If Private Insurance Can Do Better Than a Government-Run Alternative, They Should Prove It
Lee Fang dings Blue Cross / Blue Shield of North Carolina for their Harry and Louise Redux ad, which features a narrator who gravely intones:
We can do a lot better than a government-run health care system.
Needless to say, the dread specter of rationing and so forth is raised.
The proposals currently before congress would not, of course, create a government-run health care system. There is, however, a proposal to create a health care system that would include a widely available public health insurance option. The point of this would be to try and see if private industry actually can do better then a government-run insurance plan. After all, if the public option offered rationing and low-quality care, why would anyone sign up for it? Nobody would. That kind of low-quality public option would give private insurance nothing to fear. But what they really fear isn’t that a public option would be bad, it’s that it would be good—putting effective cost-controls in place without compromising patient care, thus threatening private industry’s business model.
That, however, is one of the best ways at our disposal to make health reform really work. A public option that strives to achieve public goals—quality care at an affordable price—will challenge private industry to do a better job. Then competition between plans will drive improvements in quality and efficiency. Without a public option, the risk is that private plans will compete by trying to screen out sick patients. That’s a viable root to private sector profits, but it does nothing to improve quality or control costs.
91 Responses to “If Private Insurance Can Do Better Than a Government-Run Alternative, They Should Prove It”
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May 19th, 2009 at 10:44 am
I’m from the government and I’m here to heal you.
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May 19th, 2009 at 10:48 am
I’m kim and I’m here to be a moron.
May 19th, 2009 at 10:49 am
Does “dread specter” imply something not real?
May 19th, 2009 at 10:56 am
Steve, 2. Yah, and you want privileged communications mandatorily entered into a database?
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May 19th, 2009 at 10:58 am
How the public plan should be handled depends on what your goals are. If your goal is to move most people to a public plan, but you don’t want to completely eliminate private insurance because you want to be able to say “if you like your current insurance, you keep it,” then the public plan can be heavility subsidized and you’ll achieve your goal through the back door. On the other hand, if the goal really is to resolve whether public or private insurance is better and/or to provide public competition as a spur for private improvement, then you’d have to make sure not to subsidize public insurance too heavily. I’m not sure which one Matt wants to see, but they are definitely two different things that I think he is mixing up.
May 19th, 2009 at 10:59 am
kim, what I want is for you to stop drooling on yourself, but that’s probably Utopian.
Now please go Galt and let the grownups carry on a discussion.
May 19th, 2009 at 11:02 am
David, given the revenue limitations, I don’t think there’s much danger of over-subsidizing a public option. It’s more likely that- in the unlikely event it exists at all- it would be too UNDER-funded to provide a fair test.
May 19th, 2009 at 11:02 am
Steve, 6. One of the reasons medical care is effective is that the patient believes the system is working in their interest. Some of that is inevitably lost with the government involved. Any grownup could tell you that.
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May 19th, 2009 at 11:04 am
Without a public option, the risk is that private plans will compete by trying to screen out sick patients.
The whole point of reform sans public plan is community ratings.
In any case, the competition, if it could be called such a thing, will not be at all on a level playing field. The public plan, as currently submitted, does not have to pre-fund all its outlays. It receives a very much distortionary subsidy from Congress. The accounting methods required of the public plan is significantly looser and more relaxed than that which is required of the private plans.
To call this completely stacked field ‘competition’ is pure, despicable intellectual dishonesty. The only thing the Democrats want to get out of this sham competition (recall the various Potemkin initiatives the Soviets too were so fond of) is to squash the private plans in the short-to-medium term, and leave everyone with no choice but the public plan in the long term. When everybody finds out that the so-called efficiencies of the public plan have been a sham, there will be no private plans to take over.
May 19th, 2009 at 11:05 am
Why doesn’t a progressive group run Harry and Louise ads AGAINST the insurance industry?
You know — have some nice person die while the doctor tells her friend “We could have saved her if she had came to us earlier –the medicine she needed is generic and not that expensive.”. Friend replies: “She couldn’t afford health insurance.”
Then cut to a grinning healthcare CEO counting out hundred dollar bills while his aide tells him “Profits are up 10 percent this quarter.” Then Have the CEO put a stack of $100s into an envelop and tell his secretary: “Send the Congressman in now”.
May 19th, 2009 at 11:05 am
it is foolish to think that a plan that needs to make 15% orofit can ever offer consumers as much as one (like medicare) that only needs 3% for administration fees, unless you assume large amounts of public works fraud, but no amount of private fraud.
However, there needs to be a day when we come to realize that there is already healthcare rationing. As a physician, I could order MRIs on every single child in my office. if this were done nationwide, hundreds, maybe thousands of children could survive what will become terminal brain cnacers. BUT, insurers won’t let doctors do that, AND THEY SHOULDN’T, becasue the cost would be so exorbinant, that soon as a society we woul dproduce nothing except healthcare.
Rationing of healthcare is a neccissity when we have the technology to do more than we can afford to do. The question becomes how will we ration, and who will decide on the rules. Currently, rationing is haphazard, based on patient income, insurance, local availability of technology, etc… Everytime that you wait 2 weeks for a doctors appointment you are experiencing healthcare rationing. Everytime your pharmacy plan states that one medicine is covered but another not, you are experiencing rationing. It seems to me that a more productive way would be to have a national discussion among doctors, ethicists, researchers, medical economists, and consumers about what we as a society will and won’t pay for. That is much more likely to happen in a government setting (even imperfectly) than in a setting where additional parties are looking for a profit.
At some point, healthcare rationing needs to stop being a dirty word, and start being used as a description of how we as a society choose to best and most universally allocate our healthcare resources.
May 19th, 2009 at 11:05 am
I’m from wall street and I’m here to heal you.
May 19th, 2009 at 11:06 am
kim, it probably will surprise you to know that the United Stats actually is not the only country in the world. Once you’ve grasped that difficult concept, you might want to go and find out more about how they do things elsewhere, and how their health outcomes compare to ours.
May 19th, 2009 at 11:06 am
kim, have you ever dealt with an insurance company in the US?
May 19th, 2009 at 11:06 am
Is there reason to be concerned that the government could engage in “price dumping,” i.e. heavily subsidize the public option relative to the private option, thus making everyone choose the public option because of lower consumer fees? [funded by higher general taxes]
In other words, is there a danger that the “experiment” to see whether public or private is better, could be a rigged experiment?
One could imagine that some in government do really want to see government-provided health care succeed. Since such a program does not need to be profitable to survive, one could imagine the incentives point in favor of heavy subsidy.
May 19th, 2009 at 11:07 am
Come on guys, everybody knows health insurance is better when you’re over-charged for it.
May 19th, 2009 at 11:07 am
I apologize for the typos. didn’t proofread.
May 19th, 2009 at 11:08 am
One could imagine that, in a parallel universe where Federal revenues are a lot easier to come by than in ours.
May 19th, 2009 at 11:10 am
Alan, 11. Good comment. I’m from the government, and I’m here to rationally decide how to give you less, even though you can afford more.
Really, though, a decent comment. But lets be just as plain spoken as you are about what is being done, that is, publicly limiting choices that have previously been extremely private.
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May 19th, 2009 at 11:11 am
I’m from the private sector and I’m here to profit from the misfortune of the human condition.
May 19th, 2009 at 11:12 am
Re alan at 10: “At some point, healthcare rationing needs to stop being a dirty word, and start being used as a description of how we as a society choose to best and most universally allocate our healthcare resources.”
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I concur but I think some basic level of austere care should be available to every citizen at low to zero cost. And I see no problem with letting the wealthy spend large sums on heroic measures.
I have the impression that Doctors alone have a hard time rationing care because it goes against every thing they stand for — Hippocratic Oath,etc. On the other hand, they are familiar with Triage in disasters –on best managing a defined level of limited resources.
How much to spend on the elderly –especially for the effects of long term vices like overeating, smoking and alcohol — is a tough issue.
May 19th, 2009 at 11:13 am
We already have rationing: if you’re poor, you get little or no care. Call me crazy, but I can think of better systems.
May 19th, 2009 at 11:15 am
All of the changes being considered by Congressional Democrats are meant to reduce the ability of private plans to do this. If Matt thinks that they will be able to, he’s confessing that he doesn’t think government regulation will work. So why would the public option work any better? Perhaps Matt doesn’t know anything about this subject.
May 19th, 2009 at 11:16 am
Ah, BCBSNC, the people who won’t tell you over the phone if a mammogram would be covered by its policy. Yes, let’s see if a public plan works better than that.
What they’re really worried about is that they operate the state employees’ health plan at the moment, and just bumped up premiums. If there’s a public plan, chances are that the state moves across to it, and takes a big chunk out of its business. Well, fuck them: if they want to make their case, they’ll have to do it by showing why they’re worth the money.
One of the reasons medical care is effective is that the patient believes the system is working in their interest.
We’ve already established that kim is dim. One of the biggest problems with The American Way of Healthcare is that the patient can easily come to believe that the system is working to screw them, which turns being sick and getting treatment into an ongoing process of second-guessing.
May 19th, 2009 at 11:19 am
mk,
what is the motive for wanting govenrment healthcare to work if it is a worse system. Surely, the government can make the system more profitable at a loss, BUT, remeber 2 FACTS! First, medicare has been run more efficiently than private health insurance for almost 40 years, The experiment is over. And second, by logic and experience, private health insurers will keep the most healthy (and profitable) segments of the population for themselves, thus offerring cheaper premiums for healthier people, while those in need of more care will go towards the government plan, and the government plan (because it doen’t need to make a profit or be marketed) will still be more efficient at providing healthcare. If you could add healthier people to the medicare mix, the government’s numbers would only get better.
May 19th, 2009 at 11:19 am
If conservatives actually believed their rhetoric about “government run healthcare” they would be leading the charge to dismantle the Veterans Administration (actually government run, unlike current reform proposals) and allow veterans to experience the glories of a free market in healthcare.
May 19th, 2009 at 11:20 am
To call this completely stacked field ‘competition’ is pure, despicable intellectual dishonesty
No healthcare for the coolies, eh, Miley?
In a better polity, the health insurance CEOs would be dangling from lampposts, so shut your yap, child.
May 19th, 2009 at 11:22 am
OK, time for one of my favorite slogans. When the government can no longer tax you to pay for the drugs to treat hypertension, obesity, diabetes, and atherosclerosis, it will tell you to ‘Work for Food’. Since our metabolism was formed when we scrabbled for every calorie, it will work just fine. Problems solved, and, oh, boy, cost effectively.
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May 19th, 2009 at 11:25 am
When Matt says “widely available” he actually means heavily subsidized. This way, everyone who pays taxes is already paying for the public plan. So people will sign up for it, even though it offers rationing and low-quality care.
The real way to challenge private industry is with an unsubsidized public plan. That seems unlikely, which makes it pretty disingenuous to pretend that we’ll have real competition between the public and private options.
May 19th, 2009 at 11:25 am
steved, 26. VA care is approximately twice as expensive as private care. And the delivery is erratic. You can get the best care in the world at a VA, and the worst. The sad thing is that you really can’t predict which you’ll get. And so goes publicly funded care. I’m pretty much resigned to it. It will, in fact, be nice not to have uninsured patients about whom to have ethical struggles.
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May 19th, 2009 at 11:27 am
I’m from the Scaife Counter-Blogging Project and we’ve got good benefits so screw you.
May 19th, 2009 at 11:27 am
First, medicare has been run more efficiently than private health insurance for almost 40 years, The experiment is over.
No. That is a pure lie. Obviously, you do not know that Medicare underpays hospitals, by some 40%, and hospitals lose money on every single Medicare patient they take in? That Medicare is essentially being subsidised, in hospitals, by private health plan subscribers?
God, what leeches.
No healthcare for the coolies, eh, Miley?
That is simply an gratuitous insult. You haven’t been able to refute my substantive point that the public plan as currently stands essentially represents a stacked field and cannot be called fair competition in any real sense of the word.
May 19th, 2009 at 11:28 am
@Steve:
One could imagine that, in a parallel universe where Federal revenues are a lot easier to come by than in ours.
Are you saying the plan is to have the government plan 100% funded by user fees?
Or, if the private plans are also getting some subsidy now (I don’t know enough about health care to know how much subsidy they get), then the government plan will have the same ratio of subsidy that the private plans do?
It seems like an interesting and maybe intricate technical question. But anywhere there is complexity, there is the potential for playing games. And government surely isn’t immune from playing games, just as private companies are not immune to it.
May 19th, 2009 at 11:29 am
The real way to challenge private industry is with an unsubsidized public plan. That seems unlikely, which makes it pretty disingenuous to pretend that we’ll have real competition between the public and private options.
Seconded.
May 19th, 2009 at 11:30 am
Isn’t the tax deduction for employer-provided benefits a subsidy?
May 19th, 2009 at 11:33 am
What? I’m saying the obvious- that in an era of big deficits when they’re scrambling to come up with any money at all to fund health care reform- so much so, that a politically poisonous funding mechanism like taxing employer-provided health benefits is being seriously proposed- over-generous subsidization of a public option is a remote danger indeed- or less politely, a red herring. Especially when a public option looks less and less likely to happen at all.
May 19th, 2009 at 11:37 am
It’s pretty safe to say that anyone who talks about “rationing” isn’t engaged in a serious discussion about healthcare reform. Everything is rationed – that’s what a market does – and the demand for healthcare is essentially unlimited.
Also, on the group insurance side, the insurance company doesn’t care who is healthy and who isn’t or whether to pay a claim or not. Claims paying is an inefficient bureaucracy, but the costs are ultimately born by employers. Paying more claims just pushes up insurance company revenue, since administration fees and profit margins are usually figured as a percentage of total premium.
May 19th, 2009 at 11:37 am
don at #21 “I have the impression that Doctors alone have a hard time rationing care because it goes against every thing they stand for — Hippocratic Oath,etc. On the other hand, they are familiar with Triage in disasters –on best managing a defined level of limited resources”
When I taught medical students more than 20 years ago, I constantly berated them that every dollar they spent was a dollar that could not be spent elsewhere. Every xray “just to be sure” or to “cover your ass” was a dollar that prevented someone from getting dialysis or a an immunization. Doctors don’t like these choices, but they make them. Hell , we make them every day oin ourt offices, to pay our own mortgages. Surely we could offer our patients better healthcare seeing 1 patient per hour, but we like our stuff too, so we try to offer good healthcare while seeing 20!
Like I said, rationing exists at every level, but we hide our heads in the sand, and let the profit motive decide most of it, when I believe that we should have other motivations for it, and more clear cut goals in doing it. Other nations, those who “ration’ via public plans, get better outcomes for less healthcare dollars. Why shouldn’t/couldn’t we?
I have worked in the medical indusrty for 30 years, worked with and at insurance comapnies, and I will tell you that the profit motive runs way too much of the system. The big insurers are just giant corporations, where no one knows what is going on, EXCEPT that the the financial guys keep very close track of the numbers. There is no way that a government system would be worse for the public. The haphazard (and sometimes lack of) rationing has already cost this country much of its industrial work base. We have to fix it before it swallows us up whole.
May 19th, 2009 at 11:37 am
dim, 31. Paranoia runs deep. Into your heart it will creep. No government cure for that, peep.
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May 19th, 2009 at 11:45 am
#37 “Also, on the group insurance side, the insurance company doesn’t care who is healthy and who isn’t or whether to pay a claim or not. Claims paying is an inefficient bureaucracy, but the costs are ultimately born by employers. Paying more claims just pushes up insurance company revenue, since administration fees and profit margins are usually figured as a percentage of total premium.”
this is false. Insurers do care, because that is how they keep costs down to compete with other insurers. If they can keep costs down, they can prevent another carrier from undercutting them. If what you said was true, then why would insurers even BOTHER to approve (or pre-approve) claims? It is true that for large groups they don’t make a big deal about single illnesses, but for small business groups, a single expensive illness will grossly change the following years premiums. it also assumes that there is an unlimited price that business is willing to pay for healthcare premiums, which also clearly is not true. When healthcare costs get too high, businesses either find a new carrier, reduce covered claims, or reduce covered employees. The cost to businesses of providing healthcare premiums is what is driving the reform process.
May 19th, 2009 at 11:46 am
Myles, 32 – Don’t confuse administrative efficiency with payment subsidies. There is no private insurance company remotely as efficient as Medicare in processing and paying claims. In fact, most of the innovations in payment methodology (DRGs, RBRVS, etc.) came from Medicare and have been adopted by private companies.
May 19th, 2009 at 11:46 am
It’s easy to Google the phrase “Medicare Advantage,” and find out how much more taxpayers have to pay private insurance companies to provide coverage. But at least private insurers don’t impose reimbursement reductions on doctors and hospitals the way Eeeeevil* Government Medicare does.
*I wiggled my fingers ominously right after typing this.
May 19th, 2009 at 11:47 am
One of the reasons medical care is effective is that the patient believes the system is working in their interest.
No. There are studies on “attitude” and health outcomes. There is no link. It’s just one of those things that everyone knows to be true that just isn’t so.
May 19th, 2009 at 11:51 am
kim, Myles, neither of you has even bothered trying to refute Matt’s main point here. Your argument is that a) a single payer health care system will suck because it will involve rationing and we all know the government is bad at running stuff, and b) a public option will be unfair because it will be supported by the government and will be able to out-compete the private plans.
Even if the public option is subsidized, I don’t see how that doesn’t refute point a, because the single-payer option will be subsidized as well. Essentially what you are saying is that single payer is bad because the government will do a poor job, but a public option is bad because the government will do too good a job.
Also, kim, your comments in this thread are stupider than usual. You need to step up your game.
May 19th, 2009 at 11:53 am
Re Milos
Isn’t the tax deduction for employer-provided benefits a subsidy?
Yeah, I guess there are probably all kinds of subsidies for private plans. So I’ll amend what I said earlier: The real way to challenge private industry is with a public plan that is subsidized in exactly the same way as private plans.
This still seems unlikely.
May 19th, 2009 at 11:55 am
Rob Mac, 44. Yeah, I really ought to stick to climate. But the insanity here on this board is so amusing and tempting.
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May 19th, 2009 at 11:56 am
It is true that for large groups they don’t make a big deal about single illnesses, but for small business groups, a single expensive illness will grossly change the following years premiums.
This is an important point. After my sister got cancer, her husband, under whose insurance she was covered, was forced out of his company on ridiculous and obviously trumped up grounds. I have always suspected (but can’t actually prove) that the underlying reason for this was that it had become too expensive to cover his family under the group insurance plan.
May 19th, 2009 at 12:00 pm
There are a couple problems with having a public v. private situation. The first is that it isn’t a fair fight. Private corporations can screen people out this means that public plans will be more expensive unless they are subsidized or use cartel power to control costs. If they are subsidized the private plans will be able to say that they don’t really provide cheaper health care. If they are cartelized doctors, and medical tech firms will say that they reduce incentives for being a doctor/ medical innovation. None of this means don’t try but it does mean that people will believe what they want about how good the public plan does no matter what.
May 19th, 2009 at 12:05 pm
The real way to challenge private industry is with a public plan that is subsidized in exactly the same way as private plans…
That seems unlikely, which makes it pretty disingenuous to pretend that we’ll have real competition between the public and private options.
With the caveat that I don’t actually know how unlikely it is, I third the general idea here. (My comments are about the same point).
Does Matt want to weigh in here? He probably knows more of the details than the rest of us do.
May 19th, 2009 at 12:10 pm
alan, 40 – There isn’t any serious competition among insurance companies. In any given market there are maybe 3 to 5 competitors with close to identical networks, administrative cost structures, and rating trends. Businesses change carriers periodically for some marginal premium savings, but market share doesn’t change much.
As you said, if a business has a large claim this year, they pay for it next year. And, for reasons I don’t understand, businesses continue to swallow huge rate increases.
Prior authorizations are a bureaucratic vestige – 99% of them are approved. When introduced it was a serious tool to control costs, but not anymore.
That’s why we need a public option – there is currently no incentive for insurance companies to compete.
May 19th, 2009 at 12:15 pm
b) a public option will be unfair because it will be supported by the government and will be able to out-compete the private plans.
Even if the public option is subsidized, I don’t see how that doesn’t refute point a, because the single-payer option will be subsidized as well.
No. What I am saying is that by writ of lax accounting rules, and perhaps even direct Congressional subsidy (that will far exceed the current private-plan tax offset), the public plan will essentially be committing dumping.
That’s not fair competition. When the government gives X amount of subsidy to private plans, and then by various accounting arm-twists and Congressional subsidies, give essentially the public a way to under-account for genuine healthcare costs by something like 3X or 5X amount and so as to charge premia lower by the same amount, that’s not competition. That’s a loss-leader to lure everybody into the public plan and then end up in a situation where the Congress, sometime in the future, will be forced into a huge fiscal hole subsidising the public plan.
If we can make the public plan go by the same accounting rules as the private plans (pre-fund outlays), and limit the subsidy to the equivalent of private-plan subsidies (i.e. X against X, not 3X against X), sure, I am all for the public plan.
But right now what the Democrats are proposing is not at all fair competition. It is more like predatory pricing.
May 19th, 2009 at 12:17 pm
Rob Mac, 47 –
After my sister got cancer, her husband, under whose insurance she was covered, was forced out of his company on ridiculous and obviously trumped up grounds. I have always suspected (but can’t actually prove) that the underlying reason for this was that it had become too expensive to cover his family under the group insurance plan
My point is that the insurance company didn’t care if your sister stayed on the plan – they just jacked up the premiums. The employer, on the other hand, decided to break the law…
And I’m certainly not defending insurance companies; I’m just saying that they have no great incentive to control costs.
May 19th, 2009 at 12:29 pm
Conservatives on a public health care plan:
Public health care will be a nightmare! Bureaucrats will deny you life-saving treatments to save a few pennies. Doctors won’t be able to decide your treatment. Going to the doctor will be like going to the DMV. It will be a cruel, grey Stalinist nightmare.
There’s no way the private sector can compete with that!
May 19th, 2009 at 12:33 pm
kim Says:
May 19th, 2009 at 10:56 am
Steve, 2. Yah, and you want privileged communications mandatorily entered into a database?
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kim Says:
May 19th, 2009 at 11:22 am
OK, time for one of my favorite slogans. When the government can no longer tax you to pay for the drugs to treat hypertension, obesity, diabetes, and atherosclerosis, it will tell you to ‘Work for Food’.
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kim Says:
May 19th, 2009 at 11:37 am
dim, 31. Paranoia runs deep. Into your heart it will creep. No government cure for that, peep.
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May 19th, 2009 at 12:42 pm
i don’t know why all of the apologists for the insurance companies are so distraught.
a real public option is never going to happen.
all you have to do is listen to what every one – from max bauchus to obama to chuck schumer – is saying to understand that a public option is being discussed in order to placate and pacify progressives. but it is pretty obvious that none of the important parties have any real intention of truly fighting for that aspect of so-called health care reform.
obama is setting it up so that he can sell out health care reform in the same manner that he has sold out on so many other issues.
and when it happens, we’ll have the inevitable pleas that what is really happening is some sophisticated, long-range strategy to ultimately impliment a progressive policy. we just have to be patient!
so, health care apologists, relax…chill. kick back and enjoy the show. so-called progressives like obama and schumer are going to do your work for you.
May 19th, 2009 at 12:53 pm
Re Matthew’s comment “Needless to say, the dread specter of rationing and so forth is raised. ”
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I’m confused –why are you bringing Arlen, my Senator, into it?
May 19th, 2009 at 1:00 pm
Re kim at 28: “OK, time for one of my favorite slogans. When the government can no longer tax you to pay for the drugs to treat hypertension, obesity, diabetes, and atherosclerosis, it will tell you to ‘Work for Food’. Since our metabolism was formed when we scrabbled for every calorie, it will work just fine. Problems solved, and, oh, boy, cost effectively.”
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On the other hand, we could just blow your fucking brains out and take your wallet. Works for me.
Let’s see how this Republican social Darwinism really works, once we take your “Big Government” protection away.
May 19th, 2009 at 1:09 pm
You haven’t been able to refute my substantive point
Which is what? That a public plan might have its thumb on the scale, as opposed to Big Insurance having its fat arses squarely planted on it?
Boo fucking hoo. I’m sorry that it pains you that the coolies might get treated like the sheikhs in the United American Emirates.
May 19th, 2009 at 1:17 pm
Which is what? That a public plan might have its thumb on the scale, as opposed to Big Insurance having its fat arses squarely planted on it?
Never has leftist thuggery been more clearly demonstrated.
In any case, whatever “thumb on the scale” the public plan has is extra over whatever advantages (i.e. subsidies) the private plans already have. Now, that’s ethically very questionable.
Another thing: Medicare underpays hospitals by at least 40%. Will the public plan be trying to do the same? I hope not, but the sounds being made by “liquidate-the-kulaks” leftists like you make me very unsure.
May 19th, 2009 at 1:51 pm
Myles, 59
In any case, whatever “thumb on the scale” the public plan has is extra over whatever advantages (i.e. subsidies) the private plans already have. Now, that’s ethically very questionable.
There are three componenst of cost/premium: administrative overhead, profit, and claims cost.
Medicare’s advantage in administrative costs and profit is not “ethically questionable”, and there are no hidden subsidies.
Medicare’s claim costs are lower because, (1) they have to live on the budget they get, and (2) they use their clout in the marketplace to insist on lower payments to medical providers. I’m not sure how you can say (2) is ethically questionable, since that’s exactly what private sector insurance companies do(in most places, Blue Cross pays providers less than other insurance companies because they have a larger market share and can get away with it).
It should be relatively easy to forestall any undue advantages in reimbursements in a public plan – if providers aren’t mandated to accept the public plan’s reimbursement levels and government funding doesn’t offset underwriting losses, you’ve got a level playing field.
In such an environment, private companies could compete on the basis of administrative efficiency, negotiating better provider discounts, or rationing care in a more effective way.
May 19th, 2009 at 2:02 pm
There are definitely areas where a public plan will have major advantages over private insurers. It will not have to spend nearly as much on advertising. It won’t need a sales department, or even agents, and will thus also save on the overhead of agent offices. It will not need a market analysis and investment division, since its funds will come through the government, not through investment of premiums. It will not need accountants to file business tax and SEC forms, nor attorneys to manage corporate paperwork. It will not have to hold stockholder meetings, or elect and pay a board of directors.
In short, the public plan will operate with little of the overhead that a business must face. There will be some semi-equivalent expenses as carried by government agencies, of course.
May 19th, 2009 at 2:11 pm
Yglesias wouldn’t propose that the government create an automobile company to compete with GM. He favors a public health care plan because he is very sure it will work better. If he thought that it couldn’t possibly work better he’d be against it. Moreover if the public plan doesn’t do well he will conclude that it was because the competition was rigged. He will then propose changes that will make the competition favor the public plan more. If the public plan does work Conservatives will say it was because it was rigged and propose changes to make the public plan do worse. Moreover since Yglesias is right and single payer plan would be better this whole competition is just a waste of money. The best thing that can be said about it is that it moves us incrementally in the right direction, but so would creating a single payer plan for kids and then increasing the age limit over time.
May 19th, 2009 at 2:12 pm
We can do a lot better than a government-run health care system.
Then why are we currently doing so much *worse* than government-run health care systems in other countries?
The private sector has had its chance and failed. It’s time to try a different approach.
We can do a lot better than an insurance-company-run health care system.
May 19th, 2009 at 2:18 pm
Medicare’s advantage in administrative costs and profit is not “ethically questionable”, and there are no hidden subsidies.
Dude, can you read? I said that hospitals take a 40% deficit on every single Medicare case they take. The Medicare plan underpays private facilities, like hospitals, by 40%.
What that means is that for a $1000 operation, Medicare only pays $600. The $400 difference is essentially made up from the outlays of private clients/plans; i.e., a private-sector subsidy for Medicare, which is very much ethically questionable.
May 19th, 2009 at 2:21 pm
If the hospitals were actually operating on business principles, they wouldn’t take any Medicare cases; they are essentially charity/basket cases.
However, that’s not how things work, so everybody ends up making up the difference for the underpaying Medicare plan, which is essentially a smoocher and living off the largess of everybody else.
If I were running a hospital, I would simply refuse Medicare cases (is this even legal?).
May 19th, 2009 at 2:21 pm
Private insurance plans pay varying rates to hospitals, too. The larger ones negotiate better deals with the hospitals, just like Medicare does.
So?
May 19th, 2009 at 2:24 pm
Private insurance plans pay varying rates to hospitals, too. The larger ones negotiate better deals with the hospitals, just like Medicare does.
So?
So? Sure they negotiate, but unlike Medicare, which is a charity case, they don’t end up forcing the hospital to take a loss on every single fucking operation.
Which is essentially what Medicare is doing. Sure they negotiate; but the results of that is not with hospitals losing a shitload of money on every patient they treat; with Medicare, that is precisely the case.
Think about it this way; with every single Medicare patient, a hospital loses more money. It loses money on every single Medicare patient; it has never earned a cent of profit from Medicare.
A private plan like that wouldn’t even continue to exist.
May 19th, 2009 at 2:27 pm
Let me drum this into your head: Medicare patients = LOSS ON HOSPITAL OPERATIONS.
Get it? Hospitals lose money when treating (every single) Medicare case, not earn money. Every single fucking operation.
The reason I am so pissed about it is that every time I go to the hospital and pay out of my own plan, I am effectively subsidising the guy who is only paying 60%. If it wasn’t for Medicare smooching, my premiums would be lower.
May 19th, 2009 at 2:39 pm
Never has leftist thuggery been more clearly demonstrated.
Never has the deluded grandeur of a self-imagined aristocratic ass been so evident.
If it wasn’t for Medicare smooching, my premiums would be lower.
Non sequitur. Now go and starch your collars, Little Lord Fauntlecock.
May 19th, 2009 at 2:47 pm
If it wasn’t for direct subsidies to insurers through the employer tax break, lobbying and profiteering, I would be able to have medical insurance through a public plan. If it wasn’t for conservatives and insurance companies saying “I got mine, fuck you”, I would be able to worry less about a major health problem derailing my life and career. But you know, if you can save $100 a year, Myles, it’s all worth it right?
May 19th, 2009 at 2:57 pm
This is what you really need to know: we spend almost as much public money as other advanced countries PLUS much larger private expenditures. And we don’t even get decent health care for everybody, or life expectancy as long as people in those other countries, in return for, in aggregate, spending a lot more.
It is possible (as in Germany) to have a strong private component that functions well. But that is NOT what we have. What we have is parasitism. And we keep inviting the parasites to the table to “help” us design a better system. Right, pull the other one, it has bells on.
May 19th, 2009 at 3:12 pm
What is amusingly infuriating to me is that the health insurance lobby is simultaneously saying opposite things, and while it’s plenty obvious, no one in the media thus far has said it, although Matt gets close:
1. Government cannot do anything as well as the private sector.
2. Allowing the government to offer a choice in the future health care spectrum will inevitably lead to the destruction of the private insurance industry.
How can #2 be true if #1 is true? They are mutually exclusive. Remember, Dems in Congress have already said that they will make the public plan follow the same basic limits and rules placed upon the private insurance industry.
What’s left? Profit via the manipulation of the provision of health care to real people who need it as a matter of life and health. Every dollar of profit is garnered by creating a gap between what people pay and what they get. Higher profits means a bigger gap.
And just so we’re clear: that gap actually kills people.
May 19th, 2009 at 3:56 pm
Re Myles at 68: “The reason I am so pissed about it is that every time I go to the hospital and pay out of my own plan, I am effectively subsidising the guy who is only paying 60%. If it wasn’t for Medicare smooching, my premiums would be lower.”
—————–
Shorter Myles: Why can’t those WWII, Korea War and Vietnam war veterans hurry up and die?
I have a proposal: If Myles doesn’t feel any obligation to his society, he does not deserve that society’s protection. So Let’s declare him Outlaw –outside the Law’s protection– and fair game to any old fart who wants to shot Myles in the nuts with a 45 automatic.
May 19th, 2009 at 4:22 pm
Myles, in your subtle, understated way, I believe you’re trying to make the point that a public plan with the ability to mandate reimbursement levels, like Medicare, would have a considerable advantage over private plans.
Got it.
But it’s pretty easy to fix. And you’ve still got the situation where there are no serious incentives for private insurors to control costs without something like a public plan to keep them honest.
May 19th, 2009 at 6:24 pm
What is amusingly infuriating to me is that the health insurance lobby is simultaneously saying opposite things, and while it’s plenty obvious, no one in the media thus far has said it, although Matt gets close:
1. Government cannot do anything as well as the private sector.
2. Allowing the government to offer a choice in the future health care spectrum will inevitably lead to the destruction of the private insurance industry.
How can #2 be true if #1 is true? They are mutually exclusive.
The first assetion is that government cannot compete with the private sector in terms of the quality of service provided.
The second assertion is that due to the government’s ability to tax and subsidize, its ability to operate at a loss indefinitely, and its ability to use froce to get its way, there is no way that the private sector can compete with the government in terms of price.
It doesn’t matter whether the government is competitive service-wise. If the government decides to raise taxes and to subsidize the public option so that it costs $10.00 a month, a lot of people are going to be put in a position where they cannot afford any private options, no matter how much better they may be.
You can disagree with either of the conservatives’ assertions here, but they are not mutually contradictory.
May 19th, 2009 at 6:32 pm
pseudonymous in nc (#27)
No healthcare for the coolies, eh, Miley?
Myles is not arguing the merits of government-run healthcare here. He is simply arguing that private vs. public plans will almost certainly not be fair “competition” in any meaningful sense. Maybe you feel that that is just fine because you think that private healthcare sucks, but it doesn’t change the truth of what Myles said.
Rob Mac (#44):
Even if the public option is subsidized, I don’t see how that doesn’t refute point a [i.e. that a single payer health care system will suck], because the single-payer option will be subsidized as well. Essentially what you are saying is that single payer is bad because the government will do a poor job, but a public option is bad because the government will do too good a job.
No, it’s not that the government will do a good job, it’s that the government will undercut the private plans in terms of price.
May 19th, 2009 at 6:41 pm
it is foolish to think that a plan that needs to make 15% orofit can ever offer consumers as much as one (like medicare) that only needs 3% for administration fees, unless you assume large amounts of public works fraud, but no amount of private fraud
So, with Chysler now owned by the government and the UAW they should soon be producing the finest cars in the world and for ever lower prices! Yippie
May 19th, 2009 at 6:59 pm
Conservatives used to give us the same kind of unsupported bullshit rhetoric about the glories of the unregulated financial system. That worked out great.
Reality wins out over ideology every time. In this case, the reality is that no other civilized country has anything resembling the clusterfuck of a health care “system” that we do, and the quite varied systems that they do have, have one thing in common: they all produce a lot better health care outcomes for a lot less money.
May 19th, 2009 at 6:59 pm
Hmmm… Health Care for All Americans is Simple!
1) Merge Medicare with Medicaide into one single “Income Based” system for elderly and poor citizens.
2) Require insurance companies to provide the same basic coverage for all Non-Medicare/Medicaide citizens, regardless of health status, at affordable rates.
3) Allow insurance companies to profit by offering additional benefits and options to those who qualify and are willing to pay the difference.
As for Funding…
1) Changing from an “Emergency Treatment” to a “Preventive Care” system will save local communities billions, maybe even trillions of taxpayer dollars!
2) Small business will be able to compete globally and hire additional taxpaying employees!
3) Wealthy seniors will pay their fair share!
4) The tremendous burden on future generations will be greatly reduced!
May 19th, 2009 at 7:49 pm
link
If left solely to the whim of the “free market”, I don’t think these insurance companies would do so well.
May 19th, 2009 at 9:15 pm
Re: What that means is that for a $1000 operation, Medicare only pays $600.
Private insurers do this too. Check out any EOB from a PPO or HMO: they discount severely from the initial claim. I’ve seen some cut by more than just 40%.
Re: If the hospitals were actually operating on business principles, they wouldn’t take any Medicare cases;
Um, one of the precepts of a successful business is not to PO one’s customers or earn a reputation for sleeziness and unfairness. If hospitals turned away the elderly their reputation would make Dick Cheney look like Mr Popularity.
Re: If I were running a hospital, I would simply refuse Medicare cases
And you would spepedily be out of business as people en masse boycotted you just as if you were turning away Blacks or Jews.
Re: they don’t end up forcing the hospital to take a loss on every single fucking operation.
Again, check out any insurance EOB. Insurers most certainly do discount every procedure they pay. There is very little fee-for-service insurance left out there.
May 19th, 2009 at 9:52 pm
He is simply arguing that private vs. public plans will almost certainly not be fair “competition” in any meaningful sense.
There is no competition in the market right now. BCBS has its thumb on the scale already. And the glibertarians who guff about a return to the days of fee-for-service will have to explain how healthcare can become a retail commodity.
May 20th, 2009 at 1:31 am
When someone like JonF is arguing that private hospitals will not be doing something, not out of the profit motive but rather in fear of reputation backlash, we have seen the face of thuggery.
He is essentially saying, “yeah we know you lose money on every single Medicare, but hey, we can stick to you (and more importantly, your investors and your investors’ money) and force you to swallow complete shittiness, just because, you know, we can. Might equals right. I am a thug and I am proud of it. Suck on that!”
What’s the use of arguing with barbarians?
May 20th, 2009 at 1:33 am
And to think that we would not have had utters barbarians like JonF, had we just bothered to drive our armies all the way to Moscow at the end of the Second World War.
Thou art curst, Roosevelt and Churchill! What fools for not seizing the day and crushing Communism once and for all!
May 20th, 2009 at 6:25 am
Re: When someone like JonF is arguing that private hospitals will not be doing something, not out of the profit motive but rather in fear of reputation backlash, we have seen the face of thuggery.
It’s a good thing you don’t go into business, because you are clueless as a brick. Businesses must indeed protect their reputation with the public. That’s not “thuggery”; that’s a reality that will not change given human nature. Quit smoking your idelogical crack pipe and deal with the world you actually live in.
May 20th, 2009 at 9:10 am
[...] as usual, nails it: If the public option offered rationing and low-quality care, why would anyone sign up for it? [...]
May 20th, 2009 at 12:47 pm
Hmm. Question MylesSG:
I thought that once Medicare paid its share to doctors and hospitals that the patient is supposed to pay at least some of the remaining balance due. Am I wrong? I was under the impression that whatever Medicare did not pay the patient was supposed to pay the rest.
In any case Medicare is not alone in poor reimbursements; overall reimbursements have gone down over the years and private insurers are to blame just as Medicare is.
May 20th, 2009 at 5:34 pm
Steve, 6. One of the reasons medical care is effective is that the patient believes the system is working in their interest. Some of that is inevitably lost with the government involved. Any grownup could tell you that.
Kim, honey, you know, I get you don’t trust the government. That’s great! I don’t trust insurance companies. I think they’re trying to make a profit and the only way they can do that is by constantly raising premiums and denying care. My own insurance company has raised premiums 25% every year for the last 4 years, and has never, ever, paid a thin dime for anything for my family. Recently, they approved a knee surgery, and then, so far, have refused to pay the hospital bill, the surgeon’s bill, and the anesthesiologist’s bill (the last one? They said it was “unnecessary”. Yeah, who needs anesthesia during surgery? All you need is a bullet to bite down on, right, Kim?)
However, my brother has national health insurance (he’s in the military) and so do my parents (they get Medicare), and they get just about everything paid for. My brother, in fact, can’t imagine living life without such great health care for his family. But then, he’s in the military. He likes our country. He supports it. Unlike you, who doesn’t “trust” it.
I trust my country. I don’t trust my insurance company. I’m not sure why you think I shouldn’t have the right to choose which I prefer to insure me. I don’t force you to choose one insurer over another.
Oh, why can’t I go find another insurer? Like 80% of those over 25, I have a “pre-existing condition”. Maybe you don’t realize that having had headaches or allergies or acid stomach constitutes “pre-existing condition,” and that usually means you can’t get insured by your “free market”.
But I’m glad life has worked out so well for you that you’ve never had to “trust” insurance companies. Me, I’ll take Medicare any day of the week, but I’m too young.
May 20th, 2009 at 7:30 pm
Re: What that means is that for a $1000 operation, Medicare only pays $600.
Private insurers do this too. Check out any EOB from a PPO or HMO: they discount severely from the initial claim. I’ve seen some cut by more than just 40%.
Actually,that knee surgery my insurance company approved but now won’t pay for? IF they would pay, they cut the surgeon’s bill by 80%. It’s amazing. It could be that the surgeon is overcharging– I don’t know. But this means that if you’re NOT insured, you’re paying 5 times more for the surgery than the insurance company does. (Not that my insurance company is paying any of it. I don’t understand why, considering they pre-approved it. They said it was “outpatient,” which is kind of interesting, considering it was done in a hospital and we spent the night.)
Anyway, my doctor friends say that their fees are cut 50% automatically by Anthem and Cigna. I had an office visit for a strep test — of course not covered, because I guess it was outpatient again!– and they would have paid, if they pay such things, $30 of $110. I don’t know why they even bother to negotiate prices on services they won’t pay for. Anyway, one doctor told me Medicare pays a lot better than Cigna, and faster too, and without five calls.
Insurance companies have a monopoly in a way (most of us really have no choice which company we’re insured with), and they really show the problem with monopolies that aren’t controlled or regulated (like utilities)by the government. They have no need to please customers, and they sure don’t.
May 22nd, 2009 at 12:48 am
Insurance companies have a defined rate that they pay for doctor’s fees, hospital fees, drugs, etc. In fact, those rates have been so undercut that I can’t seem to find many doctors who accept my insurance as a “primary” care physician, since they are legally bound to accept those set rates. What I’m running across is that a doctor will tell me that they “accept” my insurance, but when the bill comes, they expect me to pay the difference between what the insurance company pays and what they charge. They are not bound to accept the reduced rate. I found that out when I called the insurance company about the discrepancy.
Insurance companies don’t want the gov’t to run a plan because they want to soak the gov’t for the subsidies themselves. I work with entreprenuers all the time and there isn’t a one of them that doesn’t dream about hitting it big with a gov’t contract. I find it ironic since most of them are Republicans and will rail against “dependency” on the gov’t and the chance that they will have to pay higher taxes. It never occurs to them that their contract is paid by the very taxes they despise.
On a final note, I saw Elizabeth Edwards on T.V. the other night. She said that the CEO of UnitedHealthcare gets $1 out of every $700 paid in medical expenses. Yeah, I can hear them squealing all the way to the bank.
May 26th, 2009 at 9:55 am
[...] Yglesias gives a pretty standard defense of a public health care plan: A public option that strives to achieve public goals—quality care [...]