…From 30,000 Feet

Pete's Blog

Healthy Discussion

On the topic of health care reform (which is really health insurance reform), one of the polarizing issues is mandatory insurance subscription by all US
citizens, and for employers to offer the same. The counter-claim is that my freedom as an American includes the freedom to not get insurance. Oops, I meant to say “not get health insurance;” everyone who owns a car is required to have auto insurance, yet that doesn’t seem to bother anyone at all; even companies, large and small, sign up for the auto insurance, no questions asked. I guess it’s natural to want to protect the health and welfare of the cars in which we drive, not our families and our neighbors. But I digress…

So, anyway, I have decided to not get health insurance, as a means of expressing my freedom as an American. However, I am genetically and environmentally predisposed to various illnesses, but I have the right to not get ongoing wellness care to monitor and treat these illnesses.  Now I might wake up each morning, proud of my liberty (naturally!) until the one morning I don’t wake up because my vital organs decide they can only continue to function if I’m in a coma.  My wife drags me from the bed to the car, and drives my comatose self to the hospital.  “No insurance!” She proudly proclaims to the admitting nurse. “After all we are patriotic Americans!”  The hospital treats me anyway, because that’s what doctors, nurses, and our health professionals do — they help, they treat, and they cure whenever they can.

When I get home, now awake and feeling better, I get the bill from the hospital. $100,000 is a lot when you don’t have more than $10k in the ol’ bank account. You see, I also got my red-white-and-blue self out of that Social Security ponzi scheme, and exercised my freedom to spend, not save.   I can do it better on my own, and I invested in a new Range Rover.  I remembered that my great-uncle has a red J-D hat that I really like, so I got a red Range Rover. Very cool.  But again, I digress.  Must be adult onset ADD, but I’ll never know ’cause I don’t go to the doctor unless I’m dragged there unconscious by my wife.

So I pay the hospital $8k (my Range Rover needed new wheels, so I used the other $2k for that), and the hospital has to write down a $92k loss.  QUESTION: Who pays those doctors, nurses, and orderlies who took care of me? Who cares? They can work for free, for all I know or care. Or get it from Medicaid.

Back to reality.   For me, that’s where the whole argument against ObamaCare breaks down.  The freedom to not get insurance puts the risk and cost of health care on the government and the taxpayers across the board.  By not having insurance, wellness care becomes non-existent, making the health emergencies that much more acute, and the cost of care that much greater.  At that point, the government has to bail out the uninsured.

The ObamaCare health insurance initiative stipulates that the citizens & corporations share in the risk of health care costs in order to reduce the risk to the government via Medicaid and other social programs. Over time, with individuals taking responsibility and sharing in their health care costs, the burden on the government will be reduced.

Health insurance companies don’t make money by paying out claims, so they disqualify coverage for a host of reasons, “pre-existing conditions” being one of my favorites.   The insurance reform act — sorry, again I mean health insurance, not the mandatory auto insurance laws — will
stop the insurance companies from unreasonably denying coverage.

In the example above, if I had my health insurance as will be required by law, then the doctors would be paid, the hospitals would be paid, and I wouldn’t be sticking the government with the bill, either. And from 30,000 feet, it seems that having individuals share in the risks of their own health and wellness equates to less government involvement and a healthier, stronger America.

So if you like government bail-outs, bigger government, and a weaker populace, then you should be against Obamacare, otherwise we should be strongly in favor of the law.   I will get health insurance after all, because I don’t want to add to the government’s Medicaid burden, and I certainly don’t want to have my wife drag my comatose carcass to the hospital — what if she drops me and I get hurt?  I mean, would Medicaid cover that?

PJG66

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10 thoughts on “Healthy Discussion

  1. From: Kevin G
    Sent: Monday, October 10, 2011 12:51 PM
    Subject: Re: Healthy discussion…

    The reason health insurance doesn’t work is that it’s not insurance. Insurance is supposed to be for unusual cataclysmic events (car accidents) not everyday ones (fueling the car). Yet people want insurance to pay for routine care and prescription drugs that, once prescribed, are taken for life. It’s the wrong model and that’s why it doesn’t work.

    All credit to my wife Elizabeth, an epidemiologist in the department of veterans affairs, for pointing this out to me.

    Kevin

    ======

    10/10/11

    Kevin –

    It’s about mitigating the risk and sharing in the costs.

    You don’t have to get Rx coverage or a low deductible when buying health insurance…
    Having Rx coverage, however, might give you access to maintenance meds (i.e., asthma meds, inhalers) that would avoid very costly catastrophic collapse.

    Health insurance doesn’t cover toothpaste, healthy foods, or even running shoes (akin to your fuel analogy), as these are maintenance costs. Your auto insurance does often cover Roadside Assistance, cracked windshields, etc., (akin to the bumps & bruises & bronchitis you might otherwise absorb).

    Wellness care (check-ups, shots, mammograms, colonoscopies, etc) should be covered by the insurance companies as a function of their own risk management. Encourage early detection of disease and poor health, and you can avoid the long-term chronic/catastrophic coverage. It’s just a business model, but there are cheap alternatives on the market, too. Been there, done that.

    – PJG66

  2. Powell Arma on said:

    You left out the part where it is unconstitutional. And the car insurance example is not comparable – one makes a choice to drive. The other major failing is the thought that under a government run program it will be managed competently. Where are you going to find competent beauraceats? Oh, right, AFSCME is training them now. But, I digress.

    I agree that control health care costs is important. A better way would be via a free market. Allow insurance, or really pre paid care,
    as stated above, to be bought by an individual at the same as an employer. Allow health care companies to compete across state lines. In this system the individual has the power to shop for the right health insurance company and also has an incentive to shop for health care provider that provides the right cost benefit, something that is completely lacking in the current model and in OC. Throw in some tort reform and you have a free market system that solves many systemic issues and preserves individual rights. Or choose something unconstitutional that will devolve into a single payer that has some beaurocrat in charge of your health care decisions. Oh, and if OC is so good, why did the drafters of the law exempt themselves from the requirements of the law?

    • I know the Supreme Court will hear some arguments this session about the constitutionality of OC, but I don’t think it’s as unconstitutional (and certainly not as cut-and-dried so) as you state. We’ll see how those arguments shake out!

      Illinois has “universal health care” for its residents, and it’s not run by government bureaucrats at all. It’s administered by Blue Cross Blue Shield. The national program would likewise be administered by a large existing provider, and likely be bid on through regular procurement channels. The idea that it is a “government-run” program is a big misnomer; it is government subsidized. Part of the overall risk-sharing element.

      I would hope that the spectre of the universal program would encourage competition from insurance companies, and your suggestions for portability across state lines and competitive rates for personal options are fought only by the insurance providers. I agree with those, too.

      Read my essay on Term Limits and you’ll see that I think Congress shouldn’t have its own set of laws, policies, or privileges either. I think we need to remind our Senators and Reps that they are not from Washington DC — they’re from the states that sent them to DC for representation.

  3. Joe DiSabato on said:

    Oh boy, Pete. You really like pushing the buttons.
    Let’s start with a quick review of how we got into this mess in the first place. There are three factors contributing to high medical costs: 1) in the years after WW2 and also implemented by the Nixon administration, our government in its infinite wisdom and without regard to unintended consequences decided to fix and cap wages. Companies responded by competing with benefits packages. The employer marketplace for healthcare was born. Now, instead of buying healthcare insurance in the personal market (like you do for auto, life, house, etc), most people get their healthcare from their employer. The government actually compounds the problem by giving employers a tax deduction for benefits so it makes even less sense to buy it personally. 2) in 1965, our government instituted medicare and estimated that by 1990 it would cost $12 billion. The actual cost in 1990 came in at $107 billion, so only off by an order of magnitude which is not bad for government work when you consider it. Why the cost overruns? Certainly because of new procedures and technology and drugs. But also because our government runs a cost-plus reimbursement model. Anyone remodeling a house knows that time and materials increase magically and you find yourself arguing with a service provider that is far far more knowledgeable that you. No panel or expert or bureaucrat, however empowered, will ever stop this dynamic. And 3) Once this idiotic system was set up, the special interests lined up for their haul. Insurance companies got protection from competition and state regulators acceded. No nationwide competition. Unions negotiated for increasing benefits and management and politicians acceded as they’d be long gone by the time future benefits came home to roost. Interest groups lined up at politicians’ doors in the interest of fairness and humanity. Acupuncture should be covered said the acupuncturists and produced a study with the benefits. Sure said the politicians who told the state regulators to comply. Alternative medicine must now be covered in basic policies. Premiums up. Mental health benefits must be covered in a basic policy. It’s a right. Politicians agree. Regulators comply. Premiums up. Only a politician who likes being the center of attention (redundant) would think this system would work.
    Let’s also dispense with a few persistent myths. 1) Insurance companies are not greedy. Insurance companies are operating a business model that basically passes through most of its costs. The industry as a whole earns a 3% margin. That’s about the same as grocery stores. Where’s the outrage for grocery stores ripping off the people? Service costs go up and they pass it along. Blame the government who subsidizes and mandates the service. And CEO salaries have nothing to do with this. anyone out there thinks they can run a national business with 80,000 employees and 3% thin margins so any mistake results in losses of billions of dollars? And still we’re ok paying way more to a guy who can hit .300? 2) Government can not do this more cheaply. Medicare has lower administrative costs because they don’t do any actual administration. They are cost plus. And fraud plus. Estimates of fraud and abuse run up to 20% in medicare. Insurance companies spend to manage this down and if they spend 19% to save the 20%, then they are 1% better off. Also, mandating lower prices just reduces service across the board. Marginal service providers just exit the industry. Black markets and barter markets appear. Price controls don’t work for cars, crops or medicine. Btw, ever notice the way the cost for lasiks eye surgery has dropped from $5000 per eye to $750 per eye while other medical procedures seem to keep going up and up? Not covered by Medicare so prices dropped. This is what happens if you don’t run a cost plus reimbursement model and people have to shop and spend their own money. 3) healthcare is not a right. Rights are things that are free. See if these sound familiar: life, liberty and the pursuit of happiness. Notice that it didn’t cost the founders of this country or the government anything to grant those rights. Right to vote, sure; right to a house, no. right to free speech, sure; right to food, no. As a society, we may decide to provide a safety net. But it has to be an economic decision. Or put it another way, to ignore the economics is to have reality kick you in the head later and remind you of the economics. If science discovers a cure for cancer and it costs $10 million for treatment, does everyone have a right to that. Of course someone needs to make decisions about rationing care and allocating scarce dollars. If it’s the government, dollars and care will be allocated by politics and lobby. If it’s the insurance company, dollars and care will be allocated by insurance regulator and employer. 4) insurance is the spreading of uncertainly and risk across a population. One does not buy insurance for a pre-existing condition. “hello, Geico, my car has just been stolen; can I buy some insurance?” doesn’t quite work that way. That’s buying care. Premiums will go up exactly dollar for dollar for coverage of pre-existing conditions. It’s just math, not “insurance.”
    So now back to your statements and how wrong they are. You say “The ObamaCare health insurance initiative stipulates that the citizens & corporations share in the risk of health care costs in order to reduce the risk to the government via Medicaid and other social programs. Over time, with individuals taking responsibility and sharing in their health care costs, the burden on the government will be reduced.” Basic economics says that when costs are so diluted or indirect, they are ignored. Would any one citizen say he should defer treatment or eat better because he’ll save Medicare money therefore save his fellow 300 million citizens a fraction of a penny in taxes way in the future. Really? Hasn’t worked that way for 46 years but there’s always next year. The problem is exactly the reverse of what you say. Obamacare does nothing to have “individuals taking responsibility and sharing in their healthcare costs”. Obamacare perpetuates the issues with the current system by having me pay for everyone else’s healthcare and puts incredibly inefficient government in the middle. Also, let’s not forget that in the current employer-based system, Obamacare adds to labor costs. This will reduce employment. Every CEO I speak with has the same reaction. Companies will stay below 50 employees or move employees below 30 hours.
    Just one more point on economics, regardless of the moral rationale for Obamacare and a safety net, this is tough economics. Obamacare takes $1 trillion out of the productive economy over the next ten years and spends it in a government directed and allocated manner. And $1 trillion is an obvious underestimate (see above for government’s historical forecasting accuracy). You may think that it’s the right thing to do to give people healthcare but it will have an economic and growth cost. That’s $1 trillion that will go mostly to 80-year-olds in their last two years of life and will not fund the next Google or Apple or new energy company or whatever. Businesses will just not get formed or funded and we’ll never know why or what we’re missing. $1 trillion funds a lot of new companies. Remember that a 1% difference in growth rate on our economy is about 3 million jobs every year. Europe has a better social safety net and free healthcare but they grow at 2% vs our 3%. They also have 20-40% youth unemployment and are generally screwed economically. I know a few people who would probably rather have a job than acupuncture coverage.
    So lastly, let’s imagine a world where we had not made the prior mistakes. Insurance companies are free to compete for your business. Insurance companies are free to innovate on products and policies. Competition drives prices down just like with auto insurance. Seen those ever present ads where people compare auto rates and want your business. You buy coverage yourself so are motivated to shop for the best coverage for you and your situation. Your coverage would be yours and not your employer’s so you can leave your job and take it with you. No concerns about losing both job and coverage in one fell swoop. Innovative policies allow for just catastrophic coverage or “lifetime” policies. Just like in the life insurance market currently, you could buy insurance every year or lock in a rate to guard against a pre-existing condition cropping up later. You could buy a cheap bare bones “just-the-facts” medical policy or maybe you also want mental health and alternative medicine treatments but you will pay more. The price difference will be obvious so you can decide if it’s worth it to you – after all it’s your money. As people start spending their own money, they will start to focus on more transparent pricing for services. (The government just came out with their list of 14,000 codes for medicare so they are clearly heading in the wrong direction on price transparency.) Of course there would be caps and restrictions on policies. You would have to live with those and live with your choices. If a cancer treatment is too expensive, ah well. You made the decision. The government would have also told you the treatment was too expensive and not allowed it either. This way you at least have some control. And if society decides it wants to provide a social safety net and provide a minimum level of healthcare for people, then the government can provide a subsidy to people to go out into the market and get the best policy for them. This can still distort prices (see housing and college tuition as case studies) but at least consumers are making decisions and competition is holding prices down. This is how health reform should have proceeded. Instead we got Obamacare and are heading in the exact opposite direction.
    Man, my problem is the same as yours. Too much time on airplanes so I seem to write long comments. Try me on OccupyWallStreet next.

    • Joe,
      Thank you again for your perspective on my posts. I appreciate seeing through your eyes. Your capitalist ideology shines through, for sure. If any business decision or governmental action doesn’t affect you personally and/or financially, then you don’t see the need for it. The CEOs that you work for must love you, but you’re post is littered with inaccuracies and assumptions that just aren’t true. Where to start…

      First, it seems that the history of lobbying in Washington, and the results of it since Nixon was in office, are troubling for you. Most lobbying is done on behalf of industry (pick one, any one), and is financially driven. If your CEO clients are being honest, then they’d tell you that any lobbying and legislation that costs them money is bad, and any lobbying and legislation that favors their bottom line is the product of a free democratic society where the process works. Different companies view all of these differently, and what may be good for one is bad for another. It is natural. I know that I make decisions — personal and professional — that save money or earn money, but I also make decisions for the best interests of a happy & healthy family. Sometimes legislation has to consider a happy & healthy population, not just the special interests of the capitalists.

      Your clients make decisions to stay under 50 employees and keep employees under 30 hours just to avoid paying benefits, but that’s the type of anti-job and anti-growth attitude that legislation such as ObamaCare is trying to avoid. My last employer overtly made that decision, and it was in 2006-07, before you and I even knew what ObamaCare was. This legislation is intended to make that option go away. Any assertion that such decisions are driven by the current legislation is flat-out wrong.

      You further contend that the poor insurance companies squeak by on 3% margins, just like grocery stores. Well, grocery stores operate at about 1% margin, and in my days of working with Albertson’s and SuperValu, I was able to understand their balance sheets a little better. Construction companies, after OH, earn about the same, and the really profitable ones can approach 2%. Insurance companies are operating at least 3x the profits of grocery stores. When I was part of the team researching insurance costs for a previous employer, the insurance carriers always had the upper hand on premium costs and on services.

      Your argument that when buying health insurance, it makes “less sense to buy it personally,” actually makes my point. There are millions of Americans that cannot get group health insurance from their employers, and they are forced to buy it on the private market. This is a choice their employers made for them. The insurance companies don’t like private insurance because the risk pool isn’t diluted. If ObamaCare results in better access for health care through better insurance options, then employers and employees can find the balance between salary and benefits and talent and profits. I don’t begrudge any CEO or anyone else for that matter their salary. That is also a choice the Company makes.

      There is fraud pretty much everywhere there is money. It is not solely limited to public programs. The mortgage crisis that led to the housing bubble was certainly more costly to our overall economy than Medicaid fraud, and it was due to personal greed and corporate greed combined. Medicare/Medicaid, like many other social programs, is more vulnerable to fraud because the rules have to be all-inclusive, non-discriminatory, and non-interpretive in nature. People who feel they need to game the system take advantage of those programs, and the costs go up. The subject of fraud in Medicaid is more an indictment of our social mores than of the program itself.

      The right to have health care in a free society? No. We can’t force individuals to get a shot or to get treatment. However, we are talking about insurance and mandating the insurance coverage, so who pays for uninsured and unhealthy Americans? We all do. Put the burden back on individuals and corporations (according to Mitt, corporations are people, too.). If you look at the existing state models for universal coverage, you’ll see that they, too have varying levels of premiums, deductibles, coverages, etc. There is nothing in the Constitution about a right to education, but we have laws requiring minimum schooling for children, and we have taxes to pay for public education, which is then subsidized by the state & federal governments. We have laws against truancy, and although we can’t make people want to read, we can, as a society, value education and give them the tools how to read. We can’t make people eat healthier or take less risks with their health, but we can make sure that they share the risk. We can give them the tools and the opportunity to have access to varying levels of health care.

      Unlike cars, where we can get a new one without pre-existing dents, scratches, and faulty wiring, our bodies are the ones we’re stuck with, and when I buy private health insurance so that I am not on Medicaid, it would be nice to know that the insurance company will be giving me coverage for this body and its existing conditions. The premiums would naturally be adjusted for known risks; underwriters already do this. I could not get full coverage for my family in the private insurance market because my wife is on maintenance meds for her asthma and nasal polyps. I was willing to pay higher premiums, and I was willing to continue COBRA coverage from a previous employer, but COBRA is limited and the insurance companies weren’t required to include “pre-existing” conditions. We were denied. With Obamacare, these restrictions go away and I can purchase health care for me and my family, which is less of a burden on everyone.

      Population growth, as you may be aware, is not linear. The forecasts that I have seen show that by 2018, there will likely be more jobs than people to fill them. This is hopefully the last social and economic impact of the Baby Boomer generation. By the end of this decade, we should expect to see employers once again competing for talent in the workplace by offering real benefits. In fact, you’ll likely be advising your new CEO generation that investing in comprehensive health care is wise business decision in order to stay competitive in any industry.

      In your model for health insurance reform, you suggest that government could subsidize individuals for insurance reform, whereas in the ObamaCare model the subsidies would go to insurance companies – “to-may-to / to-mah-to” perhaps? The theme of your comment seems to be that you don’t like insurance companies and their lobbying and the lobbying against them. It is definitely a strange industry. Unfortunately, the path of the industry and last 40+ years has led us to where we are, so what are we going to do about it?

      As we grow in our society, we learn, and ideally when we know better, we do better. And at the end of the day we have life, liberty, and the pursuit of happiness. We have certain freedoms, but freedom isn’t free. And it is pretty easy to say that accessible health care and life itself are interrelated.

      Maybe we can coordinate our schedules to meet up at an airport bar and figure this all out over a beer and some pizza & wings? When is the next time you fly through Kansas City, Chicago, or Norfolk?

      Cheers,
      Pete

  4. Joe DiSabato on said:

    As if to make my point, the New York Times had this front page article over the weekend. It’s stunning how people actually wonder why premiums continue to go up year after year. Here are the first two paragraphs from the article:
    “People with eating disorders like anorexia have opened up a new battleground in the insurance wars, testing the boundaries of laws mandating equivalent coverage for mental illnesses.
    Through claims and court cases, those with severe cases of anorexia or bulimia are fighting insurers to pay for stays in residential treatment centers, arguing that the centers offer around-the-clock monitoring so that patients do not forgo eating or purge their meals.”

    • This is an excellent example of how lobbying can sway industry standards. Nobody likes court decisions or legislation or lobbying when it goes against what you want, need, or believe.

      But your comment shows your bias.
      The issue here, Joe, is what I wrote above in reply to your first post — you don’t like any program that doesn’t have a direct impact on you personally or financially. If either my daughter or one of yours suffered from one of those disorders, you and I both would be looking to get coverage and to get our daughters well.

      Smoking cessation programs are also covered under certain insurance programs. Hey, I don’t smoke, and I never have, so why should I be paying into a group plan that covers smoking cessation??

      Group plans have broader coverage and certain limits & restrictions, as well. Part of the risk dispersion is that there are certain programs covered and paid into by everyone that will only be accessed by a few. It’s the nature of the beast.

  5. FROM MY FACEBOOK FRIENDS:

    Max Allway:
    Peter, your blog is the best explanation I have seen to date! Love it!!!
    October 10 at 1:31pm

    David Allway:
    Peter, I agree with Max, I pressed ti to my blog to pass along to an even wider audience.
    October 10 at 1:56pm

    Peter Gasparini:
    Thanks, gents! For Linda and me, the whole health insurance issue is near and dear to our hearts (and lungs, and pancreases…), so we’ve been emotionally and intellectually involved for several years now.
    October 10 at 3:50pm

    David Allway:
    We hear you on that one. If we could have gotten affordable health insurance for Addi, I would still be a teacher and coach.
    October 10 at 3:54pm

    Barry Dauber:
    Well written! May I suggest your next blog explain adverse selection to people who think health insurance can be cured by the free market.
    October 12 at 10:13pm

    Peter Gasparini:
    @Barry, you should chime in on the blog page! Some of my more conservative friends could use an alternative perspective (besides mine, of course!). Cheers!
    October 13 at 2:49pm

    Wally Herbster:
    Pete, its rare that I am on Facebook, so my catching your blog post on health insurance was a long shot, but I am glad I did. Working in health care, I daily see the devastation caused by people ignoring insuring themselves and then expecting the rest of us to pick up the tab when they crash. Your analogy with auto insurance is bang on.
    October 14 at 3:06pm

    I also got “LIKES” from Dan Curran and Pamela Peters Arms.

    I am grateful for all of your input!

  6. Joe DiSabato on said:

    Since here I sit on yet another flight this week, I thought I’d take one more crack at this and reply to your reply to my reply. I think you may have misconstrued or misinterpreted some of my comments and I will attempt to clarify things. Btw, I do come through Chicago sometimes and it would be great to catch up. Beer is a fantastic lubricant for these discussions (a “conversation-flowing” quantity of beer and not a “chair-throwing” amount).
    1) I am not arguing on behalf of myself or my interests here. I’m arguing for consumer choice and lower prices for everyone so people can decide exactly what kind of coverage is important for them. I have two daughters and may want to purchase the bulimia coverage if offered separately. People with two sons may think that’s a waste of their money. When everyone is forced by the state or a regulator to buy a minimum mandated benefits package, then healthcare is more expensive for everyone. This mystery seems to be lost on all those griping about the high and rising cost of insurance premiums. I may or may not be worried about smoking, mental health and bulimia in my family, but if you force everyone to purchase this coverage then insurance will be more expensive. Less people will be able to afford basic coverage because “basic” coverage includes tons of mandated extras. So if you want more affordable coverage, allow insurers to craft a true “basic” coverage and then offer choices on top of that. Just like in every other insurance market.
    2) When you force up the cost of basic insurance by mandating broad coverage, you make adverse selection worse. By increasing the minimum entry level for health insurance, more people will just go naked. How many 25-year-olds worry about mental health coverage or bulimia? But perhaps they might buy a catastrophic package to cover true emergencies. And that coverage by itself would be very cheap (unless your name is Mark Carroll in which case any insurance company would be nuts to underwrite that risk).
    3) Most lobbying is not necessarily done by industry. Ever hear of trial lawyers, labor unions, special interest groups. My point was that when the government starts handing out money, everybody lines up. In the examples I was giving, I was pointing out that the alternative medicine lobby hijacked politicians and got acupuncture added to coverage. And the medical association of psychologists got mental health added. Now everyone has to pay these groups a ransom whether they want to or not because it must be covered. You say, “Sometimes legislation has to consider a happy & healthy population, not just the special interests of the capitalists,” but these are not capitalists lobbying. These are groups of people just lining up at the trough to get taxpayer money. The population would be happier and healthier if the government were not arbitrating and if politicians were not the ones making these decisions. Insurance could be cheaper and more available if insurers were forced to compete and not told to provide a politically motivated mandated minimum.
    4) On the point about insurance company profits, I think the point may have been lost. Whether or not the margin is 1% or 3%, it’s still a pretty lousy pass-through business model with little margin for error. When premiums go up, it does not have much to do with profits or CEO pay. Premiums are expensive because care is expensive and because too many things are mandated in coverage. Let me put this another way, if your problem is that insurance companies are making too much money, then you should be in favor of nationwide competition and less mandated coverage. Ask the airlines what happened to profits after the government stopped setting prices. Same dynamic. The government was setting prices based on cost plus and magically the costs seemed to rise. If people had to pay for part of their coverage and if insurance companies could compete nationwide, then prices and profits would drop. Democrats and Republicans agree on this point. They just can’t make it happen.
    5) You say “clients make decisions to stay under 50 employees and keep employees under 30 hours just to avoid paying benefits, but that’s the type of anti-job and anti-growth attitude that legislation such as ObamaCare is trying to avoid.” I’m confused. Obamacare incents people to stay under 50 employees. If you go above 50 employees, you must pay more in expense so business owners will stay below 50. And because of this incentive, jobs are not created. So it would appear that Obamacare stifles jobs and growth. How does Obamacare help this dynamic? I understand that people were taking healthcare costs into account in hiring decisions before Obamacare, but it’s pretty certain that Obamacare will not improve this state of affairs. This is pretty important because Obamacare will certainly not help create jobs or save money. Most companies will either not add employees or will constrain their hours. Or will pay the $2,000 penalty and punt the care to the taxpayers who will pay more since then the government will be managing the healthcare for that employee. (a McKinsey study thought as many as 1/3 of employers would opt for this and drop coverage).
    6) For pre-existing conditions there is a pretty simple solution. If standard and expensive coverage weren’t mandated and insurers were forced to compete, there would be a package that allowed you to protect yourself from future conditions arising. Just like with life insurance, you can buy coverage for one year or lock in a rate for the rest of your life. Insurance companies can do that math if allowed. Life insurers currently do that and their payouts are more sizeable than health insurers. If your insurance were personal and not through your employer, you would never have to worry about the loss of coverage due to a job loss. And if you do have a pre-existing condition and are applying for insurance, then you’re not really applying for “insurance” on that point. You’re applying for a subsidy. You just want someone to share that cost. And there’s a market for that when combined with the other insurance coverage. If insurance companies didn’t have their hands tied, you’d have more alternatives at lower prices. And you should ask yourself what happens when everyone gets a subsidy for pre-existing conditions because then you are subsidizing other people too. So the question is really, are you getting a bigger or lesser subsidy than others because baked into your policy costs are others’ subsidies. That math might not work in your favor.
    7) As for more jobs than people in the future, that would be awesome. But I don’t think that’s the way an economy works and it’s certainly not working out that way in Europe. Usually, when productive people stop working and then start using more benefits, the economy does not increase and grow. Generally speaking, when the cost of labor is increased (obamacare), when taxes are increased (in 2014), when the currency is debased (the Fed), then capital leaves the country and investment is decreased. Less investment means less productivity and lower standards of living. And fewer jobs. This is the cycle that Europe is facing. Obamacare takes $1 trillion dollars and diverts it to healthcare. You may agree with the reasons but it will grow healthcare costs and reduce investment elsewhere in the economy.
    8) Lastly, I think there was a major point lost in the subsidy discussion. There is a HUGE difference in how you provide a subsidy. Obamacare mandates coverage and has the government paying for care and trying to hold down costs. This will not work. Costs will increase, care will get rationed, and providers will leave the market thus create shortages of service. This happens whenever a government fixes prices, whether in the US, Germany or the Soviet Union. If you want to provide a subsidy, give the money to the shopper directly. Then they make the decisions based on their preferences and suppliers can set prices based on real market signals. Also, it’s so so so much better to have the government clean up the exceptions after the market has done its work. If, after all is said and done, society doesn’t feel like bulimia has been adequately addressed and not enough people bought into that risk pool to have the market take care of it and price that risk, then give a subsidy directly on that point to those people. So much better than our current system or the Obamacare debacle.
    So let me be clear again, I am not opposed to spending money on healthcare and having the state subsidize those in need. But there’s a smart way to do it and a dumb way to do it. Unfortunately, the dialogue in this country around this point and the process by which Obamacare was passed did not allow for a rational discussion of true health reform. True health reform would have addressed some of the root causes of price inflation that I referenced in my original reply. There were some bills floating around that came closer to real reform: opened competition for insurance nationwide, gave individuals the same tax deduction for insurance that companies get, a loosening of mandated minimum coverage to encourage innovation and a proliferation of new products, a recognition that people need to partially pay directly for services in order to have a stake in prices and service levels and outcomes, and a recognition that the government’s direct role causes prices to go up, care to be rationed by politicians and centralized authorities and service deterioration as providers leave the market. Unfortunately, we chose the dumb path to reform. You may be happy with one aspect (coverage of pre-existing conditions) but the whole thing is a mess and will cause problems for decades.
    I look forward to your next plane flight and the next topic.

  7. Pingback: Healthy Discussion | From The Desk Of A Common Sensei

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