Rick Santorum accidentally makes strong case for individual mandate.
How many GOP presidential candidates know how the U.S. health-care system works? Or what the Affordable Care Act does?
In October, one-time Republican candidate Herman Cain declared that if he had been diagnosed with stage-four cancer under “Obamacare” he’d be dead — because government bureaucrats would have prevented him from getting the necessary treatment. Of course, Cain completely misunderstands the Affordable Care Act. He’s not alone.
On Friday, December 2, Rick Santorum paid a visit to a group of New Hampshire high-school students, and offered the following lesson on the U.S. health-care system:
“There’s a reason that people who don’t have health insurance right now, who want to sign up for health insurance are stopped from getting insurance on a preexisting condition,” Santorum said. “So if you have cancer, and you’re not insured…then you want to get health insurance, right? Because it’s really expensive [to get cancer treatment]. Imagine if the government said you can get health insurance, and the insurance company can’t deny you because you have cancer.” Santorum asked the class if anyone disagreed with that, and one student spoke up: “Wouldn’t that drive the insurance companies out of business?”
“If you don’t have to have insurance until you’re sick,” Santorum explained, “why buy insurance?… How much would insurance be if only people who needed insurance bought it? The whole point of insurance is: healthy people buy it, sick people buy it, and those who are healthy support those who are sick…. But if insurance is only sick people buy it, well guess what’s going to be the cost of insurance. That’s why there’s a preexisting-condition clause.”
Has Santorum been paying attention to the health-care debate? Does he have the slightest idea what the health-care law he’s promised to repeal actually does?
Until the Affordable Care Act was passed, insurance companies could dump customers when they became too expensive. They could deny you coverage if you admitted to having a “preexisting condition” — in English we call this “illness” — or if they determined that you had been keeping one from them. The Affordable Care Act ends those practices. That is why the law requires everyone to have health insurance — so that insurance pools are not filled mostly with expensive sick people. And that’s why insurance companies have come around on the law — they are about to get a lot more customers. (Read about one cancer patient’s experience with the interim government Preexisting Condition Insurance Plan here. “For me it’s been a lifesaver,” she writes. “Perhaps literally.”)
Santorum seems to understand the concept of insurance — everybody pools resources so individual customers can be covered when the need arises. He even grasps the problem with a health-insurance system in which the sickest patients drive up costs for everyone. “You’re not going to see health-insurance rates go down…unless you have the consumers involved and purchasing the ordinary maintenance of them just like the ordinary maintenance of your car.” (For now, pass over his ill-considered comparison of health insurance with car insurance; he conveniently ignores the fact that while not everybody gets into major car accidents, nearly everyone will become expensively ill.) What he’s just described is the signal achievement of the Affordable Care Act. Not only does the law bring coverage to millions of uninsured Americans. It also lowers costs across the health-care system.
Recently, Santorum has been openly discussing his three-year-old daughter’s illness, a rare and very serious chromosomal condition called Trisomy 18. “I had insurance under my employer,” Santorum told the students. “And when I decided to run for president, I left my job, I lost my insurance, I had to go out and buy insurance on the open market. We have a child who has a preexisting condition. We went out and we said, we left this plan, and we want to join your plan. Fine, we have to pay more because she has a preexisting condition. We should pay more. She’s going to be very expensive to the insurance company. That cost, while not the whole cost, is passed along to us…. I’m OK with that.”
You know what else the Affordable Care Act does? It bars insurers from denying coverage to children with preexisting conditions. Right now. Before the bill was signed into law last year, a parent in Santorum’s position could find his child denied coverage because of a preexisting condition. Is he OK with that too? Because if the Affordable Care Act is repealed, that’s precisely the situation parents like him — though mostly not former U.S. senators — would find themselves in.
This would be funny if it were not real.
1. Yes, Santorum is indeed arguing unwittingly for why everyone needs to have health insurance in order for the ACA to work.
2. Yes, Santorum is showing that, even when insurance IS offered to kids with pre-existing conditions, their parents will pay through the nose (good thing Santorum can pay that premium).
The larger problem is that the ACA is predicated on a lot of “ifs” that many of us without health insurance have little faith in, but I’ve been on that rant before.
And GOP types want to forget mandatory coverage was their idea.. an example of how hate and fear distort reality.
I hate to say this but I pay as much attention to Santorum as I do to Trump -both with way over inflated views of their intelligence and importance.
Grant
What proof do you have for the proposition that the ACA has or will lower costs? We have the statewide model in Massachusetts and it hasn’t. In fact, until recently we had the fastest growing health care costs in the country. The system, and the system in the ACA, enourage people to do exactly what Santorum is talking about. They wait until they are sick to get insurance and cancel it later. The fines are meaningless unless they are equal to or more than the cost of getting insurance, and they aren’t. If people have a choice between paying an $800 annual fine and paying $500 a month for insurance and I get the same level of care regardless of which path they choose, how can this result in cost savings? All it’s done in Mass is make insurance more expensive for the people who would have bought it anyway.
“Santorum seems to understand the concept of insurance — everybody pools resources so individual customers can be covered when the need arises. He even grasps the problem with a health-insurance system in which the sickest patients drive up costs for everyone. “You’re not going to see health-insurance rates go down…unless you have the consumers involved and purchasing the ordinary maintenance of them just like the ordinary maintenance of your car.” (For now, pass over his ill-considered comparison of health insurance with car insurance; he conveniently ignores the fact that while not everybody gets into major car accidents, nearly everyone will become expensively ill.) What he’s just described is the signal achievement of the Affordable Care Act. Not only does the law bring coverage to millions of uninsured Americans. It also lowers costs across the health-care system.”
Grant – I agree with your analysis (and it really is a surprising quote :-)). I do want to raise a question about your final statement that I’ve quoted here: “it also lowers costs across the health-care system.”
I am donning my Unagidon hat here to suggest that, when insurance companies are prohibited from denying coverage or charging higher rates to customers with pre-existing conditions, what actually happens is that there is some risk-shifting going on – in essence, the insurance companies are forced to “eat” risk that their bean-counters would tell them is imprudent to accept.
So it seems to be a “win-lose” scenario. Obviously, the winners are those patients whose premiums no longer reflect their risk, and the losers are the insurance companies who are less likely to profit from income streams of high premiums from high-risk patients.
Is that a morally good outcome? To my way of thinking – probably it is. There is a basic asymmetry of financial scope between a single- or dual-income family, and a large insurance company (or even a not-so-large insurance company). What would be a catastrophic financial loss to the family is, while still a loss, not catastrophic to the insurance provider.
(The same asymmetry in risk, btw, holds true in foreclosure situations; someone – either the family or the holder of the mortgage – needs to absorb the brunt of the financial pain. What is a life-changing disaster for the family (the loss of a house) is a bookkeeping entry for a large mortgage banker – the write-down of one stream of income among many).
Where this analysis would break down, of course, would be if the aggregation of high-risk families becomes so large that the accumulated losses really do threaten the insurance company’s viability. If that happens to enough insurance companies, then I suppose we move on to, if you’ll excuse the pun, Plan C – Medicare for everyone.
What disturbs me most about Santorum’s words:
His apparent sympathy for the finances of the insurance companies and insensitivity to the financial burdens of those who are struggling with pre-existing conditions without his resources.
I think we would do well to pay attention to Sean Hannaway’s info, despite it’s being highly colored in favor of the free market system. (Merry Xmastime, Sean; we’ve missed you!)
About every three months, I troll around insurance sites to see if I can afford anything yet. The number of “products” is increasing, and the price points are more variable.
But the bottom line is that I can’t afford more than $2,400 for a $10K deductible policy that would NOT cover doctor visits or meds (roughly $800 per year, which I pay out of pocket now).
So with the insurance and out-of-pocket, that’s $3,200 per year.
I would also LOSE the ability to get mammograms through the County Health Department (I believe these run about $6,000). So my premiums and out of pocket would run about $9,200. (In reality, of course, I would simply forego the mammograms, and eligibility seems to vary; why I was able to get mammos this year and not for the past five years, I don’t know.)
Our income last year was $35K (and that was a GOOD year). So health care, just for me, if I purchased insurance and mammos, would take up just under a third of our income.
Raber and I have already consulted an attorney and have learned that the most effective way for either of us not to beggar the other in the case of a catastrophic illness would be to divorce.
Universal health care, universal health care, universal health care ….
Sean Hannaway writes, “In fact, until recently we had the fastest growing health care costs in the country.”
But now you don’t. Why do you suppose that is? Your state’s individual mandate system has been in force for all of four years.
Health-care costs are determined by lots of things besides health-insurance. But all other things being equal, any mandate system that succeeds in getting more people insured, as the Massachusetts system does, will have the effect of making insurance less expensive for those who have it. Why? Because hospitals pass the cost of caring for the uninsured on to private insurers, who pass their costs on to the insured in the form of higher premiums.
Of course, if the perverse incentives were as important as you claim, then the law would not have succeeded in getting more people to buy insurance. Maybe people are just too stupid to do the math; maybe the new law produces shame in freeloaders. Whatever the explanation, Romneycare does seem to have succeeded in at least one of its goals: reducing the number of the uninsured.
The CBO has estimated the ACA would bring something in the neighborhood of $100 million in savings over the next decade, and nearly $1 trillion the following ten years. (Repealing the ACA would raise the deficit by $200 billion over the next decade, according to the CBO.) The ACA is designed to curb health-care spending by cutting some subsidies for private insurers, reducing Medicare payments to some health-care providers, adding efficiency testing to the Medicare system, and taxing so-called platinum health-insurance plans. The idea here is to control health-care spending over the long term while insuring millions more Americans. That is starting to happen right now.
For example, because of the Affordable Care Act, seniors who end up in the so-called doughnut hole–2.65 million of them–are already saving nearly $600 annually on their prescription drugs. Those are Medicare patients who have bought $2,840 in prescriptions over the course of a year, at which point they must cover their prescription-drug costs on their own, until they’ve spent an additional $3,600. Thanks to the ACA, the doughnut hole has shrunk by about half. What’s more, the ACA has brought 24 million seniors free preventive care, which could save millions in what would have been more expensive emergency care down the road.
One key difference between “Romneycare” (the Mass. universal health care law) and “Obamacare” (the Affordable Care Act) is that policymakers (Gov. Romney, Sen. Kennedy, the state legislature, etc.) in Massachusetts did not attempt to control costs when they passed their law in 2006. They all agreed that cost controls would come later, and could be better addressed if there was universal coverage (or something approaching it) already in place.
By contrast, congressional Democrats crafted the ACA so that it actually reduced the federal deficit over a 10 year period (according to Congressional Budget Office calculations). In addition, there are numerous sections of the ACA that aim to control costs. There’s even a section that allows for any cost-saving measures that haven’t yet been thought of to be implemented.
Whether the ACA will, in fact, reduce the rate of growth in health care costs is yet to be determined. However, initial indicators (like the sharply decreased rate of growth in Medicare costs) are encouraging.
I think the ACA has had some great benefits for folks who were in a bind.
My concern lies with the part of the legislation that “promises” to help you find insurance and subsidize you if need be.
Will this mean expanding Medicaid, which many doctors, particularly specialists, now won’t take.
Or will this mean helping folks pay private insurance premiums, which amounts to a tax giveaway to private enterprise. How will this encourage lower medical care costs?
I’m trying to stay guardedly optimistic about ACA–mostly b/c I can’t see myself being any worse off than I am now–but I really really have my doubts about whether it will work.
OK, so I guess I am ranting about this again. Sorry for the post bombardo. I’ll go grade papers for awhile.
@Jean Raber (12/7, 4:00 pm) The ACA is, as you know, a big, complex piece of legislation with many different pieces being implemented on differing timetables. And, as written, it’s an intentionally flexible piece of legislation with multiple ways for states, doctors, hospitals, insurance companies, etc. to get waivers to meet their local circumstances.
Here’s one person’s (S.D. Ward, breast cancer patient, mother of two) story of how one part of the ACA that “promises to help you find insurance and subsidize you if need be” is working for her:
“I’ve been saved by the federal government’s Pre-existing Condition Insurance Plan, something I had never heard of before needing it. It’s part of President Obama’s healthcare plan, one of the things that has already kicked in, and it guarantees access to insurance for U.S. citizens with preexisting conditions who have been uninsured for at least six months. The application was short, the premiums are affordable, and I have found the people who work in the administration office to be quite compassionate (nothing like the people I have dealt with over the years at other insurance companies.) It’s not perfect, of course, and it still leaves many people in need out in the cold. But it’s a start, and for me it’s been a lifesaver — perhaps literally.”
http://www.latimes.com/news/opinion/commentary/la-oe-ward-in-praise-of-obamacare-20111206,0,6794828.story
“What disturbs me most about Santorum’s words:
His apparent sympathy for the finances of the insurance companies and insensitivity to the financial burdens of those who are struggling with pre-existing conditions without his resources.”
Sadly, he has innumerable companions is his adoration of the rich and contempt for the poor and disadvantaged. You cannot get elected to the vast majority of offices without money. It is a virtual requirement to run. While the rich may not enter heaven without extreme difficulty they easily enter everywhere else where they are feted and adored. Equally deplorable the vast majority of church leaders lead the pack in adulation.
The argument over the individual mandate is one of those bizarre political arguments that sees Democrats embracing the idea of sending more people to the big insurance companies, and the GOP arguing that people with pre-existing conditions ought to be cared for in high-risk pools administered by the States, funded by the feds (a al Medicaid). Much as it pains me to admit, the Dems are right on this one (well actually, the Heritage Institution is correct since they first came up with the individual mandate), as the high risk pools would need such an absurb amount of funding annually that it would amount to an insurmountable budgetary blackhole.
Now, if we can get the President to drop the IPAB nonsense, we could be well on our way to a workable solution.
Heritage Foundation I meant to say.
Its interesting to see all the Republican candidates, with the exception of maybe Ron Paul, try to figure out what their true conservative principles are. It has become an unfortunate balancing act.
“Whether the ACA will, in fact, reduce the rate of growth in health care costs is yet to be determined. However, initial indicators (like the sharply decreased rate of growth in Medicare costs) are encouraging.”
When you have a chance, can you post the link to the Medicare cost data? I have seen the Medicare expenditure data through FY 2010, but didn’t realize the provider cost reports have all been published. Are you looking at the cost report data for all providers in the program, or just a subset?
NYT has a piece about the million young adults now on mom and pops insurance policy because of ACA. they are paying into ins. while still heathy. I have 4 college aged granchildren on their pops policy.
http://www.nytimes.com/2011/09/22/us/young-adults-make-gains-in-health-insurance-coverage.html?_r=2&hp
@MAT (12/7, 10:06 pm) I’m not looking at cost report data. I’m just looking at articles like this one from the Century Foundation:
“In the twelve months ending in May, overall spending by commercial health insurers climbed by 7.35 percent. By contrast, over the same span, Medicare claims rose at an annual rate of just 2.6 percent.”
http://www.healthbeatblog.com/2011/08/medicare-spending-slows-sharply-few-seem-to-notice-part-1.html
If you have data that supports or rebuts what’s in that report, I’d be interested to see it.
“If you have data that supports or rebuts what’s in that report, I’d be interested to see it.”
For sure I have data to support the Medicare expenditures. The Actuary’s website has all that here: http://www.cms.gov/CMSLeadership/09_Office_OACT.asp. There is so much good info there, it becomes overwhelming at times. I actually calculated the increase in Medicare expenditures from 2009 to 2010 in my model at 2.7%, but 2.6% is close enough. I would just note that you are using the term “costs” and Medicare expenditures interchangeably but they actually differ in material ways. Someone else was doing that too above but with respect to federal budget accounting.
BTW, what is the Century Foundation? Is that an advocacy organization? I ask as the author seems knowledgeable yet both omits important information which a neutral reader may find important to their decision making process and makes different pieces of information appear more related than they are.
MAT: http://bit.ly/tgCz9D
Luke – Grant is proposing that the individual mandate. The “signal acheivement” of Obamacare, will help control costs. We have that in Mass and it doesn’t. In fact, premiums increased faster than the national average and they were very high to begin with.
Matthew, we used to be highest, and we aren’t now, but that doesn’t mean everything is working. We are still among the highest – I think third.
Yes, I favor free market solutions. Not because I am a heartless b@st@rd, but because they work better. We can’t say free market solutions haven’t worked in medical care because they have never been tried. This morning, while working out at the gym, two of the lead stories were that the MBTA – Boston’s mass transit system, “The T” – plans to raise fares by 40% while cutting service in order to cover a huge shortfalls. Of course, the other was about the postal service raising rates while cutting service.
The day someone can point me to a single example of a big government solution resulting in lower costs and better quality, I’ll start to reconsider that position.
I didn’t say the individual mandate alone would control costs, Sean. The aspects that address Medicare will likely produce the most savings over the long term. It’s a complex law because our health-care system is complex. If you think the health-care industry operates in a free market in the same way, say, McDonald’s does, you’re kidding yourself.
@Sean Hannaway (12/8, 12:36 pm) At the risk of repeating myself, one of the major differences between “Romneycare” and “Obamacare” is that the Affordable Care Act is designed to control costs whereas Massachusetts made, basically, no effort to control costs in 2006.
I must confess, I’m always a bit surprised by people who say, “I favor free market solutions” when there are so many aspects of human life and human society in which the conditions necessary for markets to work well do not exist.
I think it’s inaccurate (or at least an exaggeration) to say that “free market solutions…have never been tried” with health care. Throughout the first two-thirds of the 20th century there was a “free market” for health care for the elderly in this country. Whether that system “worked” depends, I suppose, on one’s criteria for what constitutes a successful health care system.
Luke,
Saying I favor free market solutions does not mean that believe in only free market solutions. I am saying that where individual choice at the consumer level drives the provision of a good or service you are more likely to have higher quality at lower costs than when those choices are controlled or dictated by the government.
What did Americans who had children with serious congenital problems do prior to the new requirements against excluding children with pre-existing conditions? Were there other resources available, or was financial ruin the (or the death of the child) the only option?
My son was born with a lifethreatening brain malformation–by the time he was 6 months old, his medical expenses were well in the 6 digits (I have no idea how much higher they would have been in the States–much higher, I’m assuming). I break out in a cold sweat and feel nauseated just trying to imagine what it would have been like to have had to face paying for that without real coverage…
Abe, it’s a crap shoot and a horror.
People spend hours trying to determine what their health insurance will pay for (assuming they have health insurance); looking for charities (like the Shriners) that might help them with some expense; and navigating the various public assistance programs that will kick in when their insurance either runs out or refuses to pay.
Most people without insurance are required to sign papers saying they have the means to provide payment for services rendered. (I have to do this everytime I get blood work done.) When it comes to getting their kids help, they’ll lie and go bankrupt, which certainly doesn’t help the general state of the economy, and it certainly doesn’t bring down insurance premiums.
Even legal penury may not be viable for long, though. Our attorney said that many states are trying to make it harder to declare bankruptcy for medical reasons.
While I disagree with Sean most of the time, I think he is correct on one aspect of the free market system, and that is that insurance companies DO haggle with hospitals to keep medical costs down–for their policy holders. If you’re uninsured, you pay top dollar b/c you don’t have a big gun to dicker with the providers for you.
“The day someone can point me to a single example of a big government solution resulting in lower costs and better quality, I’ll start to reconsider that position.”
The U.S. Postal Service in the olden days when the government ran it.
“Insurance companies DO haggle with hospitals to keep medical costs down–for their policy holders.” Awfully wide-eyed for a tough Michigander. Copayments and deductibles are established before a patient ever sets foot in a medical facility. You’re going to have to shell out a fixed copayment regardless of how much your doctor has agreed to be paid by your insurer. And when your doctor recommends treatment that your insurer doesn’t want to cover, well whose bottom line do you think the insurer is protecting?
@Sean Hannaway (12/8, 12:42 pm) Thanks for the response. Having many consumers/buyers is, in my limited understanding of basic economics, just one of the necessary conditions for a market economy. A second is having many sellers/providers. A third is having full and equal information available to all market participants.
If you have a real world example of a market economy in health care, I’d be interested to know more about it. In the world as it is, it’s fairly common for health care buyers to face monopolies or oligopolies of health care sellers (e.g., the town with one hospital, the state in which 1-2 insurers control 80% or more of the health insurance market).
It’s also common for individuals buying/using health care to find themselves in situations in which they have highly imperfect knowledge of what they’re buying. An extreme example would be someone in an auto accident, rushed to the hospital and into surgery while unconscious. There are, of course, far less extreme (and more common) cases: the person who goes for a checkup, is diagnosed with a life-threatening cardiac disorder and whose doctor tells her that she must go to the hospital for immediate surgery is one that comes to mind.
So, if the conditions necessary for a market economy to function smoothly and effectively do not exist—as would seem to be the case with health care—why would one want to try to create “free markets” in health care?
Following on Jean Raber above (12/8, 3:01 pm)
“The day someone can point me to a single example of a big government solution resulting in lower costs and better quality, I’ll start to reconsider that position.”
The Social Security Administration.
The Civil Rights Act of 1964.
(Others should feel free to play along.)
Luke, my understanding of PPACA is that it is in many ways a market-driven solution. It is going to rely on for-profit and not-for-profit providers, and private insurers, to deliver health care. In crucial ways, it strikes me as an affirmation of the free market in health care. Presumably, it was crafted that way originally in order to pass the Senate, which even at that time with a decisive Democratic majority was pretty conservative in its makeup.
I am sorta puzzled as to why it is as unpopular as it is. I just think the rhetoric of “socialized medicine” has distorted people’s understanding of the actual provisions. If the courts allow it to remain intact, and if it works as expected – two huge ifs – conservatives could come to embrace it. It’s closer to Rep. Ryan’s vision of government entitlement programs than existing Social Security, Medicaid and Medicare.
“Copayments and deductibles are established before a patient ever sets foot in a medical facility. You’re going to have to shell out a fixed copayment regardless of how much your doctor has agreed to be paid by your insurer.”
Lookit, Grant. I know you’re from Chicago and a White Sox fan to boot, so let me try to make this as easy as possible for you to understand:
1. One of the things that prevents predetermined premiums (or copays and deductibles) from going up is keeping the cost of health care down.
2. When most people are insured through their employers–as they were for many years–insurance companies had the clout to tell providers they wouldn’t pay more than a certain amount for a certain procedure or they would send their customers elsewhere.
3. Haggling over pricing was important b/c it kept rates affordable and prevented customers from going elsewhere.
4. ACA is, essentially, designed to restore that haggling between insurance companies and health care providers by requiring everybody to have health insurance. Just like if you belonged to the Teamsters and had your very own Jimmy Hoffa to call up the cardiologist and make him a counter offer for your last echo-cardiogram that he can’t refuse.
5. I have reservations about how well this strategy will work, not b/c I don’t have faith in government programs, but b/c I don’t have faith in free enterprise.
6. To wit: The insurance companies are essentially legalized gambling enterprises that operate with one goal in mind: The house never loses. And the house, in the midst of the health insurance crisis has discovered a whole new scam: Rather than haggle with health care providers, it’s easier for companies to jack up your deductible so you end up paying most of your own costs anyway while they collect a tidy monthly sum from you and put a cap on your lifetime payout.
7. We need universal coverage, God help me, I love Big Brother.
I hope this helps. Also, please keep your carp outta Lake Michigan.
Thank you
And if all this isn’t frustrating enough, Raber is watching “Celtic Woman” on TV.
How did co-payments and deductibles become parts of the system? When I was young there was no such thing.
“Insurance company” is another one of those old phrases whose meaning has been debased. Too many of them do not truly insure coverage. Lottery company might be a better name. Ya puts ya money down and ya takes yer chances.
Jim said: “I am donning my Unagidon hat here to suggest that, when insurance companies are prohibited from denying coverage or charging higher rates to customers with pre-existing conditions, what actually happens is that there is some risk-shifting going on – in essence, the insurance companies are forced to “eat” risk that their bean-counters would tell them is imprudent to accept.
So it seems to be a “win-lose” scenario. Obviously, the winners are those patients whose premiums no longer reflect their risk, and the losers are the insurance companies who are less likely to profit from income streams of high premiums from high-risk patients.”
Employer groups or blocks of employer groups are underwritten in order to estimate their potential risk. We can make fair estimates because members submit forms with health history on them. Here insurance companies accept “pre-existing conditions”, because they can factor them into the price.
The insurance company can absorb “surprises” (someone is hired with a serious condition) just as it can absorb (via high claim “reinsurance”) catastrophic. But no insurance company could carte blanche take on everybody who just bought insurance when they got sick. (Those “bean-counters” are called actuaries and any kind of insurance scheme needs them.)
Ann said: “How did co-payments and deductibles become parts of the system? When I was young there was no such thing.
“Insurance company” is another one of those old phrases whose meaning has been debased. Too many of them do not truly insure coverage. Lottery company might be a better name. Ya puts ya money down and ya takes yer chances.”
There are several reasons for co-payments and deductibles. One is that the annual price increases of medical care became so great, that businesses wanted cost sharing schemes with their members in order to keep their own costs down. We see a lot of groups moving to higher co-pays and co-insurance when they renew just to be able to keep the insurance plan at all. Our technical word for this is “buy-down”.
Cost sharing is also meant to get people to think before they do that emergency room visit;on one hand we want people to go to the ER when they have a real emergency. On the other hand, we saw a LOT of ER activity that was not emergent. The market has adjusted to this by creating urgent care centers and the insurance industry has adjusted by increasing ER co-pays to encourage people to go to the urgent care centers.
You are correct in saying that insurance does not look like “insurance” so much any more. There is an insurance piece to it, in the sense of the coverage of catastrophic illness or accidents. But much of it is simply a medical benefit, paid for (mostly) by one’s employer.
Jean Raber, you have an insider’s eye when you look at insurance issues.
unagidon, I worked for a workers comp insurance company for a short time. National Public Radio also ran a series two or three years ago on health insurance. If I can scare up the link, I’ll post it. It was one of the most balanced and in-depth pieces I ever heard.
BTW and off topic, I gave your story to a friend who had a grandmother EXACTLY like Julia, who used to dress her and her sister up in First Communion dresses and send them around the neighborhood selling holy medals. Gramma Ciliberto maintained an elaborate shrine to St. Anthony and had a picture of Pope John 23 in her kitchen that she would talk to. I have one of her many rosaries, one found in her apron pocket after she died.
Jean,
Yes, even a dullard from Chicago knows all of that. (Although, you should know that the Affordable Care Act bars insurers from imposing lifetime limits on benefits. It also phases out annual limits.)
But you made it sound as though haggling between insurers and medical providers was mainly about protecting the customer. Maybe it used to be. And maybe it still is (by how much I can’t say, but the rising profits of health-insurance companies may suggest an answer).
Let me give you a personal example of why I think it’s silly to believe that insurance companies are interested in protecting customers in a way that could harm their bottom line. And if anyone expresses one iota of sympathy, I will delete his account.
In the ’90s my father came out of a lung-cancer operation without his mind. The problem manifested itself in blindness at first. Hysterical, apparently, because his doctors couldn’t find any physiological reason for his loss of sight. His vision returned in a week or so, but soon after he slipped into a dramatic and prolonged bout of psychosis. He tried to escape the hospital. He developed elaborate paranoid delusions about his caregivers. He lost the ability to recognize his own family members. He had recovered from surgery physically, and that floor of the hospital wanted nothing more to do with him. So his oncologist had him sent to a nursing home. The insurance company–one that used to be considered very good–grumbled a bit, but allowed it. But my father was not improving. His paranoia only deepened. He began mistaking my mother for a previous wife. He told other family member she was having an affair. Some believed him. He had no idea who I was. He could be violent. He escaped the facility on a few occasions.
After about four weeks, the insurance company scheduled a meeting with my mother and me to discuss my father’s benefits. We had no illusions about the real purpose of the meeting. A few representatives came to the nursing home (which was nice of them; not sure how often that happens now, if at all), and explained calmly and with the utmost attempted concern, that they had determined that nursing home care was not really covered by my father’s policy, and that they had been quite generous by allowing him to be admitted there at all. After all, he was physically fine and no doctor had been able to explain his condition (one surmised the anesthesia was to blame). He would have to go home the next day (when he had an appointment with the house psychiatrist). All they could do for him now was provide some in-home care–but just a bit. I was still a student at Fordham in New York. My mother had to work. The prospect of leaving this insane man home alone for most of the day scared the hell out of us. (Just in case, that night we had a locksmith over to install deadbolts that locked by key from both sides.) We argued, of course to no effect. The meeting lasted about fifteen minutes.
My father’s doctor was not pleased. So he resolved to screw the insurance company by having my father admitted to the psych ward of Lutheran General, which was easily twice as expensive as the nursing home. That’s where he stayed for about a month.
I don’t know how often such things happen. Of course the insurance company may have been right about my father’s coverage. (His doctor disagreed, but I no longer remember whether he had good reason to.) But in trying to protect their bottom line in the short term, they ended up paying a lot more. They misplayed their hand. But I’m sure the savings were passed on to their beloved customers.
Nursing homes are usually not covered unless they are being used for rehabilitation. It may be that someone decided that your father’s condition looked permanent. I imagine the doctor didn’t think so, so he put your father into the psych unit to see if he could recover there.
Nursing homes are a permanent care place and have their own kind of long term insurance. They are very expensive; a large percentage of people end up in them; and typically unless someone is really rolling in dollars, one often surrenders all assets including their social security when one is admitted.
“But you made it sound as though haggling between insurers and medical providers was mainly about protecting the customer.”
Dear me, I hope not, and I thought my clever reference to Jimmy Hoffa would make that clear!
Haggling is all about protecting profits for the company and maintaining a healthy revenue stream. If that stream could be achieved by making premiums affordable, that was real nice and the company would exploit it. But the company exists to maximize profits by the most efficient means possible, which means providing the LEAST amount of service and coverage hidden in small print or in pages and pages of caveats in the policy, for the MOST money. It’s the American Way!
Your father’s story fills me with sorrow. I have seen many stories like this first hand, as one tends to do when one knows a lot of other poor people. These stories need to be told so that Sean Hannaway, who is not a heartless b@st@rd (Lord knows there may be small children reading this post and we don’t want them to pick up vulgarities, though it’s OK to promote a free enterprise system that screws people over daily), has something to think while working out in the gym.
If a 250 pound weight falls on his head, I hope his state hasn’t capped the liability insurance awards he can collect for his family to take care of him. Because otherwise the gym might not be able to pay its execs their big Xmas bonuses.
Whoa! I don’t know what direction I’m even riding this horse now, but I sure am pissed so it’s back to paper grading for me!
Indeed, my father’s doctor was right, and under the care of a psychiatrist the psychosis lifted. If the insurance company had decided to allow my father to stay in the nursing home (where he was scheduled to see a shrink), they could have saved themselves a lot of money.
@Jim Pauwels (12/8, 5:14 pm) We agree that the ACA relies on market mechanisms in many ways. (Which is why it’s so puzzling to see many on the political and economic right object so strenuously to it.)
To my mind, that differs from what I took to be a largely philosophical or ideological statement by Sean Hannaway (12/8, 12:36 pm): “Yes, I favor free market solutions. Not because I am a heartless b@st@rd, but because they work better.”
My own perspective is that both the state and the market are human constructs. They exist to perform functions (the common defense, the general welfare, distributing goods and services) that human societies have performed for thousands of years—well before the “state” or the “market” was created.
Markets work well for some goods and services. Currently, to cite one example, cellphones are, I think, a good example of the virtues of markets. Many sellers, many buyers, lots of information available to all parties. And the result is what market economists would have predicted: rapid innovation and improvement in the product, and enormous cost pressure on producers.
Markets don’t work so well for other goods and services. In my view, health care is one of them. In addition to the arguments I’ve made above for why that’s so, the unpredictability of demand is another reason why health care markets have limited effect.
Take, for example, an (outwardly) healthy single young man. Given the minimal medical costs he’s likely to incur in the course of a year (certainly under $1,000, quite possibly under $100), it would be a rational economic decision for him to go without health insurance for that year. In fact, it’s an economically rational decision not to have a regular checkup with a physician.
Now, suppose this young man has an asymptomatic cardiac arrhythmia—a slow and irregular heartbeat of which he’s unaware. Driving to work one day, he passes out (due to a lack of oxygen caused by his heartbeat slowing down too much) and crashes his car.
Let’s assume he survives his multiple injuries, and let’s also assume nobody else gets hurt. There’s a decent chance that by the time the year is over, he’ll have incurred medical bills exceeding $100,000. (He’ll certainly have incurred expenses in the mid to upper five figures.) In addition, even if he recovers completely from the injuries caused by the auto accident, he’ll most likely have significant ongoing medical expenses due to his underlying cardiac condition.
Now, we could, as a society decide that health care is a market good and that the young man’s options are: 1) a life of indentured servitude (or something approaching that), or 2) no treatment at all (in which case he’ll likely die). As market outcomes, those are fine. There’s nothing wrong with them. In fact, they’d be signs that the market is working as it should.
Most of us, in this body politic, recoil (to some degree) from that conclusion. Which is why I say that markets do not *always* work better. Sometimes they work worse.
“MAT: http:// bit . ly/ tgCz9D”
Due to my advocacy for the nonproliferation of small arms in conflict areas and the developing world I boycott that search company for obvious reasons. The sentiment is noted however.
“[Nursing homes] are very expensive; a large percentage of people end up in them; and typically unless someone is really rolling in dollars, one often surrenders all assets including their social security when one is admitted.”
Anyone know how ACA will affect nursing home/assisted living/hospice care?
Info I’ve seen shows that assisted living operations are beyond the means of most (even though they’re actually cheaper and provide better care for patients who are mentally fit) b/c they don’t accept Medicare (or maybe Medicare doesn’t cover assisted living?).
Medicare covered 100 percent of Dad’s hospice care because it’s cheap. That meant that the cap on Mom and Dad’s supplemental insurance wouldn’t be entirely used up on his last illness so that nothing would be left for my mother.
Anybody know how/if ACA will affect nursing home, assisted living, hospice coverage specifically?
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