, there is no insurance department to appeal too. The amount of coverage denied by govenment run health insurance far exceeds that of the private sector. Unlike the government, how many major medical plans need you to purchase a supplement in order to get full coverage? One final note on rates, the goverment APPROVES the rate increases. They can't be raised on a "whim" either as health insurance,like all insurance is a regulated business. That includes rates. I laugh at politicians that complain about the rates as if they have no say in the rates. They approve or disapprove all rate filings. The cost of the insurance is a mirror of the cost of the care. Lower the cost of the care and the rates will sink as well.

  5. [5] 
    Michale wrote:

    Regarding the Pre-Existing Conditions issue.

    Like others, I agree that this is a very important aspect of Health Care Reform (real reform, not DunselCare.) THAT should be the leading issue.

    But, it's been shown that, even with DunselCare (as has been proposed by the House), the government CAN limit care, based on pre-existing conditions.

    That is why I am constantly driving this theme home. Yes, our Health Care needs reforming. But DunselCare is NOT reform.

    Apparently, it's quite a resonating theme, because to date, no one has been able to refute it.


  6. [6] 
    Michale wrote:

    Another thing I have noticed is the flailing about that Democrats seem to have done the last week or ten.

    A common theme in the MSM and amongst the Left blogs these days is "Obama is re-thinking strategy" and "Democrats are adjusting their message" and "The Left is restructuring their campaign" etc etc etc.

    While it's understandable that the Left would want to be flexible and to absorb and respond to the ever fluid situation, it does behoove Democrats to stay on (or at the very least REMEMBER) the original message.

    To use fighter pilot parlance, it's like being in a massive dogfight. Sure you want to maintain situational awareness and respond to immediate threats. But while doing so, you pick out one target and stick with it. Even if other targets fly thru your periphery that MIGHT be a better target, you ignore the temptation and maintain lock on ONE target.

    Failure to do so has you flailing around trying to hit any target of opportunity and ending up with a sidewinder up yer tailpipe.

    This is what I see happening with President Obama. From Death Panels to Bi-Partisanship to Big PHarma to Public Option vs Co-Ops, the President is all over the place trying to master each and every message. And, in doing so, he comes across as indecisive, rattled and the master of NO message.

    If DunselCare is ever to make it to Obama's desk for a signature, the President AND Democrats really need to get their message straight. Actually, first they must agree on exactly what the message is!! I think CW mentioned it very well a previous HP comment.

    "There are three Bills in the House, which is worse than NO Bill."

    Or words to that effect.

    It's another point that I keep pounding home. The Democratic Party is made up of a bunch of little fiefdoms and special interest groups, all vying for power and prominence.

    Such diversity is a great thing when you are followers.

    But it makes it nearly impossible to be leaders.

    Which is why I always say that the Democratic Party, as it exists in the here and now, is incapable of showing leadership. If you can't lead your own Party, how the hell can you lead a country?


  7. [7] 
    Michale wrote:

    Here is a graphic representation of the Administration's problem.

    It's the mixed signals.

    Either a Public Option is essential or it's not.

    Either it's a "sliver" of the whole plan or it's a "key" component of the whole plan.

    Which is it?


  8. [8] 
    Dorkfish wrote:

    A couple of other points on your blog. Given the economics of healthcare, why would we destroy a system that works well for the majortiy of Americans rather than just fix what is ailing it? I, like many people see this as a power grab by Washington and not really reform. Reform means fixing the underlying cost problem. The government solution to that has been overly simplistic and not to the benefit of the consumer. If you understand the economics of the problem it really changes the dynamics of the arguments.

  9. [9] 
    Michale wrote:

    There has been an awful lot of talk from the Left as to why Democrats don't just "go it alone" and why they don't "own" DunselCare.

    The fact of the matter is, from all indications, Democrats don't WANT to own DunselCare.

    I mean, let's face it. The US Government swooping in and inserting itself into what has always been a Private Sector endeavor has NEVER, EVER, NOT ONCE, gone well.

    There is absolutely no reason to suspect that DunselCare will be any different.

    Democrats NEED to cover of Bi-Partisanship so that, down the road, when things DO go bad with DunselCare (assuming anything gets passed, which is seriously doubtful at this juncture) Democrats can always point the finger at the Right and lay part of the blame on them.

    And here we are.

    Democrats don't want to "OWN" this legislation. Which is why they are bending over backwards, making concession after concession and diluting the legislation to the point of irrelevance.

    Time will tell if the Democrats go "ALL IN" and actually take DunselCare as their own. Or whether they fold.

    I got a whole bunch of quatloos, ready to lay some bets.

    Anyone wanna match?? :D


  10. [10] 
    Michale wrote:

    Obama Goes Postal, Lands in Dead-Letter Office

    Commentary by Caroline Baum

    Aug. 18 (Bloomberg) -- “UPS and FedEx are doing just fine. It’s the Post Office that’s always having problems.” -- Barack Obama, Aug. 11, 2009

    No institution has been the butt of more government- inefficiency jokes than the U.S. Postal Service. Maybe the Department of Motor Vehicles.

    The only way the post office can stay in business is its government subsidy. The USPS lost $2.4 billion in the quarter ended in June and projects a net loss of $7 billion in fiscal 2009, outstanding debt of more than $10 billion and a cash shortfall of $1 billion. It was moved to intensive care -- the Government Accountability Office’s list of “high risk” cases - - last month and told to shape up. (It must be the only entity that hasn’t cashed in on TARP!)

    That didn’t stop President Barack Obama from holding up the post office as an example at a town hall meeting in Portsmouth, New Hampshire, last week.

    When Obama compared the post office to UPS and FedEx, he was clearly hoping to assuage voter concerns about a public health-care option undercutting and eliminating private insurance.

    What he did instead was conjure up visions of long lines and interminable waits. Why do we need or want a health-care system that works like the post office?

    What’s more, if the USPS is struggling to compete with private companies, as Obama implied, why introduce a government health-care option that would operate at the same disadvantage?

    Obama Unscripted

    These are just two of the questions someone listening to the president’s health-insurance reform roadshow might want to ask.

    Impromptu Obamanomics is getting scarier by the day. For all the president’s touted intelligence, his un-teleprompted comments reveal a basic misunderstanding of capitalist principles.

    For example, asked at the Portsmouth town hall how private insurance companies can compete with the government, the president said the following:

    “If the private insurance companies are providing a good bargain, and if the public option has to be self-sustaining -- meaning taxpayers aren’t subsidizing it, but it has to run on charging premiums and providing good services and a good network of doctors, just like any other private insurer would do -- then I think private insurers should be able to compete.”

    Self-sustaining? The public option? What has Obama been doing during those daily 40-minute economic briefings coordinated by uber-economic-adviser, Larry Summers?

    Capitalism Explained

    Government programs aren’t self-sustaining by definition. They’re subsidized by the taxpayer. If they were self-financed, we’d be off the hook.

    Llewellyn Rockwell Jr., chairman of the Ludwig von Mises Institute in Auburn, Alabama, and editor of, put it this way in an Aug. 13 commentary on

    “The only reason for a government service is precisely to provide financial support for an operation that is otherwise unsustainable, or else there would be no point in the government’s involvement at all.”

    Rockwell sees no “economic reason for a government postal system” and would abolish it.

    Of course, there’s the small matter of the U.S. Constitution. Article 1, Section 8, grants Congress the power “to establish Post Offices and Post Roads.” A series of subsequent statutes gave the USPS a monopoly in the delivery of first-class mail. Congress thought that without such protection, private carriers would cherry-pick the high-profit routes and leave money-losing deliveries in remote areas to the post office. (In those days, the USPS covered most of its expenses with revenue.)

    Less Bad Option

    It was only through exemptions in the law that private carriers, such as UPS and FedEx, were allowed to compete in the delivery of overnight mail.

    Short of a constitutional amendment or a waiver from Congress, we are stuck with the USPS.

    But back to our storyline. Everyone makes a mistake or flubs a line when asked questions on the spot, including the president of the United States. We can overlook run-on sentences, subject and verb tense disagreement, even a memory lapse when it comes to facts and figures.

    The proliferation of Obama’s gaffes and non sequiturs on health care has exceeded the allowable limit. He has failed repeatedly to explain how the government will provide more (health care) for less (money). He has failed to explain why increased demand for medical services without a concomitant increase in supply won’t lead to rationing by government bureaucrats as opposed to the market. And he has failed to explain why a Medicare-like model is desirable when Medicare itself is going broke.

    The public is left with one of two unsettling conclusions: Either the president doesn’t understand the health-insurance reform plans working their way through Congress, or he understands both the plans and the implications and is being untruthful about the impact.

    Neither option is good; ignorance is clearly preferable to the alternative.

  11. [11] 
    akadjian wrote:


    Also being formerly associated with the insurance industry, here's a quick economic primer on insurance:

    1. The idea originally behind insurance is that a large group of people bands together to form a pool to assist a small group in times of disaster or misfortune. In the case of healthcare, disease.

    2. Why? Because the individual may not be able to afford such a large cost at one time. Individuals pay incrementally to benefit in time of need.

    3. In which situations does this work? When the pool is large enough so that statistically, the amount of people in need at any one time is small.
    And, when the pool is designed so that what's in it will cover the need.

    What has happened with private insurance companies, however, is that they have figured out they can make more profit by reducing the pool of people who are in need. This skews the statistics towards greater profits.

    This is why I believe there is a strong statistical economic argument for a government insurance program. Everyone would be in the pool, no one would be denied, and statistics would work the way they should work to provide coverage.

    Is this saying there's no need to control costs? No. Any program would still need to determine what procedure is appropriate in a given situation. But the statistics of the situation would work the way they were designed to work.

    The insurance companies, however, want to focus SOLELY on controlling costs. Guess this is reform of a sort. But does it benefit the insured?

    My 2 cents ...

  12. [12] 
    Dorkfish wrote:

    I would disagree that with you that there is a strong statistical that points toward the govenment. The goverment has done a very poor job at maintaining the "pool". Since almost all seniors are on Medicare, thus creating the vast pool that you are speaking of (no adverse selection)why have they been unable to keep Medicare our of the bankruptcy? The answer is simple, insurance is complex science and government employees lack the knowledge and based on their track record alone, it should give people pause. Why is it that we have some many people that think that the insurance business is so simple that anyone, including the government can do it? Maybe they should be building shopping centers and doing open heart surgery as well? As for controlling costs, is it up to the insurance companies and/or the government to control the costs of the medical industry? The dreaded HMO was an attempt to do just that, stop costs that are out of control. I don't think that they have done the best job of it, so what can be done to force cost control in health care? I think that its the tried and true American way of competition. The other key point that you are missing is the damage to the health (excuse the pun)of the "pool" by government tinkering and the legal community. Government alone has created a large about of the "pool's" disfunction.

  13. [13] 
    Michale wrote:


    Then it makes more sense to reform Health Care INSURANCE than it does to create a NEW form of insurance bureaucracy, no?


  14. [14] 
    Michale wrote:

    Now that I think more about it, this is an important distinction.

    I mean, the majority of the complaints about Health Care is that it causes bankruptcy, etc etc.

    Now, is that the problem of Health Care?

    Or is it the problem of Health Care INSURANCE?

    It seems to me that creating another INSURANCE entity, saddled with all the problems and carp that plague ANY government agency is like trying to put out a fire by dousing it with gasoline.


  15. [15] 
    akadjian wrote:

    Michale- Possibly. Except all efforts at this previously have been blocked by the same lobbyists. Remember the patient bill of rights? The only reform the insurance industry is interested in is reform that boosts their profits. If there was reform that would benefit people and not just the industry, I would support that as well.

    Riddle me this, why do conservatives never talk about privatizing the military? Why is there no large conservative backlash against this government run program? (Well, ok. Maybe it's because much of this is being done anyways w/o having to beat up on the military. But you never hear it from the talking heads.)

    And why is it that conservatives are against government bureaucracy, but somehow think that there's none when it comes to large corporations?

    Could the answer to these questions be that private industry has better marketing departments and lobbyists :)?

    Dorkfish- If government insurance is so inefficient, why do the insurance companies say it threatens their business? Won't they easily be able to compete against this "inefficient bureaucracy"? Why should they be worried by public option?

    Also, wouldn't the government be able to leverage economies of scale to reduce costs?

    p.s. I notice that no one said anything disputing how insurance companies profit by narrowing the pool and "cherry picking" clientele. Only changing the subject to focus on bad government, bad government, private industry good.

  16. [16] 
    Michale wrote:


    I don't think you'll find anyone that is saying that the Insurance companies are as pure as the driven snow. In my personal opinion, they are one step ABOVE lawyers on the "blood sucking scale".. (no offense to any lawyers here..)

    And, I don't think you'll find anyone that defends the influence of lobbyists. Probably squiggied in there between Insurance Companies and Lawyers...

    But DunselCare doesn't address ANY of those problems.

    That's my whole point..

    It's as if we were to sit down and decide that flies and mosquitoes are the problem with our summer beach resort and, to "fix" the problem, we're going to augment our marine transportation assets in order to bring more people to our resort.

    The "solution" has absolutely NOTHING to do with the problem. Zero... Zilch... Nada...

    The ONLY thing the solution will do is cost us more money, create MORE people with headaches and problems and, in the mid to long term, insure the demise of our resort.

    If you need any examples of this, one only needs to look to the USPS, Medicare, Medicaid and Social Security to know that this is true.


  17. [17] 
    akadjian wrote:


    If a Lobbyist, an Insurer, and an a Lawyer were all drowning, and you could only save one of them, would you go to lunch or read the paper?

    Kidding aside, it is interesting that neither lobbyists, lawyers, or insurance companies seem to draw the wrath of conservatives as much as government. Never any talk about the beauty of our Democratic government and it's design. In fact, it's almost unpatriotic!

    Are conservatives anarchists then? Because that would seem to put them in the same company as the crazies they say they hate.

    But I digress.

    I think health care reform could do a lot of good if accomplished right. But to do any good for the public, it has to at least take into account some of the problems under the wonderful private insurance system- such as the over 40 million uninsured people in America.

    And you're right, Michale, there are other issues than health care. But does this mean we do nothing?

    If there are better options - such as this one posted at the atlantic:
    - let's look at them. But under the current system, I don't think there is any way to help bring about reform of the insurance industry w/o some type of government intervention. Even if it is to help change how these companies are incentivized.

    What would you suggest as reform that is not solely focused on reducing costs for these insurers, but addresses some of the other problems with the system?

    Other than kill all the lawyers, insurers, and lobbyists, that is :).

    - David

  18. [18] 
    Dorkfish wrote:

    The reason why the "public option" is a problem is because the government can operate at a loss while insurance carriers have to sustain themselves. The govenment doesn't "go out of business." When they need money, they just raise taxes, cut coverage or cut doctor reimbursements. All of which they have done to Medicare. To add to the problem, the government is now a player while at the same time it is the referee of the game. Meaning, they set financial regulations (as they should) to protect the consumer and the health of the industry, while they disreguard those very regulations in their own programs. At some point, the government will have to pony up to the cost,as we are seeing with the failing medicare system.

  19. [19] 
    Dorkfish wrote:

    To your question/statement about cherry picking. Remember, the vast majority of Americans are covered under a group plan at their place of employement. There is no cherry picking of people on a group plan. Either the entire group is underwritten or it isn't. The cherry picking analogy is not accurate. In terms of individuals/self employed seeking coverage, private sector companies must be able to stay in business. It is impossable to operate at a loss and stay in business. They harsh reality is that folks that think the government can sustain an ongoing loss are being misled. The govenment cannot swallow that either. This speaks to the point that Chris was making in his blog. It still comes down to economics. It would be to the benefit of all consumers if a solution can be found to help those that are uninsured rather than a powergrab (in the name of an overhaul)that will only lead to coverage rationing. The economics support my position. In the end, its about the cost of the care. Washington has decided to now shift the debate from health care reform to health insurance reform, its just a different tactic to gain control. This is about control, not health care.

  20. [20] 
    Michale wrote:

    Kidding aside, it is interesting that neither lobbyists, lawyers, or insurance companies seem to draw the wrath of conservatives as much as government.

    Yea, you won't find me disagreeing with you regarding the malfeasance and hypocrisy of the Right.

    And you're right, Michale, there are other issues than health care. But does this mean we do nothing?

    Nothing would be preferable to something as bad as DunselCare.

    The administration should follow the old physicians adage, "First. Do no harm."

    DunselCare is harm heaped upon harm.

    What would you suggest as reform that is not solely focused on reducing costs for these insurers, but addresses some of the other problems with the system?

    Tort reform would be a good start.

    Other than kill all the lawyers, insurers, and lobbyists, that is :).

    Don't tease me. :D


  21. [21] 
    akadjian wrote:


    Interesting point. Cherry picking may not be as true in the case of employer group plans. But I believe it's still true when it comes to those who aren't covered by employers. And this pool is increasing as small business owners drop coverage.

    And caps on health care and pre-existing conditions are common ways to limit the risk of the insurer. To the detriment of those who may need help the most.

    In a competitive environment, the company that makes the most profit wins and becomes the largest eventually wiping out much of the competition in certain (UHC, for example). So the incentive is to compete for the pool of healthiest insured and to limit exposure to risk as much as possible.

    If the goal is to ensure everyone against a catastrophic medical expense, then our current system has failed.

    Now, David Goldhill, in an article in the Atlantic, makes an interesting argument. He claims that insurance has gone beyond this definition and now includes paying for all kinds of everyday medical expenses.

    I would be interested to know how much all of this extra care really contributes to extra health. Are we OD'ing on health care? He argues that health care demand has no natural limit.

    He suggests the biggest reform we could possibly make would be to "move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system."

    He suggest a 3-tier approach:
    1. A single pool of catastrophic insurance run by the government that Americans are required to buy- this would kick in times of great need. And, in this case, statistics would work because the pool is vast and it would only apply in rare instances, rather than everyday expenses. A threshold of ~$50,000 or higher.
    2. How would we pay for average medical expenses? Out of our own pockets. A plan such as an HSA.
    3. How would we pay for expenses that fall in between the cracks? We could borrow against our HSA. Or have additional insurance.

    Now this may seem expensive, but he argues that a 22-year old will pay on average $1.77 million in health insurance and health care costs.

    It's an interesting argument. Because it would a) meet the goal of covering everyone in case of catastrophe, and b) put the consumer in charge of health care dollars- possibly the best way to limit costs and also to encourage competition among doctors and hospitals.

    At the very least, it's an interesting argument because it balances the need to prevent catastrophic loss with a competitive method of reducing costs.

    True, we would have to literally throw out most of the current system, so it is probably a pipe dream. But much of the trouble with health care reform is that so many companies are profiting that they will do almost anything to not change the system.

    Good discussion folks!

    - David

  22. [22] 
    Dorkfish wrote:

    Since its past midnight, I'll hold on the "pipe dream" point until I am somewhat awake. Thus, for now, I will "cherry pick" the easy stuff. LOL. The HSA approach in its current form doesn't seem to be working out well for lots of reasons. That is a subjective viewpoint, so take it for what its worth. In my heart of hearts, I think that the true solution (my pipe dream) lies in bringing health care costs down. If that happens not only will the insurance rates go down, but it will also open up the insurance market to risks that are not otherwise insurable in today's market. We have to take a look at what is driving the cost of care up at such a rapid rate. My anger with the political community lies in the fact that no one seems to be attacking the root of our problems. As a insurace/conservative guy, I see the current situation as a lose/lose. If Obamacare wins out, I think the American public loses out in a big way over the next 10 years and beyond. If the republicans win, then health care costs continue to soar. I believe that the middle ground for liberals and conservatives is the health CARE cost issue. I agree that there there need to be some changes in insurance, but we need to dig the roots, not trim the tree. You raise a good point when you ask about the "extra care" and what do we get out of it? I look at that point from the perspective of mandates. We have over 50 in our state (unfunded) and it is costing private insurance and the consumer a fortune. Just this year's mandates have increased my insurance for my small business by $11,000. Imagine if one day, out of the blue, the government decided that your auto insurance should now cover oil changes? It is the constant addition of forced coverages, by legislators that have a big impact on pricing. I don't think that was the point that you were making, but anyway....
    As for Od'ing, this has been a big problem in Canada. ER overusage is out of control. There are no limits. I think that focusing on financing the care is important, but the cost of what we are financing is the core issue. One last point on insurance, it is not vital that insurance carriers insure the most healthy pool. That is not how carriers make money. So I would disagree with that arguement. They make money by properly pricing the risk. The tougher the risk, the tougher it is to price, but its about the margin verses the risk. In the auto insurance world, Progressive has become a top five company while selecting some of the worst risks in America. The problem with with individual market (where 95% of the uninsured are) is the the pool is so skewed that it reaches the point of impossible from a price standpoint. As far as my own pipe dream goes, the goverment has to have the courage to go after ALL of the sacred cows to bring prices down. Competition in heath care itself would go a long way in drastically reducing prices. Tort reform would as well. The Obama administration is not talkng about either one. In addition to that, getting the insurance carriers to cut out the piles of silly paperwork that they are forcing on Docs, standardizing the approval process with carriers would also cut a lot of cost out of the system. Next, the government has to stop with the constant flow of unfunded mandates. They contine to tinker with a free market that only ends up costing everyone more money. Lastly, if the government wants to be in the insurance business with Medicare, they need to run it with insurance principles. The uneducated way that they are doing it today is driving the costs to doctors and private insurance through the roof. The disfunction of the Medicare system alone is costing everyone. My greatest fear is that we have a bankrupt forced national system that runs like Medicare.

  23. [23] 
    akadjian wrote:


    I find it interesting that all of your efforts support the insurance industry. Guess you did say you were an insurance guy so appreciate the honesty.

    But why should government help the insurance industry? Isn't that corporate welfare? Where's all of the personal responsibility and free market mumbo jumbo when it comes to insurance companies?

    If government has to help out insurance companies - i.e. give them money and write regulations for them - why not cut out the middle man? This is one way to truly "dig the roots."

    If the government focuses solely on lowering costs for the insurance companies, there's no guarantee the public would benefit from any of this. Corporate interests do not align to public interests. This is my big problem with corporate care. That, and it hasn't worked.

    You present an interesting industry perspective. But it sounds extremely one-sided and doesn't address at all the larger issue of making sure people are not bankrupted by health care.

    Your argument seems to be: 1) there's nothing wrong with the insurance industry, and 2) government's role should be to do everything possible to help the industry and the results will "trickle down" in some magic, unspecified manner.

    Trickle down theory all over again. Here's what people have discovered. Trickle is the perfect word. The public gets almost nothing and industries get fat off corporate welfare.

    If there's going to be reform, it cannot simply focus on the problems the insurance industry is having. Poor insurance industry.

    I do hope the insurance industry is at least paying you well for your commentary :).


  24. [24] 
    Michale wrote:

    I do hope the insurance industry is at least paying you well for your commentary :).

    No offense, David (you KNOW I like you.. :D ) but this tried and failed tactic of trying to answer any honest debate with a You-Must-Be-Bought-Off response is really beneath you. It works dismally for the Human Caused Global Warming (Yet The Planet Is Cooling) nutjobs and it's going to work just as dismally for the DunselCare supporters as well. Because, for it to be accurate, the vast majority of Americans must be "bought off" as well.

    I don't see DF's statements as unwavering support for the insurance companies. I see his comments as pointing out that vilifying the Insurance Companies (I know, I do it too..) is not the most effective way to provide reform.

    Neil Cavuto has a real good column on THAT topic. :D,2933,541226,00.html

    Of course, it's possible (even likely) that I am reading too much into your comments. You did, after all, say it with a smile :) so if you were just kidding around, then disregard everything I just said. (I can picture the comeback from THAT statement already! :D)

    But still check out Niel Cavuto's commentary. It's very funny and spot on...


  25. [25] 
    Michale wrote:

    The best course of action for President Obama is to tear up everything that has been done to date regarding DunselCare and start from scratch.

    That is what JFK did after the Bay Of Pigs and the public loved him for it.


  26. [26] 
    akadjian wrote:

    BTW - I'm not necessarily arguing for any sort of government takeover. But I think it's ridiculous to solely focus reform on helping the insurance industry.

  27. [27] 
    akadjian wrote:


    Huh? Yes, :). Not saying anyone has been bought off. Except you ;)!

    Just pointing out that these are the arguments of the insurance industry. Almost verbatim.

    Any reform that focuses solely on how to help this industry is not reform that will ultimately most benefit the public. Look at all the wonderful "reform" in the financial industry and where it got us.

    - David

  28. [28] 
    Michale wrote:

    Huh? Yes, :). Not saying anyone has been bought off. Except you ;)!


    "And the Ref takes a point away!!"
    -Jim Carrey, LIAR LIAR


    Ya'all might want to read the following...

    "When liberal activists, including trade unions, Acorn and, protested against anything and everything President George W. Bush said or did, it was called grassroots democracy.

    When conservative groups encourage supporters to attend town hall meetings and make their sentiments known to their congressmen, it’s un-American, disruptive and the work of right- wing extremists. "

    "Facts are stubborn things, this White House is quick to remind us. And in this case, the facts don’t support the vilification.

    If insurance companies were gouging the public, the evidence would show up in one of two places, according to Graef Crystal, a compensation expert in Santa Rosa, California, and occasional Bloomberg News columnist: excessive executive pay or excessive returns to shareholders.

    His analysis of five major health insurers shows just the opposite: below-market pay and below-market shareholder returns.

    “There’s no case here for undue enrichment of shareholders” or over-compensating CEOs, Crystal finds.

    Health care needs a major overhaul, but that’s no reason to make scapegoats out of insurance companies. "


  29. [29] 
    Dorkfish wrote:

    I am disapointed in your response. It appears to be emotional, not intellectual.It also appears that you have not read my responses closely. I am a small business man, I don't speak for or lobby for the the indusrty. I own a brokerage that does all forms of insurance. No where did I state that I have an interest in help from the government. Its just to opposite, my point was that the government is largely responsible for many of the health care rate increases. That's not emotion, its fact. I would be happy if the government either stayed out of the insurance business, as they can't run a tag sale, let alone an entire indusrty. Or if they want to stay in the insurance business, they should run it without politics. Every single health care and property & casualty plan that they have run, they have run into the ground. It is stunning to me that Americans acutally think that with that track record that somehow, after complete failure after failure taht they will "turn it around."

    I believe in government oversight, as there are some industries, insurance included, that it is important. My point was that you, like the president, can't seem to seperate health insurance from health care. If you want to solve America's problems in HEALTH CARE, the rest will take care of itself. The reality of my position is that I actually understand (after 25 years) this stuff. In what part of my entry did I seek government help? From an insurance perspective, you have a lot of opinions about insurance, but it doesn't appear that you have a lot of knowledge about it. My position is that if you are stuck on "insurance is the problem", like many are, than in my opinion, you are not understanding the problem. I have said in many entries and will say it again, the cost of the coverage is a refection of the cost of the care. The cost of the care is driving rates through the roof. The cost of the care has forced companies out of the individual market place. I an NOT opposed to some insurance reform, but my point is that it doesn't come close to the real problem.

  30. [30] 
    Michale wrote:

    While President Obama is keeping all options on the table, Speaker Pelosi sure doesn't have a problem with drawing a line in the sand.

    “There’s no way I can pass a bill in the House of Representatives without a public option,” the California Democrat said at a press conference in San Francisco yesterday.

    Pelosi drew a line in the sand on one of the most contentious issues surrounding the health-care overhaul after Obama administration officials earlier suggested the White House might be willing to back away from the public option to win broader support. Republicans and even some Democrats have said the idea is a nonstarter in the Senate.

    Maybe we should have Pelosi as President.

    Ohmigod, who said that!!!!????



  31. [31] 
    akadjian wrote:


    "I am disapointed in your response. It appears to be emotional, not intellectual."

    Listen to how that sounds ... and enjoy the irony of a person claiming to be intellectual using condescension and name-calling to win an argument.

    I'd agree with you that the high cost of health care is a problem. In fact, this was what I wrote about when I was talking about David Goldhill's article. Goldhill talks about this distinction between health care and health insurance.

    So yes, I'd be willing to look at reforms related to health care. But that doesn't solve the problem of 40 million uninsured Americans. It doesn't solve the problem of health care bankrupting Americans.

    And the insurance companies, not necessarily you (I'm making a distinction here because I don't know your personal beliefs), are blocking every effort at any type of reform to solve some of these issues.

    I may not have worked in the industry for 25 years but I worked in the auto insurance industry long enough to understand how they write exclusions and how they will fight tooth and nail to deny a large enough claim using every fine print clause and lawyer at their disposal.

    I've also seen how they fool people into buying coverage that they will almost never need (which provides pure profit to the company). They used to joke and say it was "like printing money."

    And I think that we have to consider options which may include the government because the insurance industry will never address these issues without either incentives, legislation, or additional competition.


    p.s. Michale, holy crap, you crack me up about Pelosi! Of course that why conservatives hate her so much, she's got some stones!

  32. [32] 
    Michale wrote:


    Yea, Pelosi has some big ones. But, the problem is, her sense of values is so out of whack, it's pathetic.

    She is the type that would say, "Oh you poor baby" to the Lockerbie bomber and send him on his way home to a hero's welcome, despite the fact that he masterminded the brutal and despicable murder of 270 innocent men, women and children.

    The same type of mentality that led to this scumbag coward's release is the same type of mentality that we should torture the poor terrorist's.. Frankly, it pisses me off, as you can probably tell...

    As far as the 50 million uninsured Americans, let's face it.

    The ONLY way to fix that is by Insurance Mandates.. And then, those that fall between the poverty and poor levels (which is quite a few million Americans) will be forced to pay for insurance that they cannot afford.

    This is what is happening with Auto Insurance and this is what will happen with Health Insurance. Talk about actually HELPING the Health Insurance industry. They are salivating at the idea that they will have all these new customers.

    And then those people will have a choice. Should they pay for their auto insurance, health insurance, their mortgage or buy food for the week.

    Yea, Democrats are REALLY helping Joe Average American, ain't they?? :^/

    That was sarcasm, in case ya'all missed it..


  33. [33] 
    Michale wrote:

    "Don't drive angry. Don't Drive Angry!!"
    -Bill Murray, GROUNDHOG DAY

    I guess a corralary to that should be,

    "Don't Post Angry."

    "The same type of mentality that led to this scumbag coward's release is the same type of mentality that we should torture the poor terrorist's.. Frankly, it pisses me off, as you can probably tell…

    Should read...

    "The same type of mentality that led to this scumbag coward's release is the same type of mentality that we says we shouldn't torture the poor terrorists.. Frankly, it pisses me off, as you can probably tell…"

    I'm gonna go get a beer....


  34. [34] 
    Chris Weigant wrote:

    Michale -

    I still have yet to tackle this whole comment thread, but your last bit there is pretty easy to refute. Pelosi's statement on Libya:

    “Today the world remembers the victims of the bombing of Pan Am flight 103 over Lockerbie, Scotland in December 1988, and expresses our deep alarm that the convicted perpetrator of this unspeakable crime has been allowed to go free.

    “I am deeply disappointed by the Scottish Executive’s decision to release Abdel Basset Mohamed al-Megrahi, who was convicted of this crime and sentenced to life in prison in 2001. Instead of returning to Libya, he should be serving the remainder of his sentence in Scottish custody.

    “We continue to condemn this brutal, criminal act and stand steadfast in our commitment to international efforts to prevent terrorism and punish its perpetrators.

    “My deepest sympathies continue to be with the families of the 270 victims, including 189 Americans, who lost their loved ones as a result of this horrific crime.”

    So what's there to argue with? Seriously, do you have a problem with any of that? Check your facts before you smear...


  35. [35] 
    Michale wrote:


    My point is that Pelosi's statement is so much crocodile tears.

    I have nothing to argue about her statement. My argument is that her ACTIONS vis a vis terrorists at Gitmo belay her *alleged* and *so-called* sympathies to the 270 victims of Lockerbie.

    How many "Lockerbies" were prevented due to enhanced interrogations of terrorists as real and as guilty as Abdel Basset Mohamed al-Megrah??

    My point is this.

    The same exact misplaced compassion that the Scottish courts exhibited towards Abdel Basset Mohamed al-Megrah.... the "compassion" that Pelosi allegedly condemns from the Scottish Courts is the EXACT same compassion that Pelosi herself and many of her fellow Democrats exhibits towards the "poor souls" at Gitmo.

    The terrorist that was waterboarded 83 times until he gave up key details that even Obama's Administration officials concede was valuable details about Al Qaeda that prevented OTHER "Lockerbie" attacks.

    Pelosi et al cannot have it both ways. They are either WITH the Scottish Courts and their compassion towards scumbag terrorists or they are AGAINST said compassion for said terrorists.

    I know this is an old point of contention between us, and by "us" I mean all of the posters here to

    But, what it all boils down to is one simple question.

    Do terrorists deserve ANY form of compassion?

    When it comes to Lockerbie, Pelosi et al say "NO" only because it is politically expedient to do so..

    When it comes to terrorists at Gitmo, Pelosi et al say "YES" because it is politically expedient to do so..

    But, I am curious..

    How do people here view the "compassionate" treatment that this scumbag Abdel Basset Mohamed al-Megrah received???

    As everyone knows, terrorism and the "compassionate" treatment of of terrorists is really one of my biggest "buttons".. I just simply cannot fathom how ANYONE can advocate the "compassionate" approach when it comes to terrorists.

    I guess what I am really trying to say is that, when it comes right down to it, Pelosi et al and the Scottish Courts are really one and the same, despite Pelosi's crocodile tears.


  36. [36] 
    Dorkfish wrote:


    You may have stubbled across a very good point without realizing it. In the auto industry, when laws were passed to force everyone to be covered, two big events took place. The insurance industry did not want and did not support the manditory insurance law (I disagree with your opinion on that). The indusrty didn't want these policies because the majority of those that didn't carry coverage were very bad risks, not unlike those that are seeking individual health coverage. What makes this point so important is the end result. At first, the states required a "risk pool" that was set up by the government, but funded by each insurance carrier (based on market share). This pool had to be set up because even those when the law mandating coverage had been passed, companies would not take on the risk. The "pool" allowed carriers to take a portion of the risk without danger of adverse selection. This worked well for a while. Soon some carriers entered that market (the biggest being Progressive) that focused only on high risk drivers. The end result was that prices dropped a lot and the pool became much less relavant. So...why not set up a "risk pool" for health insurance funded by carriers? That keeps the government out of the insurance business, but forces carriers to fund coverage. If it follows the path of auto insurance, new carriers would rise up to handle that risk. In order for this to happen though, the government would have to set up the pool and force participation in it.

    David; I again don't agree with your claim assesment of auto insurance carriers. We represent 21 of them and have never witnessed the practices that you are refering too. There are "cut rate" companies out there, (The reptile for example), but remember these policies are viewed and approved with government oversight. We actually find the opposite to be true, the majority of customers that come from one of those companies are underinsured. With that said, I think that there are a small group of carriers, especially those that do a lot of national advertising, that give the rest of the companies a bad name.

    Lastly on the point of the 40 million Americans, I don't agree with that number as that number includes young people that don't want coverage,those between jobs, and those that are not here in the country legally. The real number of uninsured that need coverage is still too high, but not 40 million. I just have an issue with the government setting up a system that plays to the lowest common denominator that will in the end cost the majority of Americans the quality of coverage that they currently have. I am not one of those people that is willing to do that. I think that we can do better and bring the level of care and coverage up, not down.

  37. [37] 
    Michale wrote:


    Going back over what was posted, I see your point.

    My apologies. You were correct. I should have researched it first before I assumed I knew what Pelosi would say.

    However, in my own defence it WAS a reasonable assumption, given the facts of Pelosis actions vis a vis the terrorists at Gitmo. So, it's a reasonable assumption that should would be on the side of compassion towards terrorists. I am sure it is nothing but political expediency that caused her to condemn the Scottish release of the Lockerbie terrorist.

    So, mea culpa. You were right.. I was wrong. :D


    You may have stubbled across a very good point without realizing it.

    I have my moments. :D

    I posted a link to an article that takes a look at government actions vis a vis the US Post Office and
    asks what would happen if these same acts of "extortion" were applied to the HealthCare industry.

    Why the Post Office will never make money (and a lesson for health insurance)
    By: David Freddoso

    Interesting read.


  38. [38] 
    akadjian wrote:


    Even if the number of 40 million is off by say 10 million, isn't this still a problem?

    As for a pool of risk, I don't understand how this would work and would benefit the average person.

    Does it work something like the following proposal?
    If so, I like this as it would put much of the ball in the court of consumers and might generate real competition again.

    I'm guessing though that you're talking about something different that seems more like limiting the risk of exposure for insurers. Not sure how this would work towards the public good. Could you help out this poor former auto insurer?


    p.s. About where I worked. It was not a cut-rate insurer. But they were very focused on turning a profit. Most had good hearts and were concerned about the insured. But there was also this driving profit motive. The two often conflicted. When this happened, as you mentioned, they would talk about reducing their exposure to risk. This meant new exclusions, increased rates, not renewing certain customers, etc. These conversations typically occurred between the executives and the underwriters behind closed doors.

  39. [39] 
    Chris Weigant wrote:

    OK, I know I'm late but I'm going to jump into this fray here. I always admit my ignorance on economics, and to that I will add my ignorance on insurance industry practices as well, so much of what you're discussing here I won't comment on at all, through my own lack of understanding. But I do have a few questions.

    1) OK, Medicare may not be the best example of how to keep costs down by government in the healthcare system, but what about the VA? I know it has problems, but also does some good things as well. From what I know, the VA operates as a fully socialized medicine system, since they have their own doctors, hospitals, and infrastructure -- instead of making payments to private businesses (doctors, clinics, hospitals), they own the whole enchilada, right? So my question is -- are they any better at controlling costs? Does it cost the VA more or less for a routine hip replacement surgery, for instance? I honestly don't know the answer to this, which is why I ask.

    Dorkfish - why is it, if your point about Medicare denying stuff more than private insurance, that when I hear doctors themselves talk, they say over and over again "I've never had a problem with getting a treatment approved by Medicare, but I have spent hours arguing with bean counters at private insurance companies?" I admit, I'm looking only through one side of the lens here, but from what I see, it seems to be the insurance companies which doctors complain most about when it comes to limiting coverage and treatments, not Medicare. Have I just been listening to the wrong doctors or what?

    Michale - interesting point about Obama. I would put it "he's playing defense, he should be on offense" but I think I'd be saying the same thing. You're right -- the lack of a consistent message or goal is indeed a lack. Although I would chalk some of the "retuning the message" breathlessness up to the sensationalism of the media. But it's still a valid point.

    Dorkfish - I'm sorry, but I just don't buy in to the argument that "government run healthcare will destroy the private market." That's exactly what the AMA and the insurance industry said about Medicare, and it hasn't come to pass in more than 40 years. There's an oxymoron at the heart of this argument by conservatives: "government-run health care will be a disaster, because the goverment can't run anything" plus "government-run health care will be so wildly popular an option that it will run the insurance companies out of business" does not compute.

    Michale - I saw Charles Schumer finally (FINALLY) come up with a decent argument for the "government can't do anything as good as the private sector" argument, and a decent metaphor to boot. Here it is: public universities. There are still private universities. They cost more. State schools, however, provide a pretty high level of education (compared to not going to college at all), and do so at a massively lower cost. And if you're all ready to sneer at public universities, here's one example to refute you (there are many): Berkeley. Whose full name is "University of California, Berkeley." It costs less than ten grand to attend Berkeley. And yet, Stanford hasn't disappeared.

    While the post office is easy to laugh at, they're actually pretty good value. They run deficits because they ARE government run -- they have to prove they're losing money before an independent board allows them to raise the price of a stamp. Imagine private industry under those rules for a moment. And they still (surprise) have pretty good poll numbers for the number of Americans who like and trust them. Sure, you can take a letter to FedEx. They'll deliver it for you -- faster! -- for about ten or twenty bucks. For ONE letter. Whereas with the post office, I can leave a letter in my mailbox, and it will be delivered in a few days to the remote wilds of Alaska, the islands of Hawai'i, or some lone nut in a shack in Montana -- all for the base price of 44 cents. When FedEx can match that, then I'll be all for doing away with the post office. Because they simply can't, I'll stick with the 44 cent option, thanks.

    akadjian/David - all I know about insurance is I pay a few hundred bucks a year to insure my house. When disaster struck and 1/3 of the house was destroyed, they shelled out over $100,000 to fix it and get our lives back together again. I won't pay this back to them in 100 years of premiums. So I know, from being one of the unlucky ones, the basic theory! And I'd like to say thanks to the rest of you whose houses didn't almost get destroyed, for paying to fix mine. :-)

    As an aside to everyone, I have to say that the Republicans reached full ridiculousness on the issue, since they now appear to be fighting to: (1) keep government out of health care, and (2) stop any changes in Medicare -- "keep the government out of Medicare". Does not compute...

    Also, Dorkfish, you complain about Medicare "not paying full price" to doctors, but also that the government has to figure out how to keep prices down. Is it that Medicare is using its size to bargain for cheaper prices, in essence? Isn't that the heart of the matter of keeping costs down? Or am I missing something? This one I may be on shaky ground, but it seems that every time any Democrat suggests something which will have the effect of lowering prices, Republicans go ballistic. Is this just my perception, or is there some truth to this?

    As for tort reform, I agree that perhaps this should have been included in the mix for political reasons (sweetener for Republicans). But please, the figures I've seen say that tort reform -- even the Draconian version Republicans favor -- would save something like one-half of one percent of the cost of healthcare. So, unless this figure is drastically wrong (which I doubt), let's at least put it in perspective here.

    akadjian - haven't read the Atlantic article yet, but that's an interesting point about day-to-day health care. Car insurance, for instance, doesn't cover tune ups or oil changes. Just accidents. That's an interesting angle.

    Speaking of interesting angles, here's one that bugs me. Economists like to bemoan the fact that health care is basically "free" to people with insurance. Most people (because they get it as an "invisible" freebie from work) do not know how much their insurance costs, and don't consider price at all when looking for a doctor. But there's another side to this coin. How can a consumer shop when there's no data as to quality? Almost every state operates a medical licensing board, who operates behind a veil of secrecy. Complaints, malpractice... none of it is public record. So, as a consumer, you simply HAVE NO WAY of finding out if the doctor you're considering is a butcher or a well-qualified guy. I don't know where this really fits into any economic or political argument, but it is another thing about the whole industry which I would like to see changed.

    Whoops! Dorkfish, I wrote that bit about the oil changes before I read your exact same point. Looks like it wasn't as original as I had thought! (blush)

    Michale -

    Wait a minute, you're admitting you're wrong just after you called for Pelosi to occupy the Oval Office?!? Are you feeling OK? Seriously, man, this commenting stuff appears to be getting to you. Perhaps you should see a doctor... or have a beer.

    Heh heh heh. OK, sorry, I couldn't resist.

    OK, to end on a serious note here, for both Dorkfish and akadjian, who both have a lot more experience (at least at the front-lines level) than me on insurance -- you keep dancing around the point, so allow me to ask it point-blank: how do we reduce costs for health care? What are the main culprits? Why is it that other countries -- some of whom do not have socialized medicine even though they manage universal coverage (Switzerland, I think) -- can provide the same treatments and drugs for HALF or even ONE THIRD the price we do? What is the problem? In other words, let's set aside the whole insurance debate for a minute, and see if we can't accurately identify the problems with the costs -- or as Obama calls it "bending the curve." Why do we pay $7,000 to get worse results than a country who pays $3,500 per capita? How would you go about reducing those costs?

    Whew! That's it for now. What a thread!!


  40. [40] 
    akadjian wrote:


    Good thread. Lots of good points from everyone. To be honest, I think this takes a huge rethinking.

    Now this type of thing is easy to do here or in the pages of the Atlantic.

    The trouble is that in reality, there is a lot of money being poured into the government to defend the current system. And, to push for more changes that will benefit industries such as big pharma, large hospitals, and large insurers. Everyone wants their cut of the pie.

    And the people want their cut of the pie too. No one seems to want to think about possibly losing some benefits.

    So trying to move this political monstrosity in any direction is going to be difficult.

    We can see from this thread that part of the problem is getting the biases and preconceived notions out of the way and working to change the incentives that exist in the current system.

    In the past, I'd say let's bring in some experts and identify what the real problems are. Then let's talk about how to fix them. But it's not as simple as that.

    The solution that they come up with has to be politically expedient. That is, it has to be something that won't make things tough on those who pass it.

    So either the political climate has to be changed beforehand to allow reform. Or any reform gets watered down to fit the political climate.


  41. [41] 
    Dorkfish wrote:

    I'll take one more stab at this as it relates to the government option. The issue comes down to cost of the product. If private insurers are forced by regulation to keep set reserve amounts (as they are today) and they are forced to price thier product so that they can stay in business, while at the same time, the government, that is also the regulator prices the product at a number below the actual cost to produce the product, thus using artificial rates, the end result will be the end of private insurance. Even Barney Frank has stated as such. It comes down to the math. I would strongly disagree with your Medicare comparison, as would many in the medical community. If a doctor needs to make an average of $100 per patient to cover the cost of running his/her office, med mal insurnace, employees etc, and Medicare pays the doctor only $50 per patient, who do you think pays the difference? The private sector does and always has. The government isn't keeping the cost of medical care down at all, they are just not paying for it. The cost for the care remains the same. What happens when the private sector is no longer there to cover the costs and coverage that medicare is leaving behind? The only solution will be rationing, as it is done in England and Canada. As for the trial lawyers, the same folks that gave the Dems 137 million in this election, they have put out that 1/2% number and it is not even close to accurate. If the Democrats were serious about lowering prices, they would be all about interjecting competition into health care.

  42. [42] 
    akadjian wrote:

    In 2006, per-capita spending for health care in the U.S. was US $6,714; in Canada, US $3,678.

    The U.S. spent 15.3% of GDP on health care in that year; Canada spent 10.0%.

    Life expectancy is longer in Canada, and its infant mortality rate is lower than that of the U.S., but there is debate about the underlying causes of these differences.

    The Canadian health care system looks pretty good to me! My 3 Canadian friends all seem to think it's better than the American system.

    As for "rationing," do you mean like how millions of Americans have no health care insurance? How could our system possible "ration" any worse than it is now?


    p.s. When it comes to competition, are you saying that currently there is no competition in the health care system? What specifically would you have the government do that is different than the current system?

  43. [43] 
    Michale wrote:

    and its infant mortality rate is lower than that of the U.S.,

    In the US, infant mortality rate includes ALL phases of the infant's life, all the way back to conception.

    In Canada and most of Europe, infant mortality rate only includes gestation of 26 weeks forward.

    So, while it is accurate to say Canada's mortality rate is lower than the US, that is solely because Canada counts differently than the US.


  44. [44] 
    akadjian wrote:

    Bottom line: Their system costs a lot less, and the quality of care is high.


  45. [45] 
    Michale wrote:

    Bottom line: Their system costs a lot less, and the quality of care is high.

    Assumes facts not in evidence.

    If their quality of care was so high, then why do so many Canadians flock to the US for medical care?


  46. [46] 
    akadjian wrote:

    Per capita spending in Canada in 2006: $3,678.

    U.S. in the same year was $6,714.

    We're simply spending too much. Why not at least look at systems that have produced results like these?

    We should keep all options on the table and not be so narrow-minded.


    p.s. Canadiens "flocking" to the U.S. for health care is a myth spread by the "let's not change anything" crowd.

    "The percentage of Canadians who'd consider giving up their beloved system consistently languishes in the single digits. A few years ago, a TV show asked Canadians to name the Greatest Canadian in history; and in a broad national consensus, they gave the honor to Tommy Douglas, the Saskatchewan premier who is considered the father of the country's health care system."

  47. [47] 
    Dorkfish wrote:

    Lets talk about what we agree on first, the cost of the care in America is far too high. That we can agree on. The question becomes what is it that drives the cost. Get to that answer and we are on our way to a solution.
    The Canadian system is not a good system. I will speak to it on a personal leval first, having spent 3 years on that system. It is not a myth that Canadians are coming to America for care. The wait times to see a specialist are far longer than that of America. I have a family member with Lyme Disease that waited 7 months to see a doctor and now travels over 1000 miles to Westchester NY for care. When I was married, my wife had a cyst on her ovary. It was found in July and she was on a wait list until Feburary to see a doctor. The Canadian system is falling apart with cost overruns and doctor shortages. For every doctor that leaves America to practice elsewhere, Canada loses 17. The majority of Canadians under the age of 30 do not have a primary care doctor as there are not enough to go around. The government is offering to pay for medical school in an effort to recruit more doctors. In Ontario, in addition to the insane tax rates imposed by the federal government, there is a 13% sales tax with 8 cents spent on the health care system. Dr. Brian Day, most recently the past President of the Canadian Health Care Association, spoke on Fox News last week in reference to the colapesing Canadian system and his concerns for America as it related to government run medicine. In 2006, 1.4 million Canadians in Ontario had no primary care doctor. Dr. Day is quoted in a 2006 NY Times story on the subject http://www.nytimes/02/26/international/americas/26canada.html
    In terms of rationing, I don't want a government bureaucrat telling me that I cannot have a given procedure because of my age or life style or because its not in the budget. That is happening in Canada. British Columbia has just mandated a 15% decrease in elective surgery due to budget problems. Take a look at their broad definition of elective. I have heard the president say that insurance comapies are doing the same, that is patently false.

    We have a problem with the uninsured in America, but while it sounds nice to have them all covered, we still have to pay for it. The American govenment as well as the Canadian govenment have yet to offer any solutions that extend coverage and cover the costs. I don't think that the 75% of Americans that are currently covered should have to see a decrease in coverage as a result of the government. A 2009 Rasmussan poll shows that 80% of covered Americans rate their health coverage as good or excellent.

    Lastly, I am saying that there is little to no competiton in US healthcare. Do you know what your doctor charges for visit? How about his competitor down the street? How easy is it to get that info? How about the quality of care results from doctor to doctor? Medical care is a product and unlike all other products sold in America, the end user has little to no knowledge of the cost. People can tell you their co-pay or how much their insurance costs, but they can seldom tell you the cost of the actual care or the actual cost of the drug. Insurance is a product that is designed to help pay for something that is otherwise not affordable. Imagine if there wasn't any insurance at all. People would be paying attention to the cost of the care and we would have competition on price and quality. People focus on the price point, IE what they actually pay out of pocket. The price of the insurance is not the price of the care. The problem with health care in America is the delivery system.

  48. [48] 
    akadjian wrote:

    Couple points. I don't disagree that some Canadians aren't coming to the U.S. for health care. The myth is that they are "flocking" here.

    You make a good point that we don't know the cost of our health care. Probably because we pay for insurance, not health care. And even with insurance, some of it tends to be covered by the company we work for so we don't know the actual costs.

    If we:
    A) Paid for our own health care maintenance costs (HSA or out-of-pocket), and
    B) Had a government-run medical catastrophe program to which we all chipped in that paid out if medical expenses were more than $50k (or some set #)

    This would:
    A) Increase competition as we're paying for our own health care
    B) Cover everyone in case of huge unexpected medical expenses
    C) Remove the overhead of paying for insurance- you get the most for your money

    I would tend to agree with you that there's not much competition when it comes to health care. Though I think there's problems up and down the line in the system and not just with the delivery.

    But I'm just repeating someone else's argument. Dorkfish- How would you introduce competition in the delivery system?

    - David

  49. [49] 
    Dorkfish wrote:


    Simplistically I would take a look at what drives competition in America in the first place. I think that products in the American market place (and other countries as well) are always driven first and foremost by price and quality. An arguement can also be made for "ease" of doing business. Regardless of the industry, it seems to come down to those three things. I do like your comment about Americans having a vested interest in the actual cost of their care. I don't think that the HSA route is the best delivery system for that though. I would mandate pricing formulas to be made public. Although its a crude comparison, garages are forced to post labor rates in most states. Why not post the cost of each and every procedure at both the doctor's office and hospitals. A standardized system would be needed. Secondly, a legislative requirement that standardizes quality of care. A nationally recognized grading system of hospitals and doctors. Ease of public information reguarding a doctors & hospitals "batting average." How long has a doctor been in business, how many successful legal actions have been taken against the doctor etc. With specific procedures, what is the doctor's average outcomes, short and long term? I tend to think of the catogories that we, the public, want to see prior to having a doctor do a procedure. I would also include average wait times for an appointment and things like that. I think that the customer has to have a financially vested interest in the system. I am not sure what is the best way to do that (yet). Another angle would be for the medical profession to have some regulation as it relates to pricing. Today, the government doesn't regulate pricing based on need. It just regulates payments. There is a difference. I would also require doctors to have business training as part of their degree program. All doctors in private practice are running a business. They take payments in the form of insurance, medicare reimbursements and co-pays. They are collecting large sums of money on a daily basis in return for services rendered yet most have very little understanding of how to actually run a business. Many medical offices have been behind the curve in record keeping technology and staffing levels verses other business' their size. Doctor's offices are among the few industries that are still relying on paper files. Why? It could be HIPPA, but I don't think so.

    The solution lies around forcing competition where the best of the best get paid the most and the least are no longer in business. The consumer needs to have a say with thier dollars to finish that cycle. Low income Americans could be issued vouchers from the government, similar to the food stamp program, to purchase care. The American dream (I'm getting sappy) has always been built on rewarding the builder of the better mouse trap with the spoils of victory. Clearly, I have not thought this through, but I think that this would hit the highlights.

  50. [50] 
    akadjian wrote:


    Thanks for the reply! The discussion board is a great place to think these things through.

    Competition is a very interesting phenomenon. When conditions exist for healthy competition, the consumer often benefits. But, more often than not, what we really get is more like Coke-Pepsi- 2 giant companies that aren't really competing with each other.

    Access to information is a great way to boost competition. It's the reason why auto dealers try to hide their costs. If you don't know how much it costs them, it's harder to figure out how much you should pay. George Akerlof won a Nobel prize for his work on this very topic regarding asymmetries of information- when one side knows more about the costs than the other.

    The only thing I wonder about is that you are talking about lots of government intervention here:
    1) A standardized system- who's going to standardize? The only group that can- the government.
    2) A legislative requirement that standardizes quality of care- Isn't this the same thing as "rationing"?
    3) Regulation as relates to pricing- again, the only agency with the power to regulate is going to be the government.

    Now I'm not disagreeing with you. I just wonder why this type of government regulation is ok, yet the government can't be trusted to administer a "single payer" plan or public option.

    To be quite honest, I agree a great deal with you. I think that one of the government's biggest roles should be to create an environment for healthy competition- busting up monopolies, making sure consumers get access to good information, etc.

    The trouble is that the companies benefiting from "deregulating" the government will fight tooth and nail not to return to healthy competition.

    The American dream should be about building the better mousetrap and sometimes it is. But too often, the American dream is about monopolies, exclusive deals, misinformation, government payoffs, and forcing the better mousetrap builder out of business.

    Why is Budweiser the King of Beers? Answer: it sure as heck ain't the beer.

    So I think you're onto a good idea, I would just say that somehow or other, the government will have to be involved in creating this environment for healthy competition.

    Now that I think about it, this is one of my biggest beefs with neo-con conservatives. All you hear about is "government bad. government bad. government bad."

    If either party were smart, they would start arguing that government is essential to creating healthy competition.

    Because, let's face it, do Republicans really want anarchy or "no government" as many seem so often to argue? Wouldn't that make them moonbats? :)

    Thanks again for the thoughtful response. It's a sticky wicket and good to talk through.


  51. [51] 
    Michale wrote:

    Now I'm not disagreeing with you. I just wonder why this type of government regulation is ok, yet the government can't be trusted to administer a "single payer" plan or public option.

    It is painfully obvious that I am not in the same league as ya'all when it comes to discussions of this nature.

    But I consider myself a reasonably intelligent knuckle-dragger and pride myself on a logical and rational approach to things.

    And, as I (an admitted amateur) see it, the problem is NOT with the government setting up the system. The government, as you point out, is the only entity that CAN create the legislation, standards and regulations that would govern the Health Care field.

    But where the problem comes in (again, as I see it) with DunselCare is that the government wants to not only set the rules of the game, the government also wants to be a PLAYER in the game. A player that will be able to (and be most likely to) ignore the very rules that they (the government) set for the OTHER players in the game.

    And THAT is where things go south. THAT will do much more harm than good. And, like doctors, the government should, above all else, DO NO HARM.

    Why is Budweiser the King of Beers? Answer: it sure as heck ain't the beer.

    Whooaaa now...

    Let's not be sayin' things we can't take back! :D

    So I think you're onto a good idea, I would just say that somehow or other, the government will have to be involved in creating this environment for healthy competition.

    Creating, yes...

    Playing, no....

    Now that I think about it, this is one of my biggest beefs with neo-con conservatives. All you hear about is "government bad. government bad. government bad."

    To be fair, you only hear that from neo-con conservatives when there is a Democrat government. When you have a Republican government, you hear that from the Democrats.

    "The nature of the beast.."
    -Colonel Hadley, THE FINAL OPTION

    If either party were smart, they would start arguing that government is essential to creating healthy competition.

    Again, I am in complete agreement with you. You and I are in complete agreement that the government is essential in the CREATION process for something as important as health care.

    But the government should not be a player in the game where they set the rules.

    Because, let's face it, do Republicans really want anarchy or "no government" as many seem so often to argue? Wouldn't that make them moonbats? :)

    Ouch.... And the ref takes a point away! :D


    G'mornin' :D

  52. [52] 
    Dorkfish wrote:

    I think that government has to play a role. I don't think that the majority of neo-cons, myself included, think government needs to be out of everything. (What blog sites are you reading??)I believe that the role of govenment has an important place. The regulation is needed in some industries in and insurance is one of them. The role of government as I see it is to police the business community and assure that both the consumer and industry are protected from harm. Speaking for my fellow conservatives, if I may be so bold, we don't want government crossing the line into the actual day to day operations of the business. We spend a large amount of time trying to fix the mess that govenment makes when it crosses that line. Remember, elected officials are not experts in multiple business fields yet they wield a lot of power to "tinker". In our state legislature, we have only 2 business owners out or 400 legislators. Its no surprise that our state, has lost business' each of the past five years. In the insurance debate, as someone that has been doing this since 1981, a lot of the stuff that is coming out of Washington, including from the Republicans, will not work. We have a legislative body that is trying to run a complex business without any expertise. the end result has been bankrupcy every time. There are far more conservative business owners than liberals. I think a lot of that push back from us comes from the government being unable to resist crossing the line. But I digress...

    The government needs to set the laws.(rules). I am OK with that. The government sets lots of laws in society. Setting a law is not running a business. Single payer would be running a business. Not only running a business, but a business without competition on the cost or delivery side is very dangerous to the consumer.
    Let me clarify what I mean by pricing. Today, when an insurance company wants to raise rates, (or lower them), they must seek approval from the state insurance department. The insurance department, acting as the policemen, makes sure that the rate requested is valid based on loss ratio and expenses. It then approves the rate change. I think that when doctors want to change the cost of their services, that they should go through the same process. The government isn't setting the rates in either case, its just policing them and forcing a justification for the needed rate. A lot of folks that are upset by the high cost of insurance forget that the government has approved each and every one of those rates. In every case, the rate must be justified from a loss standpoint. On the point of standardization, the government sets standards all of the time, take fuel efficiecy requirements for example, the government is not rationing cars. Lastly, I don't agree with the Coke/Pepsi analogy. It does happen, but not the majority of the time. I will go back t my indusrty. There are over 1700 health insurance providers in America today. There are 2.3 million people working in all forms of insurance with 1.4 million working in insurance business' that employ less than 50 people. These are 2006 DOL stats. When I hear from the president that the a government option will "keep companies honest" by adding competition. How does adding one more company to the 1700 make for better competition? It only does if company 1701 doesn't have to submit to the regulation of the other 1700.

    Michale, you crack me up!

  53. [53] 
    Michale wrote:

    In topics like these, where I am by no means an expert, the best I can hope for is comic relief.. :D


  54. [54] 
    akadjian wrote:


    Though there may be 1700 companies in the insurance industry, a few companies seem to dominate the market.

    "Although there are more than 1,000 private health insurance carriers, 94 percent of the nation's metropolitan areas meet the federal antitrust definition of being highly concentrated, according to a 2008 survey by the American Medical Association. One insurer controlled at least 30 percent of the commercial market in most areas and controlled at least half the market in 44 percent of the areas."

    Maybe the insurance industry needs more competition too!


  55. [55] 
    Chris Weigant wrote:

    OK, guys, I have to jump in here and suggest that we move further responses on this thread to today's article "The Grand Confusion", because this thread has just dropped off the "recent articles" linkbox up above. I may not get a chance to reply to this thread until tomorrow night (tomorrow is Obama Poll Watch day, and the charts take some time to get ready, sorry), but for the sake of convenience, I'd like to invite everyone to shift this thread over to today's column.

    This comment thread may already have set the record at this site, I must point out. Well done, everyone!



  56. [56] 
    Dorkfish wrote:

    You are correct about the concentrations, but if you had looked a little deeper, you would have found that it is most often government regulation that has kept companies from easily crossing state lines.

Comments for this article are closed.