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Author Topic: How much will healthcare reform cost?
G2
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We all know the bogus numbers produced through the CBO - not totally the CBO's fault as you'll see. Let's get a reality check.

quote:
One gimmick makes the new entitlement spending appear smaller by not opening the spigot until late in the official 10-year budget window (2010–2019). Correcting for that gimmick in the Senate version, Sen. Judd Gregg (R-NH) estimates, “When all this new spending occurs” — i.e., from 2014 through 2023 — “this bill will cost $2.5 trillion over that ten-year period.
Democrats know the CBO will score the cost on a 10 year window, that's what the CBO does. So they hide the actual cost by not paying out until nearly half way through the first 10 years. A relatively clever deceit. When we look at total annual cost at this point, it's $250 billion a year.

Next up:
quote:
When the bills force somebody to pay $10,000 to the government, the Congressional Budget Office treats that as a tax. When the government then hands that $10,000 to private insurers, the CBO counts that as government spending. But when the bills achieve the exact same outcome by forcing somebody to pay $10,000 directly to a private insurance company, it appears nowhere in the official CBO cost estimates — neither as federal revenues nor federal spending. That’s a sharp departure from how the CBO treated similar mandates in the Clinton health plan. And it hides maybe 60 percent of the legislation’s total costs. When I correct for that gimmick, it brings total costs to roughly $2.5 trillion.

When we correct for both gimmicks, counting both on- and off-budget costs over the first 10 years of implementation, the total cost of ObamaCare reaches — I’m so sorry about this — $6.25 trillion

So the first 10 years of total implementation (2014-2023) using the CBO accounting method that was traditionally used, we're clocking in around $6 trillion - or about $600 billion a year. As we shall see, that's the low estimate.
quote:
Both the House and Senate versions of the healthcare reform bill would require employers above a certain size to provide health insurance for their workers or face some sort of penalty. The House bill that passed last month would require employers to pay an 8% additional payroll tax for not insuring their workers. The Senate bill now under consideration is much less punitive, requiring employers who do not provide insurance to pay a $750 annual fee per full-time worker, but only if one or more of their employees receive a government subsidy in the insurance exchange.

Quite a difference between the two bills. By way of example, take an employee earning $50,000 per year. Under the House bill, an employer who did not provide insurance would be required to pay an additional tax of $4,000 to the federal government. Compared to only $750 under the Senate bill – a difference of more than 500%.

Now consider whether it would make more sense financially for the employer to provide insurance or pay the penalty. In our example above, under the House bill it would probably be close to a break-even if the employer is providing coverage only for the employee. According to the most recent data from the Bureau of Labor Statistics (BLS), the average monthly insurance premium for private industry employers across all worker categories was $317.63. Or just over $3800 annualized (compared to the $4,000 penalty). However, it would be quite a bit more expensive if the employer was providing family coverage (BLS data: $737.68/mo – $8850/yr).

Obviously under the Senate bill it would be far less expensive for the employer to just pay the $750 penalty rather than provide the insurance.

This is just one example, but importantly, note that under the House bill, the lower the average wage base of the employer, the more it would be cost-effective for the employer to pay the 8% penalty rather than offer insurance coverage. In fact, an average wage base of $50K is probably close to the tipping point. An employer with average wages much lower than this would likely find it less expensive to not provide insurance for their employees. And correspondingly, any employer with an average wage higher than $50K would likely find it more cost effective to provide insurance.

Of course under the Senate bill practically speaking, there is no tipping point. Given the cost of health insurance, it would make far more financial sense for every employer to ante up the $750 per worker rather than provide health insurance.

That 50K a year is important because that's the median income in the US. That means it's going to be more cost effective to put about half of America's workers on the public plan. What does the CBO think that means for the public plan?
quote:
Based on their analysis of the Senate bill, by 2019 only 5 million fewer individuals will receive insurance coverage through an employer compared to current law. (Note that this total also includes family members who would otherwise receive coverage through an employer policy). With the CBO’s estimated total of 162 million people receiving employer-based coverage in 2019, that’s a reduction of only about 3%.
Does anybody think only 3% a realistic estimate? No, you know it's not.
quote:
Let’s assume under the Senate bill that 5% of individuals lose their employment based coverage rather than the 3% estimated by the CBO. (Still a very conservative estimate in my opinion). This would result in an additional 3 million individuals in the exchange, and an incremental annual subsidy cost of up to $15 billion. Even under the accounting method that the Democrats are using (accelerating revenues, and deferring costs), this would increase the initial 10 year cost of the bill by another $50-75 billion. Not an insignificant amount. And this total would be dramatically higher if a greater number of employers elect to dump their coverage. (A 10% drop in employer coverage would result in an additional cost in excess of $50 billion per year!).
How many people will enter the public option? Hard to tell but it seems to G2 10% is a low ball estimate. People will think they're getting a deal by moving to the new government plans and will do it in droves.

The incentives get better:
quote:
Let’s take the example of a single large employer – like Wal-Mart – which currently offers health insurance for the majority of its employees (including many part-time employees). The average hourly wage of a full-time store worker at Walmart is just over $11/hr (source). Given that this wage level is very close to the federal poverty level, under the Senate bill most employees of Wal-Mart would be eligible for either Medicaid coverage at zero cost or a federal subsidy in the insurance exchange which would limit their annual cost to no more than 2-3% of their income.

Since most Wal-Mart employees who participate in the company-provided insurance plan contribute more than 3% of their income now (source: Wal-Mart Watch), they would actually be better off under the new government plan. And at a cost of only $750 per full-time worker, so would Wal-Mart. In the business world, this is what’s called a “win-win”.

Wal-Mart has over 2 million employees.

Granted they are probably the largest company which falls into this category, but how many other large retailers will be looking at this same calculus? Costco, Home Depot, McDonald’s, Starbucks…just to name a few. And how many other industries are there which consists primarily of people making less than $30K per year? More than a few, I’m sure. Considering the substantial savings for these employers, and considering that the majority of their workers will pay no more – and possibly less – in the insurance exchange than they do for their current coverage, the Senate bill is virtually rigged to lead to this outcome.

And if the prospect of spending only $750 per employee for health insurance costs is not enticing enough, there is one more big incentive for large employers with predominantly low-wage employees to ditch their coverage and send their workers to the federal exchange. Most very large employers (including Wal-Mart) self-insure, meaning they typically carry a large reserve on their books to cover the expected costs of the healthcare services its employees and their eligible family members will use in the future. (Wal-Mart, for example, reported an accrued liability of $3.1B for their self-insurance reserve as of 1/31/2009.)

Guess what happens to these reserves once the company passes off responsibility for their employees’ coverage to the feds? No more long-term liability, no more need for a reserve. Cha-ching, straight to the profit line.

That is a *very* big incentive to dump your employees onto the government plan. Is there any fiscal reason for Wal-Mart to not do this? No, none at all. Is there a PR reason not to do it? How's that gonna work if people complain about getting dumped into ObamaCare which is supposed to be the best damn care possible in the history of all humanity? You think Reid and Pelosi are going to lead that charge? Hardly. Obviously the CBO estimate of 3 million is ridiculously low, not even in the ballpark.

G2 thinks the actual cost, based on the estimates and common sense, will come in somewhere between $650 billion and $1 trillion a year in the first full 10 years of the plan. Total 10 year cost, $6.5 - $10 trillion. If history is any guide, it will only go up after that.

[ December 03, 2009, 10:16 AM: Message edited by: G2 ]

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TomDavidson
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quote:
the Senate bill is virtually rigged to lead to this outcome.
So, to clarify, the insurance they're offering is just TOO competitive?
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Pyrtolin
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Picking a few bits, since there's a lot to cover here.

Employers dropping coverage and letting people pick their own? That's a bonus we could only hope for. The employer based coverage system is part of the problem. Let people take that money home, but give them access to the same large group risk pools that give companies discounts on care costs. Best of both worlds there. It's not as good as, say, removing the employer tax subsidy for providing coverage and folding it into the standard deduction on tax forms, but it's a start.

It's clever how they total up how much will be spent on coverage as a "cost of the bill" but don't bother to deduct how much would be spent on it without the bill over that same period. Let's take a quick look at that number a do a rough calculation:

6.25 trillion /10 years /300million people = $2083/person/year for health insurance. If they're right, then the bill will have succeeded beyond the best estimates that come from its supporters.

You conflate the exchange- a market where people can pick between many competing health plans, just like the offerings they'd get from a large employer, and the public option- a single set of plans that would be available on the exchange. And the article glosses over the subsidies that the employers would receive for covering those lower income folks rather than allowing them to use the exchange to get personal coverage, as well as the jump in pay they'd see because they're now taking home the money that the company previously was spending on their coverage.

The Walmart bit is absurd because that health plan they refer to costs the average individual employee about 20% of their wages (forget family costs). Only half of their employees actually use it, and in at least 21 states, Walmart employees are already the biggest users of public health assistance. In fact they even directly acknowledge that it's often a better deal for their employees.

This bit really slipped by you:
quote:
Considering the substantial savings for these employers, and considering that the majority of their workers will pay no more – and possibly less – in the insurance exchange than they do for their current coverage, the Senate bill is virtually rigged to lead to this outcome
There is it laid out nicely. Employers save money. Employees not only make more money, but they pay less for coverage, and they're not dependent on their employer for it. Wins in every direction there.
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whitefire
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quote:
The employer based coverage system is part of the problem. Let people take that money home, but give them access to the same large group risk pools that give companies discounts on care costs.
Any reason we can't do this sans the Public Option?

quote:
6.25 trillion /10 years /300million people = $2083/person/year for health insurance. If they're right, then the bill will have succeeded beyond the best estimates that come from its supporters.
I don't think even the biggest supporters expect the 6.25t to cover everyone

quote:
There is it laid out nicely. Employers save money. Employees not only make more money, but they pay less for coverage, and they're not dependent on their employer for it. Wins in every direction there.
Except who does pay for it?

I'm willing to grant that taking the burden of an inefficient health care system off employers would probably be a good thing for the economy. I'm just not sure why we would want to then replace it with another inefficient system.

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TomDavidson
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Unless, I imagine G2 would wind up saying, the insurance program winds up losing money and thus being supported by taxes.
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G2
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quote:
Originally posted by Pyrtolin:

6.25 trillion /10 years /300million people = $2083/person/year for health insurance. If they're right, then the bill will have succeeded beyond the best estimates that come from its supporters.

As whitefire points out, this is not a plan that will cover everybody in America. Based on the estimates, that amount will cover less than half.

quote:
Originally posted by Pyrtolin:
This bit really slipped by you:
quote:
Considering the substantial savings for these employers, and considering that the majority of their workers will pay no more – and possibly less – in the insurance exchange than they do for their current coverage, the Senate bill is virtually rigged to lead to this outcome
There is it laid out nicely. Employers save money. Employees not only make more money, but they pay less for coverage, and they're not dependent on their employer for it. Wins in every direction there.
Again, whitefire nails it: who does pay for it? What's slipping by you here is that this is only the cost savings to employers. Somebody has to pay for it, no matter how you try to subsidize and shuffle the money, it has to come from somebody. Any guesses as to who will foot the bill?

quote:
Originally posted by Pyrtolin:
The Walmart bit is absurd because that health plan they refer to costs the average individual employee about 20% of their wages...

Not according to Wal-Mart.

quote:
Originally posted by TomDavidson:
quote:
the Senate bill is virtually rigged to lead to this outcome.
So, to clarify, the insurance they're offering is just TOO competitive?
Nope.
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Pyrtolin
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quote:
Originally posted by whitefire:
quote:
The employer based coverage system is part of the problem. Let people take that money home, but give them access to the same large group risk pools that give companies discounts on care costs.
Any reason we can't do this sans the Public Option?


Without a dedicated non-profit insurance company? Sure. But only if we cracked down with much stronger regulations since we'd lack a good baseline to use the market to enforce good behavior. It still amounts to billions in savings on overall costs, but it's not strictly necessary.

Of course, as anemic as the public option has been made, it only really serves as a rough safety net and an alternative for people who don't want to have their money going into big executive paychecks and investor profits instead of being used for health care costs.


quote:
I don't think even the biggest supporters expect the 6.25t to cover everyone


Sure. But I also didn't count population growth in there, and 2/3rd of the people that wouldn't have coverage are illegal immigrants, where there are measures preventing them from even paying for unsubsidized coverage.

quote:
quote:
There is it laid out nicely. Employers save money. Employees not only make more money, but they pay less for coverage, and they're not dependent on their employer for it. Wins in every direction there.
Except who does pay for it?


I'll assume you're not being completely dense given that the baseline funding mechanisms are pretty well laid out.

The employee pays for it. They get their employer contribution added to their paycheck plus the personal contribution they were making plus (if applicable) any subsidy they're eligible for (less the $750, going by the Senate) and they get to apply that to buy a plan that costs less or provides better coverage (meaning they pay less for actual care). The general projection is a savings of about 20% in just the cost of plans, so they've got that much more in their pocket even before you add in any benefit from the subsidies.

quote:
I'm willing to grant that taking the burden of an inefficient health care system off employers would probably be a good thing for the economy. I'm just not sure why we would want to then replace it with another inefficient system.
True enough, but there's no way that we'd get single payer to pass. Since we want a market based solution with its corresponding inefficiencies, this is a good framework to start with. It's not optimal because of all the compromises that have been made getting it this far, but those adjustments (such as allowing all people to opt to use the exchange instead of being stuck with employer selected choices, and few direct provider oriented cost controls) will be much easier to make once the main system is in place, some might not even be necessary, but getting the essential framework in place is the biggest challenge.
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whitefire
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Not trying to be dense, but it all seems very oddly laid out. For example, G2's piece mentions that what would, in effect, be the equivalent of premiums in the system are not counted as cost.
Confusion aside there seem to be 2 categories of folks. Those who can afford coverage in some form or another, and those who can't.
Further, I imagine that it won't be the really wealthy using the PO - it will mostly be low to middle income folks, and those who have no other option.
So those who have no option will receive some kind of subsidy from either the GOV or by the premiums of the others.
I suspect that it will be the former for the sake of keeping costs down. (I also suspect that there may end up being some form of subsidy for the others as well, up to a point if my experience with MD medicare is any example).
The only way I can see to actually pool the risk of the uninsured in a system like this is to get everyone in, including the rich, is SP. Otherwise, just give a subsidy to those who can't afford coverage in the form of a tax credit, since it will happen anyway and skip the PO middleman.
I'm also skeptical that employers will simple convert the costs of HC into compensation. More likely they will keep as much as they can. Otherwise there is NO net savings to the employer.
The bottom line, for me, is this:
Health care, the actual cost of care, will cost what it costs. The employer based system is bloated and inefficient. Pushing around the costs will do little to affect this reality. So let the person getting the service decide how best to pay for it, and eliminate that inefficiency. As for the people who can't get coverage - they should also be considered in the actual cost of care, like a hospital building or an electric bill. (the poor you have with you always)

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TomDavidson
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quote:
Somebody has to pay for it, no matter how you try to subsidize and shuffle the money, it has to come from somebody.
Yes. In theory, it comes from private insurers, who are no longer making as much profit.
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whitefire
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quote:
the Senate bill is virtually rigged to lead to this outcome.

So, to clarify, the insurance they're offering is just TOO competitive?

I finally realized why this seemed disingenuous to me - its not that the insurance is more competitive than private coverage: its that the penalties imposed for not having coverage are less than the cost of providing it as opposed to actually providing a cheaper alternative.
A subtle distinction, but an important one, I think.

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Pyrtolin
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quote:
Originally posted by whitefire:
Not trying to be dense, but it all seems very oddly laid out. For example, G2's piece mentions that what would, in effect, be the equivalent of premiums in the system are not counted as cost.

Right, but those are only a cost in as much as they cost more than what people are already paying. It's only that high if you assume that people are currently paying $0 for health care. And if the costs after the bill are lower than what people are paying now, then it's not a cost at all, but a savings.

(Using the 10K number it posits as an example. Let's say the bill forces people to pay 10K for insurance. But right now they're paying 15K for the equivalent. The "tax" then imposed by the bill is not 10K but -5K.)

quote:
Confusion aside there seem to be 2 categories of folks. Those who can afford coverage in some form or another, and those who can't.
Further, I imagine that it won't be the really wealthy using the PO - it will mostly be low to middle income folks, and those who have no other option.



As it stands right now, the exchanges (and thus the public option) are only available to those who don't get employer coverage or those that are self-employed or work at very small business (with eventual plans to open them up to most small businesses)

Income doesn't directly play into it at all, though the bulk of those that work for larger companies but don't get coverage are indeed usually lower income. This is part of why an important fix is to eventually let all people opt into the exchange instead of being bound to what their employer chooses to offer, even if they work for a large company- that's the only way to ensure full competition across the board.

quote:
So those who have no option will receive some kind of subsidy from either the GOV or by the premiums of the others.
Subsidies are income based. Businesses who offer plans will receive them directly for lower income workers, those eligible for the exchange will get them based on income- those subsidies can be applied to any plan on the exchange, private or public.

quote:
I suspect that it will be the former for the sake of keeping costs down. (I also suspect that there may end up being some form of subsidy for the others as well, up to a point if my experience with MD medicare is any example).
The only way I can see to actually pool the risk of the uninsured in a system like this is to get everyone in, including the rich, is SP.

SP would give the biggest risk pool, plus the most leverage for negotiating provider prices, hands down. But one of the base line requirements was something market based here, so instead we use the exchange to let all the different providers compete for a slice of that pool. The public option is useful here because it provides a non-profit baseline for cost and service. If the private companies offer higher prices for the same service or less service for the same price, then they'll lose customers to it, because they'll tend to select toward the best value. And if they find ways to cut costs and margins so that they can outperform it and attract those customers, that's all the better.

quote:
Otherwise, just give a subsidy to those who can't afford coverage in the form of a tax credit, since it will happen anyway and skip the PO middleman.


The PO is no more a middle man than any other private insurance company. The only difference is that it won't have investors demanding dividends at the expense of service and will likely have much harder limits on administrative costs.

quote:
I'm also skeptical that employers will simple convert the costs of HC into compensation. More likely they will keep as much as they can. Otherwise there is NO net savings to the employer.
Historical data does not support that. There is a direct correlation between income and healthcare costs:

http://voices.washingtonpost.com/ezra-klein/2009/10/will_lower_health-care_costs_m.html

Healthcare costs directly affect employee compensation; when you boil it down, they're essentially pay that's pre-spent for employees. Many people even take a better health plan as a more important factor than direct pay- if healthcare is not an essential part of that package any more, the money needs to go to salary or other benefits to remain competitive for the same employees.

quote:
The bottom line, for me, is this:
Health care, the actual cost of care, will cost what it costs. The employer based system is bloated and inefficient. Pushing around the costs will do little to affect this reality. So let the person getting the service decide how best to pay for it, and eliminate that inefficiency.

That is, in essence, the entire point of the exchanges. Let people choose how to get coverage, but prevent the companies from treating each person as a risk pool of one. Take the best aspects of the employer provided system and extend it to individuals.

It's already proven effective- both in the lower rates that companies currently pay, and in Massachusetts, which has already essentially implemented this system- it saw a 40% drop in insurance premium prices while the rest of the country saw a 14% increase.

quote:
As for the people who can't get coverage - they should also be considered in the actual cost of care, like a hospital building or an electric bill. (the poor you have with you always)
Do you then propose that we apply the same service rules to all medical providers that we do to ERs? None can turn away patients based on the ability to pay? Because right now we do pay an extremely high overall cost- not just in health care but in just about all costs for those that can't afford coverage and thus depend on public assistance of some sort or another and generally have more health problems because they can't afford essential routine maintenance.
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whitefire
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quote:
Yes. In theory, it comes from private insurers, who are no longer making as much profit.
OK - how so?
If we let the insured's make their own decisions vs employers or the gov, I expect that insurers incomes would go down, and a lot of waste would be eliminated, but other than that I don't see it.

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Pyrtolin
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quote:
Originally posted by whitefire:
quote:
Yes. In theory, it comes from private insurers, who are no longer making as much profit.
OK - how so?
If we let the insured's make their own decisions vs employers or the gov, I expect that insurers incomes would go down, and a lot of waste would be eliminated, but other than that I don't see it.

They have to compete with each other for customers. They actually have to treat their customers as their primary clients rather than their investors, so market forces will push prices down and improve service. They can no longer lock people into plans using preexisting conditions and arbitrarily pump up premiums. They can't collect premiums then deny coverage. Companies mistreat their customers will actually risk losing them because they can switch at will rather being trapped on one plan, and they won't be able to quote different prices to different people to try to block such movement.
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Pyrtolin
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If you want to see a full argument for offering a public option, here is a good source:
http://www.urban.org/publications/411984.html

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whitefire
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While I'm reading Pyrtolin's doc link I have another question - will the PO, in enacted, be subject to state by state regulation as private companies are (IE - like state by state medicare)?
If not, will this, de facto, allow private insurers to compete over state lines?

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Pyrtolin
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The Public Option will likely be held to federal standards that will likely be stricter than any individual state regulation. I'm not sure how it will interact with state regulations, but ideally the stricter of the two will win out.

Your follow up question still seems to imply a confusion between the exchange and the public option. Is it possible that you're conflating the two?

It will have no effect on the already existing ability of private insurers to compete across state lines- there will be some additional federal regulations and requirements, but they will still have to comply with any stricter state regulations in any state they want to do business in as well.

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DonaldD
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Just noting that "PO" could stand for either 'public option' or 'private option'...
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whitefire
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Maybe I need a better understanding of how something like medicare works, but, for example, the plan I have is not available, in WV (where my parents and other relatives live) due to state restrictions. Maybe I'm wrong, but I've been told that state restrictions vary widely and some are very strict.
Would there be different POs (I will use PO for Public and the word Private)for each state like there are different Blue Cross options?
If the PO were exempt from state requirements, that would be a problem unless all providers an exchange were also exempt.

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whitefire
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Some quotes from Pyrtolin's doc link:
quote:
The likely outcome of competition between even a
strong public option and private plans would be much like
the competition between private and public universities and
between the U.S. postal service and more expensive
private competitors.

quote:
Second, a public option would not be funded with
federal tax dollars.

Why not enact legislation allowing the creation of not for profit insurers, rather than a government run plan? Further, a national co-op/ non profit insurer could have substantial negotiating power.

Oh - here:
quote:
Some politicians have proposed that states could establish
nonprofit plans as an alternative to the public option

Good, but:

quote:
Co-ops, however, would face some serious problems.
They would take considerable time to set up and require
substantial government seed money.

Wouldn't this also be a problem with the PO?

How would the PO reduce costs:
quote:
Second, the public option should be able to establish
average provider payment rates at lower levels than private
payers are able or willing to establish today. Currently,
commercial rates are 30 percent higher than Medicare

From what I've heard, and I'd welcome comment from the Business managers from Doc's offices to comment, is that by and large medicare doesn't begin to cover the costs of service, and that insurance rates aren't much better.
A PO setting rates between current private insurance and medicare would seem to force service providers to be not for profit entities themselves.

Back to that in a minute.

Unless:

quote:
The cost-shifting argument presupposes that
provider costs are unalterable and that efficiencies cannot
be achieved in the face of financial pressure.

Except I would think that if there were a way to make accepting medicare patients profitable, more docs would be doing it, not less. The vast majority care about helping people, not getting rich - they do not want to turn away the most needy (IE, medicare patients).
quote:
The debate over a public option has essentially become a
debate over the size and role of government. This debate,
as we see it, fails to recognize the consolidation in both the
insurance and provider markets that are propelling a higher
rate of growth in health care costs.

Size of the government isn't the issue, its the role. It does have the ability to allow for, and possibly even mandate a nonprofit health insurance company be created.
I doubt there would be any lack of interest in doing something like this.
The real problem is that the government is considering a penalty on folks who don't have insurance, whether its on the employers or individuals. More to the point, they get to pick the sweat spot for what they think is a reasonable premium and coverage level.
So, if there is a government run option and the gov gets to set the threshold for coverage, they can, in effect, force folks into that option. And what happens if the premium charged for the PO is too low to cover claims? The best case is that the premiums go up. The worst case is that gov money would go into the program as a direct subsidy. At least, if there were a non gov, not for profit insurer the latter option would be less likely.

As to reform in general, why not do something like the exchange without a PO? It wouldn't remove profit as the motive, but the profit of every insurer combined isn't really that large (as I understand it, about 2% of annual revenue) anyway. A not for profit insurer would still be useful to make sure that those who can't get coverage could, but the cost of subsidizing them through the premiums of others would probably offset the cost difference between profit and non profit insurers.

Again - as I see it, the way to reduce costs is to put the financial decisions about coverage and service cost decisions in the hands of the ones making decisions about that service. I think that much, at least, we can agree on.

[ December 04, 2009, 03:15 PM: Message edited by: whitefire ]

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Pyrtolin
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Speaking of costs- the costs of not passing reform come to about $8.6 trillion- $7 of it in the from of GDP lost to untreated/improperly treated illness:

http://www.fivethirtyeight.com/2009/11/americas-health-is-americas-business.html

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Pyrtolin
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http://voices.washingtonpost.com/ezra-klein/2009/11/an_insurance_industry_ceo_expl.html

Look at this then ask yourself again if there's a way we could cut costs and pay providers reasonably. (Forcing most providers to be non-profit? That sounds like a good plan overall; then they wouldn't be forced to compromise between providing care and providing dividends. Doctors should certainly be well compensated for their skill, but paying out a third party takes away from being able to do that properly)

Medical technology is one big example here. US hospitals and facilities pay a price that's completely out of proportion to what their counterparts in other countries pay for the same equipment because manufacturers know that they can ask whatever price that they want and the cost will be transfered to our health insurance system. They can still profit from selling the same equipment in other markets, but they actually have to negotiate a fair price because those providers actually have limits on what they can afford.

http://voices.washingtonpost.com/ezra-klein/2009/10/the_question_of_cost-shifting.html

quote:
Think of Wal-Mart and CVS. It's cheaper to buy razors at Wal-Mart. But that's not why it's more expensive to buy razors at CVS.
http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html

What it all eventually amounts to is: Health care is a mortal need- you can pretty much name your price and people will pay it (even if it means going into impossible levels of debt) Costs will endlessly inflate unless there is strong pressure to keep them down. But we're not about to impose direct cost controls on medical providers- while that has proven exceptionally effective, the US on the whole prefers to use the market to set the prices, so we need to find a way to create a functional market. The next best step is to put heavy pressure on the insurance companies so that they, in turn apply real market forces to the care providers. If insurance has to control its costs to stay competitive, then it will put the necessary pressure on providers to do the same thing.

Adam Smith nailed the issue very well when he included doctors among the professions that need to be payed as a public resource since the benefit they bring is independent of the ability of people to pay them, but we still need to ensure that they're properly compensated for that benefit.

[ December 05, 2009, 01:47 AM: Message edited by: Pyrtolin ]

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Pyrtolin
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quote:
Size of the government isn't the issue, its the role. It does have the ability to allow for, and possibly even mandate a nonprofit health insurance company be created.
I doubt there would be any lack of interest in doing something like this.

That is, essentially, what the PO is. A non-profit company much like the post office whose mandate and management are set by the federal government, but must otherwise fend for itself.

In fact, the post office would be the perfect parallel in every way- an agency that manages to ensure every person is covered by its services, no matter how remote and keeps its price of service increasing at a rate below inflation, but yet still allows private industry to compliment and flourish around it (and even provides some support to that industry when it cannot afford the most remote or difficult of deliveries), and only suffers when a technological revolution begins to render a core part of its service obsolete.

quote:
The real problem is that the government is considering a penalty on folks who don't have insurance, whether its on the employers or individuals.
That's not a problem- that's the base cost to reserve a spot so that you cannot be denied coverage (or offered a selectively high price for it) at any point along the line; the cost of ensuring that no ER can turn you away in an emergency. It is, in essence, that catastrophic care coverage that some were saying should be the baseline coverage offered to all people.
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whitefire
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quote:
Medical technology is one big example here. US hospitals and facilities pay a price that's completely out of proportion to what their counterparts in other countries pay for the same equipment because manufacturers know that they can ask whatever price that they want and the cost will be transfered to our health insurance system.
Funny, that. This is exactly the example I was thinking of when you said non profit providers would be a good idea. Let me ask this: Where is the incentive to create the next MRI if there is no profit incentive. The fact that Americans are early adopters and heavy users of the system accounts somewhat for why it costs more. Also, if we paid less, someone else would have to pay more - the manufacturers won't operate without profit. Period. (Unless, of course, the government steps in to provide huge incentives to develop new technologies, with little thought to costs or profit. I wonder how much more the next MRI made by the gov would cost?)

quote:
That's not a problem- that's the base cost to reserve a spot so that you cannot be denied coverage
Of course this is a problem. First, its a problem of kind because the government is both the mandator and the operator.
In the example of the post office, there is no mandate, nor penalty to not use the post office or other service, at the risk of penalty.
Second, since you only pay for the service you use, the Post office and Health care are very different, operationally. Its also a problem since the base price is legislated regardless of costs. Even in the case of the post office, fees are mostly tied to costs (keeping in mind the postal budget deficit is only 4.2%).

Of course, I've been ignoring the home delivery aspect of the post office, which is, of course, free. As an ethical comparison, if we were to take Health care and the postal system operationally, we'd either have to: a. charge everyone for home delivery at an estimated cost of $235/household/year, or b. give away a minimum amount of health care to everyone. Either side of that cost debate would be very interesting.

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Pyrtolin
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"The fact that Americans are early adopters and heavy users of the system accounts somewhat for why it costs more. Also, if we paid less, someone else would have to pay more - the manufacturers won't operate without profit. "

You're missing on two points here-

1) This isn't about early adoption. This is about right now, side by side pricing. A Japanese hospital today buying an MRI would pay a fraction of the price that a US hospital would for the same one, even when counting shipping it to Japan.

2) The company profits on both of the machines. It doesn't sell to Japan at a loss. It just knows that it has to negotiate a fair price in Japan, while it can mark up the price as high as it wants in the US because there's no pressure for the hospital to negotiate the price; it'll just bill the insurance companies for it.

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cherrypoptart
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How much will healthcare reform cost?

An arm and a leg.

Badumbump.

That's a good point about future potential. One opportunity cost for "free" government healthcare and reduced profit incentives for private industry will be the development of new technologies and drugs. We can see this very clearly in many countries with socialized medicine who look to the U.S. to push the envelope on new advances in healthcare and then use our investments in time and money and energy as the free riders they are. When we're gone there won't be anybody out there for us to free-ride on.

So when we're looking at cost, there will be an opportunity cost and the reality is that we'll never even know what it was because we won't know what could have been. If we'd had government run healthcare for the last 50 years would we even have MRI machines? We wouldn't even know what we were missing.

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Pyrtolin
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There's no substance to that scare tactic, especially since we're not talking about government run healthcare.

You're ignoring both the points I asserted above- that this isn't about early adoption costs or about basic profitability. neither of those would actually be affected, while there would be more pressure to improve of create newer technology to get ahead of the market, because there would be an actual margin to worry about and a need to stay competitive.

There would be no effect at all on universities, which are our biggest asset overall. We'd still have MRI for example, because it came from academia, not from private industry. We'd just have much cheaper MRIs, like many other countries do, because there would be pressure to find a way to keep their costs reasonable.

And if you're talking about cures that we don't have but might have had- there are myriad applications of long existing cheap medications that private industry doesn't investigate because they don't provide the huge profit margins that designer drugs do. Again, universities and other non-profit entities pick up the slack there, and it's from that powerhouse that most of our reputation actually comes.

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whitefire
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No, I'm not missing those points.
Early adopters always pay more for new technology, due to the costs of development. If I buy the newest computer today I will always pay more then the guy who buys it in 2 months.
Further, the manufacturer is going to pass those costs along at some point. If they make a 20% profit in the US, and 5% in Japan, and you reduce that percent in the US, Japan will pay more. We're talking about overall company profitability, not just margin per machine.

What you're talking about is reducing the price everyone pays to the least amount possible, and that doesn't work in the business world.

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whitefire
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quote:
There's no substance to that scare tactic, especially since we're not talking about government run healthcare.
Er, uh, what are we talking about, then?

quote:
There would be no effect at all on universities, which are our biggest asset overall. We'd still have MRI for example, because it came from academia, not from private industry.
Not to be flippant, but who do you think pays for many of those studies? Sure, a lot comes from the gov. I have friends at NIH and I know they spend a lot of money and do very good work, but corporations sponsor a lot of the development of ideas that have actual merit with an eye to their profitability.
My question for taking away the profit incentive is: how many useless, or undevelopable projects would get government funding that would end up taking away from ideas that are practical?

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Pyrtolin
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quote:
Originally posted by whitefire:
quote:
There's no substance to that scare tactic, especially since we're not talking about government run healthcare.
Er, uh, what are we talking about, then?
We're talking about increased health insurance regulation, and perhaps a government sponsored national insurance company. Private companies will to the bulk of the insuring, and private providers will offer the care. The government is not taking over any aspect of the system, just laying down the ground rules that will actually allow for a competitive market.

Incidentally- the Senate did intend or actually put in a provision that would allow companies that agreed a set of strong federal regulations to list their plans nationally in the exchange and thus compete directly against a national public option. No restrictions at all on a state by state basis (and no advantage to pulling up all operations and moving to the most permissive state) It wasn't clear if that was actually in the bill or just in the original intent, but likely to be folded back in again before the end.

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