Would this be an okay outcome even if the plan didn't require community rating? That seems like a prerequisite to a workable subsidy regime. Without some form of enforced cost-averaging, how could you know who needed the subsidies?

Ezra, in the 1980's, Medicare added catastrophic coverage. Costs threatened to spiral out of control, and they repealed the coverage rather than controlling the costs.

So you are WAY too confident that welfare state benefits will never be taken away. That dictum only applies to welfare state benefits that WORK.

Ezra,

A lot of speculation in this piece.

I could just as easily envision politicians:

-- lowering the qualified poverty level to receive a subsidy to 200% to lower costs

-- cutting benefits only for those that require government subsidies (i.e. a basic subsidy plan)

-- increasing debt levels by several trillion dollars before taking any action whatsoever

All three of these alternative scenarios have pretty minimal political cost as well.

Here's the thing-- the vision you described above is along the path of my vision of health care reform. So I'm not arguing against this development. I just think you're fooling yourself into thinking that incremental changes of this nature are providing enough for your vision of change.

Real health care reform has a chance ever 15-20 years looking at the political cycles of the recent past. You've made a good case as to why the time is now right for change, but you're making huge leaps of faith on the impact of the proposed changes.

This is kind of like your take on electability (which I like): you could see the future many different ways, so you better make your evaluations on the merits alone.

On the merits, none of these plans by the Dems are really offering significant progress for health care reform beyond providing universal access.

Politicians don't like to cut benefits that regular, reliable voters are getting - example, Social Security. They LOVE to cut benefits that non-voters get, to prove to the regular voters that they are Fiscally Sound - example, welfare.

A mandate without a public option, or with a surreptitiously defunded public option as Schwarzenegger is pushing here in CA, is only really "universal" if the subsidies are sufficient and up-front. Want to take odds on both of those things being true and STAYING true?

What you will end up with is a law that says that everyone has to buy insurance; insurance can only be bought from for-profit companies; subsidies will be a joke; sick people will be more afraid to go to emergency rooms for last-resort care than they are now.

If you don't believe that this will happen, then I want to know specifically what the subsidy levels will be and how it is you think that means-tested money for poor people will somehow be more exampt from demagogic slashing in the future than it has been to date.

Politicians will, eventually, be left with one of two options: Cut benefits, or cut costs. And politicians really don't like to cut benefits. They pander to insurers, after all, because that gets them campaign contributions and helps them stay in office. It's an indirect way of pandering to voters, who have demonstrated a preference for candidates with large advertising budgets

One other thought-- you're falling into the trap of thinking that administrative savings will solve the problem. While there could be savings of 20% plus or minus from administrative savings-- that equates to two or three years of overall cost growth due to increased utilization. Cost growth will be contained when we control utilization. Which means cutting costs equals cutting benefits. Not the tradeoff you've suggested above.

Dilan: That's not how it went. MCC was passed, but seniors themselves hated it from the beginning, largely because it imposed a new tax for something they were already getting, or if they weren't, that wouldn't start for two years. More on that here.

That said, you're right that this bill has to work.

> Politicians will, eventually, be left
> with one of two options: Cut benefits, or
> cut costs. And politicians really don't like to
> cut benefits. They pander to insurers, after
> all, because that gets them campaign contributions
> and helps them stay in office. It's an
> indirect way of pandering to voters, who have
> demonstrated a preference for candidates with
> large advertising budgets. But what voters hate
> even more than a small ad budget is anyone
> cutting their benefits.

I think the Cheney and Norquist demonstrated quite convincingly in the 2001-2007 period how to handle this. The underlying assumption is that the program will be run on a reasonably competent basis and that changes will occur in good faith. FEMA; Katrina; New Orleans.

If George W. Bush had had a bit more luck in Iraq, and been a bit more personable, he would have been able to take a good run at destroying /Social Security/. If SocSec is not safe then it is hard to convince me that a change that leaves the old rent-sucking structure in place underneath will be very fundamental or last very long.

Cranky

Ezra is correct here. Matthew hasn't bothered to think through the issue yet.

Ezra I think this is actually flipped from the way you view it. Non social security benefits are not that secure as the people above me have mentioned (poverty subsidies especially which could lead to the forced into paying health care they can't afford). Also see TN health care fight. Also see huge deficits.

The corporate forces like mandates and the conservative forces are not in principle wholly opposed to mandates(except marginal libertarians and far right). But if there is enough pressure to force through regulations, public competition, ect. then adding a standalone mandate that industry wants wouldn't be too hard. Or you could try to compromise somewhat with a bill that has a 50/50 chance of passing by bribing insurers with a mandate (if your original plan didn't have it). On the flipside I have a feeling that if a mandate is part of the plan it would be used as a powerful weapon against the other harde to pass reforms.

That said, you're right that this bill has to work.

But that's the point, Ezra. From my vantage point, the mandate-and-subsidies plans of today, and the 1994 Clinton plan, look like jury-rigged attempts to avoid simply having the government pay for a minimum standard of health care for every American. And I assume that once they take the form of actual legislation and are subjected to lobbying efforts, they will be even more jury-rigged.

And given this jury-rigging, you are placing way too much faith in the assumption that once something gets added to the welfare state, it never gets taken away. The MCC was added to the welfare state, and it got repealed. There are state guarantees of coverage that have passed and then were repealed.

You should assume instead a significant chance that these plans actually will not work once they are passed. And then the calculus becomes whether the benefit of a mandate and subsidy plan-- which is far from the ideal way to do health care reform-- is worth the potential cost, especially if it ends up discrediting health care reform for another 12 years like the Clinton effort did.

Put another way, if you assume instead that any plan that the public doesn't cotton to will be repealed and will not remain a part of the welfare state, do you still have an argument for passing a mandate-and-subsidy plan?

Politicians for the last 30 years have clearly stated it is their intent to force everyone into Federally regulated HMOs. They have also clearly said this is so the HMO would be rationing care and they wouldn’t be blamed for cutting benefits. Congress cuts reimbursement to the HMOs and the HMOs are forced to ration care. This has been their plan since before 1973 when they required employers offer HMOs.

Who in their right mind wants an insurance system with 3-4 carriers regulated and paid by Congress with no choice or control. In tight budget times your benefits get slashed, provider reimbursement bounces around with politics. There is nothing positive about the changes being proposed. Regulated cable, phone service, air travel, how efficient and enjoyable where they?

And just since I haven't mentioned it before:

Your healthcare piece is really, really good, Ezra.

Nate,

Let me adjust your text just slightly. My changes are in […].

"Who in their right mind wants an insurance system with [1 single carrier] regulated and paid by Congress with no choice or control? In tight budget times your benefits get slashed, provider reimbursement bounces around with politics. There is nothing positive about the changes being proposed."

With the substitution of "1 single carrier" that would be Medicare, Nate.

Now, please go through your screed again with Medicare as your target and, oh yes, please park your intuitions at the door and provide documentation for your complaints.

But wait, the Reps did attempt to introduce choice into the matter. They're called Medicare Advantage plans. And they have been on life support with unwarranted taxpayer subsidies over the last 15 years or so. They have documentably shown themselves incapable of competing on a level playing field with old original Medicare.

The fact that they may now be gaining some headway because they are able to use the leverage of Part D coverage for prescription drugs, which their lobbyists were slick enough to get Medicare legally prohibited from providing, is an even more damning indictment of their basic lack of competitiveness vis-à-vis the public option. To adopt your rhetoric for a moment, "who in their right mind" doesn't think Medicare with a fully enabled public prescription drug option would blow United Health Care, Cigna, Aetna, Humana, and the other high bonus low service Part D providers out of the water – along with their otherwise failing Medicare Advantage programs? Certainly the private carriers did not think they could compete against such an offering. That's why they – actually Big Pharma, but no difference for these particular purposes -- paid Billy Tauzin off with a $2 mil per year job as President and CEO of PhRMA to get Medicare legally barred from offering a prescription drug option. I hope it's not necessary in this blog to provide links to these sorts of basic facts.

Or do you have access to information which no one else apparently does? Soundly statistically based opinion, Nate, not windy intuitions based on anecdotes or cherry picked statistics. (See my earlier post above for some links about the raid on the public treasury that Medicare Advantage plans have represented.)

In short, try to set aside your otherwise infallible intuitions about how things just will have to work out according to your world view if we go to universal – and one would hope Medicare-style single payer – coverage for the 18 to 65 population. I mean, do the extraordinary and pay attention to how the single payer system known as Medicare has actually worked out to date – not to mention the publicly financed health care systems of virtually every other first world country.

Yes, Medicare will require significant fixes as we go forward, especially in terms of financing. But private Medicare Advantage programs are not even in the same county, let alone ballpark, when it comes to being able to address those problems.

And please, spare us any links to Rudy Giuliani type anecdotes or cherry picked statistics. Just the overall outcome stats, Nate, just the overall stats.

This is, after all, wonky public policy were talking about here, not just-so bedtime stories for those who can't be bothered with the details.

I'm gratified to see Ezra making an argument that I've been trying to promote for a while now.

14 days ago on Matt Holt's Health Care Blog I wrote:

"Mandates are not only justifiable on policy grounds, they are smart politics.

First, regarding the specter of health care industry resistance to mandates, where do you imagine it coming from? Not the insurance industry, the AHA, AMA or a number of other lobbying organizations which are either in favor of mandates or neutral.

Second, I totally agree that a mandate system could not be enacted simultaneously with deep reforms to the delivery and cost of care. I'm [] pessimistic that deep reforms could be enacted rapidly regardless of whether access to care improves. But a universal health care system with mandates is really the best lever we could make to accelerate the reform agenda. Once currently uninsured individuals have to pay for coverage (even if there are tiered subsidies) and more taxes are raised to pay for the expanded programs and subsidies, the pressure to improve the value of the system (quality of outcomes as a function of cost) will dramatically increase.

I cannot imagine a better way to move the health care delivery reform agenda forward in the next 10 years than to enact truly universal health care in the next 2-3 years."

Then I made the point again at the end of a long thread on this blog yesterday:

"Final thought: we all know that getting universal health care simultaneous with serious reforms that reduce the bloat in our system is almost impossible. The smart strategic move here is to take the UHC without the major delivery system reform as a first step. Once we have UHC no one will be able to take it away (like Medicare, Social Security, etc.). After we have UHC and people see how painful the taxes are, that is the moment to usher in reforms to the system in terms of lower prices, care management, etc. Republicans can even be used to help bring real reform to the system once we have UHC as a non-negotiable reality."

Oh, and my point in my previous post was just that I'm a swell guy.

As for all the paranoia about health insurance, I think everyone needs to keep in mind a few things:

1. Health insurers have only ever made average profit margins of around 5%. In the mid 90s when the HMO backlash happened, they were single-handedly getting health care costs to stay below the rate of inflation for the first time since WWII, and their average profit margin was around 0. Yes, as in, no profit. The backlash pretended to be about HMO profiteering, but in reality it was mostly providers lashing out against the (temporary) end of their gravy train and patients lashing out at someone finally exerting some control on utilization. Yes, there were excesses and horror stories, and there still are. No, I don't like the current system either. But most of you have made the perfect scapegoat out of health insurers, and it clouds your image of what role they can play in the future.

2. Switching to single-payer at most only removes about 2% of total costs from insurance company profits and admin. Insurance company admin and profit is a small part of our problem when you look at the $2 trillion system as a whole.

3. There is a schizophrenic attitude which says, on the one hand, that the problem with insurers is that they keep denying care to control costs, and on the other hand the problem is that they can't control costs like government can. Well, which is it? I hope it's obvious that by far the bigger problem is that insurers haven't been able to control costs--that is, they haven't been able to manage care very effectively and even more that they haven't been able to control supply-driven spending (see Wennberg).

It is here that government can, and must, step in to make a difference. But it won't matter in terms of the quality and cost of care if government steps in as an insurer to force (a) lower rates, (b) lower utilization of excessive care and (c) better integration and efficiency of care, or whether it steps in as a regulator and law-maker, and lets private insurers operate within the new market incentives it has created.

I'm not arguing that the best way (from a public interest perspective) is a better regulated multi-payer system. There are perfectly good multi-payer systems (Netherlands, Germany) and perfectly good single payer systems (Sweden), along with perfectly good hybrids (France). There is more than one way to skin the health care cat, it's just that the path of least resistance is multi-payer.

I have to smile when people argue that private insurers cannot be controlled or made to serve a better role, and they then go on to argue for single payer. It's as though you were to say: This giant cannot be wounded. Let's kill it!

Switching to single-payer at most only removes about 2% of total costs from insurance company profits and admin. Insurance company admin and profit is a small part of our problem when you look at the $2 trillion system as a whole.

This isn't really the entire point, though. A single payer has more bargaining power than even a large HMO (and large HMO's do have a lot of bargaining power themselves).

Thus, not only does the single payer save the administrative costs, but it also saves additional costs by bargaining down the cost of health care.

The single payer can also set payment rules that deter the incursion of needless costs, like tests that aren't needed and c-sections that are not medically necessary.

A single payer, properly operating, will thus save a lot more than 2 percent.

Billyblog what exactly are you trying to project? Apparently I’m speaking way over your head, stop making up canned conservative arguments and debating them and read what I type. I don’t want Medicare or Medicare Advantage. Medicare is outdated, inefficient, fraud prone and provides no choice. Medicare advantage has misaligned goals, overly regulated, poorly serviced, also offers no choice.

Let me say it slow and clear for you, both Medicare and Medicare Advantage programs are crap and I hope to never be enrolled in either. Hopefully you followed that.

For those that actually know our healthcare system and know its history this is not an either or debate. Congress is not offering Medicare for all, they are pushing everyone to Medicare Advantage for all.

http://www.house.gov/formpatrickkennedy/pr990702.html

You can never repeat enough why HMO’s even exist in the first place;
http://www.truthout.org/cgi-bin/artman/exec/view.cgi/60/19506
Because Democrats controlled Congress at the time, Nixon obviously needed considerable Democratic support to get his HMO Act passed. He got it, in part because the AFL-CIO was so enthusiastic about HMOs. Democrats such as Senators Ted Kennedy, Walter Mondale, and Warren Magnuson, and Representatives Wilbur Mills and Paul Rogers, all lent their names to HMO legislation introduced during the 1971-73 period.
With the critical support of the AFL-CIO, Nixon's proposal, known as the HMO Act, became law in 1973. This is the law that created the planet's first HMO industry. The HMO Act subsidized the formation of HMOs and required employers with more than 24 employees to offer an HMO to their employees if an HMO existed in their area.

Politicians created HMOs to do specifically what they are doing today, this was their goal, hate the HMO and don’t blame the politician. Why do you think now that the politicians are succeeding they would do anything to hamper the growth of HMOs?

Andrew J. Biemiller, then director of the federation's Department of Legislation. Biemiller, a former member of Congress himself, opened his testimony with this statement: "Let me say at the outset that the AFL-CIO has had differences ... with this [the Nixon] Administration. However, we are in complete accord on the importance of utilizing public funds to stimulate the development of ... Health Maintenance Organizations."

Despite solid evidence that turning Medicare and Medicaid over to HMOs raises the costs of these programs and damages quality of care, politicians of both parties continue to support the further privatization of both programs.

Health Insurance works best when purchasers have numerous, 10+, carriers to chose from and are free from regulation to purchase the plans they desire. It worked best when insurers did just that, insured risk, not making healthcare decisions. When people where responsible for their care then seeked reimbursement, not when they are totally insulated from the cost was it a functioning system.

I’ll assure you Billyblog I know more about the day to day working of Medicare from the insurance perspective then anyone on this blog. Find me one other person that administered Medicare Supplement policies for 10+ years, contracted with CMS and Medicare intermediaries for EDI, and marketed both Medicare Choice and Advantage plans. I also worked on 10 years of renewals for a block of Medicare business. What are your credentials Billyblog????

Dilan Esper – Medicare has done the exact opposite of everything you just said. Medicare/single payor doesn’t bargain anything, Congress passes a law saying it is going to pay this much and that is it. This has consequences, if money is tight Congress looks at it as an opportunity to save, imagine yourself as a doctor, one day your making $x, the next morning you wake up to see Congress just cut your reimbursement and now your making $x-10%. Your landlord isn’t going to drop your rent 10%, your student loans, mortgage, car payment don’t all drop. And if progressives have their way and enact single payor you don’t even have the option to go work for someone else or treat other patients. Medicare is already losing providers, Medicaid which has been jerked around much worse and more frequently then Medicare has lost substantial providers.

Medicare has always been reactionary, Congress only sets payment rules after the tax payers have been fleeced millions of dollars. That’s one of the major problems of Medicare and public systems; it takes the proverbial Act of Congress to fix anything. Corporations manage their health plans every day, Congress takes up healthcare at best every couple years.

Apples to apples Medicare is not any cheaper to operate then a normal insured plan and is considerably more expensive then a self-funded plan. A properly managed private plan outperforms Medicare any day. People need to keep in mind not every plan is ran by HMOs and Insurance companies.

Nate and Dilan, you're both missing some things.

Dilan, the quote you took was only one part of my argument. I completely agree that removing the extra insurer admin and profit isn't the whole point, which is why I went on to say that the vast majority of the savings can be gained either in a single-payer or multi-payer system, so long as government uses its regulatory and market-setting powers wisely. And if it doesn't do that (as with Medicare today), we won't save a damn dime going to single-payer. This was Nate's point above.

What is so bad about the Dutch or German systems that you have to keep insisting on the English or Canadian system?

Nate, I agree with some of your points about how reactive Medicare has been historically. However, the point of the debate we're having now about reforming the system is how to change that. Change is hard. It is not impossible. It is worth attempting. Those are three truisms, but they bear repeating.

I don't know where you get your statistics on Medicare being no cheaper to run than private plans, and more expensive than a self-insured plan. I haven't seen any data to support that.

By the way, people on both the left and right are generally unaware that traditional Medicare has always been administered in large part by private insurers. Blue Cross/Blue Shield plans have always done the claims processing and I think most or all of the customer service. This inconvenient fact doesn't fit well with either the single-payer die-hards who think private enterprise is the enemy, or the multi-payer evangelists who think government programs can't do the job. But this fact fits perfectly well with someone like me who argues that both systems can work with the right incentive structure.

To clarify, when I said we won't save a dime going to single payer if we don't change the regulatory and market structure, I meant we won't save any money in medical expenses. The supply driven expenses Wennberg has cataloged in enormous detail would still exist, for example. But we would save a little on admin and profit. That's why I asked Nate for evidence for his claim that Medicare isn't any cheaper to run administratively than private insurance.

First, regarding the specter of health care industry resistance to mandates, where do you imagine it coming from? Not the insurance industry, the AHA, AMA or a number of other lobbying organizations which are either in favor of mandates or neutral.

This is both true and exactly why mandates shouldn't be focus of pre-election Democratic campaigns. It might be good politics to HAVE mandates, but not good politics to be enthusiastic about them--they're a bitter potion to swallow, so make the other side be the poor sap holding the spoon, while we reluctantly agree to them when it comes time to pass a bill. Insisting on mandates now is just negotiating with ourselves. That seems to be what Matt is, correctly, focusing on--not the politics of how things will be after we have mandates, but the politics of how talking about mandates now changes the likelihood of getting any kind of bill passed, mandates or not. And it frankly seems to make them worse.

Also, it seems like we have a possible nightmare scenario like mandates and subsidies, but no community rating or something like that--especially with the candidates talking so much about mandates, mandates, mandates--the bitterest pill to swallow--and never talking up the benefits of community rating.

But, it gives Clinton a nice way to attack Obama, so I guess we're gonna keep talking about mandates whether or not such talk in January '08 helps us in January '09 (it doesn't.)

consumatopia,

I think mandates must come with community rating (in the individual market) and guaranteed issue (likewise in the individual market). Anything less doesn't make sense. You can't mandate someone to buy an insurance policy that no insurer will sell him/her, or that will cost $20,000 a year because the person has diabetes.

I would go so far as to say that it is a truth, universally acknowledged, that a mandate without community rating and guaranteed issue is simply not viable, and will not be enacted.

You could do like they do with mandated car insurance and force them to buy a plan from the government--a terrible plan stuck with the sickest of all patients. The government plan would be guaranteed issue.

But that wasn't my main point, so don't focus on that.

There are surely a lot of ways we could have a mandate plan that isn't awesome. Massachusetts isn't necessarily doing all that great right now. What we need to do is talk a lot more about the parts of the plan that make it awesome, and a lot less about the bitter pill we have to swallow. Otherwise we could end up stuck in MA.

Some great posts on here by jd and Consumatopia.

One point to push further that I've mentioned previously:

It is here that government can, and must, step in to make a difference. But it won't matter in terms of the quality and cost of care if government steps in as an insurer to force (a) lower rates, (b) lower utilization of excessive care and (c) better integration and efficiency of care, or whether it steps in as a regulator and law-maker, and lets private insurers operate within the new market incentives it has created.

There will be a difference between single-payer and heavily regulated private insurers-- because there are many potential solutions to (a) and (b) above, and there are no clear winners-- yet. Meaning, a private system with competition would allow for different cost control and utilization control methods to determine what's most effective. A single-payer system would be much less nimble in this regard. That said, jd rightly points out that a strong government role would be necessary to ensure the right market incentives as well as basic structure/data (e.g. best practices, cost effectiveness, etc.) to enable an effective market-- something we don't have in today's system.

What is so bad about the Dutch or German systems that you have to keep insisting on the English or Canadian system?

I actually don't particularly vehemently object to a plan where the government buys a top-line executive level private sector policy for all of us. In other words, I am not a fetishist for a single payer. (By the way, the English system is not a single payer system, but a single provider system.)

My opposition is to health care plans that put universality and funneling money to insurance companies uber alles, because they will end up forcing poor and middle income Americans to pay for crappy care and denials of coverage delivered by HMO's, simply because that's what health insurance lobbyists will push a mandate-and-subsidies plan towards.

Apples to apples Medicare is not any cheaper to operate then a normal insured plan and is considerably more expensive then a self-funded plan. A properly managed private plan outperforms Medicare any day.

Only if it slashes coverage.

Medicare isn't perfect, but it doesn't have the horror stories with review boards and skewed arbitration clauses and dying patients and all the rest.

And Medicare, as a public sector agency, is accountable to the public. If scandals do happen, it's a lot easier to clean them up.

Look, as I said, if the government wants to waste money buying is top-line private sector care, I have no objection to that. But the goal of private sector providers isn't to give us as much health care as possible, but to give us as little and keep the remainder of the pot as profits. Thus, you can't count on that regime to control costs at the same level of care as a single payer would provide.

Jd – there is a common misrepresentation of cost where people claim admin for Medicare is 5%. This only includes what the Medicare Intermediaries are paid, the Blue Cross/Blue Shield and other insurers that pay the claims you mention towards the end of your post. That 5% doesn’t include any allocation for running or managing the plan, the work CMS and congress does. For my point though that 5% figure works. Medicare runs around $6,000 per person per year. That is $300 a year. For a living I do the same thing those intermediaries do, for any employer over 1000 lives with a plan design similar to Medicare we wouldn’t charge over $15 PEPM or $180 a year. Not that I wouldn’t love to charge $300 but there is so many TPAs competing for that business I’m lucky if I can get the $180 a year.

The common mistake is people compare Medicare to private insurance on a % of claims basis. The post office, power company, employee salaries, none of that is paid as a percentage of claims. The reason advocates do this is because Medicare cost almost twice as much as private insurance so using the % makes it look better then it really is. Throw in the cost of State premium tax, compliance with mandates like COBRA and HIPAA and on apples to apples Medicare is more expensive.

I agree the system needs fixed, what I keep telling people is to look at what worked not some solution baked up by a politician or wonk who doesn’t know the first thing about our current system.

The first thing we need to do is go back to defined roles. In the past insurance companies insured risk, they reimbursed care after it was delivered and had no prospective say in it’s delivery. TPAs use to process claims and that is all they did. UR companies played their roles and PPOs theirs. Each of these easily replaceable parts had to compete vigorously with numerous other companies for that business. If one part wasn’t doing the job it was easy to replace them with someone new. 1 government regulating 3 insurance companies will never work, it will fail guaranteed. We need insurers competing against 10 other insurers to keep them honest. We need politicians staying out of it, general regulatory guidelines fine, it’s not the role of congress to determine how much doctors earn, how employers insure their risk, or what care we are allowed to buy with our money.

“Reform” as been on the wrong track for 30 years and that is why the problem is getting worse not better. Every Progressive solution ends with fewer insurers and federal manipulation on day to day activity. Congress has never shown themselves capable of running anything real time, nor should we allow them to. Look how they butcher the economy managing it monthly, you want them doing that with healthcare to?

The inflated figure of private insurance administrative cost which includes State taxes, marketing, sales, advertising etc is 20%. That’s 20% of roughly $3500 a year or $700. Forgetting all the cost of running Medicare not included in the 5% claim and just look at fraud, it runs around 10% or $600 a year. The fraud alone in Medicare would pay almost the entire administrative cost of private insurers.

The other area no one wants to mention is lets say you do scrap our current system and go single payer, hundreds of thousands of people make their living selling and administering insurance, what are you going to do Jan 1st, 20XX when they are unemployed? Sales and service is one job that hasn’t been outsourced, commissions might be considered wasted spending from a purely healthcare perspective but it’s a huge contributor to our economy. Not that it alone justifies it’s continuance but if your going to be honest about reform you must account for the consequences.

I meet with a friend/client/employer earlier this week for a general talk about Insurance and what the next couple years hold. His main comments where;
1. He wants employer mandates so his competitors have to compete on a level playing field. He wants to offer benefits he just doesn’t want to be under bid because someone else doesn’t. The Tax deduction is the only reason a lot of employers can afford to offer benefits.
2. For years a national association of contractors he is active in has tried to put an insurance program together. Liberals in Congress refuse to let association health plans pass. Everyone would agree even with Union Corruption them being able to offer health plans has been beneficial for there members. Large Union plans covering many employers have the size to demand better rates, coverage, and service. How can anyone claim to care about our system and claim to want to fix it while blocking a proven solution for political reasons?
3. HRA and FSAs so employees are involved in the cost of insurance.

Jd – there is a common misrepresentation of cost where people claim admin for Medicare is 5%. This only includes what the Medicare Intermediaries are paid, the Blue Cross/Blue Shield and other insurers that pay the claims you mention towards the end of your post. That 5% doesn’t include any allocation for running or managing the plan, the work CMS and congress does. For my point though that 5% figure works. Medicare runs around $6,000 per person per year. That is $300 a year. For a living I do the same thing those intermediaries do, for any employer over 1000 lives with a plan design similar to Medicare we wouldn’t charge over $15 PEPM or $180 a year. Not that I wouldn’t love to charge $300 but there is so many TPAs competing for that business I’m lucky if I can get the $180 a year.

The common mistake is people compare Medicare to private insurance on a % of claims basis. The post office, power company, employee salaries, none of that is paid as a percentage of claims. The reason advocates do this is because Medicare cost almost twice as much as private insurance so using the % makes it look better then it really is. Throw in the cost of State premium tax, compliance with mandates like COBRA and HIPAA and on apples to apples Medicare is more expensive.

I agree the system needs fixed, what I keep telling people is to look at what worked not some solution baked up by a politician or wonk who doesn’t know the first thing about our current system.

The first thing we need to do is go back to defined roles. In the past insurance companies insured risk, they reimbursed care after it was delivered and had no prospective say in it’s delivery. TPAs use to process claims and that is all they did. UR companies played their roles and PPOs theirs. Each of these easily replaceable parts had to compete vigorously with numerous other companies for that business. If one part wasn’t doing the job it was easy to replace them with someone new. 1 government regulating 3 insurance companies will never work, it will fail guaranteed. We need insurers competing against 10 other insurers to keep them honest. We need politicians staying out of it, general regulatory guidelines fine, it’s not the role of congress to determine how much doctors earn, how employers insure their risk, or what care we are allowed to buy with our money.

“Reform” as been on the wrong track for 30 years and that is why the problem is getting worse not better. Every Progressive solution ends with fewer insurers and federal manipulation on day to day activity. Congress has never shown themselves capable of running anything real time, nor should we allow them to. Look how they butcher the economy managing it monthly, you want them doing that with healthcare to?

The inflated figure of private insurance administrative cost which includes State taxes, marketing, sales, advertising etc is 20%. That’s 20% of roughly $3500 a year or $700. Forgetting all the cost of running Medicare not included in the 5% claim and just look at fraud, it runs around 10% or $600 a year. The fraud alone in Medicare would pay almost the entire administrative cost of private insurers.

The other area no one wants to mention is lets say you do scrap our current system and go single payer, hundreds of thousands of people make their living selling and administering insurance, what are you going to do Jan 1st, 20XX when they are unemployed? Sales and service is one job that hasn’t been outsourced, commissions might be considered wasted spending from a purely healthcare perspective but it’s a huge contributor to our economy. Not that it alone justifies it’s continuance but if your going to be honest about reform you must account for the consequences.

I meet with a friend/client/employer earlier this week for a general talk about Insurance and what the next couple years hold. His main comments where;
1. He wants employer mandates so his competitors have to compete on a level playing field. He wants to offer benefits he just doesn’t want to be under bid because someone else doesn’t. The Tax deduction is the only reason a lot of employers can afford to offer benefits.
2. For years a national association of contractors he is active in has tried to put an insurance program together. Liberals in Congress refuse to let association health plans pass. Everyone would agree even with Union Corruption them being able to offer health plans has been beneficial for there members. Large Union plans covering many employers have the size to demand better rates, coverage, and service. How can anyone claim to care about our system and claim to want to fix it while blocking a proven solution for political reasons?
3. HRA and FSAs so employees are involved in the cost of insurance.

nate,

Full disclosure: I work in the industry also, but for an MCO.

Association health plans have been tried at the state level many times and have done poorly due to cherry picking. It's not clear that national plans would do all that much better. I also think you overstate how much extra power such a plan would have to demand better rates. After all, United and WellPoint have something like 35-40M members each (fully insured and self insured). How much larger is any association health plan going to get?

I am still quite sure that Medicare's all-in admin figure is lower than the all-in admin and profit figure for private insurance, even after excluding taxes. I don't think the difference is large, and I don't think the small savings are worth the huge hassle and turmoil of the radical change, but there is some long-term savings to be had. What I don't get is why some on the left want to struggle so mightily for this additional 1% single-payer savings when it threatens our ability to enact universal health care in the first place, and when we can cut costs 30% or more by focusing on things that can be done in either single-payer or multi-payer systems.

I completely agree with your point about fraud being a bigger problem than insurer admin. But an even bigger problem than fraud is unwarranted variation in the intensity of care (Wennberg-speak for doctors doing things because it makes them wealthy rather than because it makes their patients healthy, though no fraud is involved). If the nation's doctors behaved like those in Minnesota, we'd cut costs by 25% from that alone and have healthier patients (and yes, that adjusts for Minnesotans living healthier lifestyles).

The other area no one wants to mention is lets say you do scrap our current system and go single payer, hundreds of thousands of people make their living selling and administering insurance, what are you going to do Jan 1st, 20XX when they are unemployed?

So we should keep a terrible health care system because it is a welfare state for workers in the insurance industry?

Heck, by the same lights, let's never cut a weapons system! After all, the defense budget is a jobs magnet.

Hey, even those earmarks create jobs! We can't cut them.

We live in a dynamic economy. At the same time that some people in the insurance industry will lose jobs (though not as many as you imply, as there will still be a supplementary insurance market just as there is for Medicare), there will be some government jobs created. And our unemployment rate is low, when any business closes, workers tend to be able find new jobs.

But it is ridiculous and immoral to continue our stupid system of health insurance just to keep health insurance industry employees on the dole.

jd – excellent point, someone should also point out all of the provider organizations pushing for single payor, could it possibly be because they think they would get paid better by politicians then fighting for reimbursement from insurers?

I haven’t seen an AHP in a decade. I know of only one state that even allows them and that is Ohio. In NV we had special legislation passed so a group of rural hospitals we had as clients could band together and self-fund. Most of them where to small to do it alone and being in the middle of no where had few insurance options. The DOI fought them every step of the way and finally made the conditions so onerous they gave up. CA flat out outlaws MEWAs and passes laws to try and force those grandfathered in out of business. The states with the heaviest regulation have the highest healthcare cost but no one wants to make the connection. AHPs on a national level sponsored by trade associations would not be allowed to cherry pick. I wouldn’t advocate for a return to unfettered METs and MEWAs but the law as written and blocked by Democrats would offer the needed protection but still allow for considerable savings. Self funded plans have a fraction of the administrative cost of United and Anthem. Our admin fees run half theirs. A self-funded plan has no marketing, executive compensation, State tax, or State mandates. A large self-funded plan has administrative cost below 10%. That’s 90% of premium dollars going directly to providers. And unlike Medicare that’s 89% to legitimate claims, very little fraud. It’s not about size it is about competition. United and Anthem don’t have to be efficient they have minimal competition. In NV in the past 2 years United purchased both Sierra and Pacificare gobbling up 60+% of the market. Sierra who had 60% of the market didn’t even offer HSA and high deductible plans because they had no competition to force them to. We need smaller plans not larger ones.

Excessive care and defensive care, and caving to requested care. A doctor has no reason to tell a patient no when they request treatment or care they don’t need. It’s also in their best interest to order every test possible less that 1 in million chance diagnosis pops up and they get sued. Then like you mention sleep apnea, back surgeries, on and on, I would tend to label it fraud though. Our cost problems are utilization derived not administrative. It’s just easier to blame a big bad insurance company then it is the patient and doctor.