Posted by Charity on June 12th, 2009

Green Mountain Daily has a post this morning about the upcoming health care reform battles.  It, of course, misrepresents the opposition to the “public option” because how else can the left win a debate on any issue other than mischaracterizing the opposition?  (You’ve gotta give them credit for being proactive, though.)

A “public option” would be a government payer (a la medicare or medicaid) as one of the menu choices. Obviously this makes subsidizing easier on the one hand, but also allows the feds more control over the types of coverage. Private insurers are afraid any public option would be too appealing and affordable and draw away business – and both opponents and proponents of a single payer system see this as a way to potentially facilitate a transition to such a model.

The bolded selection is my emphasis, obviously.  That’s the part that’s, let’s say, less than accurate.

How about this?

Private insurers are concerned that any public option will be given an unfair advantage and, as a result, look more appealing and affordable.

The public option will be artificially low in cost, as the current medicaid and medicare systems are.  There’s the obvious, that the public option has the advantage of tax payer funding, but that is not the only advantage.  The government does not pay fair market value for services rendered. This is possible because the rest of us are subsidizing it though our insurance or cash payments.

Once the public option entices unsuspecting consumers with her siren song of low, low prices, the private firms will be driven out of business and all of the sudden the public plan will be in a world of financial hurt, since there won’t be anyone around to offset the below-value payments.

Oh wait, the public option already is in a world of financial hurt.  How about we fix the public plan before we lure more people onto it?

Here’s an analogy the left ought to appreciate: The public option is like when Wal-Mart moves into a neighborhood and puts everyone else out of business with their artificially low prices.  And how does it get such low prices?  By forcing companies to charge them less, in exchange for doing business with the country’s largest retailer.  That’s exactly what the government does to doctors.

The public option: it’s the Wal-Mart of health care.

Sign me up!

Look, health care is expensive.  Next time you are at a hospital, take a look at all of the expensive equipment.  We have made amazing advances in medical science, all of which cost money.  If we want it, we need to pay for it.

Right now, private insurance is paying for most of it.  When private insurance is gone, the public plan will have to pony up the dough.  It’s either that or lower our expectations for care because it’s not going to come for free.

As P.J. O’Rourke says, “If you think health care is expensive now, wait until you see what it costs when it’s free.”

9 Responses to “Public Health Care: Always Low Prices?”

  1. Honestly, I don’t seem to know which way this supposed health care reform from D.C. is going to go. A lot of the details seem to be pretty scarce right now, and the debate seems to have taken a turn from what Obama had promised during his campaign. Back then, he was basically for just extending the eligibility for the Federal Employee Health Benefit Plan (or the FEHBP, which is just a bunch of reasonably priced private health coverage plans where there’s basically no such thing as being denied care due to a “pre-existing condition” or being denied the health care that you need before you try & get it) to all Americans & extending COBRAs from 18 months or so to as long as it takes one to get another job that has health care coverage. Neither of those options would really cost the govt. any more money.

    “Next time you are at a hospital, take a look at all of the expensive equipment. We have made amazing advances in medical science, all of which cost money.”

    Except that’s not the real reason why health care costs so much in this country. The real reasons are the wasted money that goes to administration costs (which are some six times what other countries pay right now), huge profits & CEO pay, and the cost shift from those that use the most expensive form of health care (like emergency rooms) but can’t afford to pay for it to those that pay health care premiums.

    “It’s either that or lower our expectations for care because it’s not going to come for free.”

    Yea, because “lowering our expectations” might include getting better health results for less overall money…ugh…

  2. “The real reasons are the wasted money that goes to administration costs…huge profits and CEO pay…”

    What percentage of our insurance premiums go to administration costs, ‘huge profits’, and CEO pay?
    If the administration costs were reduced to the level of ‘other countries’ (which may have far smaller populations), hospitals only broke even, and CEO pay was reduced to your ‘acceptable’ amount, how much lower would the cost of health care be? Probably not that much.

    Don’t make the mistake of confusing cost and price. The cost is the amount of money required to produce a good or service. The price is how much is charged for that good or service. They are NOT the same thing. When politicians talk about controlling costs, what they really mean is controlling prices, which is always a bad thing to do.

    “Yea, because “lowering our expectations” might include getting better health results for less overall money…ugh…”

    The best way to get better health results is to eat right, exercise and avoid risky behavior, not go down the road of socialized (rationed) medical care.

  3. I agree with a lot of this post. If there is a viable public option people will jump to it as fast as they can. This will drive the private health insurances out of business. That’s a good thing. For-profit health insurance costs a lot because it’s run for a profit. It’s heavy in costly bureaucracy dedicated to delaying and denying payouts. That’s where the profit comes from. The profit comes from screwing people out of the coverage they paid for.

    In Vermont many, many people on private health insurance wish to switch to a Medicaid program, but are not currently allowed unless they go uninsured for 12 months and a great many of them will do just that because private insurance is simply unaffordable. The 12 month rule is in place to dissuade too many people jumping on the life boat all at once and swamping it, but it isn’t fair or right.

    If the federal government offers a low cost public option with low barriers to entry, most people will be all over that out of necessity. Everybody needs health insurance and morally it’s a human right. Let the private companies be destroyed in competition with government insurance. Yes. That’s the best possible thing that could happen. That will lead to a government run single payer insurer which is exactly what we want. It’s broadens the risk pool to include everybody, which will lower the cost, and the price of health care as much as possible, with much better health results for the general population.

  4. “What percentage of our insurance premiums go to administration costs, ‘huge profits’, and CEO pay?”

    According to the insurance industry group America’s Health Insurance Plans, administrative costs for private health insurance plans have averaged approximately 12% of premiums over the last 40 years. A 2003 study published by the Blue Cross and Blue Shield Association also found that health insurer administrative costs were approximately 11% to 12% of premiums. According to a report published by the CBO in 2008, administrative costs for private insurance represent approximately 12% of premiums.

    “The average employee contribution to company-provided health insurance has increased more than 120 percent since 2000. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115 percent during the same period.”

    “the United States has $480 billion in excess spending each year in comparison to Western European nations that have universal health insurance coverage. The costs are mainly associated with excess administrative costs and poorer quality of care.”

    “The United States spends six times more per capita on the administration of the health care system than its peer Western European nations.”

    http://www.nchc.org/facts/cost.shtml

    “The United States spends nearly 40 percent more on health care per capita than its G.D.P. per capita would predict.”

    “The McKinsey Global Institute estimated that excess spending on ‘health administration and insurance’ accounted for as much as 21 percent of the estimated total excess spending ($477 billion in 2003). Brought forward, that 21 percent of excess spending on administration would amount to about $120 billion in 2006 and about $150 billion in 2008. It would have been more than enough to finance universal health insurance this year.”

    “The McKinsey team estimated that about 85 percent of this excess administrative overhead can be attributed to the highly complex private health insurance system in the United States. Product design, underwriting and marketing account for about two-thirds of that total.”

    “One of these is an earlier McKinsey study explaining the difference in 1990 health spending in West Germany and in the United States. The researchers found that in 1990 Americans received $390 per capita less in actual health care but spent $360 more per capita on administration.”

    http://economix.blogs.nytimes......ive-costs/

    “On December 2nd 2008, Emdeon and Newt Gingrich’s Center for Health Transformation (CHT) announced the formation of the U.S. Healthcare Efficiency Index.

    The US Healthcare Efficiency Index measures the progress towards use of electronic transactions and stands at a lowly 43%. Current electronic transaction utilization for medical claims ranges from Claims (75%), Eligibility Verification and Claims Status (both 40%), Claim Remittance Advice (26%) and Payments (10%).

    Converting the remaining paper transactions to electronic is estimated to save the U.S. healthcare system $30 billion annually.”

    “A 2007 McKinsey Global Institute study of healthcare costs in the US concluded that the US spends $1,600 per capita ‘more on healthcare than other OECD countries’ and ‘found that the overriding cause … is the failure of the intermediation system – payors, employers and government – to provide sufficient incentives to patients and consumers.’ Despite this excess spending, the U.S. provides coverage to 85% of the population, compared to 100% in most other OECD countries. McKinsey estimates that, of the U.S. excess spending on healthcare overall, more than 20% is attributable to administration and insurance.”

    http://news.avancehealth.com/2.....ative.html

    “while Regence BlueCross BlueShield of Oregon raised individual policy rates by 26 percent in 2008 and is asking for another double-digit increase this year, its president and CEO, Mark Ganz, is the highest-paid insurance executive in Oregon. After receiving an 11 percent raise, his 2008 salary and bonus totaled $872,665. In fact, Regence handed out raises to its entire executive team, according to documents filed with the Oregon Insurance Division.

    So what did Regence do that resulted in its leaders being rewarded so well? If you take a look at the company’s performance last year, it’s hard to find the merit. Not only did the state’s largest insurer lose 32 percent (334,228) of its members, bringing its enrollment down to its lowest level in five years (776,647), Regence’s profit margin barely reached 1 percent. However, the company collected more in premiums than during the previous year.”

    http://www.oregonlive.com/opin.....we_us.html

    “If the administration costs were reduced to the level of ‘other countries’ (which may have far smaller populations), hospitals only broke even, and CEO pay was reduced to your ‘acceptable’ amount, how much lower would the cost of health care be?”

    Would you like to spend roughly 10-30% LESS in health care premiums and get better care for it?? I sure would…

    Population has nothing to do with the problem, since the per capita rate of expenditures is high in the USA. Even your buddy Newt is on board with the idea that health administration costs in the USA are waaay out of whack. It’s time to wake up…

    “Despite spending more than twice as much as the rest of the industrialized nations ($7,129 per capita), the United States performs poorly in comparison on major health indicators such as life expectancy, infant mortality and immunization rates. Moreover, the other advanced nations provide comprehensive coverage to their entire populations, while the U.S. leaves 45.7 million completely uninsured and millions more inadequately covered.”

    “this needless administration consumes one-third (31 percent) of Americans’ health dollars.”

    http://www.pnhp.org/facts/sing.....ources.php

    “The best way to get better health results is to eat right, exercise and avoid risky behavior, not go down the road of socialized (rationed) medical care.”

    Many other countries have health care systems that encourage people to do the very things that you are advocating. Also, if you don’t think that medical care is “rationed” right now in the USA (by both individuals that can’t afford certain types of care or by corporations that make a bigger profit by denying health care coverage to millions), then you really need to open your eyes…

  5. Haik said, “It’s heavy in costly bureaucracy dedicated to delaying and denying payouts.”

    You should have a talk with my mom about her problems with Medicare. They did not to pay for the care her doctor said she needed. Instead, they made her try a bunch of meds with known bad side effects first. Then her doctor had to jump through hoops for months.

    I would rather let people have choices than to have a government monopoly.

  6. That’s the point though with our *current* system! People don’t really “have choices”. They are told what their choices can & can’t be, and the people making those decisions don’t have the patient’s best interests at heart…they have their own bottom line at heart.

  7. I’m sorry your mom had a bad experience with Medicare Charity, but under our current system, she has a choice. We’re not at the monopoly stage yet. Why did she choose Medicare over a private insurance?

  8. So, Haik, do you think the public health insurance system is going to improve once it becomes a monopoly??

    You implied that the problem of private health insurance denying or delaying payment would not be present in a public system. I offered a counter example. It already is present in the current public system.

  9. I didn’t mean to imply Medicare was perfect, but I do think public health insurance will improve when it covers everyone, because everyone is an extremely large voting block which includes even the richest and more influential people.

    I don’t know why your mom went with Medicare over a private competitor, but I know why most people do. It’s because a choice between something you can afford and something you can’t afford is only the illusion of a choice.