Insurance Firms Fear Public Option Will Kill Their Near-Monopolies

[one...two...tree 2,762]

By Zachary Roth

As Congress gets set to take up health-care reform, there's a crucial piece of data that hasn't received nearly the prominence in the debate that it deserves.

Defenders of the status quo on health care like to point out that a public option will destroy the system of robust free-market competition that currently exists.

Sen. Richard Shelby (R-AL), speaking earlier this month on Fox News, called President Obama's plan the "first step in destroying the best health care system the world has ever known." A public option, Shelby added, would "destroy the marketplace for health care."

But the notion that most American consumers enjoy anything like a competitive marketplace for health care is flatly false. And a study issued last month by a pro-reform group makes that strikingly clear.

The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country's insurance markets are defined as "highly concentrated," according to Justice Department guidelines. Predictably, that's led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.

Far from healthy market competition, HCAN describes the situation as "a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate."

So extreme is the level of consolidation, in fact, that one former top Federal Trade Commission official working with HCAN has sent a letter to the Justice Department's Antitrust Division, asking for an investigation into the health insurance marketplace.

The problem is most acute in small rural states, according to the report. In Shelby's own state of Alabama, the biggest insurer, Blue Cross Blue Shield, controls 83 percent of the statewide market. There, and in nine other states -- Hawaii, Rhode Island, Alaska, Vermont, Maine, Montana, Wyoming, Arkansas and Iowa -- the two largest health insurers control at least 80 percent of the market. So much for Shelby's "marketplace for health care."

The report doesn't consider how this reality stands to affect the forthcoming congressional battle for reform. But extreme consolidation may actually be making it harder, not easier, to win support from lawmakers for a public option.

That's because insurers who control large swathes of a given market stand to see their bottom lines particularly threatened by the introduction of a lower-cost public option. So, in turn, they'll be particularly aggressive in pulling out all the stops to pressure lawmakers to oppose the plan. Given the healthy amount of campaign dollars that some wavering members take in from the major insurers, that's hardly encouraging.

Of course, the Senate is where the major legislative showdown will likely occur. So in some forthcoming posts, we'll be taking a close look at just which senators have taken money from insurers who control major percentages of the state-wide market -- and where those senators stand on the public option. Stay tuned...

http://tpmmuckraker.talkingpointsmemo.com/...n_n.php?ref=fpb

[Ban Hammer 13,491]

That's because insurers who control large swathes of a given market stand to see their bottom lines particularly threatened by the introduction of a lower-cost public option.

alleged lower cost public option.

[scandal 951]

More fuel for the debate. This one (from The Economist) sums up my perspective very nicely ... yes, the system is broken and needs fixing. And yes, we want a truly competitive private provider system. So why not achieve that within the PRIVATE system (via antitrust)? What is is this demand for a public model? If it's to be used as a threat-device, fine. But it really shouldn't be the first or only way forward. See bold section in the article text......

http://www.economist.com/opinion/displayst...ory_id=13900898

Health-care reform in America

This is going to hurt

Jun 25th 2009

From The Economist print edition

Barack Obama was elected in part to fix America’s health-care system. Now is the time for him to keep his word

DIAGNOSING what is wrong with America’s health-care system is the easy part. Even though one dollar in every six generated by the world’s richest economy is spent on health—almost twice the average for rich countries—infant mortality, life expectancy and survival-rates for heart attacks are all worse than the OECD average. Meanwhile, because health insurance is so expensive, nearly 50m Americans, an obscene number in such a rich place, have none; those that are insured pay through the nose for their cover, and often find it bankruptingly inadequate if they get seriously ill or injured.

The costs of health care hurt America in three other ways. First, since half the population (most children, the very poor, the old, public-sector workers) get their health care via the government, the burden on the taxpayer is heavier than it needs to be, and is slowly but surely eating up federal and state budgets. Second, private insurance schemes are a huge problem for employers: the cost of health insurance helped bring down GM, and many smaller firms are giving up covering employees. Third, expensive premiums depress workers’ wages.

Click here to find out more!

Every rich country faces some of these problems (see article), but nobody suffers worse from them than America. This summer’s debate about health care may determine the success of Barack Obama’s presidency. What should he do?

Uncomfortably numb

If he were starting from scratch, there would be a strong case (even to a newspaper as economically liberal as this one) for a system based mostly around publicly funded health care. But America is not starting from scratch, and none of the plans in Congress shows an appetite for such a European solution. America wants to keep a mostly private system—but one that brings in the uninsured and cuts costs. That will be painful, and require more audacity than Mr Obama has shown so far.

The uninsured are the relatively straightforward bit. All you need do is “mandate” everyone to take out health insurance, much as drivers are legally required to have car insurance. Poorer Americans would get subsidies, and (as with car insurance) insurance-providers would be forced to offer affordable plans and not exclude the sick or the old. This has already happened in Massachusetts as well as in a raft of countries, including the Netherlands, Israel and Singapore. All the main proposals now working their way through Congress include some version of a mandate. Mr Obama opposed a mandate on the campaign trail, but since he has not come up with any plausible alternative, he should quietly swallow one.

The snag is that all these subsidies are expensive. Those congressional plans might cost $1.2 trillion to $1.6 trillion over ten years: the White House is feverishly trying to massage the estimates downward, as well as working out how to plug the hole through various savings and tax increases. But the sticker-shock for the mandate is really just a reflection of the second big problem: the overall cost structure of American health care. Indeed, one of the worst things about Mr Obama’s oddly hands-off approach to health reform (see article) is that he is concentrating on a symptom, not the underlying disease.

A bolder president would start by attacking two huge distortions that make American health care more expensive than it needs to be. The first is that employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes. It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).

Perversity on stilts, or crutches

The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes. Private providers everywhere are vulnerable to this perverse incentive, but in America, where most health care is delivered by the private sector rather than by salaried public-sector staff, the problem is worse than anywhere else.

The trouble is that many Americans are understandably happy with all-you-can-eat health care, which allows them to see any doctor they like and get any test that they are talked into thinking they need. Forcing people into “managed” health schemes, where some species of bureaucrat decides which treatments are cost-effective, is politically toxic; it was the central tenet of Hillary Clinton’s disastrous failed reform in 1994.

But to some extent it will have to be done. There is solid evidence to suggest that by cutting back on unnecessarily expensive procedures and prescriptions, anything from 10% to 30% of health costs could be saved: a gigantic sum. The Mayo Clinic in Minnesota and the California-based Kaiser Permanente system have shown that it is possible to save money and produce better outcomes at the same time. So reform must aim to encourage more use of managed health care, provided by doctors who are salaried, or paid by results rather than for every catheter they insert. Medicare, the government-run insurance scheme for those over 65, could show the way, by making much more use of results-based schemes and encouraging more competition among its various providers and insurers.

But in the end it will be up to the private health-care system. One thing that should be unleashed immediately is antitrust: on a local level many hospitals and doctors work as price-fixing cabals. Another option, favoured by many Democrats and the president, is for the government to step in with a results-based plan of its own, to compete against the private industry. That could harm innovation and distort the market further. Mr Obama should use it as a threat, rather than implement it now. If the private sector does not meet certain cost-cutting targets in, say, five years, a public-sector plan should automatically kick in. Such a prospect would encourage hospitals and doctors to accept a painful but necessary reform now.

[w¡n9Nµ7 §£@¥€r 123]

Most children get their healthcare from the government? Not any of the children I know.

[w¡n9Nµ7 §£@¥€r 123]

The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes.

...

The Mayo Clinic in Minnesota and the California-based Kaiser Permanente system have shown that it is possible to save money and produce better outcomes at the same time. So reform must aim to encourage more use of managed health care, provided by doctors who are salaried, or paid by results rather than for every catheter they insert.

Obama has been saying exactly this for a while now. I agree.

... employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes. It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).

GFY, Economist.

[scandal 951]

The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes.

...

The Mayo Clinic in Minnesota and the California-based Kaiser Permanente system have shown that it is possible to save money and produce better outcomes at the same time. So reform must aim to encourage more use of managed health care, provided by doctors who are salaried, or paid by results rather than for every catheter they insert.

Obama has been saying exactly this for a while now. I agree.

... employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes. It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).

GFY, Economist.

Managed care -- yes. Americans use health care like they use water, gasoline, electricity, land, .... like it's endless and costless. This will not continue because it cannot continue.

Taxes -- well, that's the thorny question. Obama was on record during the campaign - very explicitly - no taxes. No income tax, no payroll tax, no tax on healthcare benefits - to pay for it. Time for campaign rhetoric to meet political reality. If we really want healthcare, and we do, we better be prepared to pony up. Time to cash in some of those political goodwill chits, Obama.

Not addressed by AJ - public plan. All we hear is public plan, public plan. Tonight I listened to Mitt Romney and Lindsay Graham. I still say we can have a bipartisan bill WITH universal coverage mandates AND paid for AND with reform through regulation and/or a coop and/or antitrust.

Democrats need to listen to Republicans here. We are running the danger of our own worst nightmare - becoming what they were for 8 years. A party that did its own thing its own way and did not build consensus in drafting legislation. There are smart and caring Republicans with good ideas on the Hill, and they want to reform healthcare. There are also red-state bluedog Democrats who are not going to swallow the whole Obama package. It's time for Obama to not simply sit by -- he needs to directly intervene in the Congressional debate and twist a few arms in his own party.

[Immigrant2009 0]

More fuel for the debate. This one (from The Economist) sums up my perspective very nicely ... yes, the system is broken and needs fixing. And yes, we want a truly competitive private provider system. So why not achieve that within the PRIVATE system (via antitrust)? What is is this demand for a public model? If it's to be used as a threat-device, fine. But it really shouldn't be the first or only way forward. See bold section in the article text......

http://www.economist.com/opinion/displayst...ory_id=13900898

Health-care reform in America

This is going to hurt

Jun 25th 2009

From The Economist print edition

Barack Obama was elected in part to fix America’s health-care system. Now is the time for him to keep his word

DIAGNOSING what is wrong with America’s health-care system is the easy part. Even though one dollar in every six generated by the world’s richest economy is spent on health—almost twice the average for rich countries—infant mortality, life expectancy and survival-rates for heart attacks are all worse than the OECD average. Meanwhile, because health insurance is so expensive, nearly 50m Americans, an obscene number in such a rich place, have none; those that are insured pay through the nose for their cover, and often find it bankruptingly inadequate if they get seriously ill or injured.

The costs of health care hurt America in three other ways. First, since half the population (most children, the very poor, the old, public-sector workers) get their health care via the government, the burden on the taxpayer is heavier than it needs to be, and is slowly but surely eating up federal and state budgets. Second, private insurance schemes are a huge problem for employers: the cost of health insurance helped bring down GM, and many smaller firms are giving up covering employees. Third, expensive premiums depress workers’ wages.

Click here to find out more!

Every rich country faces some of these problems (see article), but nobody suffers worse from them than America. This summer’s debate about health care may determine the success of Barack Obama’s presidency. What should he do?

Uncomfortably numb

If he were starting from scratch, there would be a strong case (even to a newspaper as economically liberal as this one) for a system based mostly around publicly funded health care. But America is not starting from scratch, and none of the plans in Congress shows an appetite for such a European solution. America wants to keep a mostly private system—but one that brings in the uninsured and cuts costs. That will be painful, and require more audacity than Mr Obama has shown so far.

The uninsured are the relatively straightforward bit. All you need do is “mandate” everyone to take out health insurance, much as drivers are legally required to have car insurance. Poorer Americans would get subsidies, and (as with car insurance) insurance-providers would be forced to offer affordable plans and not exclude the sick or the old. This has already happened in Massachusetts as well as in a raft of countries, including the Netherlands, Israel and Singapore. All the main proposals now working their way through Congress include some version of a mandate. Mr Obama opposed a mandate on the campaign trail, but since he has not come up with any plausible alternative, he should quietly swallow one.

The snag is that all these subsidies are expensive. Those congressional plans might cost $1.2 trillion to $1.6 trillion over ten years: the White House is feverishly trying to massage the estimates downward, as well as working out how to plug the hole through various savings and tax increases. But the sticker-shock for the mandate is really just a reflection of the second big problem: the overall cost structure of American health care. Indeed, one of the worst things about Mr Obama’s oddly hands-off approach to health reform (see article) is that he is concentrating on a symptom, not the underlying disease.

A bolder president would start by attacking two huge distortions that make American health care more expensive than it needs to be. The first is that employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes. It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).

Perversity on stilts, or crutches

The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes. Private providers everywhere are vulnerable to this perverse incentive, but in America, where most health care is delivered by the private sector rather than by salaried public-sector staff, the problem is worse than anywhere else.

The trouble is that many Americans are understandably happy with all-you-can-eat health care, which allows them to see any doctor they like and get any test that they are talked into thinking they need. Forcing people into “managed” health schemes, where some species of bureaucrat decides which treatments are cost-effective, is politically toxic; it was the central tenet of Hillary Clinton’s disastrous failed reform in 1994.

But to some extent it will have to be done. There is solid evidence to suggest that by cutting back on unnecessarily expensive procedures and prescriptions, anything from 10% to 30% of health costs could be saved: a gigantic sum. The Mayo Clinic in Minnesota and the California-based Kaiser Permanente system have shown that it is possible to save money and produce better outcomes at the same time. So reform must aim to encourage more use of managed health care, provided by doctors who are salaried, or paid by results rather than for every catheter they insert. Medicare, the government-run insurance scheme for those over 65, could show the way, by making much more use of results-based schemes and encouraging more competition among its various providers and insurers.

But in the end it will be up to the private health-care system. One thing that should be unleashed immediately is antitrust: on a local level many hospitals and doctors work as price-fixing cabals. Another option, favoured by many Democrats and the president, is for the government to step in with a results-based plan of its own, to compete against the private industry. That could harm innovation and distort the market further. Mr Obama should use it as a threat, rather than implement it now. If the private sector does not meet certain cost-cutting targets in, say, five years, a public-sector plan should automatically kick in. Such a prospect would encourage hospitals and doctors to accept a painful but necessary reform now.

The Insurance System in US is indeed broken and does need reform IMHO for the simple fact that private companies want to be more profitability by denying claims and saving up money while if we make the system completely government run than we will have the same situation we are facing with USCIS.

They do things on their own and don't care if people die or life. So the health care reform is a messy business I hope the current administration finds a good solution for the health care system.

[Mr. Big Dog 10,747]

Democrats need to listen to Republicans here.

Why? If the Republicans have the right and superior recipe on health care reform, then why didn't they use their Congressional majority and occupancy of the White House - which they enjoyed until 2006 - to craft this reform bill, get the red-state bluedog Democrats on board and get it done?

[w¡n9Nµ7 §£@¥€r 123]

Democrats need to listen to Republicans here.

Why? If the Republicans have the right and superior recipe on health care reform, then why didn't they use their Congressional majority and occupancy of the White House - which they enjoyed until 2006 - to craft this reform bill, get the red-state bluedog Democrats on board and get it done?

Because the GOP is happy with health care just the way it is. The ill and indigent die early, insurance executives buy mansions in bermuda. What's not to like?

[Mr. Big Dog 10,747]

Democrats need to listen to Republicans here.

Why? If the Republicans have the right and superior recipe on health care reform, then why didn't they use their Congressional majority and occupancy of the White House - which they enjoyed until 2006 - to craft this reform bill, get the red-state bluedog Democrats on board and get it done?

Because the GOP is happy with health care just the way it is. The ill and indigent die early, insurance executives buy mansions in bermuda. What's not to like?

Bingo. So what's the big deal not getting the GOP to buy into the reform?

[mawilson 2,133]

That's because insurers who control large swathes of a given market stand to see their bottom lines particularly threatened by the introduction of a lower-cost public option.

alleged lower cost public option.

Well if the government plan costs more than a private one, who in their right mind would use it?

Edited June 30, 2009 by mawilson

[w¡n9Nµ7 §£@¥€r 123]

That's because insurers who control large swathes of a given market stand to see their bottom lines particularly threatened by the introduction of a lower-cost public option.

alleged lower cost public option.

Well if the government plan costs more than a private one, who in their right mind would use it?

It could cost more in total but charge less to subscribers, funding the remainder with debt and/or higher taxes on non-subscribers.

[Ban Hammer 13,491]

That's because insurers who control large swathes of a given market stand to see their bottom lines particularly threatened by the introduction of a lower-cost public option.

alleged lower cost public option.

Well if the government plan costs more than a private one, who in their right mind would use it?

It could cost more in total but charge less to subscribers, funding the remainder with debt and/or higher taxes on non-subscribers.

this just don't sound like a good idea.

[mawilson 2,133]

Democrats need to listen to Republicans here. We are running the danger of our own worst nightmare - becoming what they were for 8 years. A party that did its own thing its own way and did not build consensus in drafting legislation. There are smart and caring Republicans with good ideas on the Hill, and they want to reform healthcare. There are also red-state bluedog Democrats who are not going to swallow the whole Obama package. It's time for Obama to not simply sit by -- he needs to directly intervene in the Congressional debate and twist a few arms in his own party.

Where are these smart Republicans? Where's their alternative plan? I haven't seen any new GOP ideas other than their usual solution for everything - "cut taxes for the rich".

[w¡n9Nµ7 §£@¥€r 123]

I said it, no one in charge actually did.