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December 04, 2007
Policy? In A Campaign!?
I got a long policy memo from the Clinton camp this morning on the effects of individual mandates on health care access and affordability. The whole thing's up at Tapped for those interested in the campaign's case.
December 4, 2007 | Permalink
Comments
Yet experience at the state level suggests that implementing such reforms without an individual requirement will fall short of achieving the goal of affordable, accessible, and expanded insurance.
Absolutely overstated to the point of being incorrect. There is no evidence that an individual requirement leads to success. Massachusetts is the only state with one and its too early to make any conclusions there.
The rest of the argument assumes individual mandates will achieve 99% coverage. The data isn't there to support that belief. Which makes the rest of this debate overheated rhetoric to make political points, the policy itself is far from validated.
As one health writer recently put it, “you can’t make the necessary reforms to the insurance market without putting everyone in the coverage pool. The point of the reforms is not merely to keep insurers from gaming consumers, but to keep consumers from gaming insurers. You can’t have one without the other.”
So they are too scared to mention your name? Wow.
Posted by: wisewon | Dec 4, 2007 12:18:54 PM
The whole Obama/Clinton 'debate' about mandates is a red herring to distract the American public from the corrupted move to fatten the trillion dollar medical insurance industry. The film "Sicko" effectively demonstrated that the primary aims of this industry are to collect premiums and deny care. But hey, that's where the profits are, with enough left over to contribute to Clinton ($2.3m this election cycle) and Obama ($1.8m). Everybody knows that single-payer is the better, preferred policy but the insurance lobby won't have it, so there you go. No matter who wins this 'debate' the industry will win and the people will lose, a familiar American scenario these days.
Posted by: Don Bacon | Dec 4, 2007 12:20:26 PM
Yes, community rating and forced immediate issue will not work well without a coverage mandate. The memo is accurate that far.
The problem is, they will not work well WITH a mandate either. Insurers will still want to avoid people who are likely to get sick, whether they are paying 6 months or 1 month of premiums. Insurers will still have a tendency to avoid paying in the short-term for things that reduce cost in the long-term.
And, most critically, lots (and lots and lots) of people are not going to find it easy to come up with $500/month per person in the household for health insurance.
Posted by: SamChevre | Dec 4, 2007 12:29:40 PM
PS Thanks for posting the memo.
Posted by: wisewon | Dec 4, 2007 12:33:18 PM
Back when I did math team, we had a term called "proof by vigorous assertion". This whole thing reads a lot like that.
Posted by: Nicholas Beaudrot | Dec 4, 2007 12:43:03 PM
The problem is, they will not work well WITH a mandate either. Insurers will still want to avoid people who are likely to get sick, whether they are paying 6 months or 1 month of premiums. Insurers will still have a tendency to avoid paying in the short-term for things that reduce cost in the long-term.
Sam Chevre: You are right, of course, that insurance companies will still want to avoid high risks. Indeed, they'll have even more incentive to do so if, because of community rating, they're not allowed to address such things as preexisting conditions in the premiums they charge. But it's not a foregone conclusion that mandates as a result won't "work well," especially compared to the status quo. If insurers are required by law to take all parties, and if government is serious about enforcing this provision, whatever it is that insurance companies want to avoid will hopefully have little bearing either way. And the insurance companies will, of course, have millions of new, mostly healthy customers to sweeten the medicine.
Everybody knows that single-payer is the better, preferred policy but the insurance lobby won't have it, so there you go. No matter who wins this 'debate' the industry will win and the people will lose, a familiar American scenario these days.
Don Bacon: there's also the little annoying fact that millions of consumers are happy with the status quo. Resistance to change is a powerful obstacle to overcome. And maybe that's because, for all its faults, the healthcare sector in America delivers an often superb product. Many people are naturally reluctant to try something new. We can all hang our heads and be miserable about the very small odds of getting what, say, France or Canada have by next year. Or, we can roll up our sleeves, and go about the business of enacting serious reforms that will get every American covered by affordable, adequate health insurance. Who cares if the insurance industry temporarily makes more money at the outset? I deem this a small price to pay for what in some ways would be a truly revolutionary and hugely desirable change. After all, if we manage to get a plan that is 100% universal in nature, but also encompasses community rating and guaranteed issue, the health insurance industry is increasingly going to begin to resemble a public utility.
And at any rate, whatever we do get enacted in the next year or two need only be the first step on the road to deeper reforms.
Posted by: Jasper | Dec 4, 2007 1:16:51 PM
Don, Jasper and Sam you really have no clue how insurance and insurance companies work. Your contention they don’t want to insure sick people is completely off base. Insurance is based upon risk, the carrier agrees to assume X projected risk for Y premium. Carriers have underwriting profits, basically they add profit margin to X along with administrative cost, taxes, and other expenses. Add all of those up you get Y.
The larger X is the more profit they make, if they could collect enough Y to cover every sick individual in the country they would gladly do it because their gross profit would be larger. Every major carrier makes 10-12% operating profit, they net about 6%. This is hardly an excessive return. What you can’t seem to grasp is they can’t allow someone that is sick and has potential claims 300% projected premium to join the plan, have their claims paid, then drop coverage. That would kill their loss ratio and put them out of business. They also can’t raise the cost on the honest people who pay while they are healthy to a large enough amount to cover the people that try to game the system.
And I will repeat once again 10s of millions of people have self-funded group insurance with no carrier or the carrier plays a very small role, insuring only large claims over 25,000-250,000. Not all insurance problems are from evil insurance companies, Congress has done more to increase cost then any insurer has.
Look at CA and their small group reform, carriers love it because they get to charge higher rates and employers have little to no choice. Any carrier would take a sick group and their 10% margin as long as they get paid a premium to cover the risk.
Posted by: Nate O | Dec 4, 2007 1:43:38 PM
Don, Jasper and Sam you really have no clue how insurance and insurance companies work. Your contention they don’t want to insure sick people is completely off base.
Nate O: What the heck are you talking about? Please point to a specific point I make that is off-base (I seem to have rather a different take on things than Don and Sam, so, I'm not sure why you're looping us together). But, while we're at it, is it true that in America today health insurance companies sometimes decline to sell a policy to a person based on risk, or quote him/her a premium that would be unfordable to all but a tiny percentage of the population?
Posted by: Jasper | Dec 4, 2007 1:52:10 PM
Nate,
Yes, if premiums are underwritten and can be frequently re-underwritten, insurers are entirely indifferent to how risky their policy-holders are. (That's how CA small group works.) (For everyone else--if insurers can charge whatever they estimate your claims will be + 10%, they don't avoid policyholders who are likely to make claims.)
The problem is that all the proposed plans include community rating. If everyone pays the same premium (that's what "community rating" means), insurers want very badly to avoid insuring the people whose expected claims are higher than the premium.
Posted by: Sam Steinmann | Dec 4, 2007 2:01:33 PM
Jasper this is the comment I was refering to;
"You are right, of course, that insurance companies will still want to avoid high risks. Indeed, they'll have even more incentive to do so if, because of community rating, they're not allowed to address such things as preexisting conditions in the premiums they charge. "
Only a politician would propose mandatory coverage with community rating and think good things would come of it. Think down the road 3-5 years. Insurers would have to cap their profit, lets say at 10%, so they would expect to make 10% of what they pay in claims. If everyone is forced to purchase from you, and they all pay the same rate how do you make more money? If claims go up so does their profit! It’s a government program so claims will be reported so they aren’t doing anything wrong just making the 10% agreed upon profit. Medicare use to, might still, pay the intermediaries for administration on a cost plus basis. This is how most regulated utilities work as well. You’re reimbursed 100% of your cost plus a set profit margin. How concerned do you think either group is about controlling cost?
You basically have 2 Liberal politicians proposing we give a blank checkbook to the insurance companies and providers. Does anyone trust those two groups to be fiscally responsible? Just to carry it a step forward, you’re a provider group or insurance company raking in billions in profit but you want more, just turn on the gravy train to the politicians. Everyone gets rich but the taxpayers.
Under the proposed systems who is responsible for controlling cost? You removed any incentive for the insurance company to do it. You eliminated employers from the equation so they have no motivation. Consumers have already shown if they aren’t paying the bill they’ll spend till the cows come home. It’s really amazing these plans get any serious consideration. The reason Hillery Care failed was people that actually know what they are doing took one look at it and shot it to pieces.
Posted by: Nate O | Dec 4, 2007 6:45:49 PM
Under the proposed systems who is responsible for controlling cost? You removed any incentive for the insurance company to do it.
Nate O: I think grasp your arguments -- you strike me as someone who is intimately familiar with the workings of the health insurance industry -- and I don't know that I disagree with a word of what you say. I'd be the first to admit: universal coverage attained via an individual mandate combined with community rating/guaranteed issue will cost a ton of money and will probably exacerbate healthcare inflation, at least in the beginning. I'm okay with that, because I deem the problems with the status quo -- lots of access and affordability issues for both firms and individuals, big problems dealing with preexisting conditions, etc. -- to be so undesirable I'm willing to support a plan that transforms the system, even if it's quite flawed, and even if it does little or nothing to address the underlying economics. I guess you could say I want the United States to enact UHC so badly I'm eager to see the apple cart of the status quo overturned, come what may. Some may disagree with me, but I doubt our system will get any worse -- I suspect voters simply won't tolerate ineffective reforms, or changes to the system that hit their wallets to forcefully. This probably means, at least initially, a reliance on subsidies. If "first stage" reform gets us to 99.9% universal coverage, I'm content to wait for second stage reform to deal with costs, and some of the deeper structural issues. A few years of fatter health insurance profits strike me as a reasonable price to pay for a more just system. And yes, I'd probably advise anybody who makes their living selling health insurance not to vote Democratic in 2008.
Posted by: Jasper | Dec 4, 2007 8:08:16 PM
That's the interesting thing about insurance "reform", every time the government fixes insurance it creates more jobs and more work. COBRA and HIPAA for example. CalChoice, CA's small group reform was great for brokers, you don't have to work any more, you hand an employer a 200 page book of all the possible plans they can choose, tell them to pick one and your done.
The apple cart needs turned, then smashed, and just to be sure it's not used again lets burn it. You want to bring in even more governemnt involvement, I want to rewind to 20 years ago when the government wasn't so involved.
I'm not sure people realize how bad unfettered fraud can be in insurance. If we where to see fraud in the new UHC system like Medicare has that is a 10% rate increase right off the top without paying for a single uninsured to now have coverage. Take 30 million people who haven't had insurance and give them an ID card, minimal direct cost, and no financial responsibility and you could see numbers in the trillions.
Time will tell.
Posted by: NateO | Dec 4, 2007 9:38:04 PM
