« Andrew Sullivan, there is "No Exit" for you on this one. | Red Planet's Blog | The Private Health Insurance Distortion Field »
American Health Insurance Industry Argues For Single-Payer?
The American health insurance industry is inadvertently doing its best to promote single-payer universal health care. A report commissioned by America's Health Insurance Plans (AHIP) and released this weekend estimates the following:
I know AHIP is using this to argue against health care reform (see TPM article and Jonathan Cohn in TNR), but really, I can't imagine a better argument for universal, single-payer health care.
Can you?
- $12,300 is the cost of an average family health plan today. The same plan will cost:
- $15,500 in 2013
- $18,400 in 2016
- $21,900 in 2019
I know AHIP is using this to argue against health care reform (see TPM article and Jonathan Cohn in TNR), but really, I can't imagine a better argument for universal, single-payer health care.
Can you?
Advertisement
The AHIP claims are not a case for single payer specifically, but they do make a strong case for universal or near universal coverage, whether supplied by private or public insurance, or a combination. The two greatest contributions to increasing premium costs, in their estimation, are the absence in the Senate Finance Committee bill of a sufficiently strong mandate for all to participate in becoming insured, as well as an increase in the "actuarial value" (level of benefits as a percentage of needed services) in the basic plans. The second item is desirable (a more robust coverage per plan), but the first is very unwelcome (insufficient penalties for affluent Americans to opt out of the insurance mandate).
The House bill and the Senate HELP Committee bill contain stronger mandates, and are less subject to this criticism than the Finance Committee bill.
October 12, 2009 1:59 PM | Reply | Permalink
You're looking at this logically and I'm just screaming in frustration. Apologies.
In this study the insurance industry tells us that, if we do nothing (i.e. - adopt no health care reform), they expect to raise the premiums on a typical family health plan from $12,300 today to $21,900 in 2019.
That's a 78% increase in health insurance premiums in 10 years, if we do nothing and they continue to be allowed to design their own coverage, cherry-pick their customers and weasel out from under paying "medical losses."
The AHIP cover letter contains these recommendations:
The first five of these recommendations are on everyone's list. Good stuff.
The sixth one is the kind of thing you get in to when you value preserving the role of insurance companies over providing cost-effective benefits to individuals and society. It's a substitute for progressive taxation and it doesn't work nearly as progressively.
The seventh one is a red herring.
For decades now, large numbers of health care insiders have been working with genuine passion and intelligence on the first five of these recommendations, but progress is extraordinarily slow. A few cases in point - hospital acquired infections, anti-microbial resistance, administration of aspirin for acute myocardial infarction, health information technology, etc.
I think we're fooling ourselves if we think that tweaking the status quo so we can say we've designed a "uniquely American" health care system will provide the results we want. Tweaking the system, and that appears to be what Baucus is doing, will result in more profits for insurance companies and a more complex system for the rest of us to try to navigate.
October 12, 2009 5:31 PM | Reply | Permalink
The basic facts do make a strong case for single payer, since it's clearly an option that would work, whereas the current plans in the House and Senate that rely on for-profit (and even worse, employer based) insurance leave in place a totally unworkable system.
Any private system that retains the tax exemption for employer health insurance coverage, or which does not contain a risk adjustment system to provide an incentive for insurers to retain high cost patients, or which is not funded mostly through progressive taxation, or which retains for-profit insurers would be highly undesirable.
If all those conditions are met, there is nothing wrong with it as far as I am concerned, but nobody is proposing anything remotely like that. The current effort by organizations like HCAN to pass off their proposals as such is a sickening sight to behold.
Single payer is still the obvious choice and probably has as much support in Congress as any other workable proposal.
October 12, 2009 2:33 PM | Reply | Permalink
Single payer is the obvious choice. We twist ourselves into pretzels trying not to admit it.
And by the way, why is dental care, which leads to a good bit of medical illness, suffering and death, not considered to be health care? But that's probably a question for another day.
October 12, 2009 5:37 PM | Reply | Permalink
Hi Red Planet - I think single payer might be worth considering at some future time, but not now, for reasons I outlined in another thread:
http://tpmcafe.talkingpointsmemo.com/talk/blogs/jpieterick/2009/10/just-another-dlc-failure-on-he.php
October 12, 2009 5:40 PM | Reply | Permalink
A tax exemption for employer health insurance is something that would be worth scrapping, but there is currently too much resistance from many middle class factions, including the unions, and so the tax on "cadillac" insurance plans is being proposed as a semi-satisfactory substitute.
Progressive taxation might be added to the mix, but the problem is that healthcare costs are rising faster than income, and so progressive income tax increases will not keep up with the increased costs - hence the need to tie some type of tax revenue to insurance costs.
There is no need to worry about incentivizing insurers to retain high cost patients, because the reform proposals will require them to do so.
In my view, retention of for-profit insurers is not really an issue at this point, because a single payer alternative is unrealistic for economic reasons as well as political ones. However, insurer profits contribute only in a minor way to excessive costs. Their profits have consistently run at about 3-4 percent of their budgets (less than 2 percent of overall healthcare costs), and even if they were eliminated, the reduction in costs would be minor in the absence of other cost constraints, including some in the proposed bills.
October 12, 2009 5:33 PM | Reply | Permalink
I hope my foregoing comment doesn't stigmatize me as a fan of the insurance industry. My point is that the main virtue of insurance reform will be to eliminate inequities - cherry picking, price discrimination based on health status, policy caps, recissions, etc., with cost containiment only a minor benefit to expect from insurance reform, but rather something requiring dramatic reform of the healthcare system itself.
October 12, 2009 5:37 PM | Reply | Permalink
Throwing out for-profit insurers doesn't necessitate single payer. The German system is a model that satisfies all the conditions I laid out above, but it's not single payer. This model is fine, but nobody is really proposing it, and support for it among political elites is probably comparable to Medicare for All.
The tax on "cadillac" plans isn't nearly the same as removing the tax incentives for employer based plans. Employer based health insurance is inherently inefficient. We need to slay this beast.
If you retain private insurers, there is every need to have a risk adjustment system in order to remove incentives for the insurers to compete to retain low cost, low risk patients and closely scrutinize claims from the high risk ones. Such behavior causes administrative inefficiency. Every major rich nation where private insurers are allowed to compete has a risk adjustment system.
Progressive taxation isn't strictly necessary for the efficiency of a health care system, but considering that our society is first among rich nations in inequality and any sort of workable health insurance scheme is likely to further increase that inequality without it, it's mandatory in my book.
October 12, 2009 6:47 PM | Reply | Permalink
I think you're right in stating that a system that is not single payer and which includes private insurers can still in theory be entirely non-profit. In practice, I'm not sure there are many, if any, healthcare systems among the major democracies that include private insurers exclusively of a non-profit type. Switzerland requires private insurers to offer basic benefits on a non-profit basis, but they can make a profit on supplemental insurance. As you point out, German private insurers appear to be mainly non-profit. They do include a small number of for-profit entities:
http://www.allhealth.org/BriefingMaterials/CountryProfiles-FINAL-1163.pdf
I agree that risk adjustment ("risk equalization") has proved useful in some European healthcare systems, exemplified by The Netherlands. I'm not sure how necessary that would be in the context of proposed legislation here, given the proposed existence of an Insurance Exchange, a mandatory requirement for insurers to accept all applicants at a rate that doesn't discriminate by health status, and a mandatory requirement that all offer a package with at least a basic minimum set of essential benefits. My guess is that this might leave some wiggle room for insurers to try to game the system when it comes to the plans with extra features, but probably would not disadvantage higher risk subscribers in obtaining affordable coverage from the basic plans. Obviously, however, this scenario would only apply in the presence of competition - between private insurers, and even better, with a public plan in the mix. In the presence of a monopoly, insurers could charge whatever they can get away with.
I'm in favor of progressive taxation rather than opposed to it. My point was that progressive taxation applied to income will lag behind costs over time, because healthcare costs are rising faster than income. It can be part of the revenue package, but probably not the entire revenue source - at least until we get the cost curve under control. I think the point you made earlier is relevant here - we would benefit from removing the tax exemption from the employer contribution to group plans.
October 12, 2009 8:01 PM | Reply | Permalink
When I say non-profit insurance I'm only talking about the basic benefits package. Actually, there is no such thing as a "pure" non-profit health insurance system, even in say the UK. (Howard Dean uses this fact as an excuse to not talk about Medicare for All, which would be funny if so many people didn't take him so seriously.)
Risk adjustment is necessary for an efficient system because it reduces administrative costs. I don't think people would be dropped illegally. But being dropped illegally is not the source of cost problems.
October 12, 2009 8:32 PM | Reply | Permalink
When I watched the initial coverage about the report, the first thing that crossed my mind was that they were making the best case I've heard for why we need the public option. The insurance industry is basically telling us they can't be trusted to lower premiums or reform on their own, so they NEED the public option in order to force them to do the right thing.
I still prefer changing the industry so that it is regulated like a utility, but mine is the way minority voice, and the public option is the next best thing.
October 12, 2009 9:13 PM | Reply | Permalink
You're right. In estimating cost increases for private insurance premiums, they neglected any role for a public option. The latter would of course put downward pressure on premiums. The following is an analysis by a group owned by an insurance company, but the liberal Commonwealth Fund arrived at similar numbers:
http://www.lewin.com/content/publications/LewinAnalysisHouseBill2009.pdf
October 12, 2009 9:37 PM | Reply | Permalink
When I first read this story I had a similar thought! The Insurance Industry just shot themselves in the foot. Are they seriously suggesting that we're going to read these numbers and think, "Cool! Who needs reform?!?!?"
If anything, these numbers prove the need for an option... a "Public Option", if you will.
October 13, 2009 8:43 AM | Reply | Permalink
(Not sure why that previous comment showed up under your name, Fred... It was supposed to be a response to the OP)...
Anyway...
Don't cite the Lewin group... that smells bad.
Give us a credible link :)
October 13, 2009 8:46 AM | Reply | Permalink
I love the HuffPo headline right now:
http://www.huffingtonpost.com/2009/10/12/insurers-mount-attack-aga_n_317159.html
Basically, the insurance industry saying they'll raise rates if reform passes. Not much of a threat. Everybody already knows they'll raise rates--they don't need an excuse like reform to do it.
October 12, 2009 9:46 PM | Reply | Permalink
No big surprise that they'll raise rates...my surprise came in that they were so blatant about it. I expected at least the pretense of denying it...this is just so in your face.
Now they plan on launching a huge PR blitz against reform? As much as people distrust government and don't want them involved any further in health care, I'm SHOCKED, (all caps, huge font, SHOCKED) people are willing to let these slimy creatures (for lack of a better word) hold their very lives in their slimy hands.
I'm not a fan of big government, and knowing that our Congress has been bought and paid for by the lobbyists doesn't inspire my confidence, but to me, on balance, if I have choose between government and "Big Business" (talk about lesser of 2 evils!) I choose government. At least for now...subject to change w/o notice.
October 13, 2009 4:03 PM | Reply | Permalink
Very well put.
October 13, 2009 2:29 AM | Reply | Permalink
My first real job out of college, back in the mid-60s, was working as a health insurance underwriter at the home office of Occidental Life, in L.A.
Left a bad taste in my mouth. Things haven't improved in 45 years and I don't expect a new round of lobbyist-written laws and regulations to make things better.
Why should we expect insurance industries to ever act as anything but corporations seeking to feather their own nests? That's what we want corporations to do.
In this case, the corporate, for-profit motive doesn't play well with a broader vision of good health care for every American.
October 13, 2009 9:55 AM | Reply | Permalink
Fred,
I just read your post "Is the Public Option Important," and the comment thread that follows. Thoughtful comments by everyone involved.
You appear to believe that the private, for-profit health insurance industry will become a positive player, driving down costs and improving health care outcomes, if only we apply the appropriate regulations and insist on some competition. I don't share that faith.
The industry is rich, powerful and resourceful. When we apply regulatory pressure they respond in many ways, some of which are predictable, others unanticipated. My point is, the game continues, while health care suffers.
Insurance inserts an unnecessary layer of complexity between patient and provider in ways that are inimical to the interests of both. To turn the private insurance industry into a positive force for better, more cost-effective outcomes, one would have to redefine the meaning of capitalism in America.
Even if insurance were regulated like a utility (not the deregulated utilitiies that monopolize our public services today, but regulated with teeth), the industry would still represent an unnecessary layer of complexity, overlain with a new layer of regulatory bureaucracy.
You argue that we shouldn't go for single-payer now because we're in dire economic straits. But propping up and subsidizing counter-productive enterprises, like insurance giants and financial houses, is just what got us here in the first place.
Better to bite the bullet now.
October 13, 2009 9:50 AM | Reply | Permalink
My point in the earlier blog was not that private insurers were a positive force for good, but that eliminating their profits and overhead would have only minor effects on healthcare costs, because the far larger cost problem resides within healthcare itself - duplicate or unnecessary facilities, tests, procedures, or specialty referrals driven by a fee for service paradigm that rewards excess. I've also pointed out that among the other major democracies, which all surpass us in providing universal coverage at lower cost and with better outcomes, private insurers are an important component in some systems, and minimal or absent in others, but the costs and performance of the systems are all about the same.
Insurance reform is critical, however, less because of cost considerations, but rather to correct the severe inequities that exist today - refusal to cover individuals with health problems, discriminatory rates based on pre-existing conditions, caps on total coverage, excessive copays, recissions, etc.
To summarize, insurance should be reformed to correct inequities, and the healthcare system should be reformed to correct cost excess.
Also, in the earlier post, I argued based on the above rationale that a public option was desirable, but not the centerpiece of effective reform. Finally, I just don't believe you'll find many economists, even among those sympathetic to single payer, who will argue that we could begin to establish such a system that would dismantle an entire industry (private insurance) and add their ranks to the unemployment rolls in the midst of a deep recession. I think it's just not in the cards for reasons that go beyond the purely political.
October 13, 2009 10:31 AM | Reply | Permalink
We agree on this point, Fred. Now is not the time to put a whole industry out of business...Regulate the hell out of them, but don't put them out of business. Not yet.
October 13, 2009 4:26 PM | Reply | Permalink