health care reform

All posts tagged health care reform

“Fearing that health insurance premiums may shoot up in the next few years, Senate Democrats laid a foundation on Tuesday for federal regulation of rates, four weeks after President Obama signed a law intended to rein in soaring health costs.”

In other words, they realize the bill they passed will skyrocket insurance rates (40% estimated increase in individual premiums, above the already expected increase) and now they want to control premiums now, too.

Let’s pretend you’re a company with a, say, 2% profit margin.  Let’s say one line item of expenses (health care claims) equals 84% of your revenue.  Now, say those costs go up…by 40%.  How much does your revenue need to increase to cover those higher expenses?


That’s right, your premiums will have to increase 33.6% to cover that increase in costs.  Do you think the federal regulator will approve that increase?  Here’s a hint:

“After a hearing on the issue, the chairman of the Senate health committee, Tom Harkin, Democrat of Iowa, said he intended to move this year on legislation that would ‘provide an important check on unjustified premiums.'”


Since the politicians keep linking insurance premiums to GDP growth, what if they only approved rate increases that were at par with GDP growth?  What a company’s profit margin be then?

-27.6% in year 1.

-41.1% in year 2.

Somewhere between years 5 and 6, they have a 100% loss.

Before that happens, you will not be able to buy individual health insurance, except for from the government.

Which is what Obama and the Democrats have wanted all along.

Soon, the government will be telling you what to eat, what outdoor activities you can do and what medicine you can and can’t take.

A surgical team from Wilford Hall Medical Cent...
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“‘If people are more aware of their overall health care costs and how the different types of care have different costs, then people will use the health care system more efficiently,’ said Amy Lischko, the lead author of the report and former commissioner of the Massachusetts Division of Health Care Finance and Policy.”


“Those who knew their co-payments were more likely to have more office visits and fewer emergency room visits, which are typically more costly, according to the study.”

Interesting words from someone so closely tied to the spectacular failure that is Massachusetts’ new health care system (and the model for the Federal Health Care Reform Bill).

However, she’s correct.  As I’ve been saying throughout this debate, forcing insurers to cover everybody without a significant mandate to always be insured is a recipe for lost freedom and extremely high insurance rates, not the solution to our problems.

The solution is to lower the cost of services through competition for those services, based on quality and price.  Let’s make price and quality information freely available and step back and watch the market work.  Then services AND insurance will be affordable for everybody.

PORTSMOUTH, NH - AUGUST 11:  Diane Campbell, 5...
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A month ago, I wrote about the “tragedy of the commons” and how it applies to health care in the US. Basically,

“The same holds true for health care. Collectively, we all have an incentive to avoid over-utilizing health care and unnecessarily burdening our system. Individually, however, when we have no skin in the game, when somebody else pays the bill, we have no incentive to monitor our use of this pooled resource.”

My proposed solution to the health care crisis was,

“I’d like to see a proposal that gives tax advantage to high-deductible plans, so people have skin in the game, and that forces doctors and hospitals to publish their prices before treatment is given. With both the use and cost of health care better controlled, health insurance will become much cheaper.”

Predictably, Harry Reid and the Democrats are not only refusing to make high-deductible health plans tax-advantaged, they’re trying to eliminate them altogether.

“The Reid bill also assaults health savings accounts, or HSAs, which allow individuals to accumulate tax-free funds for future medical expenses when coupled with low-premium, high-deductible insurance. The Reid bill changes tax provisions to make HSAs less attractive, but the real threat comes via increased regulation.

These insurance products will likely be barred from the insurance ‘exchanges’ that will demolish and supplant today’s individual market. Employers will also find them more difficult if not illegal to offer once the government has new powers to ‘define the essential health benefits’ that all plans must eventually offer. Plans that focus mainly on catastrophic health expenses, instead of routine procedures, aren’t generous enough for Democrats.

In other words, instead of bridging the gap between payer and consumer, the very heart of the problem, we’re increasing the gap.

Mark my words, this can have no other effect than to increase health care costs.  This won’t just leave the costs as they are now, but make them worse.  People who are already being responsible about health care costs will no longer be incented to do so.

Even worse, remember the other effect of the “tragedy of the commons” I discussed.  The crab fisherman I talked about did everything they could to get all the crabs before somebody else did.  The same applies here.

Health care is a scarce resource (meaning there isn’t an unlimited amount of it).  This is because there are a limited number of doctors and other health care professionals, facilities, machines, etc.  One reason prices are so high (besides the lack of price competition, see post linked above) is that our health care system is overburdened.

Cash Money

Image by jtyerse via Flickr

Another scarce resource is money.  Despite the government’s willingness to deficit finance over the past 10 years or so, there is a scarce amount of money in the world.  Of course, the US could start printing money (they’re not, despite what Glen Beck says) but if they do that on a large scale, get ready to occupy your underground bunker ’cause things will get rough.

Given that the services and the ability to pay for them are scarce, we can expect Congress to work to manage those costs through lower coverage and higher premiums for the “public” option (or legislation that makes other plans look worse, compared to the public option).

Knowing this, consumers who enroll in the public option (already expected to be the highest users of the health care system) will explode their utilization in an effort to get all the services they can before the costs go up.

The bottom line is this:  the current Senate plan not only doesn’t do anything to cut health care costs, it will raise them.  Guaranteed.  At a price of $1.2 trillion ($2.5 trillion by some measures that account for Congress’ accounting gimmicks), this is unacceptable.

Please, please, please contact your Senator and Harry Reid’s office and make sure they know how you feel about this bill.  Your ability to provide health care for your family is at stake.

{{w|John Shadegg}}, U.S. Congressman.
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Than opening up the Wall Street Journal and seeing your name:

“John Shadegg’s proposal is certainly a better alternative than the Democrats’ bloated bill, guaranteed to increase costs and explode the deficit (“The No-Cost Path to Cheaper Health Care,” op-ed, Nov. 6). However, it still just chips away at the heart of the problem, the actual cost of the health-care procedure. I’d like to see a proposal that gives tax advantage to high-deductible plans, so people have skin in the game, and that forces doctors and hospitals to publish their prices before treatment is given. With both the use and cost of health care better controlled, health insurance will become much cheaper.

– m”

(link removed for safety reasons)

Okay, maybe there are stranger things