Update on Mandates

Today the Wall Street Journal has been running a poll asking readers how they feel about mandates requiring that everyone sign up for health insurance. Asking “What should the federal government do about the uninsured?” the Journal gives readers three options:

(1) Require everyone to have insurance coverage, but keep private insurance.

(2) Adopt a single-payer, government-funded system.

(3) The government shouldn’t require everyone to have health care.

Late this afternoon, 347 people had responded, with 40 percent favoring mandates, 31 percent picking single-payer, and 29 percent saying the government should keep its sticky mitts off our free-market health care system.

Okay, this a very small poll, and it’s not random. But that is precisely what I find interesting.

I was surprised that 40 percent of the Journal’s relatively affluent readers voted for mandates since some of them are healthy and wealthy enough that they could easily “self-insure” by saving enough money in a health savings account to cover all but catastrophic medical expenses and then buying a low-cost, high deductible policy. Premiums for high-deductible insurance are going to be significantly lower than the premiums for mandated policies designed to ensure that everyone has comprehensive coverage (i.e. benefits comparable to what Medicare offers, plus maternity and other coverage younger people need).

Nevertheless, 40 percent think it is fair to require that  everyone to pay into the pool while another 31 percent pick a single-payer system that would be funded by taxpayers.

Of course, 71 percent isn’t everyone. Consider the curmudgeon who sent in this comment: “Medical needs are endless…You are not your brother’s keeper no matter what the Bible or any other book written by superstitious savages says.”

That is why we need mandates. Trust me, this fellow is not going to sign up voluntarily.

29 thoughts on “Update on Mandates

  1. I am sorry, mandates to purchase substandard health insurance and support the profits of the health insurance industry is just wrong. This won’t solve our health care problems, insurance companies will continue thier ridiculous reimbursement schedules, adimistrative costs, and profits, while the poorest will have coverage without true care. If people could afford health insurance with a $4000 deductible they could have had regular health care and maintanence. It is truly obscene to force the population to pay for profits, overhead, and administration while they continue to suffer from lack of general health care!!!

  2. drmatt–
    It seems you didn’t have a chance to read my original post on mandates (scroll down to “Obama says”)
    If you had read it you would realize that No One is talking about requiring everyone to buy Private Insurance.
    All of the candidates plans offer everyone a choice between private insurance and a Medicare-like public sector plan (Medicare for All)
    In addition, no one is talking about letting insurers sell substandard plans or a plan with a $4000 deductible
    Under all of the plans for reform (include Edwards and Hillary’s mandated plans) insurers would be tightly regulated. They would be required to offer a package that was at least as comprehensive as Medicare (plus the benefits that younger people need, like maternity and probably drugs as well.)
    Moreover, insurers would not be able to charge more based on prior conditions or age.
    How would the public pay for mandated insurance? All of the plans for reform call for subsidies from the government to cover, not just the poor, but the working-class and much of the middle class.
    For example, in Massachusetts a family of 4 that earnings less than $60,000 is eligible for a subsidy.
    But the problem in Massachusetts is that because they don’t have a mandate requiring that everyone get insurance (you are just charged a small fine if you don’t enroll), many of the young,uninsured, healthy and relatively wealthy people in the state are refusing to get insured saying they don’t think they need it (they don’t expect to get really sick and have enough money to cover minor medical bills out of pocket) and they are not willing to help pay for other people’s insurance . ..

  3. Dear Maggie (Matt)
    I think Matt is referring to the real world, rather then campaign platforms, wherein as the experience in Mass (and Maine, etc.) shows us that when one tries to go the mandate via private insurance route, what one gets (regardless of rior assurances to the contrary) are either very high premiums for decent coverage, or low premiums for crummy coverage (high deductuble, out-of-pocket, etc.). In other words the single payer argument against keeping the unnecessary bloated skimming denial of service for profit private insurer in as the middlemen.

  4. DrSteve B–
    Probably you didn’t read my posts about the Mass plan. (See tk and tk )
    IF you did you woudl know that, first of all, most of the insurance in Mass is not-for-profit. Secondly insurers worked very hard–and went back to the drawing board more than once–to come up with affordable plans.
    I agree with you about the very cheap plans which don’t offer comprehensive coverage.. They are basically a sop to the relatively wealthy and healthy young people who are not eligible for subsidies (earn too much) and so Mass decided to offer them some cheap plans to try to get them to chip in something to the insurance pool. Masscahusetts also lets insurers offer young people much cheaper insurance–a 27-year-old pays half as much as a 57-year-old for the same insurance. And even then, many affluent people under 35 have refused to sign up.
    Finally, if we want to talk about what can work in the “real world” one only has to look at Europe. There, throughout Europe, you find manadated insurance which is a combination of public and private sector plans offering affordable, very comprehensive and high quality coverage.
    Some people seem to think that most healthcare in Europe is “single-payer.”
    This simply isn’t true. Germany, Switzerland, France etc. etc. etc all have different combinations of public and private insurance.
    Pure single payer is very rare.
    The biggest difference between European and U.S. healthcare is that they practice more evidence-based medicine. They won’t cover treatments, pills, artificial knees etc. that are over-priced and no more effective (or only slightly more effective) than what we have.
    And overall, they have better outcomes.
    They also don’t pay specialists nearly as much as we pay the best-paid specialists in the U.S.
    Though they do subsidize the cost of medical school, so students don’t come out with huge loans.
    Basically, in the U.S. insurance (of any kind, including Medicare) is so expensive because healthcare is so expensive here.
    And as the CommonWealth Fund has pointed out time and again healthcare is so expensive here because
    a) we pay more for everything (drugs, devices, specialists, hospitals with atriums and waterfalls)
    b) we do more high-tech cutting edge tests and procedures and devices (a ridculous number of MRIs, unncessary angioplasties, artificial knees made especailly for women
    c) we have higher administrative costs not simply because we have so many insurers but because we have so many solo practioners, small hospitals, clinics etc. mostly billing fee-for-service.
    Fee-for-service is responsible both for much of the wasteful and hazardous overtreatment and much of the high administrative costs.

  5. Maggie, I have read all your posts and apparently the CDC doesn’t agree that there is a big problem with wealthy young invincibles not signing up for health insurance because they don’t think they will need it. The true cause of uninsurance is the high cost. Massachusetts might be an outlier, and there might be a problem there,but as an example it isn’t relevant to the discussion of a proposed national plan.
    I feel, like Dr Matt, there is a legitimate argument to be made that it is unacceptable to mandate that everyone must buy deeply flawed insurance policies that do not make needed health care available at an affordable rate. Unfortunately the private health insurance industry cannot produce comprehensive coverage that will protect against bankruptcy in the event of serious injury or illness. Schwarzenegger has been trying to negotiate an acceptable policy offering with California insurers, and he cannot get a single insurer to agree to offer minimally acceptable coverage under the conditions outlined in his plan. The individual mandate will force people to pay out money many can ill afford, causing hardship and at the cost of other important personal priorities such as education, safe living conditions, etc. Living in conditions of economic hardship, insecurity, and stress is a cause of increased illness and early mortality. We could inadvertently cause a degradation of American’s health from a public health standpoint, as mandated health care costs become too onerous for many families to bear. Far too many families have been crushed under health care costs already.
    You are insisting that the health care mandate plans proposed by Clinton and Edwards include many consumer protection regulations in addition to the individual mandate. There is no guarantee that Congress will pass the industry regulations along with the individual mandate. Even if there were community rating and guaranteed issue imposed on the insurance companies, those regulations could be easily stripped out of the program later by the next right wing administration, leaving only the individual mandate intact. Additionally, the health insurance industry has developed marketing schemes to cherry pick the healthy and avoid the sick, and even under regulation they would work very hard to pick the most profitable patients, and discourage the costlier ones, leaving them to flee to the available public option, which would inflate it’s costs through adverse selection. It’s not in the least clear to me that risking an individual mandate will ever benefit the American people, or lower costs. It seems all too likely that the increased revenue stream to the private health insurers will serve to increase their political clout, to assist them further in evading any profit reducing regulation. It’s like arming the enemy. It is very difficult for me to see how this can end well.
    I certainly do agree with you that doctors need to be on salary in large practice groups to help control health care costs. I’m not sure how we can make that happen.
    If we had a single payer plan here in the US there would be numerous tools available to lower health care costs through economies of scale. Single payer is necessary, but not sufficient to solve the problem, agreed. Many other steps will be needed to contain costs.

  6. The real world, when the bill goes to the senate and the house and the lobbyists are pushing, and the changes are made, and there are add ons. What will we have then, and money spent to enforce strict regulations is just wasted, that would be health care money not going to health care, like the private insurance’s “administrative” cost. Let’s not forget that the private insurance industry, by law, works for the stolk holders, so they will find ways to make money, and I have no doubt that it will be at the expense of true health care. There are just way to many loop holes and too many financial interests for this to turn out well.

  7. Jay and Dr. Matt–
    Thanks for your comments.
    Jay– You seem absolutely convinced that single-payer is the only way to go.
    I like single payer, but I don’t see it as the Holy Grail.
    Question: have you ever looked at healthcare in Switzerland, Germany, France, Scandanavia?
    It is not single payer.
    It covers everyone (and in most countries everyone has to sign up)
    And it combines private sector and public sector.
    Finally it is much less expensive than our healthcare and overall, quality is better.
    If single-payer is the only way to go, how do you explain the success of these other systems?
    I, too, think that single payer (Medicare For All) sounds like a good solution for us–and an elegantlyl simple solution for us.
    But two things bother me.
    First, what if we get another administration like the administration that we have had for the last 8 years?
    Or like the Reagan administration which began to gut the FDA, turned medical research over to for-profit corporations with a vested interest in outcomes,slashed medical school scholarships and took away the tax breaks that had made not-for-profit HMOS successful.
    (Reagan is reponsible for the growth of the for-profit HMO industry.)
    What do you think another GWB, or Ronald Reagan, or Herbert Hoover, or any one of a number of disasterous presidents would do if they and their cronies were in charge of a single payer system?
    And if Americans had no other alternative for health care? It would be like waking up one day and finding that FEMA ran all disaster relief–your local fire dept., police dept., etc.
    The second thing that has begun to bother me when I think about having only single-payer as an alternative is that I’m afraid that many people will hate many of the things that you and I probably think are needed to improving the quality of health care while making it more affordable:
    for instance, putting doctors on salary, refusing to cover unncessary tests and ineffective over-priced durgs and devices, etc. etc.
    Rational change in our health care system will make many patients unhappy. If we have only a single-payer system they will blame “the government” or “socialized medicine”
    IF we have private sector insurance competing, they will see that private sector insurance also can’t afford to cover over-priced wasteful medicine (or its premiums would be too high to compete with public sectors insurers.)

    Finally, what do you think about not-for-profit health plans? There are actually still some good not-for-profit HMOs (mainly in the Northwest). Why destroy that model?
    If people in California want Kaiser, why not let them have Kaiser? (It’s a huge organization and it’s not perfect but over the years it has provided a benchmark for some very good care.)

  8. Dr Matt–
    I agree that getting tight regulations of insurers through Congress won’t be easy–but you speak as if public sector insurance won’t need regulation.
    We know Medicare is rife with fraud. Claims will still have to be checked. Providers will have to be audited. And in any closed government system that oversees itself and covers anyone, corruption can be worse –or at least harder to weed out.
    Finally, I think it will be possible to pass tight regulation of the insurance system (just as we have fairly tight regulation of public utilities) because at this point, the vast majority of Americans distrust insurers.
    True, Congressmen will have lobbyists for the insurance industry on their backs, but they will also have to face taxpayers who want community rating, and comprehensive insurance packages that deserve the name “insurance.”

  9. I still think the discussion on “mandates” is just going to derail the conversation. The issue is that private insurance is a bad deal for everyone concerned except the big players in the private insurance industry,.
    Today the former head of UHC, William McGuire, has agreed to give back about $618 million in payments. He does get to keep another $800 million, though, so don’t worry too much.
    The head of Medicare is a civil servant. The bottom line is that discussing the practicality of finding the votes in congress to establish universal care (not coverage) is allowing the McGuire’s of the world to win without even trying to push for meaningful reform.
    Congress in not immutable, if the public shifts its attitude they will go along, just look at the attitudes towards the current wars.
    All that is required is to frame the issue in terms people can understand. Suppose there were ads say something like:
    “If you had the same coverage as provided by UHC from a national program your annual payments would be $1000 less – we wouldn’t have to provide millions to McGuire, but could pass the savings on to you.”
    The votes aren’t there because the pols (including the Dems) are feeding at the same health care trough at the GOP. This could also be highlighted.
    Since the media is swimming in drug ads it is unlikely they will deal with the issue either. That’s why sites like this need to take the lead and not assume that the current situation has to be considered as unchangeable.
    Don’t talk about mandates, don’t talk about insurance, talk about coverage and certainty. With private insurance one never knows when the company will resist coverage. This also needs to be emphasized. There are enough people out there with stories of such situations that bringing them out would make Harry and Louise look like the phonies that they were.
    How about some creativity and fearlessness?

  10. Robert–
    First, thanks for your comment.
    You wrote: “Congress in not immutable, if the public shifts its attitude they will go along, just look at the attitudes towards the current wars.”
    Right. Most people in this country are now against the war in Iraq.
    But we are still in Iraq.
    And progressives just don’t have enough votes in Congress to get us out.
    Most people realize that the President of the United States and his advisers lied to us about the reasons for going into Iraq.
    Has Congress started impeachment proceedings?
    No. Why? Because they don’t have the votes.
    Unfortunately, Congress does not always respond to what the public wants.
    If it did, we wouldn’t have kept sending wave after wave of troops into Iraq, sending people on a second tour, a third tour . . .
    Over the past 27 years (since the begining of the Reagan administration) Conservatives have built a very strong, very well-funded base in this country. That base has a lot of power in Congress and in the many very well-funded conservative think tanks.
    The Conservatives also own Fox New and talk radio. They have pretty much silenced any truly progressive voices on PBS.
    The only strongly progressive voices in the media are in the new media and they are heard, on the blogs, by a fairly small group of generally young, generally white people who already believe what they say. (In other words, the progressive political blogs they are preaching to the choir.)
    Meanwhile the Conserative’s main goal is this: to shrink government, reduce taxes and to turn many of the things that government does over to the for-profit private sector.
    They wanted to privatize Social Secruity–and they came pretty close to winning.
    They wanted to privatize Medicare, and with Medicare Advantage they have started the process.
    Meanwhile, while many ordinary Americans are unhappy with Bush and the war, they are not in favor of big government and they do not want government intruding in their lives.Poll after poll shows this.
    When it comes to healthcare many polls show that 80 percent say they like the insurance they have (mainly employer-based private insurance) and their greatest fear is that someone will force them to change.
    They are in favor of national health insurance for other people–but don’t want it for themselves (if they have employer-based care) and are not willing to pay a penny to expand Medicare so that uninsured people can be covered.
    So we have two problems:
    a) even after the 2008 elections, we are not going to have an overwhelmingly liberal Congress. I talk to people who actually sit down, count the seats that will be open and look at who is likely to win. Even many of the Democrats will not be progressive Democrats.
    In 2009 the ideological war between conservatives who want to turn government over to the private sector and progressives who want government to do more will be fiercer than ever. And I’m afraid the political climate in this country will be poisonous, with people fighting over “who lost the war in Iraq.” I remember what it was like after the Vietnam war.
    This ideological war between Conservatives and Progressives explains why we couldn’t even get the votes to expand SCHIP–healthcare for poor children.
    Most Americans were in favor of it. But Republicans wouldn’t vote for it, not because of Bush (they know he is a very lame duck) but for ideological reasons: they saw Schip as “opening the door to more govt-sponsored healthcare.)
    Secondly, when it comes to many issues the majority of Americans are still pretty conservative. They like the idea of an “ownershp society” with everyone taking care of himself. They would like to see other people have health insurance too, but they don’t want to help pay for it.
    And I’m afraid you are mistaken to think that premiums for public-sector insurance would be $1,000 less than equivalent private sector insurance.
    See my recent post on healthcare spending and how much private insurers administrative costs take from the pie.
    Have you looked at how expensive traditional Medicare has become? The monthly premiums, co-pays and deductibles are sky-rocketing. Some people on Medicare are now paying more out-of-pocket than they were with their employer-sponsored care. They thought Medicare would be free. It isn’t. You have a $1,000 deductible every time you go into the hospital. And that’s just the beginning.
    Finally–and this is very important. Robert, this is not about being fearless. When it comes to writing what I believe, I’m pretty fearless.
    But you have to understand what is at stake: If the next president tries to get comprehensive reform, or Medicare-for-all—and the Conservatives defeat him or her, that will be the end of that administration’s power. (Especially if it is Hillary who is defeated on this issue again.) And no other politician will touch Medicare-for-all –or any real reform–for another 9 years.
    There are many things that the next administration can do, beginning with expanding SCHIP (they will have the votes to do that) and repeal the legisation that gives billions to private insurers to provide Medicare Advantage.’
    Even the AARP (that originally backed this give-away to private insurers) now wants to take that money back.
    A new administration can also begin to clean up the waste in Medicare. The reason Medicare has become so expensive is because it is covering way too many unproven, over-priced and often ineffective tests,devices, pills and procedures.
    Medicare is also over-paying specialists at the top of the pay ladder.
    IF Medicare begins to get tough about the waste, that will pave the way for Medicare-for-all that we can afford–which will solve another big problem when it comes to getting it through Congress.
    It took two administrations to get Medicare. First there was JFK. Then he was assassinated and LBJ realized that he could use a martyred president as a platform to push Medicare through Congress.
    And keep in mind LBJ had a landslide majority in Congress of historic proportions. It’s extremely unlikely that the next Democratic administration will do that.

  11. Firstly, the WSJ posts scare the heck out of me, putting the polling results aside (was I the only one who got the creeps??). As far as the 40% factor, I found that fascinating given the expected audience, although the WSJ blog does attract an interesting mix of folks, right and left.
    As far as this interesting thread, my two cents:
    As covered here and other places, a discussion surrounding single payer makes for a good cognitive exercise, but given pluralistic nature of US as well as deep cultural suspicion of federal control (I dont care if next president is FDR and Lincoln all rolled into one), it will never fly. Realistic approach is hybrid model like suggested, non-UK/Cananda. Sorry if I offend, but lets move on.
    In theory, I agree with mandate, and although I am not an Edwards fan, I liked his courageous first step in proposing a solution. Krugman is just muddying this debate.
    Subsidizing those who are unable to qualify under current definitions will be a challenge. The $100B cost that is floated will not materialize overnight, niether from a CEI, EMR/IT, or tort reform. As some of you know who live the system daily, the savings wont be realized for years. Everything will need to be baby steps. Like D-Day and best laid plans: it never goes the way it is suppose to, etc., but you need to make the most of a bad situation. Clinton is a smart lady, and she knows this, but I hope at some point the discourse is elevated. I am not holding my breath.
    I do believe that incrementalism, with some forethought and investment, is the way we will have to approach this problem. Whether a “cover them first” or spend a Fort Knox worthy sum on national HIT system is more appropos is debatable. Bottom line, we cant do both a la full court press, nor can we afford it.
    My feeling is lets agree on getting as many people in the system first, and carefully lay out out how we will control costs. The debate is always access vs delivery.

  12. Bradley,
    Thanks very much for your comment.
    Yes, some of the WSJ comments gave me the creeps too. (Reminded me of some of the hate mail I sometimes received from investors when I was at Barron’s).
    Reading the comments it’s very surprising that 40% support mandates, but as you say the WSJ blog (which is often interesting) does attract a diverse group.
    I, too, think that coming up with the money for the needed subsidies will be challenging–especially given where the economy is going to be by 2009.
    Some of the money has to come from within the healthcare system itself, cutting out waste that also lowers the quality of care.
    I’m hopeful that Medicare will get serious about comparing the effectiveness of treatments, refusing to cover unproven and over-priced drugs, devices, tests and procedures. I think that this is one of the first things the next president should focus on.
    Given the number of risky drugs and devices that have had to be withdrawn from the market in recent years (after Medicare had agreed to cover them) I’m fairly hopeful that Medicare could persuade many people that this is about improving the quality of care–and reducing risk–while also reducing costs.
    Health IT is going to be an enormous expense that, as you say, won’t pay off for years. My hope here is that, increasingly, Americans will want their doctors and hospitals to have electronic records.
    At some point, many patients will feel very uneasy going to a doctor who keeps their record on paper, with little yellow post-its occasionally floating out of the sometimes hard-to-locate manila file. . .
    And so doctors and hospitals that can afford to will band together to invest in health IT. To make it more affordable (i.e. enjoy eonomies of scale), small group practices will have to form “virtual” large group practices”–perhaps joining with the hospitals where they refer most of their patients.
    Insurers (who will enjoy the first benefits–fewer errors, fewer re-admissions) also will need to kick in to help pay for IT. As will the federal government.
    Basically, the only way we can afford it is if everyone contributes, according to theirability to pay.
    It’s very frustrating to see hospitals building new wings (that in most cases, they really don’t need) when they could be borrowing the money that they are borrowing for construction to invest in health IT –which would reduce errors and needless deaths..
    Perhaps the next President will establish a new agency to oversee health IT and give it the clout and funding that it needs.

  13. Maggie,
    If we are going to insist on community rating and guaranteed issue, we have to have mandatory participation even if a significant percentage of the population won’t like it. The three issues are: (1) how do we define what Massachusetts calls MCC or minimum creditable coverage (2) how much money are we prepared to pour into subsidies to make health insurance affordable, especially for the bottom half of the income distribution, and how do we finance it (raise taxes) in a way that does as little economic harm as possible, and (3) how significant is the penalty for non-compliance and how aggressively will it be enforced?
    I think it makes a good sound bite to say that everyone should have coverage “as good as Congress has” or “at least as good as Medicare,” but one of the historical shortcomings of well intentioned ideas to achieve “fairness” or “social justice” is that they frequently underestimate (sometimes significantly) how much implementation will cost, are unrealistic about who will eventually have to pay, and don’t anticipate the likelihood of adverse unintended consequences.

  14. Maggie:
    You’ve been in the trenches and see how distorted the will of the public has become, but I have a different perspective having worked for non-profits for my career (not health-related).
    It has been my observation that such people (and many in government as well) do it because they believe in what they are doing and are, therefore, willing to take less money and have less status than the would otherwise.
    I think that if health services was returned to a non-profit status these instincts would be allowed to reassert themselves. I don’t know about the inefficiencies of Medicare, but from my limited personal experience I’ve not seen any examples.
    If there is as much waste as you claim there should be some studies available which put a price tag on this. It would be nice if you cite some.
    I don’t see why removing the 30% overhead that private insurance extracts and replacing it with the 2-3% of Medicare wouldn’t free up funds for expanded coverage of those currently being under served.
    I also don’t believe people are “satisfied” with their health insurance. They are satisfied with their health care, that is they trust their doctor. Who pays for the service is not really a paramount issue. The GOP has already demonized universal coverage by calling it “socialized” medicine. The fact that the government acts as a collection and disbursing agent for health service payments should be emphasized and that the care would continue pretty much as at present.
    That’s why I keep coming back to the theme that it is important to discuss care and not insurance. Care is what people want, insurance is just a mechanism to get it paid for.
    You are probably right that the votes aren’t there, but that’s because the pols are in the pocket of the health industry. How about reporting how much each of them gets in campaign contributions from such sources. I don’t think Dems are guided by a conservative ideology, they are just doing what they are being paid to do.
    “He who pays the piper, calls the tune.”

  15. I’ll offer one possible alternative approach to dealing with the mandate issue, especially as it relates to young, healthy people who don’t think they need health insurance and don’t want to pay for it.
    Let’s say a new system took effect on January 1, 2009 that offered everyone a chance to buy comprehensive health insurance with significant subsides up to, perhaps, 400% of the FPL. The policies would be priced based on community rating, and insurers would have to take all comers, regardless of preexisting conditions or current health status. If you don’t sign up during a first year, open enrollment period of 3-6 months and you decide next year or the year after that you want / need health insurance, you would then have to pass an underwriting screen to be able to buy it, and insurers would not have to sell you a policy. This is the way employer coverage works now. If you sign up for insurance when you are first hired, there are no pre-existing condition exclusions. If you don’t take it but want it later, you have to pass an underwriting screen and show that you are insurable.
    If, under the new system, you don’t have insurance, get sick and can’t get insurance, doctors and hospitals will not be obligated to treat you if you get cancer and need chemotherapy or very expensive cancer drugs or if you need heart bypass surgery, hip replacement or whatever. If you show up bleeding at the ER, you will be stabilized based on provisions of the EMTALA law, but that’s about it. If you are going to free ride on the rest of society, then society should see to it that there is some downside risk for you associated with that decision. As I’ve said over and over, personal responsibility should count for something.

  16. Barry Carol:
    By the same logic doctors shouldn’t treat those who get lung cancer from smoking and insurance companies shouldn’t pay for the treatment.
    It is standard libertarian fare to claim that people are free agents and thus bear all the responsibility for whatever befalls them.
    We have something like this in auto insurance. A great deal of time and money (and litigation) is spent on determining who was at “fault” in an accident. This has gotten so far out of hand that lots of states have adopted “no fault” insurance instead.
    Do you also favor allowing merchants to sell uninspected meat to consumers at a cheaper price? You save the money and you take the risk.
    Societies have already figured out through centuries of trial and error that spreading risk over the largest group and enforcing the rules for everyone leads to the best outcome. For some reason libertarians refuse to examine the historical data.

  17. Robert and Barry–
    Thanks for coming back.

    I actually do have numbers documenting the amount of waste due to overtreatment in Medicare.
    One out of $3 is wasted on
    unncessary tests, unproven procedures, unneeeded hospitalization and over-priced “cutting-edge” drugs and devices that are no better than the older, much cheaper products that they replaced.
    We have nearly three decades of medical research documenting the overtreatment done by researchers at Dartmouth. This reserach is now accepted by virtually everyone in the medical community as well as MedPac (the Medicare Payment Advisory Commission–and independent commission that advises Congress on Medicare spending), etc. See the story that I wrote about this here. http://dartmed.dartmouth.edu/spring07/html/atlas.php
    I think you’ll find it interesting.
    Both Edwards and Clinton propose addressing this problem by setting up an independent institute to compare the efficacy of various drugs and treatments in order to decide what Medicare should and shouldn’t cover.
    (Right now we already have a pretty long list of things that Medicare covers which medical reserach shows are not effective)
    AS for medicine being non-profit, I too would prefer non-profit insurers (they could be in the private sector or part of govt.)
    As I’ve explained elsewhere, most developed countries in Europe and elsewhre do not have a single-payer govt. system.
    They have a combination of private sector and public sector, but there is less emphasis on profits.
    Actually I work for a non-profit foundation now, and in an earlier career, taught for about 11 years at a (non-profit) university). So I agree that some people care more about the work for its own sake than about how much they make . …
    But private insurance does not extract a 30% overhead. See my post on how much private insurance’s total overhead (administrative costs, profits, salaries, advertising costs etc)costs the system. It adds up to just 4.5% of the total $2 trillion that we spend on care. Govt’s administrative costs equal 2.5% of the total.
    IT’s easy to check these figures. Insurance companies tell their shareholders how much they take in in the form of premiums and how much they pay out in reimbursements. The difference is what they keep to cover their expenses, pay their exectutives, advertise, and provide profits for their investors.
    Typically, they pay out roughly 85% of what they receive in premiums to doctors hopsitals and patients, keeping 15%.
    IF you add up what they keep, you find that it equals about 4.5% of the nation’s total $2 trillion healthcare bill.
    So abolishing private insurance won’t solve the financial woes of the health care system. Health care costs are rising by over 6% a year. If you eliminated private insurance industry tomorrow, that 4.5% savings would be eaten up by one year’s inflation.
    When people say they like the healthcare they have now, you are right, they are talking about liking their doctor rather than how much they love their insurer.
    But what they are really saying is that they like all of the treatments, tests, drugs, devices and procedures that their doctor offers and their insurance covers.
    In the 1990s, insurers were trying to “manage care” and they often said ‘no’ to some of these drugs, devices and tests. Sometimes they were right to say “no”–there was no medical reserach proving the product was effective and it was overpriced. Sometimes they were saying ‘no’ simply because they wanted to save money.
    Whether insurers were right or wrong in refusing to cover something, Americans just didn’t like to hear the word ‘no. ‘
    There was a backlash at the end of the 1990s, and today insurers don’t try to manage care nearly as much.
    They say “yes” more of the time–and pass the cost on in higher premiums.
    This is why premiums, co-pays etc. have skyrocketed since 2000. Over the same span, Medicare’s premiums co-pays etc. also have sky-rocketed because Medicare also is saying ‘yes’ to virtually everything the FDA approves.
    And, under the Bush administration, the FDA is approving virtually anything that anyone wants to sell. All you have to do to win FDA approval is to test it against a placebo–you don’t have to show that it is any better than–or less risky than–the much cheaper products that we already have.
    When 80% of the population says they like the healthcare they have–and would not want a change-they are experssing their fear that if they were forced to go into a public sector plan, well-insured upper-middle-class and middle-class people might not get everything that they get now.
    And they would be right. If we are going to provide high quality insurance for every American, we cannot afford to waste $1 out of $3 buying everything that someone decides to advertise on TV.
    There are many, many products and services that provide a profit for someone–but don’t help the patient.
    Just one familiar example that I have written about before: PSA testing and early treatment for prostate cancer.
    Both the American Cancer Society and the National Cancer Institute no longer recommend PSA testing and treatment for men diagnosed with early stage prostate cancer because they know that there is no medical evidence that the early detection and treatment saves lives–or even extends life by one day.
    And the treatments often have very unpleasant side effects–impotence and long-term incontinence.
    Meanwhile prostate cancer is a very slow-growing disasee. 17 out of 20 men diagnosed with early stage prostate cancer will die of something else long before the cancer bothers them.
    Treatment makes sense only if the cancer begins to grow quickly.
    Yet the American College of Urologists continues to recommend that every man over 50 should be tested every year. Why? Who do suppose administers the test and performs the treatments?
    Americans need to learn that “more care” is not “better care” and that the newest tratment often is not the best.
    Other countries don’t cover PSA tests. But they do cover all of their citizens. In other words, they “ration” care based on medical evidence. We ration care based on ability to pay.
    Yes, we need to face the fact that providing subsidies so that everyone has high quality health care will be expensive.
    But if we begin cutting the waste now, over time, we will find that we do have enough money for those subisdies. Initially, though we’ll need to seed the program with higher taxes (to pay for the institute for compartive effectiveness, for starters), though we can immediately begin to save money. For example, we can let the government negotiate lower prices with drug makers and device makers (the cost of all drugs and devices adds up to roughly 15 percent of our health care bill and we pay twice as much as other countires for many of these products).
    Finally, Barry, as to the notion that we should let people die of cancer on their own (without palliative care, drugs, whatever they need to breathe, etc.–all of which is very expensive) is simply horrifying.
    Of course Americans are willing to step over the bodies of homeless people on the streets, but I’d hate to think we will get to the point of being willing to let people die of gangrene, let burn victims suffer and finally die on their own, etc.
    What about childbirth What if the infant is born needing 9 months of hospital care??
    This is why we cannot leave it up to the individual as to whether or not he has health insurance, just as we don’t leave it to the individual whether or not he wears a helmet while riding on a motorcycle.
    He isn’t just risking his own health, he is risking the mental health of a driver who might hit him, kill him (because he wasn’t wearing a helmet) and be haunted by that death for the rest of his life.
    I agree with Robert –we have to spread the risk, and we have to try to protect everyone (i.e. meat inspection) even if that means protecting them against their own youth and naivete (requiring that motorcyclists wear helments and that everyone has insurance.)
    We live in a society, not just an eoonomy, and that means we have to look out for each other.

  18. Maggie,
    I sometimes (maybe even often) express ideas in a black and white style and suggest things that I don’t intend and don’t think would actually happen. With respect to the mandate issue, I think it is highly likely that whatever reform approach we come up with will not drive the population of uninsured to zero, and those who remain uninsured will receive treatment under the same terms as they do now. That is, they will most likely go to the ER and receive treatment well beyond mere stabilization.
    The points I want to emphasize are the following:
    1. While insurers should be required to take all comers on a community rated basis during an initial enrollment under a new health reform system, the industry should not have to sell a policy to anyone who refuses to buy initially, then gets sick and wants insurance later. I note that even under Medicare Part D, anyone who doesn’t buy coverage when they first become eligible and doesn’t have alternative retiree coverage provided by an employer must pay a surcharge of 1% for each month of delay between when they were first eligible for coverage and when they finally applied for it. That premium, by the way, would remain in force for the rest of their lives.
    2. You have said many times that you think high deductible coverage is undesirable because people will forgo both necessary and unnecessary care. The tradeoff is that the cost of comprehensive coverage is considerably higher than high deductible coverage, and it is likely that under any reform approach that defined a comprehensive policy as minimum creditable coverage will result in a higher percentage of people remaining uninsured than would be the case if they could buy a more affordable high deductible policy. Moreover, there are millions of people today who have insurance that would not meet the comprehensive standard. What happens to those policies whether purchased by an individual or provided by an employer?
    3. I have said several times that any mandate (not just for health insurance) has to have meaningful penalties for non-compliance and at least a reasonable attempt to enforce the mandate. Plenty of people drive without auto insurance, for example, despite a mandate to buy it. What to you suggest in the way of non-compliance penalties and enforcement mechanisms? Would a large fine approximating the cost of the policy be OK? What do you think of John Edwards’ proposal to garnish wages to cover the employee’s share of the cost of health insurance, along with presumed subsidies?
    4. I really hope you are right and I’m wrong regarding our ability to save money in the short term by unshackling Medicare to stop paying for treatments that are not cost-effective, crank up a comparative-effectiveness research effort and negotiate with drug companies for lower prices, though I’m especially skeptical regarding the fruits of drug price negotiation because to do it effectively will require a willingness to accept a much more restrictive formulary than Americans will find acceptable. The VA formulary, for example, would never fly with most of the population, especially the elderly.
    5. I think what will probably ultimately happen regarding the mandate is that, if we’re lucky, we will drive the percentage of the population that lacks health insurance from the current 15% down to 5% (best case) to 8% or 9% and declare victory with most of the remaining uninsured being either illegal immigrants or young, healthy people. While some of the young and healthy will, unfortunately, be seriously injured in accidents or contract cancer or suffer a heart attack, etc., the vast majority will remain healthy and, as a group, not consume much healthcare. Even today, my understanding is that the Kaiser Family Foundation estimates that hospital costs are only 6%-9% higher than they would otherwise be as a result of uncompensated care.

  19. If you watch your nickels and dimes your dollars will watch themselves.
    I dont quite understand your reasoning on the health insurance administrative costs/expenditures. You use the whole countries expenditures to get the 4.5%? In the 3rd 1/4 of 2006 Cigna collected 4.1 Billion and paid out 750 million? in any case if we cut 4.5% here, and some rationing of costly yet valueless treatments there, this is how we would attain our goal of humane, yet efficient health care reform.
    Additionally, The insurance companies not only use a greater amount of the health care dollar for administrative costs, they raise the cost of medicine. i.e.
    In my office, My staff spent 20 man hours a week on insurance company requirement, I had to hire a billing specialist at $22/hr to meet thier requirements for reimbursement, I had to personally expend 2-8 hours a week on thier overt requirements, and another 10 a week on things like, proper note writting. My computer billing software was based on the requirements of the insurance company. the total cost for my solo practice was about $106,000 a year, without adding any value.
    Bottom line is, as far as I can tell the health insurance companies add cost but do not add value, if we are looking to get more for our dollar, we must get rid of them.
    Barry, If we are going to “force” people to buy health insurance why don’t we just tax and go to a govt single payor system? it is the same as forcing but you dont pay administrative costs near as high and non of your money is going to a valueless middle man in the name of profit?

  20. Maggie:
    If I understand your complaint properly, you are unhappy with the high degree of “unnecessary” or ineffective treatment. But you then go on to say that both Medicare and private insurers are guilty of paying for this.
    Lets’ assume that I grant your point. We “waste” 1/3 of our health care dollars. This doesn’t change the fact that the for-profits deliver less service per dollar of premiums than does Medicare. The two issues are separate.
    When I was young Blue Cross (then a non-profit) ran ads in NYC touting the fact that it returned 96% of premiums as benefits. Now it claims about 83%, because it’s for-profit. There is just no way around it, for-profits have to make a profit, and pay taxes. They also get to bundle things like huge executive compensation into overhead that the government doesn’t have to pay for.
    It is exactly that the private insurers know that they can’t compete with government health care that makes them so resistant to change and makes those proposing new programs to suggest stealth approaches like lowering the Medicare eligibility age.
    As to waste in health services. This is a social issue, not an economic one. Currently the US feels itself rich enough to support such activities. Health care is not unique in this respect, why do people spend $11 billion (according to Wikipedia) on bottled water? Is there anything wrong with municipal water? No. Have people suddenly moved to the desert and need to carry water with them? No.
    The US is enmeshed in consumerism and excess health spending is just one facet. I doubt any politician will make a serious effort to rein this in, look at how difficult raising CAFE standards is.
    If the US is going to limit health care (or bottled water sales, or the size of automobiles) then it will require a change in the public’s attitudes. Right now it’s all gimme.

  21. “In the 3rd 1/4 of 2006 Cigna collected 4.1 Billion and paid out 750 million”
    DrMatt – Several points on this. First, over 80% of Cigna’s health insurance membership are ASO members. This means that CI provides administrative services only on behalf of employer customers who self-insure. The medical costs associated with these members do not run through Cigna’s financial statements, but Cigna’s administrative fees do. Moreover, Cigna also has a significant business in dental insurance as well as life and disability insurance. If you look at Cigna’s full risk health insurance membership only, for which both healthcare costs and administrative fees are reflected in its financial statements, you will find that well over 80% of the premium dollar is spent on healthcare.
    I would also like to repeat several points that Maggie does not make clear in her statement that Medicare’s administrative costs are significantly lower than those of private insurers. First, some administrative costs clearly add value such as fraud mitigation and disease management. The costs that are most often questioned by reform advocates relate to marketing and underwriting, which play an especially large role in the individual market, which affects about 20 million members, and, to a lesser degree, the small group market. Second, there are administrative costs associated with Medicare that do not show up in Medicare’s budget. These include the cost of enrolling newly eligible beneficiaries when they turn 65, which are borne by the Social Security Administration (SSA) and the cost of raising and collecting the money necessary to finance Medicare which is handled by the Treasury Department (borrowing) and the Internal Revenue Service (tax collection and compliance). Finally, Medicare beneficiaries incur, on average, 2-3 times higher medical expenses in a typical year compared to the under 65 population, so administrative costs as a percentage of this higher revenue look artificially low. If properly accounted for, administrative costs for Medicare and for large self-insured employers with 10,000 or more employees are probably roughly comparable or, at least, within 1% of each other on a per member basis.
    Finally, with respect to the administrative burden affecting doctors in their practices, experts tell me that those who outsource the billing function to a firm that specializes in that activity generally pay about 5% of revenue actually collected. I have also heard many doctors complain about all of the documentation that Medicare requires them to provide in order to get paid. With technology likely to become ever more important in the future, I suspect that solo and small group practices will just not be a viable business model.
    In the best case, given the political realities in the U.S., any healthcare reform is likely to have to build on the current employer based system. Even if it could somehow be pushed through the political process, single payer is not the answer for the U.S., nor is it a good fit with our culture. We like choices, even if they cost more, we don’t trust government to do the job right, and we don’t want to be stuck with a government run system no matter how expensive, inefficient and unresponsive it turns out to be.

  22. Robert
    Thanks for your comments.
    You write: “We “waste” 1/3 of our health care dollars. This doesn’t change the fact that the for-profits deliver less service per dollar of premiums than does Medicare. The two issues are separate.”
    This is true. My point is only that the amount we waste on unncessary treatment–roughly $700
    BILLION dollars–is much much more than what we waste on private insurer’s administrative costs.
    Look at the numbers. First: the government’s admnistrative costs while paying half of the nation’s health care bills (Medicare, Medicaid, the VA Schip etc.) equals just 2.5 percent of our $2 trilion-plus annual health care bill. That’s roughly $50 billion.
    How much do private insurers’ Total administrative costs (eveything that they don’t pay out in reimbursements) cost us?
    As Karen Davis, president of the Commonwealth Fund (and a strong suppoter of national health reform) testified before Congress:
    On average, administrative
    expenses for private insurers are more than twice as high as the cost of administrering public programs.”
    This confirms what I have said: govt adminstrative costs equal 2.5% of the pie (or rougly 50 billion) as it pays roughly half of the $2 trillion bill.
    Meanwhile, private insurers administative costs are more than twice as much or well over $100 billion while one-third of the $2 trilion.
    IF we had single-payer and govt paid the whole $2 trillion (not just half) we could expect its administrative expenses to nearly double, rising by, say, $40 billion.
    Meanwhnile we would save the more than $100 billion that we spend on private insurers’ administrative expenses. Total savings?
    $100 bill minus $40 billion, or $60 billion– far far less that the $700 billion we are wasting on overtreatment that is hazardous to your health.
    That’s why people like Shannon and I– and the DArtmouth researchers etc. are far far more concerned about overtreatment than the insurers’ administrative costs.
    Robert you also write: “The US is enmeshed in consumerism and excess health spending is just one facet. I doubt any politician will make a serious effort to rein this in.”
    You are right that excess health spending is just one aspect of out-of-control consumerism. But when you suggest that no politician will try to rein it in, you are wrong.
    Look at both Clinton’s and Edwards health plans–read them closely. They are both calling for serious cuts in how many tests, procedures, drugs etc. we receive based on “comparative effectiveness” reserach.
    Medicare is already trying to cut back on treatment.Have you followed how much co-pays and deductibles for traditonal Medicare have been rising? This is partially an effort to try to rein in over-treatment by giving consumers “skin in the game.” I think this is the wrong way to go about doing it, but politicians are voting for this even though seniors are up in arms.
    And this year, Congres is threatening to cut fees that Medicare pays doctors by 10%–across the board. They may actually do this before the end of the year. That will mean that fewer docs will take Medicare patients.
    Again, I think this is the wrong way to go about cutting excess care under Medicare–if they vote to do this, they will be using an axe rather than a scalpel. But many politicians are serious about this.
    We’ve reached a “tipping point” where Congress is going to have to begin doing some very unpopular things. We’re running out of money, and heading for a wall.

  23. Barry and Dr. Matt–
    Dr. Matt– Barry is right about Cigna’s numbers. And many large corporations self-insure.
    The fact is that most private insurers pay out an average of roughly 85% of the money that they receive in premiums reimbursing doctors, hospitals and individuals who pay out of pocket.
    These numbers are all very straightforward–nothing hidden there. Barry knows how to read a corporate statement–as I do–and while there are places where corporate statements fudge, this isn’t one of them.
    Corporations would Never tell their shareholders that they pay out More than they do in reimbursements– the shareholders want them to pay out as little as possible so that profits will rise.
    When you add up the roughly 15% of premiums that each private insurer keep, that adds up to rougly 4.5 percent of our $2 trilion plus health care bill. A chunk of change, but not the cause of our financial problems.
    The health bill is rising by over 6% a year due to the rising cost of drugs, devices, some doctor’s and hosptials fees as well as the fact (as Shannon points out in her post) that the volume of tests, procedures and pills prescribed is rising.
    But Barry, you are dead wrong in suggesting that Medicare’s administrative expenses are equal to the private sectors.
    I’m sorry, but this is all very easy to check. Even if you include what Social Security spends enrolling people in Medicare, that’s a one-time enrolllment. They enroll and then eventually they die.
    People change private insurance all of the time-and enrolling them and dis-enrolling them is one fo the private insurance industry’s big expenses.
    The there is the cost of underwriting as private insurers try to avoid the sick. And the cost of advertising, the cost of marketing, the cost of lobbying, the cost of exectuive salaries that are much much higher than salaries in the public secotr and the need to generate profits for investors.
    Where, exactly do you think Medicare spends money that equals or exceeds these expenses??
    Investing the Medicare trust fund? Haredly–the money goes into laddered bonds, which you, of all people, know is hardly labor-intensive investing!
    Collection and compliance? Medicare taxes are paid as an automatic payroll tax. The IRS doesn’t have to do any extra work that it would’t already be doing to make sure that employers are correctly reporting payrolls and that employees are correctly reporting income. They would have to do exactly the same work to make sure people are paying their personal adn business income taxes.
    In her testimony before Congress, Karen Davis, President of the Commonwealth Fund, got it right: Private insurers administrative expenses are more than twice what govt spends.
    I don’t know anyone in
    Congress –or for that matter among Wall STreet insurance industry analysts–who disputes this.
    People on Wall Street would argue that it’s worth paying the extra amount so that insurers can market, advertise, lobby, underwrite etc and offer consumers multiple choices.
    (The only people who ever try to make the argument that Medicare has higher expenses are true neo-con ideologues at some think tanks who tend to simply ignore or distort facts that don’t suit their purpose.
    On this, see Greg Anrig’s book “The Conservatives Have No Clothes.” I think you’d like it, Barry, because it is very clearly written and argued with great logic.
    Full disclosure– Greg hired me to become a fellow at the Century Foundation.

  24. My last comment on this thread:
    My sister (a psychiatrist) mentioned to me yesterday that she is now getting less money for seeing a Medicare patient than she did 15 years ago. It would seem that the squeeze is in the wrong place.
    It would be useful (as the Dartmouth report attempted to do) if end of life care was separated from the rest of the Medicare/Medicaid program.
    I think that such care seldom falls on to private insurers. If the care is very expensive and prolonged the person exhausts their private insurance, then their personal savings, then may have to get a divorce and then go on Medicaid.
    This makes the cost comparisons somewhat unbalanced, especially since end of life care is one of those areas most prone to pointless treatment and at the same time one area where people are most willing to “try anything”.
    So, if we limit to regular care how does private/public insurance compare? I suppose there would also need to be allowance for the fact that there are few elderly people in private plans (are there any?).
    So comparisons would also have to be age adjusted.
    What I see from this dialog is that you think it is more cost effective to go after inefficiencies in care delivery right now rather than trying to battle the private insurance industry. I’m not politically savvy enough to know if this is a good idea or not, but partial solutions have a way of foreclosing real reform.
    One just has to look at energy conservation or the mortgage mess to see how little such “politically practical” solutions do to address the problems.

  25. Maggie,
    My reference to the comparison of private insurance costs with Medicare’s costs relates to large groups of (primarily) self-insured employers. In my own employer’s case, we pay our insurer for claims processing, network access, and disease management. Our total ASO cost is about 5% of medical spending for our active employees. ASO costs for our retirees are higher in dollars due to more claims but lower as a percentage of spending due to much higher medical costs per person. As a self-insured employer, we are not paying for underwriting or marketing / advertising. By contrast, in the individual market, as Ken Thorpe illustrates in his Health Affairs paper “Inside The Black Box of Administrative Costs,” administrative costs can eat up 40% or more of the premium dollar in the individual, underwritten insurance market.
    If there were a stand alone public insurance option competing with private plans in a reformed health insurance market, the public plan would have an advantage with respect to marketing and distribution costs assuming it did virtually all of its marketing via its website and/or call centers without help from brokers or advertising. Underwriting costs would probably disappear and be replaced with community rating. The public plan would, presumably, have to develop its own claims handling and fraud mitigation infrastructure. I don’t think the Blues would be willing to perform this function for the public plan except, perhaps, for a very high price. I would also question how diligent they would be because if they do a poor job of weeding out improper claims, their competitor’s claims costs would rise.
    Even if I take your numbers for the public sector’s administrative cost advantage vs the private sector at face value, there is still the issue of fraud costs which are impossible to quantify. However, experts in this area have told me that the private sector’s technology and capability in analytics is considerably better and more sophisticated than Medicare’s (or Medicaid’s). I still think that the administrative savings that could potentially be harvested from a single payer system would be materially lower than advocates estimate. Of course, neither side can prove its case in court. Since the consequences of being wrong would be serious, however, I think we would be net better off with lots of choices even if overall administrative costs are somewhat higher than they would be under a single payer system.
    One thing I can say absolutely for sure is that I appreciate the opportunity for the dialogue and your willingness to engage and help all of us learn more and correct our factual errors when we make them.

  26. Barry, Outsourcing billing functions probably is cheaper in a large practice. Not sure how many of your experts ever opened or ran a practice, but a full 15% of my patients were medicare yet the majority of my overhead related to billing and reimbursement was very much private insurance. The numbers I provided where conservative, I ran my practice, accounting, managing, billing, I am intimately familiar with the costs, they do not, by any means, justify the ends. You are probably right about single payor, however I dont believe the private sector has shown itself to be more efficient, or have less red tape, too bad, I miss providing care.