Running a health care plan in the US without a public insurance option is the nuclear option for health care in America. It will destroy health care.

If there is no public option, any reform will be a massive transfer of money from us to private insurers, and effective control of the program will be turned over to the private insurers. Costs will rise, as they have during the last 60 years of domination of health care by private insurers, health care effectiveness will decrease, and health care will eventually destroy the economy or become a luxury available only to a smaller and smaller part of the population.

There is one big reason why insurers want to get rid of a public option. They know they can't compete with a public option because of overhead costs and in ability to create and enforce appropriate payment and practice standards. A large public insurer combined with or part of Medicare would come to dominate the market and make life for insurance companies as we know them impossible.

This is not to say that we don't need to give a lot of thought to the public option and how it is structured, including considerable improvement of the way Medicare works now. It just means that we must fight for a public option with everything that liberals have to fight with.

Much of this is right. What Clinton promised, the market delivered, and then Democrats ran against what the market delivered. Holding down costs was the goal, until it was abandoned because insurers were holding down costs and were unpopular because of it.

But HMOs are gone, and doctors are for the most part back to being chosen, not dictated. And all that needs to be done to oppose any reform is to say that it means bringing back HMOs in new clothes.

There is, btw, a big difference between an insurance company bureaucrat and the government's bureaucrat. When your doctor disagrees with the insurance company about a bill, he isn't going to go to jail for the dispute.

Thomas, I imagine you know that it is in fact legal to dispute Medicare and Medicaid payment decisions. Indeed, there is a bureaucracy dedicated to this very task.

Perhaps the real difference between the for-profit bureaucracy and the government one is that in the latter representative government can dictate the basis on which coverage decisions are made. This is one area in which the Invisible Hand is ineffective.

What's wrong with non-profit HMOs? I've had Kaiser for years and absolutely love it. I've often wondered if it could serve as a model for national health care

In 1993, the promised restrictions of the Clinton proposal promised a real, and unpleasant, change. But those restrictions were not, in fact, the result of government taking over health care, but of government giving health care over to HMOs. The threatened consequences of CLintonCare were in fact the promised innovations of managed care.

Not exactly-- both on the substance and political context. I doubt most Americans were aware in 1993 or in 2008 that the Clinton plan heavily relied upon managed care to achieve their cost-saving goals. More likely, the claim of "government taking over health care" was precisely what most Americans thought at the time and now. On the substance, the federal government still controlled the overall purse strings in the Clinton plan, i.e. global budgets. At the end of the day, this is the most important element of cost-savings, and one that remained solely in the hands of government. Managed care, was simply tasked with being the hatchetman, undertaking the order from the boss.

Much of this is spot-on.

But the reason that HMOs failed is that they were never terribly effective at controlling the cost of health care - they succeeded only at controlling their own costs. For the most part, they cherry-picked their populations, and enacted onerous rules designed to force out high-cost participants or deter them from joining. That worked well for a while, as you note. HMOs could claim to deliver care for less. But as they destroyed their competition, and encountered greater regulation, they suddenly had to provide care for people who actually have health problems. And that proved more difficult than they'd figured. In fact, by adding layers of bureaucracy and overhead and the need to generate profits, HMOs increased the cost of delivering care. And they've never been very good at limiting the amount of care that gets delivered. The result was that health care costs resumed their steady, upward march.

Anytime someone spews that "socialized medicine" garbage, just tell them to stick a sock in it until they're ready to forego Medicare for their parents or themselves and cover all their medical bills themselves. Then to come talk to you.

I even chuckle sadly at dolts in places like Alabama and Arkansas who squawk about socialized medicine when they have lots and lots of folks on Medicaid.

I also find it most amusing when people say, "I wouldn't have an HMO for all the tea in China!" and then head off to their mega-PPO practices where they don't see a doctor until the last 3-4 minutes of their visit because most of the work is done by nurse practitioners. Then, said doctor tells them he can't give them the full rundown on their meds because he has to head off to a conference call or the next dope who's up for their 3-4 minute face time with Doc.

These people have no idea what's being paid for their medical care already.

Just way too much stupid to go around.

Just to riff off of Katherine's post, there are some HMO's that are liked by their members. Harvard Pilgrim and Tufts Health Care are usually ranked high in customer satisfaction. In the past I have pushed hard on my companies to pick up Harvard Pilgrim as an option for insurance. (Granted, when I worked at companies that were based in the Mid-West, they thought I was crazy for wanting an HMO. They thought they were doing a good thing by not requiring it.)

Perhaps, Ezra, it might be worth while to look into the HMOs that are liked and see what the difference is? Do they make less money than their hated counterparts? Do they have more restrictive care plans? Do they just have a happy feel to them that makes us like them?

Something to look into in the New Year? Maybe an article for the ProspecT?

I don't understand why people get so hysterical over managed care.

I have an HMO, which we switched to a few years ago because the employee contribution was half as expensive as the Cadillac plan we had been using. So far, the only difference is that we have to get authorization before seeing a new specialist -- in the two years we've had an HMO, we've seen four new specialists and not a single one of them was denied, let alone questioned.

Sarah, HMOs do deny care. That's just a fact. I'm glad that your HMO hasn't done this to you, but the mere possibility is not morally acceptable.

No patient or doctor should ever have to consider the monetary cost when making medical decisions, ever. I don't see how anything less than the Cadillac plan for everyone can be considered just.

@Katherine: Your nonprofit insurer is a throwback to the 1950s, when most components of the system other than doctors and pharmaceutical companies were nonprofit. Widespread dissatisfaction with healthcare dates from the years when the system was corporatized, and will continue as long as it operates for profit rather than healthcare delivery.

I would be one who said I am 'happy' with my HMO, which is Tufts. But 'happy' means 'I can't really complain'. My family is healthy (knock on wood) so my interaction is limited to the routine.

That said, I don't have 'choice' of doctors since not all are in the Tufts network. In fact since I have moved half-an-hour from my previous residence I have skipped my latest physical because my doctor is not conveniently located anymore. In a semi-rural area like I live in it has proven difficult to find doctors in my plan and in a convenient location.

It seems to me the problem we have is that most of the population is healthy enough to not want to rock boat by changing to a new system. When you add to the spin that any change is going to 'ruin your life', change becomes even harder even as we watch our economy crumble because employee-based health care is a competitive ball and chain.

Tom Daschle has been - since he left the Senate - a lobbyist for - among others - the health insurance industry.

Do you believe that he will now "bite their hand" by creating a "public option" in a universal health plan?

If you believe that, then I assume you also believe Chuck Schumer will work hard to write and enforce rules regulating Wall Street abuses?
(Assisted by Obama advisor Bob Rubin?)

My wife and I are staunch supporters of a nationalized healthcare plan, but I have to say, we absolutely love our HMO.

We have been with Group Health Cooperative (PNW area) for many years, and they have been nothing short of wonderful with our family, our children, and the past two years with my wife's cancer treatment.

We have *never* been denied treatment, led down a less-expensive path, or had to deal with anyone other than our primary caregiver, her oncologist or the nurses in charge of her care.

We are also blessed by my employer, which pays all of our insurance costs, to include zero co-pays on our visits and prescriptions.

What pains us is knowing that so many of the rest of the country does not have what we have.

From Twila Braze; “Advocates of universal coverage saw this financial crisis as an opportunity to advance national health care through the fledgling HMO. Legislation encouraging members of the public to enter HMOs, where individual control over health-care decisions was weakened, would likely make the transition to a national health-care system, where control is centralized at the federal level, less noticeable and less traumatic. By 1971, the administration had authorized $8.4 million for policy studies to examine alternative health insurance plans for designing a "national health insurance plan."2

Senator Edward M. Kennedy, a longtime advocate of national health care, proceeded to hold three months of extensive hearings in 1971 on what was termed the "Health Care Crisis in America." Following those hearings, he held a series of hearings "on the whole question of HMO's."

“In 1993, government really was selling a more restrictive, technocratic system.”

And what was it the government was selling since 1973 when Ted Kennedy forced HMOs on America?

Just five years after the HMO Act of 1973 was signed into law, the U.S. Senate Committee on Human Resources, Subcommittee on Health and Scientific Research, held a hearing to discuss amending the Act. Following are excerpts from Senator Ted Kennedy's opening statement at the March 3, 1978 hearing:

“As the author of the first HMO bill ever to pass the Senate, I find this spreading support for HMOs truly gratifying.”

"In fact, many medical experts argue that the peer review built into group practice in the HMO setting promotes a quality of care superior to that found in the traditional health care system.... "In our enthusiasm to see HMOs proliferate throughout this country we should not lose sight of the need to guarantee the quality and integrity of the prepaid plans we create."

“The current revival of the HMO movement should come as no surprise. HMOs have proven themselves again and again to be effective and efficient mechanisms for delivering health care of the highest quality. HMOs cut hospital utilization by an average of 20 to 25 percent compared to the fee-for-service sector. They cut the total cost of health care by anywhere from 10 to 30 percent. And they accomplish these savings without compromising the quality of care they provide their members.”

Which is it Ezra, when Kennedy took credit for saving the HMO movement they cut cost 10-30% now you claim they didn’t save anything.

“HMOs ripped across the land,” um no they didn’t. I know your hack when it comes to research but HMOs ripped across mostly liberal states, they had a fraction of the market share in the Midwest and South as they did in CA, NY, MA, and other high cost poorly ran liberal states. 2 seconds of research would have taught you that.

“But anyone who has tried to get reimbursement for a medical service from an insurance company that didn't want to provide it knows that government bureaucrats are pussycats compared to insurance company bureaucrats.”

Waldman knows as little or less about healthcare as you do. I can rattle off hundres of lawsuits forcing insurance companies to pay for services they didn’t want to. Can you name any where someone sued Medicare or Medicaid to cover something and won? It’s not that government bureaucrats are more compassionate it’s just you have no chance of success so resistance is futile. Accept that you have no input with government and submit and you have nothing to get aggravated about. Waldman also apparently doesn’t realize all Medicare claims are paid by the same insurance companies he says are so impossible to deal with. Those same impossible insurance companies also take the majority of their payment guidelines from Medicare, Waldman is starting to read like another clueless hack.

“But those restrictions were not, in fact, the result of government taking over health care, but of government giving health care over to HMOs”

You might be slightly interesting to read if you ever got a clue what you where talking about. Try reading Blame Congress for HMOs
by Twila Brase
For some facts

Only 27 years ago, congressional Republicans and Democrats agreed that American patients should gently but firmly be forced into managed care. That patients do not know this fact is evidenced by public outrage directed at health maintenance organizations (HMOs) instead of Congress.

Although members of Congress have managed to keep the public in the dark by joining in the clamor against HMOs, legislative history puts the responsibility and blame squarely in their collective lap.

The proliferation of managed-care organizations (MCOs) in general, and HMOs in particular, resulted from the 1965 enactment of Medicare for the elderly and Medicaid for the poor. Literally overnight, on July 1, 1966, millions of Americans lost all financial responsibility for their health-care decisions.

Offering "free care" led to predictable results. Because Congress placed no restrictions on benefits and removed all sense of cost-consciousness, health-care use and medical costs skyrocketed. Congressional testimony reveals that between 1965 and 1971, physician fees increased 7 percent and hospital charges jumped 13 percent, while the Consumer Price Index rose only 5.3 percent. The nation's health-care bill, which was only $39 billion in 1965, increased to $75 billion in 1971.1 Patients had found the fount of unlimited care, and doctors and hospitals had discovered a pot of gold.

This stampede to the doctor's office, through the U.S. Treasury, sent Congress into a panic. It had unlocked the health-care appetite of millions, and the results were disastrous. While fiscal prudence demanded a hasty retreat, Congress opted instead for deception.

Limited by a noninterference promise attached to Medicare law--enacted in response to concerns that government health care would permit rationing--Congress and federal officials had to be creative. Although Medicare officials could not deny services outright, they could shift financial risk to doctors and hospitals, thereby influencing decision-making at the bedside.

Beginning in 1971, Congress began to restrict reimbursements. They authorized the economic stabilization program to limit price increases; the Relative Value Resource Based System (RVRBS) to cut physician payments; Diagnostic-Related Groups (DRGs) to limit hospitals payments; and most recently, the Prospective Payment System (PPS) to offer fixed prepayments to hospitals, nursing homes, and home health agencies for anticipated services regardless of costs incurred. In effect, Congress initiated managed care.

Patrick you have no clue what your talking about.

“If there is no public option, any reform will be a massive transfer of money from us to private insurers, and effective control of the program will be turned over to the private insurers. Costs will rise, as they have during the last 60 years of domination of health care by private insurers”

Unlike Ezra’s phony gold standard consultant Milliman is a respected source of factual data in the industry. They have shown;

“Blue Shield of California and Premera Blue Cross in Mountlake Terrace, Wash., have worked with Milliman, the actuarial and consulting firm, to evaluate exactly how much more private health plans have to pay in their states because of government underpayments. In Washington, where Medicare pays about a quarter less than private insurers, hospitals in 2004 charged private payers $738 million to make up for underpayments, while physicians charged private payers $620 million to make up for shortfalls, putting the total at close to $1.4 billion, according to the Premera study. That translated to $902 per family insurance policy, or 13 percent of all commercial hospital and physician payments.”

“Milliman found similar results in California, where employers and employees paid about $951 per family insurance policy to cover losses from Medicare and Medi-Cal. The cost shift rose from 3.6 percent of premiums in 2000 to 9.5 percent in 2004.”

NO ONE disputes government insurance programs shift cost to the private sector driving up cost. Contrary to your claim there has been a massive transfer of money from private insurance to government programs. Nice job completely blowing that claim.

Medicare and Medicaid have dominated in system since they where created, their rules and policy become defacto standards. To claim other wise you would need to be a moron.

Wisewon was right just generous in how he states Congress’ control over the system. Congress for 4 decades plus has publicly stated their goal was to control cost by using Federally regulated HMOs. Most funding in the US system comes from congress and congress sets all the rules. If budgets where tight congress would decrease funding to the federally regulated HMOs who would then cut benefits and take the publicity hit. Ezra’s and other liberals ability to completely ignore this truth shows the complete and utter dishonesty of the debate. The system we have now and all of it’s ills is the result of regulation, there is no free market in our healthcare system. Between ERISA and state regulation every benefit is mandated and their delivery as well. States like CA with some of the most expensive insurance in the world also dictate pricing. Everything was going great until HMOs actually did what Congress told them to and controlled cost. For the better part of 5 years we had stable to declining cost. When the public revolted Congress left HMOs out to dry. This action created the mess we are in today, they left a vacuum where the public expected minimal cost sharing and unlimited benefits and payors with no ability to restrain utilization. As expected utilization and thus spending went unchecked and here we are today, all thanks to the politicians and a clueless public.

I think insurers would be perfectly willing to compete with a public option under the following conditions:

1. There can be no cost shifting to the private sector as there is with Medicare and Medicaid.

2. Doctors, hospitals and other providers can refuse to accept the public option insurance if the reimbursement rates are deemed inadequate while continuing to accept Medicare patients if they want to.

3. The public option must cover its costs out of premium revenues alone with no subsidies from general tax revenues.

4. There would need to be a mechanism for redress if any of these conditions are violated.

The only inherent costs that private insurers incur but Medicare and a public option don't are for medical underwriting, which would disappear under community rating and guaranteed issue, and broker commissions, along with marketing and advertising. Insurers probably do a better job of mitigating provider fraud. Insurers could put durable medical equipment out for bid whereas Congress will not currently let CMS do the same despite a successful pilot project which suggested potential savings of at least $1 billion per year nationally.

If the Medicare Payment Advisory Commission (MEDPAC) issues recommendations against payment for certain drugs, devices and procedures based on cost-effectiveness, it could provide the political cover and moral authority to allow private insurers to refuse to cover them even if lobbyists prevail upon Congress to force CMS and a public option to continue to pay for them. Private insurers may also be able to outperform Medicare or the public option on providing care coordination for chronically ill people with multiple co-morbidities.

All things considered, I think it is quite likely that private insurers could compete effectively with a public option if the playing field were truly level. If the Congress is determined to put them out of business, however, it wouldn’t be hard to deliberately under price the product, perhaps significantly, and make up the difference with general revenue. If that happens, what’s the industry’s recourse? Under those circumstances, their opposition is understandable.

Personal anecdote from the annals of "your insurer is not your friend": my wife called our insurance company (MVP) regarding a charge that had not been covered--a breast ultrasound that had been ordered by her doctor in light of the very high frequency of breast cancer among the women in her family. She asked the agent on the phone to be passed up to a manager to appeal the case, to which the agent replied, "I can pass you to a manger, but you can't file an appeal because your case has not been denied." My wife responded, "What do you mean? It says here [on the letter she'd received from the insurance company] that the ultrasound was rejected."

"Exactly," the agent explained, "it was 'rejected,' not 'denied.'"

I supposed we should be thankful that we don't live in a country where government bureaucrats would have shot her in the head for calling to dispute the case, eh?

This is a depressingly low quality post and, aside from personal testimonials, a depressing thread. Maybe holiday fever is overtaking people.

First, Ezra: As wisewon notes, you overstate the extent to which the managed care "revolution" of the 90's implemented what Clinton Care promised. Not only that, but the reality of managed care turned out to be a pale shadow of what managed care advocates had promoted. PPOs have over 60% of the commercial market, while HMOs have less than 25%. HMOs never had more than about 33% of the commercial market, and even then most of the 90's growth in HMOs was in mere "network" HMOs (remember US Healthcare?) rather than "staff model" or "integrated delivery system" HMOs (Kaiser). The network HMOs were never able to coordinate care effectively, unlike integrated delivery systems. They "managed" care by paying lower rates to independent providers (resulting in smaller networks as docs and hospitals opted out) and requiring gatekeepers, pre-auths, etc.

These watered-down network HMO practices became further watered down and neutralized when the backlash hit around 1997. Ezra notes this phenomenon, but misdescribes the sort of HMO that it primarily affected.

Similarly Nate, when Kennedy and others were trumpeting HMOs, they were trumpeting the non-profit staff model or integrated delivery system HMOs. This was not the model that United, Aetna, CIGNA, WellPoint, Humana and the companies they swallowed adopted.

Of many dumb comments in the thread, I think Mark wins the prize:

"...HMOs do deny care. That's just a fact. I'm glad that your HMO hasn't done this to you, but the mere possibility is not morally acceptable."

1. HMOs (and the other 75% of private insurers) do not deny "care." What they do is refuse to pay for a claim. They say: not our responsibility. They do not say: you can't have it. You can still have it, it's just that you're paying for it. Of course, refusing to pay can be a huge problem for people, particularly when the rules were unclear and a person thought they were going to be covered for a treatment but weren't. You can speak the truth and still criticize insurer practices.
2. Not only HMOs refuse to pay for certain treatments, but so do national health care systems. Mark needs to wake up and get a whiff of England.
3. The possibility and reality of refusing to pay for certain treatments is absolutely justifiable and moral. It can be justified in Utilitarian/Consequentialist as well as Deontological moral systems. When a proposed treatment has no proven curative or palliative value, and in fact known evidence points in the opposite direction, then why in God's name should the insurer or the state (either way, that means you and me) be forced to pay for it? This was probably Mark's stupidest comment of all, but one hears it all the time.

BC, private insurers have costs that public insurers do not beyond underwriting. There is also advertising, and other strategic/competitive functions. For most publicly-traded insurers, there is also the cost of the dividend paid to shareholders. Finally, there is the matter of scale and costs that are incurred due to the complexity of many insurers, many claims systems, many products and benefit designs.

jd: there is a difference between front-loaded and back-loaded limitation.

In practice, your point 1 is insidious. It's one thing to call your insurer in advance of a potential test, consultation or treatment and be told whether it's covered. It's another to equivocate and say that you'll have to either do without or spin the Wheel of Insurance. It contributes towards a climate of second-guessing and mistrust.

BC yo actually missed some of the largest cost. State Premium tax can exceed 3% in some states. Private plans also have to comply with COBRA, HIPAA, and other regualtions. COBRA for example, is a great idea but poorly excuted. Of every 100 COBRA notices we mail 2 are returned. Worse then 98% of notices going in the trash is if we forgot to record someones change of adress and mail a COBRA notice to an old address we could be liable for millions in claims. Should someone really be penalized millions for a clerical error?

1/1/09 there are new laws where we must report the name and SSN of our members to Medicare so they can check and make sure providers aren't billing them instead of us. If we screw up and miss reporting someone they fine us $1000 PER DAY! per missed member. We make about $200 PER YEAR per member. And people wonder why insurance is expensive, try complying with government regulation.

Private plans have a fraud rate around 2-3% VERSUS Medicare 10%. A switch to Medicare for all would lose any administative savings, if they exist at all, to fraud right off the top. In the very liberal Cleveland Plan dealer today they had an article on HIV treatment fraud and the billions it cost Medicare. A great example of how poorly ran Medicare really is.

A large self funded plan easily beats Medicare on administrative cost, fraud, and every other meaningful statistic. Self funded plans also cover somewhere around 40% of private insureds, odd you never here liberals discuss them...

jd not sure what that has to do with my comments. From compeeting with them I know the HMOs congress was funding. I know with Federal law requiring employers offer an HMO and HMOs undercutting our cost because they where subsidized we got our asses handed to us through the 80s and into the early 90s. The carriers you mention got huge buying the HMOs Ted Kennedy created and nurturied. Back then there were not large national HMOs covering the country. They where small community HMOs built around a hosital system or group of doctors. These HMOs used congressional favor to siphon off all the young healthy risk. That's why they where so successful. The PPO option employers kept had terrible adverse selection becuase the healthy people that didn't mind the extra rules all went with the lower cost HMO. Finally the PPO option became unaffordable and employers started going 100% HMO. That's when they started to fall apart, for the first time they had high utilizers driving up cost and complaining. They also had Congress walk away and stop funding them, then the death blow was all the regualtion and bad publicity about denial of care.

While they where getting filthy rich before this though they merged and where bought and turned into the HMOs we have today. The fact they are now called United Health doesn't change the fact Ted Kennedy started it. It might not have turned out exactly like they planned but they are still responsible for the disaster that insued.

forgot to mention the really funny part about CMS requiring us to report SSNs is the industry just spent hndreds of millions to stop using SSNs per state and federal law. We finally get to the point where we don't need peoples SSNs any longer and can use alternate IDs then CMS demands we start collecting them again. How anyone can think government ran healthcare is more efficient and cost effective is beyond me. I wouldn't mind a refund of the money we spent compling with the law and all of it's changes.

What they do is refuse to pay for a claim. They say: not our responsibility. They do not say: you can't have it. You can still have it, it's just that you're paying for it.

I don't undertand this point -- seems like he's being disingenuous. Every so often one hears a news account of a person who needs a particular procedure -- but the insurance company doesn't cover it (won' pay for it). In fact in such situations it's often false to say "you can still have it." Sometimes that may be the case, but sometimes the health care provider won't go ahead and schedule you for the procedure because they know they're very likely not to get paid. Apparently they check, in other words, to see whether your plan will pay. Isn't that the case?

Mickey,

It is not disingenuous. It is being precise and factual. It is absolutely true that when an insurer refuses to pay for a treatment, if that treatment is expensive the practical effect is often to make it unaffordable and thus unavailable. If the reason for the denial is that the treatment is unproven or experimental, people are often kidding themselves when they claim that the treatment is "necessary" to save them. They are clutching at straws, and the insurer becomes the convenient bad cop. But England and other countries have bad cops, too. People just tend to be more realistic in other nations and they expect fewer miracles.

It's a different situation when an expensive treatment is denied not because it is unproven, but because it is simply not covered under the benefit plan. Often, details about what is and is not covered are totally opaque to the patient/member, and here I think it is perfectly fair to criticize the system and insurers. But you also have to criticize employers, because about 90% of the commercially insured get the coverage their employer decides they should get, and large employers in particular pick and choose highly specialized combinations of what is covered/not covered, contributing to the general confusion in the marketplace.

pseudonymous in nc, I fully agree that far greater clarity needs to be created with regard to what will and will not be covered. As I said, there is no shortage of things that can be criticized about how health insurance works today. You just have to decide in describing the problems whether you want to be accurate or demagogue the issue.

Nate, my point is not that the actions of Kennedy and others didn't lead to the present state of affairs. It's that the present state of affairs was in part an unintended consequence of their actions, not the objective. This is why your quote of Kennedy's praise is misleading. They wanted plans like Kaiser, Geisinger, Harvard Pilgrim, the Group Healths of WA and MN, etc., to dominate the industry. That's not what they got for a number of reasons, some of which should have been foreseen.

I also think you are making a subtle mistake about HMO "cherry picking" in the 80s and 90s. It turns out that whenever a new health plan or totally new product enters the market, it tends to have members that skew towards younger/healthier. I'm seeing that phenomenon again and again with the company I work for in NY. New EPO and PPO products that have fresh risk pools also often have better risk profiles and can undercut competition for a while. I could go into the reasons why, but I think it doesn't take much work for an insider like yourself to put it together. Sure, mandating an HMO option and other congressional actions also helped the growth of HMOs in the 80s and 90s, but it probably would have happened anyway, just more slowly. And again, HMOs never acquired more than about 1/3 of the market. As you yourself know, if you were in a major metropolitan area in a Blue state you felt the impact a lot more, but you sometimes write as though HMOs took over the industry, and they never did.

One thing most people forget or don't know is that in the mid 90s when HMOs were reaching their apex, they were almost uniformly unprofitable. 1994 to 1996 margins were close to 0. This is critical to understand when thinking about the backlash that happened in the late 90s. The main interpretation the public made of the utilization restrictions of HMOs was that HMOs were doing this to make massive profits. In fact, they were not making significant profits at the time. They were engaging in the utilization restrictions because they were trying to control costs, which they did to be able to offer lower premiums, which they did to increase market share and because there was a tacit deal with business and government to take actions that would finally control medical costs. That's why HMOs came along. It wasn't because HMOs were in the long or short run a more profitable business model than traditional indemnity health insurance.

Of course, it was true in 96 that insurers would have (and later did) increase their margins a bit to the 5% range when competition was less fierce, but health insurance has never been a high margin industry. Hospitals make profits at basically the same rate as health insurers.

I suppose my general attitude can be summed up like this: the US health insurance system is massively screwed up, but both the Left and the general population only understand a small portion of what is screwed up and most of what is said amounts to scapegoating rather than trenchant criticism.

Nate:

Private plans have a fraud rate around 2-3% VERSUS Medicare 10%. A switch to Medicare for all would lose any administative savings, if they exist at all, to fraud right off the top. In the very liberal Cleveland Plan dealer today they had an article on HIV treatment fraud and the billions it cost Medicare. A great example of how poorly ran Medicare really is.

Can you refer me to link or citation. I want to read up on this. Also, folks will find this recent paper interesting. Speaks to some of the public/private issues mentioned above. Whether you agree or disagree, raises interesting issues. The debate can go on endlessly.

http://www.law.berkeley.edu/chefs.htm

jd,

I agree with most of what your saying. The problem is after 40 years of unintended consequence of congressional action they need to start being held responsible for the actual consequences. The fact that Kennedy has any voice in the debate without every article pointing out his disasterous history with healthcare can't be allowed to continue. I have never seen one MSM article on the 40 years of failed healthcare reform. We have a clueless general public voting with no idea how bad these politicians are at reform.

I don't think they cheery picked risk as they had no way to do so, but it was abundently clear after a couple years that the HMO "product" was only attractive to younger members shoping on price. Designing and marketing a product to those that are interested in buying it is smart business, when the federal government forces you to offer that option to the detriement of the overall plan it is wrong.

We where headquartered in CA through the 90s but had an office in Ohio, HMOs killed our CA business but we continued to do well in Ohio. This expands on one of my main claims, America doesn't have a healthcare problem blue states do with spending 50-100% higher then Mid America. Blue State imbrace then rejection of HMOs is one of the reasons their cost is so out of control. They have mismanged their systems for decades and now are trying to balance it on the back of Mid America who didn't make the same mistakes.

I think people also need to be aware of the major cost shifting HMOs briefly enjoyed, providers with huge dollar signs in their eyes took on tons of risk via PHOs and IPAs and lost their shirts.

Brad,

The National Health Care Anti-Fraud Association (NHCAA) estimates conservatively that 3% of all health care spending—or $68 billion—is lost to health care fraud.

Medicare is harder to find becuase CMS and congress don't like the public knowing how poorly man government healthcare is, some links non the less;

http://www.law.berkeley.edu/chefs.htm

As a result of the way that this was handled (remember the fox watching the hen house), Medicare officials investigated their own information and came out with a faulty figure. They determined that the $700 million in fraud that they gave as their figure amounted to about a 7.5% fraud rate.

When looking at the true figures, however, it is actually estimated that the total amount in fraud is actually over $1 billion. The federal report said that if the Medicare officials had made the auditors abide by the rules, the amount of incorrect or fraudulent billing would have been much higher, resulting in the $1 billion mentioned.

http://www.washingtonpost.com/wp-dyn/content/article/2008/08/25/AR2008082502157.html

The report by Inspector General Daniel R. Levinson at the Department of Health and Human Services found an "error rate" of almost 29 percent in a sample of claims paid in 2006 under Medicare's multibillion-dollar durable medical equipment program.

aging.senate.gov/crs/medicare18.pdf

Nate
I have read those stories, a bit anecdotal. I have not seen any rigorous studies or examinations comparing private vs public fraud. Yes, my gut tells me more of this occurs with govt plans, however, I would not make assumptions. Unless I see something authoritative, not speculative or based on conjecture, I will reserve my judgments.

Thanks for the effort though.
Brad