Chicago Tribune Editorial
October 28, 2009
Democrats in the U.S. House and Senate have spent the spring, summer and fall grappling with how to fix the health care system. They’re still trying to craft a bill they can sell to Americans — or even explain in plain English.
And the Republicans? Well, as the minority party, they’re mainly on the sidelines. They’ve become the party of “no,” sniping at every Democratic health care reform idea without promoting any of their own. Right?
Not entirely.
Over the summer and fall, Republicans in the House and Senate have introduced six — yes, six — health care reform proposals. You didn’t hear? Well, those plans didn’t produce much of a ripple because Democrats dominate the Congress.
But now Republicans are weighing a shift in strategy. Instead of taking more potshots, some Republicans say their party should present a coherent alternative to whatever final Democratic plans emerge in the House and Senate. Republicans on the House Ways and Means Committee reportedly are drafting legislation the GOP could introduce when Democrats bring their proposals to the floor.
Here’s hoping they do. Rep. Mark Kirk, R-Ill., who sponsored a health reform bill, said recently: “The job of the opposition is not just to point out all the flaws in legislation coming to the floor, but to offer ideas for how you would fix it.”
He’s right. Others offering proposals: Rep. Tom Price of Georgia, Rep. Paul Ryan of Wisconsin, Rep. Roy Blunt of Missouri, Rep. John Shadegg of Arizona and Sen. Jim DeMint of South Carolina.
We don’t agree with everything in these bills. But the GOP proposals contain smart ideas to increase choice and competition in the health insurance market — a powerful Republican counterpoint to the Democrats’ expensive plans. The ideas include:
–Let insurers sell policies across state lines. That would loosen the strangling state-by-state regulations and unleash competition to drive premium prices down.
–Give people who buy insurance in the private market the same tax breaks as those who get it through employers. Now, employers that offer coverage get a tax break on the premiums they pay for employees. And employees don’t pay taxes on the value of the coverage they receive. People who want to buy insurance in the individual market should get the same tax breaks. That would help millions of people acquire coverage.
–Expand the ability of small businesses, trade associations and other groups to set up insurance pools to offer coverage at more attractive rates.
–Control health costs in part by reining in the medical malpractice system that raises insurance premiums and forces doctors to order tests to protect themselves from lawsuits. Limiting certain kinds of damage awards would reduce spending on health care by about $11 billion in 2009, or about one-half of 1 percent, the Congressional Budget Office estimates. Think about that in human terms: Reform would save millions of patients the expense and trauma of unnecessary tests and procedures.
These excellent ideas could expand coverage for the uninsured without cratering the federal budget or curbing the competition and innovation that drive the U.S. health care system. Republicans should keep pushing them — and ruling Democrats need to give them a full and fair hearing.
Copyright © 2009, Chicago Tribune
What is interesting here is how carefully the Trib editors cherry-picked a few attractive ideas from bills that are otherwise little more than insurance industry protection acts.
I think there would be wide agreement with eliminating state regulation of health insurance (excepting the state regulators themselves) and extending income tax breaks to individuals who purchase private health insurance. And obviously permitting the creation of large insurance pools that either small businesses or individuals may buy into would be welcome as well but this can only work if very large widely encompassing pools are formed.
The issue of medical malpractice is much more complicated however. In those states that have already implemented tort reform the results have not matched proponents expectations of savings in medical malpractice insurance costs. What tort reform has accomplished is to greatly limit the option of civil litigation to remedy bad medicine.
The bigger question in my mind is why must insurance companies be kept involved in healthcare? What does their participation bring to the table other than contribute hundreds of millions of dollars in extra costs and profit?
I could make a strong case that many news outlets cherry pick favorable points in the health care proposals being discussed by the House and Senate. I believe the quest for profit creates the most lean and efficient system possible. How is a huge government health plan going to be motivated to be efficient? It is well documented that insurance company profit margins are 3%. Why not make other industries the target of your outrage. Doctors, pharmaceutical companies, hospitals, attorneys, MRI mfg’s, etc. , etc make much higher profit margins. And, do a little research, Blue Cross Blue Shield of Illinois administers many of the government health plans, Medicare and Medicaid, in the state of Illinois. If government is the answer why do they contract this out to private insurers?
Dan,
When the Republicans announce that they are shifting their strategy so that “Instead of taking more potshots, [they] should present a coherent alternative .…” that is an admission that up to now they have only carped in the absence of their own coherent plan.
Indeed, some of the ideas Republicans such as Aaron Schock, congressman from Illinois’ 18th, have suggested are either knockoffs of ideas already proposed—-for instance allowing young people to stay longer on their parents insurance—-or they are tricks designed to destroy Medicare and Medicaid by cynically using privacy regulations.
However, let’s take a look at three of the suggestions mentioned in the article: selling across state lines, allowing businesses to pool, and malpractice.
To begin with, selling and buying health insurance across state lines would require exactly what many Democrats and virtually all liberal/progressives want—-and what you suggested in an earlier post: federal insurance regulation, or as you called it, a “national standard.” That could be achieved by repealing McCarren-Ferguson (something I heard Dave Dunn propose months ago) and establishing a department of insurance, or at least a national insurance commission (again something Dave has proposed).
Insurance pooling for businesses? I am all for allowing businesses to pool, but the best way to do this is via a national exchange which includes a strong government choice-competition plan. For example, small businesses in Galesburg could hold an insurance summit among themselves, including both the owners and the employees, and after examining all of the options, agree on a plan that would best suit their health care and financial needs.
Before leaving the topic of insurance pools, I should mention that we have historical precedent to evaluate this concept. During the ’30’s and ’40’s, several rural areas across the country tried to dispense medical care through co-ops, and without a large national pool of enrollees they simply could not sustain themselves. That is what makes the national health exchange so appealing; while fifteen small businesses in Galesburg would be selecting a plan from the exchange, tens of thousands of other groups (and individuals) across the country might be selecting the same plan. A national exchange would provide the kind of numbers needed to sustain an insurance plan—-a private one or public one.
Regarding malpractice: Studies estimate that malpractice reform would spare 1–3% on health care costs. Okay, when you factor that into the trillions we spend, it’s not chump change; however, it is not a silver bullet either. What’s more, during his address to Congress, President Obama extended some compromise to the Republicans on that issue, and in turn they disrespected him.
On insurance profits, an AP article on 10/25, placed the industry’s profit margins at 6%. Of course, that’s not as high as many other enterprises, but we have to keep in mind that government plans don’t have to make a profit or appease stock holders—-with one caveat: Since the late 1990’s, when private insurers became directly involved in Medicare through Medicare Advantage (MA), both the the General Accounting Office (GOA) and Congressional Budget Office (CBO) report that costs for MA run 10–13% greater than traditional Medicare. The GAO also reports that a significant portion of government subsidies channeled to private insurers participating in MA go into company profits. Why were private insurers brought so directly into the delivery of Medicare payment through MA? This came about as part of the Balanced Budget Act in 1997 (I think that was the year), when the twin notions of deregulation and privatization permeated the Washington mindset, and an embattled President Bill Clinton capitulated to a Republican-controlled Congress.
There is a great deal of back and forth on the administrative costs of Medicare versus private insurance. However, a study conducted by Jacob Hacker for Berkeley’s Center on Health, Economic, and Family Security, found that between 1997 and 2006, spending per enrollee for comparable benefits grew 4.3% in Medicare and 7.3% in private insurance. A number of analysises report administrative costs for private insurers to be several times that of Medicare. In addition, there is no dispute that government insurance has an advantage over private insurance in that the former does not have to spend money advertising.
Finally, there is great incentive for government-run health care to deliver quality. Government programs such as Medicare and the VA are open to constant scrutiny because they are PUBLIC. Also, with a government program, when an enrollee feels they have been wronged, he or she can appeal to a representative or senator for redress of grievances. Because those public officials are held accountable by the electorate, they will become an advocate for their constituents. In the case of private insurance, the agent is the policy holder’s advocate, and most agents make every effort to be an effective advocate; however, the agent not only has to answer to his or her client, but also to the insurance company; and because of the profit-motive, the insurance provider may have a vested interest in not satisfying a health care claim.
Dan, thanks for you ideas and the dialogue you provide.
Jim
In the 20 years I have spent in the health insurance business I can honestly say that I have never had an insurance company decline a claim that was medically necessary and covered by the insurance contract. What happens more often than not is an initial denial due to incomplete information. For example, I recently had a customer’s claim denied because it was considered elective treatment. Why did this happen? The treatment for this condition was Botox injections which is typically related to cosmetic surgery. After the denial we had the insureds physician write a letter explaining that Botox injections were medically necessary for the condition suffered by this insured. As a result, United Healthcare paid the claim and is paying ongoing claims. This greedy insurance company is paying for $3,000/ month treatment on this individual when the total group premium is less than $3,000 per month. Who can argue that this is unfair? The best news is that I just received this groups renewal and they are only paying 2% more for insurance next year. Only 2% more when one individual on the group spent more than the total premium payed by the group last year. Folks, I don’t come to these conclusions by ideology, I come to them based on real life experience working with insureds every day. Does every story have a happy ending? No! But the happy endings are the norm.
Dan,
I appreciate your advocacy for your clients. I don’t know you personally, but if Mike Kroll vouches for you, that’s good enough for me. No question about it, you work very hard for you clients, as I believe most insurance agents and insurance brokers do.
Have you ever encountered a situation where a health care insurer eventually paid a claim—–but only after the client had threatened legal action or public embarrassment? I ask this question because my brother-in-law told me this evening that years ago his insurance company was refusing to pay some bills incurred from my nephew’s heart surgery, while dragging its heels on other bills. After being harassed for months by the medical institutions and providers, my brother-in-law threatened a law suit against the insurance company, and it promptly paid the bills. According to my brother-in-law, the claims in question were clearly covered by the insurer, yet the company did what it could to delay payment—- or even avoid payment. Yes, the insurer paid the claims, but only after being threatened. Others have told me similar stories, and I just wondered if you have ever encountered that situation.
I don’t for a minute believe that agents or even the insurance people we talk with on the phone are heartless—-quite the opposite. I do wonder, though, if the flip-side of the old adage “Distance makes the heart grow fonder” isn’t true for those insurance executives and actuaries who have little contact with suffering people: Because these men and women rarely, if ever, see the human face of denied or delayed claims, they lack any foundation for empathy. It’s like when we hear on the news that a thousand people got drowned in flooding in some faraway place, we think it’s terrible but have no emotional investment in the tragedy.
Dan, let me know your thoughts.
Thanks for the dialogue!
Jim
Jim, if you want distance try dealing with a government bureaucrat that has no motivation to do the right thing. He is not motivated by the quest for profit by providing quality. Believe me, in the insurance marketplace quality of service is a big part of being competitive. I appreciate your example Jim, but even your example has a happy ending.
Dan, thanks for your reply.
Everyone on Medicare with whom I have spoken is extremely pleased with that government program, as are military people on TriCare and VA.
I know insurance companies deliver quality. However, what happens to people who have the same situation as my brother-in-law, but instead of fighting, just give up? I am asking these questions not to be a smart a…, but to get information from you because you are in the trenches.
Thanks for the dialogue, Dan.
Jim