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Variations on a Theme

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So, okay, it’s Thursday, which is my worst day of the week in terms of having my act together.  I have a late night on Wednesday–I’m teaching an adult night class–and an early morning today, and I tend to be walking into walls.

Today, I’m even more messed up than usual, because when I got home last night my younger son insisted that we stay up and watch the ten o’clock encore showing of Keith Olbermann’s Countdown  Yes, I know, Olbermann is not unbiased, but neither is O’Reilly, and Greg watches him, too.

Last night’s Olbermann was a special edition of the show, a single long rant on the health care debate, occassioned by the fact that he had just seen his elderly father through a bad health care crisis.

And although I quibbled with some of his stuff–he takes the “45000 die every year from lack of health insurance” thing seriously, which I don’t think is warranted by the facts–I couldn’t quibble with the basic thrust of the thing, which is this:  it is completely insane that Americans are not furious with their health insurance conpanies.

Furious enough to get rid of them, I mean.

Because listening to this, I kept thinking that there are really two issues in the health care debate here, and getting them mushed together isn’t helping us any.

One of those issues is, of course, how we’re going to manage to make sure everybody in the US has not only access but full access to the care they need. 

The other one is what we’re supposed to do about a health insurance industry that has become little more than legalized organized crime.

I’m not exaggerating here. 

Too many of the arguments against significant change in this debate seem to be running on the assumption that health insurance and the companies that issue it behaves as it did in, say, 1960, 

Even in 1960, of course, there were signs that something was likely to go badly wrong, eventually.  Medicare exists not because Lyndon Baines Johnson wanted to socialize medicine, but because private health insurance companies were refusing to insure the elderly.

After all, the elderly are the people most likely to get sick.

Right now, the insurance companies have managed to erect a nearly perfect bait-and-switch scam, thanks to both Medicare and Medicaid.

It works like this:

First, they charge significantly high premiums for health insurance coverage, usually paid all or partially by employers.

Then, if you get sick, they do whatever they can to deny you any payment–incidents have included finding “pre-existing conditions” the patient couldn’t have known about, declaring the patient should have known about it and then declaring his contract void because it was “fraud” since he didn’t disclose what he didn’t know about.  That’s my favorite one, but some of the excuses on this front are truly astounding.

But say you get past that, and you end up getting benefits.  If you’ve got something really bad,  a catastrophic illness or an expensive chronic one, then chances are pretty good that you’re going to have to leave work eventually, because you’ll be too sick to keep going.

And as soon as you leave work, you have two choices–lose your health insurance altogether, or buy COBRA.

COBRA is billed at full rates, which means that in the middle of having an illness too bad to allow you to continue working, you’ve got to come up with $1000 a month or more to keep your insurance.

And even if you manage to do that, it only lasts for eighteen months.

At that point, your options for private insurance are functionally nil.  So what happens to you?

Well, you pay for what you can, and when you can’t anymore…the government pays.

Note the sequence here–the government ends up paying for your care when it is most expensive. 

The big whacking hunking medical bills at the end of a catastrophic illness end up getting covered by Medicaid or Medicare, leaving the insurance conpanies off the hook.

And now, the insurance companies are demanding provisions in the new health care reform bill that would REQUIRE individuals to buy insurance whether they want to or not, at the risk of being fined.  People too poor to afford it would be subsidized by the government, but what amounts to “too poor” is, shall we say, contentious.

I mean, look at this situation.

We’ve somehow managed to erect a system where one group of people–insurance companies, their executives and employees–gets to collect really enormous sums of money on the basis of “contracts” that are binding on only the purchaser–a health insurance company can change the provisions of your plan any time it wants to, just because it wants to, and you have nothing to say about it; what’s more, no “competition” is available if you’re already sick, because your “pre-existing condition” means you can’t move companies.

I mean, seriously.

This is not the free market.  This is not capitalism.  This is not limited government, either, since it depands on the governments willingness to enforce “contracts” that aren’t really contracts for one of the partners.

And this is not the doctors charging this, or the hospitals. 

Olbermann ended his show yesterday by calling for a strike–for all of us who have insurance to just stop paying the premiums, cold turkey.

And that actually would be the best possible response to this.

The problem is that most people do not dare do it, because in the present legal framework, it would result in nothing but an opportunity for the insurance companies to get rid of all the sick people. 

Oh, one more thing I didn’t mention–if you happen to have insurance that you pay for yourself, in the “individual” market, the insurance companies can simply cut you from the rolls as soon as you get sick. 

So you pay all this money in case you get sick.  You get sick.  The insurance company sens you a note that says you’re “no longer insurable” and there you are, on your own again.

You just paid–in one case I know of, for fourteen years–for absolutely nothing.

I go back and forth about how I feel about single payer systems, government systems, private systems, whatever.

But I do not go back and forth about this.

I’ll wait on the provisions for covering everybody, if the Obama administration will just put an end to the ability of insurance companies to do this sort of thing and do it legally.

If the answer is that it is not possible to make a profit providing insurance contracts and fulfilling them honestly, then whether we like it or not we will need a government system.

If the answer is that it can be done profitably, but with an earnings ratio of closer to 4% than 17%, then that’s the nature of the business and if that’s not the kind of investment you want to make, you shouldn’t be in it.

What we don’t need is what we’ve got, and it’s got to end.

Written by janeh

October 8th, 2009 at 9:51 am

Posted in Uncategorized

4 Responses to 'Variations on a Theme'

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  1. I’ve got a very minor example of the weird ways in which insurance companies operate.

    Lots of Canadians have private medical insurance in spite of also having ‘socialized medicine’ (how I hate that term!). It usually covers stuff medicare doesn’t – private room fees (if charged), glasses and routine eye and dental checkups, drugs. Some provinces cover some of this stuff for some people – the children, the elderly – but such coverage is a popular job benefit and can also be bought privately.

    A lot of people have double insurance. This is perfectly legal, and often happens when both spouses have insurance through a different employer, or someone has access to two different group plans from a previous job and a current one.

    What happens then is that one plan is designated primary. That one pays 80% of the eye exam cost every two years, or whatever the policy says, and the secondary one pays 75% of the balance, or whatever their policy says, and the customer pays little or sometimes nothing. Great, right?

    Yes, especially for the secondary company which is getting paid premiums for full coverage and paying out a fraction of what they’ve said they will cover. And you can’t stagger benefits – say, each company promises to pay for a dental checkup every year. You can’t claim a dental checkup from company A in January and company B in June, even though each company is being paid separately for policies which pay for an annual dental checkup.

    I’m the only one who seems to find this greedy and weird (on the part of the companies, that is). Most people just notice that they get even more money back if they can claim under a second policy, and don’t think about the fact that they’re actually paying for double coverage and getting much less than even 1.5 overall.

    But compared to the US insurance industry, that’s small stuff.

    I’ve always thought the US consumer could save a fortune with just the reduced overhead in administration costs in a single-payer system, but hadn’t realized quite how the insurance companies offered – at least before my mother’s told her that if her cancer recurred, her treatment wouldn’t be paid for because there was a cap in her policy. Fortunately for her, it didn’t recur, and now she’s home.

    Cheryl

    8 Oct 09 at 10:14 am

  2. I will NOT do this in a major way. A few points to note:
    1. Beware of anyone who assesses the quality of health care by life expectancy rather than NATURAL life expectancy–unless you think changing our medical treatmant system will have an effet on our murder, accident and suicide rates.
    2. Also take a look at survival rates for various conditions. No health care plan currently before congress will make us diet and exercise, so the number of heart attacks is not a function of medical care. The survival rate is.
    3. Beware of magic money. Can YOU find the “fraud waste and abuse” line in the budget? Do you think Congress can and will? The “Gang of 15” had what I thought was an excellent plan–companies pay money to employees with which they buy insurance, so pay has to go up by the amount of currentn insurance premiums plus the taxes the companies don’t pay on money spent on medical insurance, which counts as an expense. With the additional tax money, the Federal government could pay premiums for the poor. This has several good features, but that additional tax money is real money: either the employees or the stockholders will pay it. The proponents write as though the plan doesn’t cost money. “Budget neutral” is NOT free.
    4. Consider what would prevent the sort of cheating by insurance companies Jane describes. If we each purchased our own policies, the reputation of the insurance company would matter. A lot. When I buy a used book through Amazon, I know exactly how many transactions have been made that way, and what the dealer’s satisfaction rate is. I have no such numbers for my health insurance company, and couldn’t use them if I had, since my employer buys the insurance.Another aid would be a quick cheap legal resolution. If it takes months and tens of thousands of dollars to sue an insurance company over treatment, the insurance company has already won.
    5. Consider what would actualy make medical care cheaper and more efficientTort reform to limit “pain and suffering claims?” Medical courts to sort out junk science? Fee for ailment and not for “procedure?”
    6. Consider what would make insurance cheaper: The sale of insurance policies across state lines to encourage competition. High deductable policies for those who only seek medical attention in emergencies? How about NOT specifying that any insurance policy has to cover sex change surgery or treat mental illnesses we don’t know how to diagnose or treat?

    I went on too long. Save the list for next time. There will be a next time, because nothing currently coming out of the committees of Congress addressing much of anything covered in 4, 5 and 6. Whatever passes, the serious work will just be put off.

    As for a revolt against insurance companies, let’s get our priorities straight. A rational people would have lynched congressmen, cabinet members and possibly a President or two on at least three occasions over the past 50 years. Insurers are a minor annoyance by comparison.

    robert_piepenbrink

    8 Oct 09 at 6:25 pm

  3. I think one addition to the list, Robert, should be “stop treating health insurance like a get-out-of-medicine-free card.” It should be more like car or home insurance..there in cases of catastrophe, but you pay for the basics. If car insurance was like health insurance, people would expect to get all their gas, oil, tires and service for free, and car insurance would cost $12,000 a year.

    Basic doctor visits, lab tests, dental visits, etc, should be paid for out of pocket. Yes, I know some people cannot afford even that. Perhaps a subsidy for them. But if everyone had just catastrophic coverage, and the rest was pay-as-you-go, costs might be a bit more balanced.

    One more thing I haven’t seen mentioned…long term care. Is this health care reform suddenly supposed to pay for all the baby boomers soon to be living in elder care? Wowser.

    Oh…and I move that we make Congress take whatever coverage the rest of us get stuck with. I am sick to death of them exempting themselves from whatever they decree is good for the rest of us.

    Lymaree

    8 Oct 09 at 11:32 pm

  4. Hi. A couple of things. I always feel so odd writing comments to my own posts, but…

    First, none of the reforms suggested by Robert and Lymaree address the issue in the post, which was not health care coverage, but practices that would be considered, in any other business, simple and outright fraud.

    This is not simply “cheating.” Health insurance companies have entire departments dedicated to finding ways to get out of paying benefits, and they do.

    Second, less regulation is unlikely to solve this problem, for two reasons.

    The first is that we can see what the largely unregulated insurance market is like–individual policies are far less regulated than group policies, and there isn’t less fraud in that market, there is more.

    And along with more fraud, more abuse. Your group policy can’t drop you from the rolls if you get sick. There are regularions that prevent it. Your individual policy can do that–and it will.

    But the second is the crux of this whole matter, and the reason why I don’t think competition is going to work here.

    And that’s because, no matter what you do about health insurance regulations, there will be no competition in the only sector in which it matters.

    I’m talking about sick people.

    To quote a National Review article at the time of the Clinton attempt to get this done–no insurance company can afford to get the reputation of being good to sick people.

    If it gets that reputation, sick people flock to it, and sick people are a net drain on the system.

    Private insurance worked fairly well in the Fifties and Sixties because people didn’t actually have to have it. If the insurance companies behaved badly, people could simply refuse to buy any insurance.

    And that meant that insurance companies had to promote their reputations as being good for you when you were sick–otherwise, you’d just not bother to enter the system.

    The “not bother” option isn’t really available any more, and if they get an individual mandate to buy insurance, it will actually be illegal.

    And the bottom line would remain the same–insurance companies make a profit by taking more in in premiums than they pay out in claims.

    That gives them an incentive to attract healthy people and to get rid of sick people in any way possible.

    Given that imperative, they’d be crazy not to engage in the practices I’ve described as long as they knew they could get away with them.

    You could put all the reforms Robert and Lymaree have suggested into effect tomorrow, and they’d do nothing at all to end the fraud.

    And sick people would still be the people nobody wants and everybody wants to get rid of. There would be no competition for their business.

    janeh

    9 Oct 09 at 5:38 am

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