Health Care Forecast: Politicians Marching Ever Deeper into the Swamp

February 24, 2010
By John

Tomorrow’s Grand Health Care Summit is burning up a lot of BTU’s on television, radio, and the blogosphere despite the likely emergence of a national state of ennui over the whole thing.  So we’ll keep this one short and quasi-educational by taking a stab at a couple of key questions about Health Care, and then make a guess about where this is all going.

And then maybe, just maybe, we can stop talking about ObamaCare and get onto the business of reviving a flagging economy.  And pray we can avoid Britain-style National Health Service calamities like we read about today.

Question 1:  Why is the President Still Beating This Pulpy Horse?

Taxing the Dead Key to Lower Costs?

The President and the Congressional leadership are careerists in their advocacy of the collective interest over individual rights and the private sector.  They are true believers in the State, and in its right and obligation to bring cradle-to-grave government care to the United States.  They believe that a public taking of this magnitude actually creates wealth, and fail to see how it could be destructive.  They fundamentally have no clue how capitalism works, or how it can be used to improve lives, increase choice and drive innovation.  And they love taxes – and this thing is loaded up with them.

It also helps that their friends and allies will get to touch a couple trillion more dollars every year.  The sound of that gushing river of money is enough to make their statist hearts go pitter-patter.  At least until they have heart disease, and then they’ll be headed south to an offshore clinic run by American cardiologists who will figure out how to make money serving rich health care refugees.  Kind of like the Premier of Canada going to Miami for heart surgery this week.

So it’s off to Blair House for a prayer meeting, errr – I mean ‘Summit’, staged to upend opposition leaders.  And where they hope to find the spine and the justification to run square into massive public opposition by passing the latest, greatest, most expensive and intrusive health bill offered yet.

Question 2:  Why are Insurers Like Blue Shield and Anthem Raising Premiums Up to 40% – and Why This Week?

Many insurers want the state to mandate insurance programs, and to run those monies through their companies.  These types of firms are typically very bureaucratic (much like the government), and look at premium increases as the only way to keep operating when innovation is elusive.  A government mandate of their current model – and using them – keeps them in business.  So it’s possible that the timing is a ploy by some firms to prompt Congress into imposing ObamaCare, and thereby expanding their revenue base and giving them extended life.  This may be a bit of a stretch – but crude manipulation of events to drive public opinion isn’t a stranger to us these days.

It’s also possible that the Great Recession has pushed a lot of healthy people out of the insurance system, and is leaving a larger share of sick and older folks on the insurance rolls.  If that’s true – and it’s entirely plausible – then premiums must go up to cover the increased cost of a sicker insured population.   This is an example of ‘adverse selection’, and is entirely coincidental with the Summit.  Tin eared?  Perhaps.  But coincidental nonetheless.

Question 3:   Why Can’t We Just Cover Everybody?

We could  But it’s wildly expensive to cover another 30 million people who can’t or won’t pay for it themselves.  Somebody has to pick up the tab.  And the size of the tab depends on how you do it.

The premium spike noted above also points out a fundamental problem with the current ‘market’ structure for pre-paid care.  Health risks are not homogenous across our population – some people are sick (many chronically) and some aren’t.   And the healthy have no reason to want to be insured against anything but a major event, and certainly don’ t want their insurance cost lumped in with a bunch of sick people.  And the sick want to drag the healthy into their system so they can share the cost of their care today.  But the Rough Truth is that everyone, someday, will move from the healthy to the sick pool.  And then everyone’s interests change.

It’s also true that some people got a weaker deal in the ‘DNA lottery’ – some of us are just prone to be sick.  Is it fair to have them pay more for maladies that are not due to any action of their own?  And there are others whose health habits increase the risk of an incident.  Should we penalize the fat, the sedentary, the ‘food wasteland’ addict?  Unfortunately, we have no easy way to identify or quantify the impact of these conditions for any individual’s health cost today, and the state of medical science is changing fast enough that anything we might firmly believe now could be found in error in the near future.

Thinking About ObamaCare Taking a Toll?

So how do we balance these lifecycle-based interests and the vagaries of evolving treatment?   How do we make sure people who need care can get it, and not break the system?  Ouch.  My head hurts.

Question 4:  So What is the Health Care Problem We Are Really Trying to Solve?

The health insurance question is complex, and solutions have many shades and colors.  Politicians and their familiars try to obfuscate the situation to suit their own interests, but it boils down to one important question:

How Should We Allocate the Lifetime Cost of Health Care in the United States?

Despite all the noise, there are really just a few general models worth considering.  Everything else is in the details around them.  Unfortunately, our political class generally prefers to drive us down the path toward some form of mandated HMO/government-run care system (where no or low fee services are included in a pre-packaged delivery system).  In such a system, there are few individual incentives to moderate the amount or cost of care used – and it inevitably leads toward some form of care rationing because the resources to pay for care are limited .  Indeed, what our leaders have done is muddle the concept of Health Insurance (coverage for unexpected health events) with pre-paid care.  And so we’re starting from a misunderstanding about definitions.

Ah, well.  Let us move on.

Question 5:   What Are Our Real Options?

So without further bloviating, here are the four basic health cost allocation models that should frame our thinking:

Health Cost Allocation Model What You Must Believe The Questions
Individuals and Companies Act Independently

  • Government has limited role in payment or service delivery
  • Individuals choose the insurance they want, and carriers select the individuals or groups they wish to cover
  • Uninsured individuals may or may not be offered care
Responsible citizens should make their own decisions about life issues without interference from the State

A free market will offer a wide variety of solutions targeting consumer needs

The uninsured can choose to receive public welfare, or receive treatment in public facilities, or none of the above.  (think of it as an updated Dickensian London model)

Are we willing to let an uninsured or financially disadvantaged person die for lack of funds?

Will people make rational decisions?

Will carriers offer (affordable or any) coverage to higher risk individuals?

Rough Truth:  This is great until you’re sick or get hurt.  Then you’re in trouble.

Government Operated Payment System

  • Single Payer System
  • Delivery may be state operated or independent
  • Providers are price takers
  • Consumer choices limited
  • Care rationed through some form of rules-based, economic rationale
The State has an obligation to ensure equal care for all citizens

The State can efficiently direct health resources to achieve the best result

The State has a right to allocate limited resources to their highest value (those with the longest life or likely to make the greatest contribution post-treatment)

Market forces – price discovery, competitive advantage, cost pressure – aren’t governing in health care

Is this Constitutional and appropriate to an American market system?

Are we willing to allow a bureaucracy to make rationing decisions on limited health resources for us?  Shouldn’t we make our own choices?

Do we want health care spending set on the floor of Congress, and priorities decided by lobbyists, advocacy groups and protestors?

Isn’t this really just pre-paid care?  How will we constrain health costs without impairing care?

Rough Truths:  This is wildly expensive until you’re sick.  Then you can wait in a long line for care, or hope you know somebody who can bump you higher in the queue.  Further, your health privacy will ripped from your grasp, and your care will ultimately be rationed by someone you do not know.   It will also bankrupt the nation, as it has every other nation that has tried it.

Government Directed Quasi-Private System

  • ObamaCare
  • Government is price setter
  • Providers are price takers
  • Coverage is set by the State
  • Rules-based care standards set by national standards (rationing) board
  • Everybody must participate
The State has an obligation to ensure equal care for all citizens

The State can drive health care efficiencies by regulation of delivery  and pricing through quasi-private institutions

Including everyone in the covered (i.e. taxed) pool reduces the total cost of care for the country (adding 30mm people to a government run system will reduce the cost of care?  Really?)

Is this Constitutional and appropriate to an American market system?  Do we care about our health information privacy?

Does funding and regulation of private health care actually improve care, or just increase cost?

How will total costs actually fall?  What happens if they don’t?

Will the addition of more public dollars increase the tort lottery system costs?

Rough Truth: This is a painful back road to a Single Payer System, and the costs that will ultimately bring.

Revive and Modernize Major Medical Coverage of the pre-HMO Era

  • Consumers pay for smaller items out of pocket
  • Offer range of  consumer desired insurance offerings for risk-based events
  • Eliminate preferences for groups over individual buyers
  • Require price transparency and consistency by providers and suppliers
  • Create (and selectively) subsidize assigned risk pools for those with those pre-existing conditions
  • Create an individual property interest in health insurance (100% portability)
  • Prevent insurer-initiated cancellation for continuous coverage customers
  • Provide limited transitional benefits for the unemployed
  • Allow licensed insurers to sell across state lines
  • Implement tort reform at the state or national level, or both
Prices will come down if consumers have an incentive to shop for the care they receive – not just the deductibles they pay

Insurers will innovate and premiums will fall if the cost of processing small-ticket items (up to 30% of health dollars) is returned to the consumer

Providers  and insurers will offer lower prices if millions of consumers shop for products/services/coverage’s

Care innovation will increase when consumers are incented to shop

Unnecessary testing and procedures will diminish if consumers are allowed to make purchase trade-offs and incentives to litigate are reduced

We can create reasonably priced (subsidized) risk pools for those with pre-existing conditions

Can consumers make informed and rational health spending decisions if they must pay a larger share out of pocket, even if premiums are lower?

Will insurer behavior improve if portability and consumer choice increase?

Will consumers make ‘rational’ life choices without government health diktats?  Do we really want to make them behave differently?  Do we have a right to do so?

Rough Truth: This is a radical return to what worked before HMO’s – only better.  Remember when Mom wrote the independent pediatrician a check or $37 for the kids check-up and inoculations?  No lines, no pre-approvals, no co-pays, no-reimbursement rates, no trading dollars for care.  Wouldn’t it be nice?

Blair House Summit Preparations Start Early: Pedestrians Already Smell the Result

Pedestrians Already Smell What is Coming at Blair House

Question 6:  Is there Any Chance the Blair House Summit Will Result in a Grand Compromise?  Or Anything Useful?

No.  Unless the massive quantity of hot air generated is used to drive some kind of bureaucratic power co-generation system.

Question 7:  Will President Obama and Congress Be Able to Ram This Thing Through Anyway?

Probably not.  But if they do, pitchfork and torch sales will be spiking at Ace Hardware Stores near you.   I’d also speculate the most over-used words in the English language for the next year would be Repeal, Recall, and Restore.


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One Response to “ Health Care Forecast: Politicians Marching Ever Deeper into the Swamp ”

  1. JoJoTo4 on February 25, 2010 at 10:38 am

    Yes we need to stop this Obama care, create jobs so we can afford health care. Let’s dump the egos and get to the point. The scary things about the lies in politics are not the lies, but the fact that most of them are true! I say it again keep up the great work! Thanks a less angry American.

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