Health Care

WPC's Center for Health Care develops patient-centered solutions to reduce costs and improve the availability and quality of health care for businesses and individuals, providing the only detailed, independent critique of health care issues available in the Northwest.

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Is the "Public" Option Gone?

August 17, 2009 in Blog

Yesterday multiple members of the Administration, including the President, began to distance themselves from the "public" health plan option. They have been loosing the debate over the issue of the public plan destroying the private health insurance market. Consequently, attention seems to be shifting away from the public option to...the co-op plan.

Although no one is exactly sure what a co-op would look like, the idea is that a group of providers would solicit membership for health care on a state or regional basis. Funding would come from member dues with majority contributions from the government. These would NOT function like energy or food co-ops, however. Instead, a health care co-op would be another form of insurance with pricing and benefits set by the federal government.

So, in point of fact, a co-op would functionally be the same as a government "option" health insurance program. It would set rates less than private insurance companies and the end result would be a transfer of patients to the public plan (because costs are less) and the demise of private health insurance in this country.

The language may have changed, but the health reform debate is still based on government-run vs patient controlled health care.

Public Option Will Lower Private Health Insurance Premiums...to Zero

August 17, 2009 in Publications

Responding to the concern that setting up a government-run public option insurance plan would inject politics into American health care, public option backers are saying, “Right. And that’s a good thing.”

Running On Empty

August 12, 2009 in Blog

"The problem with socialism is that eventually you run out of other people's money." -Margaret Thatcher

This is a helpful phrase to keep in mind when thinking about the pending health care reform proposals being considered in Congress. John Mackey, CEO and founder of Whole Foods Market, had a nice article in The Wall Street Journal on the reality of the financial conundrum we find ourselves in as a country as we consider a serious overhaul of our health care system. He offers up eight things we can do to improve health care in the U.S. without adding to the deficit in this August 11th article.

1. Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs)

2. Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits

3. Repeal all state laws which prevent insurance companies from competing across state lines

4. Repeal government mandates regarding what insurance companies must cover

5. Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year

6. Make costs transparent so that consumers understand what health-care treatments cost

7. Enact Medicare reform

8. Revise tax forms to make it easier for individuals to make a voluntary, tax deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program

Laffer Study

August 12, 2009 in Blog

Last week Arthur Laffer and two associates published an economic analysis of Congress' proposed health care reform legislation. Dr. Laffer is a noted economist and has been actively involved with national fiscal issues since the mid-1970's.

As background, the authors describe an economic "wedge", which is the difference between provider costs and consumer costs of any service or product. They applied this wedge concept to the common proposals in the House and Senate bills now under consideration in Washington, D.C.

What they found was:

*  the health care wedge would increase

*  there would be no discernible benefit and approximately 30 million people would still be uninsured

*  in the next 10 years 

      - health care inflation would increase by 5%

      - the cost of health care would increase by 9%

      - economic growth in the country would decrease by 5%

The things that would decrease the health care wedge - and are not in the legislation at present: 

*  promoting high deductible health insurance

*  leveraging Health Savings Accounts

*  tort reform

*  meaningful Medicaid and Medicare reform

The Laffer Study adds to the growing list of economic research that clearly shows the unsound fiscal policy of the proposed health care reform legislation.

Injecting politics into health care will lead to efficiency, public option backers say

August 7, 2009 in Blog

Responding to the concern that setting up a government-run public option insurance plan would inject politics into American health care, public option backers are saying, “Right.  And that’s a good thing.”

Today the Washington Post reports, “Economists in this [pro-public option] camp say a public option would not underprice insurers so as to drive them out of business; political pressures from medical providers would restrain Congress just as it is restrained today from limiting Medicare rates too much.”

The article add, “And the [public] option’s pricing powers would be limited by political pressures against driving too hard a bargain on providers.”

This is a novel argument, that bringing “political pressures” into a private market makes that market more efficient.  I’d sure like to know the names of the economists in the public option camp who say lobbying Congress is a form of healthy market competition.  Ample real-world experience shows the opposite.  Massive government intervention distorts markets, reduces the benefits of competition, and leads to waste, inefficiency and cronyism, not lower prices and better service.

We already have an example from the world of health care.  Every year Congress experiences a political firestorm as it tries to save Medicare from bankruptcy by cutting reimbursement rates to doctors.  The American Medical Association, not surprisingly, vigorously objects and lobbies hard to preserve or increase payments to doctors.  A deal is reached and the controversy is re-scheduled for the following year.  Whether this management technique is saving Medicare or sinking it faster is an open question, but I doubt most Americans want their own health plan run this way.

The current lack of competition in health care comes from politicians, not insurers.  Health insurance is perhaps the most highly regulated economic activity in the country, with price controls, limits on products, extensive reporting rules, a ban on interstate sales, high barriers to entry, unequal tax treatment, and a host of minutely detailed federal and state regulations.  Congress and state legislatures might first try removing the anti-competitive laws that they created, and force insurance companies to compete more against themselves, before Congress sets up an insurance company of its own.

ObamaCare supporters are right about one thing.  A public option would reduce the cost of private insurance premiums.  It would reduce them to zero, as private insurers go out of business trying to compete against a federal plan that can print it own money.

Guarding Against Disease

August 6, 2009 in Publications

In 1965, the United States government assured that all children would receive access to vaccines for common childhood diseases through the passage of the Vaccination Assistance Act. The law created a program that provides federal grants to local authorities for preventive health services, including immunizations.

Will small businesses see an extra tax for national health care reform?

August 3, 2009 in Blog

Newspapers the past few weeks have been carrying op-eds from small business owners on both sides of the national health care reform fight. Some small business owners want to see a public option because they believe it will help their bottom line without compromising their employees' health insurance plans. That is a noble goal even if it is misguided -- as I point out here.

But one of the reasons for concern, besides quality and quantity of health care, is the cost of the program. This is important because if small business owners are trying to ditch the cost of health care on the back end, how will higher costs on the front end affect their business? Essentially, what happens if small businesses are no longer burdened with the cost of health care at $X cost, but then the national plan requires either a pay or play option or a surtax? That cost cou!
ld easily be $X + $Y, and the business owners who were concerned about the skyrocketing cost of health care for their employees would then have to worry about the skyrocketing taxes to pay for the program.

Case-in-point: The Heritage Foundation's WebMemo on how the House bill would hit small businesses with a surtax. According to the paper, about 2 million tax filers would be hit by the potential surtax of 1% for joint filers over $350,000, 1.5% over $500,000 and 5.4% over $1 million. About sixty percent of the 2 million tax filers affected receive at least some of their income from small businesses, and over 400,000 of them report that a majority of their income comes from a small business. And considering Congress is, at this point, expected to let the Bush tax cuts expire, the surtax could lift the marginal tax rates on small businesses to over 50 percent in the states when combine!
d with state and local taxes.

From the paper:

quote>

"Small business is the backbone of the American economy. Half of all private workers in the U.S. are employed in firms with fewer than 500 workers. These small firms have also created 60-80 percent of all new jobs in the last decade. Higher tax rates discourage investment in small business by increasing the hurdle rate for investors...Higher hurdle rates mean that fewer small businesses will be created and fewer existing businesses will expand."

Update: I should have also linked to this week-old Puget Sound Business Journal article which also talks about the possible health insurance surtax and it's effect on small businesses. They quote the National Federation of Independent Business as saying,

"[NFIB] estimates that one-third of small business owners with 20 to 250
employees make more than $280,000. Taxable income at small and
medium-size manufacturers averages $570,000, according to the National
Association of Manufacturers."

The Public Option Insurance Company of the United States (POICUS): getting Congress to target your competitors

July 31, 2009 in Blog

The plan for the federal government to enter the health insurance market got a boost yesterday after members of the powerful House Energy and Commerce Committee expressed concern that an earlier version of the bill did not do enough to harm their future competitors.

“Private insurers were coming off unscathed,” said committee member Peter Welch, a Vermont Democrat.  He worried that people working in private insurance “...do quite well – too well, frankly.”

Liberal members of the committee stoutly opposed a provision that would have allowed doctors to negotiate with the government over how much they would be paid for their work.

To make sure private citizens would not succeed too much in the same business government officials themselves plan to enter, the bill was modified to enhance the market power of the proposed public option insurance company.

Liberal members succeeded in altering the bill so that government officials would unilaterally determine payments to doctors for treating people covered by public option insurance, as officials currently do in the Medicare program.

If backers of government-run health care say private insurers have too much influence in Congress, imagine the political clout of an insurance company that is run by Members of Congress.  As private companies go out of business and employers transfer workers to the government plan, the only recourse for public option patients who are denied medical care will be to write a letter to Congress.

A good name for the government plan might be Public Option Insurance Company of the United States (POICUS), managed by the Social Commission for Reform, Equality and Wellness of the United States (SCREWUS).

The Popular Proposals in Federal Health Care Reform

July 27, 2009 in Blog

Although neither the House nor the Senate health care reform bills are out of committee and haven't reached their respective floors, some consistent proposals are being discussed in both legislative bodies. The House bill under consideration runs to 1018 pages and the Kennedy-Dodd bill from the Senate Health Committee contains almost 800 pages. Consequently, it is nearly impossible to outline all of the similarities, yet some consequential proposals are found in both bills.

The good:

1.  Both bills talk about putting more transparency into the health care system. This gives patients more information about pricing and benefits and makes them better consumers of health care.

The bad:

1. Individual mandates forcing everyone to buy health insurance. 

2. Employer mandates to either purchase health insurance for employees or pay a fine (of up to 8% of payroll) to the federal government.

3. Probable guaranteed issue and community ratings which will force insurance rates higher.

4. "Best practices" or evidence based medicine which will force providers to practice cook-book medicine and treat every patient the same.

5. Government dictated "preventive care" which can potentially result in laws dictating our life styles - what we eat, what we do, whether we can smoke, etc.

6. There is no language dealing with meaningful tort reform. Legal fees and more importantly defensive medicine practices account for up to 10% of our health care costs.

The ugly:

1. A government "option" insurance plan that will destroy the private market in health insurance.

2. An insurance exchange or connector or co-op so that bureaucrats would be able to dictate the price and the benefits included in each insurance policy.

3. No significant Medicare reform. This government-run health insurance plan for seniors is on track to bankrupt the country.

As the debate in and between the House and Senate unfold, these conjoint proposals may change, but for now the two houses seem to have very similar plans.

And, oh, there is no agreed upon funding mechanism that even comes close to paying for all of this.

Congress' Health-Care Reform is a Trojan Horse

July 23, 2009 in Blog

Trojan HorseGovernor Bobby Jindal of Louisiana had an interesting article in The Wall Street Journal on July 22nd about the manner in which health care refo