Second installment on ACA for those that like to read tea leaves...

[samclem]

It's going to be a long period of uncertainty but another scenario is if they impair the ACA with budgetary moves or executive orders which do not require 60 votes in the Senate, a lot of insurers may choose to bail long before a full repeal.

That can be fixed. For example, Congress could pass a law that requires any company selling group/employer insurance in a location to offer like coverage via the existing exchanges (throw in some language to account for the different health status of the two populations). One side of the aisle would vote for it as a way to reduce turmoil before the permanent "fix", the other side of the aisle would support it because to do otherwise is to assure the ACA ship hits the rocks and leaves millions stranded before it has been repealed, something they probably don't want on their record.
As MichaelB has pointed out before, the group/employer market makes up the bulk of the health insurance business. Insurance companies won't want to abandon that business. Lashing the two together, at least temporarily, will be a way to keep everything afloat until a replacement is fielded. Group/employer plans have one important salient feature: Some fairly sophisticated "customers" are at work there, and the market is competitive in most places. This level of competition can be expected to help keep prices linked to performance, at least better than a centralized price-setting secretariat or a sole-issuer "market" as some locales now have under the ACA exchanges. While unpalatable to many, doing this would be far less intrusive than many governmental actions already taken to date in this area. As a bonus, the plans companies field may just serve as templates for what they could offer under any new construct, and a year or two of experience with costs/pricing could help with the transition.

Heck, maybe the "linkage" could become permanent. Doing that, along with tax changes to equalize the treatment of employer plans and individually purchased ones, could go a long way toward making the health insurance biz a lot more rational.

 

[MichaelB]

Political speculation is not helpful.

Healthcare insurance is an extremely complex issue, and it does not lend itself to simple "binary" measures. There are two distinct challenges. One is how much it costs (breathtakingly expensive) , the other is who pays (way too expensive for so many). There are deep philosophical aspects to this in addition to practical, day to day concerns.

If there were only two main constituents (providers and consumers) - it might be possible to design and achieve a more rational approach. There are other major constituents, however, such as insurers, institutions and a host of industry, with objectives that are often not compatible and even contrary to "providers + consumers". There is also an abundance of conflict of interest among the constituents.

The hefty price tag of our health care has grown as our health care design and delivery has become more institutionalized. There may be no cause - effect there, but I would bet real money there is.

It is not possible to reduce the cost of health care without providers incurring a serious reduction in income. That's math.

It is also not possible to enable all our citizens access to a standard of health care without some shouldering the bill for others. That's also math.

Working out those two challenges is (IMHO) the work of a generation. After all, that's about how long it took to get us where we are.

 

[GTFan]

It is not possible to reduce the cost of health care without providers incurring a serious reduction in income. That's math.

It is also not possible to enable all our citizens access to a standard of health care without some shouldering the bill for others. That's also math.

IOW, what you're saying is that reform is not possible. For both statements, but especially given the truth of the second statement and the opposition to that. And by opposition I mean opposition to mandates that enable cost-sharing, not tax credits that can be created out of thin air.

The sad part is that we are already paying for access to a standard of health with some shouldering of the bill for others. That's called the ER, and it means that the unreimbursed cost is simply shifted to the rest of us. Which again makes me wonder why people are opposed to having all of us carry health insurance. You can't just claim that because you're healthy you don't need it - if you ever do (for an accident or whatever), you've now become part of the problem.

 

[tulak]

It is not possible to reduce the cost of health care without providers incurring a serious reduction in income. That's math.

Very true. I looked at how much German doctors make a few months ago and it's a decent salary, but it pales in comparison to their US counterparts. This looks to be true in most (all?) European countries.

At one point, DW and I were thinking about living abroad. She's an RN and researched nursing wages outside the US. Let's just say that RNs in the US are paid well.

The math is simple, but the problem is hard.

 

[MichaelB]

IOW, what you're saying is that reform is not possible. For both statements, but especially given the truth of the second statement and the opposition to that. And by opposition I mean opposition to mandates that enable cost-sharing, not tax credits that can be created out of thin air.

Nowhere am I saying reform is not possible. My point is it will take a long time and require many steps.

 

[samclem]

It is not possible to reduce the cost of health care without providers incurring a serious reduction in income. That's math.

It is also not possible to enable all our citizens access to a standard of health care without some shouldering the bill for others. That's also math.

Regarding statement 1: True in the aggregate. But the allocation of GDP to health care in the US has not been the result of normal market forces (as, say, we decide how much to spend on houses, cars, food, etc). Instead, it has been the result of very distorted forces that result when those doing the consuming are not the ones doing the paying, when government policies distort normal pricing signals, etc. So, there's hope for making these choices in a more rational way by reducing these distortions. People need to decide how much the want to spend on health care in a long-term, smoothed fashion over the course of their lifetimes, not when they have a grave diagnosis.

Regarding statement 2: Sharing costs will be a lot more acceptable once we've gotten a handle on them (see statement 1). It's not going to go down well to ask some to pay for the care of others when the cost is out of control and >everyone< can place unlimited demands on the "shared" pot. It's a "tragedy of the commons" scenario. "Luckily," we already spend more than enough to care for everyone, "unluckily", the demand will continue to inflate if more money is just dumped into the existing black hole.

 

[NW-Bound]

It took a few decades for the healthcare system to devolve into the current mess. So, it will take a few years to work it out. I just hope that I do not find myself a "collateral damage" during the tribulation.

 

[MichaelB]

Regarding statement 1: True in the aggregate. But the allocation of GDP to health care in the US has not been the result of normal market forces (as, say, we decide how much to spend on houses, cars, food, etc). Instead, it has been the result of very distorted forces that result when those doing the consuming are not the ones doing the paying, when government policies distort normal pricing signals, etc. So, there's hope for making these choices in a more rational way by reducing these distortions. People need to decide how moch the want to spend on health care in a long-term, smoothed fashion over the course of the lifetimes, not when they have a grave diagnosis.

Regarding statement 2: Sharing costs will be a lot more acceptable once we've gotten a handle on them. It's not going to go down well to ask some to pay for the care of others when the cost is out of control and >everyone< can place unlimited demands on the "shared" pot. It's a "tragedy of the commons" scenario. "Luckily," we already spend more than enough to care for everyone, "unluckily", the demand will continue to inflate if ore money is just dumped into the black hole.

Samclem, I do not share your view on why healthcare is so expensive. Certainly not because of "policy", which is most notable because of its absence. This is not new and has nothing to do with the ACA. Like other products and services that have enjoyed dramatic increases over the decades (university education is a good example), the service providers have transitioned from cost based pricing to value pricing. It is priced to what it is worth on the margin and then bargained down by intermediaries for a fee.

That is a great difference between the US and other OECD countries. Their prices are much more heavily regulated. I do not believe there is any example in the world today where a "free market" is a leading force in lower health care costs.

It took a few decades for the healthcare system to devolve into the current mess. So, it will take a few years to work it out. I just hope that I do not find myself a "collateral damage" during the tribulation.

You and me both, brother. Probably most others here as well.

 

[samclem]

Samclem, I do not share your view on why healthcare is so expensive. Certainly not because of "policy", which is most notable because of its absence. This is not new and has nothing to do with the ACA.

Well, we have policies, but little that is coherent. For instance, we have a policy that allows individuals to receive at least one type of compensation from their employers that we don't tax as income--health insurance. That policy increases the cost of insurance by making more money available for that product. We have government policies about mandatory ER care, we have Medicre and Medicaid and a confused, uncoordinated Gordion's knot of indigent care programs. The ACA is, in many respects, the most comprehensive national policy we have to date on health insurance (if not health care).

Like other products and services that have enjoyed dramatic increases over the decades (university education is a good example), the service providers have transitioned from cost based pricing to value pricing. It is priced to what it is worth on the margin and then bargained down by intermediaries for a fee.

I agree with the analogy, but not the mechanism. I would put home prices in the same basket: In all three cases (residential real estate, college education, health care) , we see large amounts of easy money/government money that has been dumped into the market to make things "affordable", but have had the opposite result. As long as this continues to happen (an increasing amount of dollars chasing a good/service with unlimited natural demand from consumers who are insulated from those prices) we should not be surprised when prices spiral up. Of course 4 year degrees will cost $100K+ if people can get an easy loan to cover it (a loan that might not need to be repaid). It's the same with medical procedures--why should the patient >or< the doc say "no" to the fanciest medical procedures if it has even the slightest chance of helping and it is paid for by someone else?

 

[NW-Bound]

Totally agree with samclem about more money made available pumping up prices.

I see that clearly in education. When I went to school, all classes were taught by professors, and the class size was small. A large class might be 40, while senior and graduate classes often were 10 or less.

My children attended my alma mater 30 years later. The university now has a larger attendance, but many classes are now taught by graduate students, and some classes are on the Web. Tuition goes through the roof. When I went back to visit the campus, I hardly recognized it. So many new buildings, but what are they for? Why do they need so many administrators now?

It's still not as bad as some post high-school vocational schools that have recently been shut down for turning out graduates that cannot get employment, while driving them into debt.

About Medicare, I have some personal experience about seeing my late father given fancy, expensive, but dubious procedures. I will save that for later.

 

[pb4uski]

That can be fixed. For example, Congress could pass a law that requires any company selling group/employer insurance in a location to offer like coverage via the existing exchanges (throw in some language to account for the different health status of the two populations). One side of the aisle would vote for it as a way to reduce turmoil before the permanent "fix", the other side of the aisle would support it because to do otherwise is to assure the ACA ship hits the rocks and leaves millions stranded before it has been repealed, something they probably don't want on their record.
As MichaelB has pointed out before, the group/employer market makes up the bulk of the health insurance business. Insurance companies won't want to abandon that business. Lashing the two together, at least temporarily, will be a way to keep everything afloat until a replacement is fielded. Group/employer plans have one important salient feature: Some fairly sophisticated "customers" are at work there, and the market is competitive in most places. This level of competition can be expected to help keep prices linked to performance, at least better than a centralized price-setting secretariat or a sole-issuer "market" as some locales now have under the ACA exchanges. While unpalatable to many, doing this would be far less intrusive than many governmental actions already taken to date in this area. As a bonus, the plans companies field may just serve as templates for what they could offer under any new construct, and a year or two of experience with costs/pricing could help with the transition.

Heck, maybe the "linkage" could become permanent. Doing that, along with tax changes to equalize the treatment of employer plans and individually purchased ones, could go a long way toward making the health insurance biz a lot more rational.

Or better yet, eliminate the linkage between employment and health insurance entirely so the whole population becomes one giant group that health insurers can compete for using group insurance rules (no underwriting, pre-existing condition exclusions if coverage is continuous, no or limited age rating, etc.) and ACA type subsidies for those for whom insurance is unaffordable.

It is totally stupid the way people who have frequent job changes or periodic layoffs have to contort themselves for health insurance or pay through the nose for COBRA... personal policies would be much simpler so if it was affordable then there might be more participation.

You could put transition processes in place so employers don't get a windfall benefit... require them to apply what they now pay for health insurance to employees to keep them whole... finally, eliminating the 10% threshold for the health insurance deduction would mitigate the change for those with employer coverage and level the playing field for all.

We need some sort of drastic change.

 

[samclem]

Or better yet, eliminate the linkage between employment and health insurance entirely so the whole population becomes one giant group that health insurers can compete for using group insurance rules (no underwriting, pre-existing condition exclusions if coverage is continuous, no or limited age rating, etc.) and ACA type subsidies for those for whom insurance is unaffordable.

I'd be 100% in favor, but >nobody< of any importance is talking about eliminating this link (i.e. effectively doing away with "employer-provided" health insurance). That was a main piece of several previous proposals, but resulted in some very unfair (but effective) attack ads and resultant casualties. Now nobody will touch it. Accomplishing it will need to be done slowly and in many steps over many years. It's a crazy system that resulted from previous government policies (specifically, excepting fringe benefits from government-imposed wage caps during WWII, and lots of policies since then).

 

[Texas Proud]

Samclem, I do not share your view on why healthcare is so expensive. Certainly not because of "policy", which is most notable because of its absence. This is not new and has nothing to do with the ACA. Like other products and services that have enjoyed dramatic increases over the decades (university education is a good example), the service providers have transitioned from cost based pricing to value pricing. It is priced to what it is worth on the margin and then bargained down by intermediaries for a fee.

That is a great difference between the US and other OECD countries. Their prices are much more heavily regulated. I do not believe there is any example in the world today where a "free market" is a leading force in lower health care costs.


You and me both, brother. Probably most others here as well.

I think all of the high cost increases for the various drugs that we keep hearing about is due to lack of policy....

We all know that they were making money selling Epipens for $100.... but the new company decided to keep raising prices and now it is $600.... and probably would have kept rising if not for the outcry that has occurred... there are many other examples of this happening...

I also think it has been happening for other medical tests and procedures... the price just continues to rise.... new products sell for $100K a year even if the cost to produce is nowhere near that amount... why, because they can....


I, like others, do not want to be stuck in this system.... but I am... I can remember when I first started working the cost of health insurance for me was a whopping $10 per month and I had to pay $5 for a doctor visit which was the full cost (sure, it was subsidized, but not that much)....

My next year plan for a family of 4 is almost $1500 per month... I can see the doc twice and then 100% of the cost is on me... and deductible for the family is close to $13K....

Healthcare is becoming the largest cost for me.... and I never thought that it would be possible to say that... BTW, it is not just health care but also dentistry that I put in this category....


I do not know how this will ever be fixed.... all I see are bad outcomes as long as we keep on the glide path we are on....

 

[FIREmenow]

I also think it has been happening for other medical tests and procedures... the price just continues to rise.... new products sell for $100K a year even if the cost to produce is nowhere near that amount... why, because they can....

[rant]
Keep in mind that it takes sometimes tens, or even hundreds of millions of dollars of R&D to develop those products. You can't just base everything on the "cost to make them".

There is NRE to recoup or else these companies would not be in business, nor would we have all that neat stuff to take advantage of.

Granted, some, maybe lots of, companies are doing wrong, but it bugs the crap out of me (being in R&D) to hear statements like, "It only costs $$ to make it".

[/rant]

 

[travelover]

............... BTW, it is not just health care but also dentistry that I put in this category...............

It does seem to be a catching disease. I spend more on my veterinary bills for my pooch than I spend on myself. Greed begets greed.

 

[Taxman59]

When I was w*rking, we tried to create a new subsidiary. We were regulated by the state banking commission, and the new subsidiary would be an SEC regulated entity. When we were meeting with the State, the regulators were saying that they wouldn't let us spin off the assets needed to the new sub unless the state got the right to regulate us (along with the SEC ). When we looked at creating the sub a different way, the SEC wanted to regulate the bank ). When we finally gave up, we realized that the end result was workable, but there was no way to get there from where we were.

This whole health insurance debate, starting with the proposals in the early 90s strikes me as the same thing we ran into, easy answer of where we should end up, but no way to get there without tremendous pain.

 

[MichaelB]

Samclem, yes, decades of easy money led to this. That, a passive, unquestioning household, and an intermediary (private insurance) whose primary objective was not to control the total cost, just make sure they got a share. The end result was, unsurprisingly, price exploitation and unbridled greed.

The challenge we face now is not only the cost. The % of GDP being spent on healthcare, when compared with the rest of the world, points to a pretty substantial misallocation of resources. That is something to approach carefully. We want to bend that into a different shape, not break it.

 

[GTFan]

Nowhere am I saying reform is not possible. My point is it will take a long time and require many steps.

Of course you didn't say that reform is impossible, that was my interpretation of your statements given the current realities.

The problem here is that some folks want to live in a world where if you don't work for MegaCorp then it sucks to be you. For healthcare coverage, that is. There is no sense of shared responsibility for something that we ALL face.

FWIW I am a MegaCorp retiree and I was lucky to have been born on the right side of the bell curve. But I've always believed that the tying of quality insurance to employment leads to corporate serfdom. It should be abolished if any meaningful reform is ever done. It's also why corporations like things as they are, IMO, which makes that reform difficult.

 

[Live And Learn]

Or better yet, eliminate the linkage between employment and health insurance entirely so the whole population becomes one giant group that health insurers can compete for using group insurance rules (no underwriting, pre-existing condition exclusions if coverage is continuous, no or limited age rating, etc.) and ACA type subsidies for those for whom insurance is unaffordable..

So very logical.

 

[Texas Proud]

[rant]
Keep in mind that it takes sometimes tens, or even hundreds of millions of dollars of R&D to develop those products. You can't just base everything on the "cost to make them".

There is NRE to recoup or else these companies would not be in business, nor would we have all that neat stuff to take advantage of.

Granted, some, maybe lots of, companies are doing wrong, but it bugs the crap out of me (being in R&D) to hear statements like, "It only costs $$ to make it".

[/rant]

Rant all you want, but the fact is that the cost of making these drugs include R&D.... and they are STILL charging a lot more than a normal business because they can.... look at the profit margins of drug companies.... some of the highest around....

BTW, I would bet that the cost of advertising is pretty high up compared to R&D... I do not think you can watch an hour of TV and not see a drug commercial...

 

[explanade]

Yeah a lot of the biggest pharmaceuticals spend more on marketing than R&D, supposedly.

 

[Katsmeow]

Samclem, I do not share your view on why healthcare is so expensive. Certainly not because of "policy", which is most notable because of its absence. This is not new and has nothing to do with the ACA. Like other products and services that have enjoyed dramatic increases over the decades (university education is a good example), the service providers have transitioned from cost based pricing to value pricing. It is priced to what it is worth on the margin and then bargained down by intermediaries for a fee.

That is a great difference between the US and other OECD countries. Their prices are much more heavily regulated. I do not believe there is any example in the world today where a "free market" is a leading force in lower health care costs.

I agree with this. While I think I don't often agree with samclem on many things about health care and health insurance, I do agree with him about employer supplied insurance. The not taxing of that insurance does create a huge distortion in people's perceptions. One of the reasons, for example, that some people are shocked by the cost of insurance on the marketplaces is that people have no clue how much their health insurance really costs. We have retiree insurance that covers me and our kids (DH is on Medicare). The unsubsidized cost is over $18k a year. Now, it is subsidized so we are paying more like $8k a year. But, I know the full value. But when DH and I were working we paid a small premium for coverage each year which covered only a small fraction of the true cost. I had no real idea at the time how expensive it was.

I also think it is crazy to have health insurance tied to employment. I know how it came about, but it makes no sense. The fact that you leave your job (voluntarily or not) and it means you lose health insurance makes no real sense when you think about it. And, one of the problems with replacing the ACA is how to deal with that piece. What do you do about the people who leave their job (such as early retirees) or those who lose their job or those who get jobs without health insurance in a world where the expectation is that you get your health insurance through your job.

All of that said, MichaelB is right. "Free market" has not really been the force for lower health costs in the world. There are good reasons about that. Health care is different than buying most other things and there are reasons why free market solutions haven't worked. What keeps costs down in other countries is basically government regulation and, in many countries, having single payer. I'm not saying that has to be the solution for the US, but simply leaving it to the free market isn't going to work.

 

[GTFan]

I also think it is crazy to have health insurance tied to employment. I know how it came about, but it makes no sense. The fact that you leave your job (voluntarily or not) and it means you lose health insurance makes no real sense when you think about it. And, one of the problems with replacing the ACA is how to deal with that piece. What do you do about the people who leave their job (such as early retirees) or those who lose their job or those who get jobs without health insurance in a world where the expectation is that you get your health insurance through your job.

It's all hidden and it's all good as long as you're not paying for it, and then you resent having your tax money go to those that aren't employed as well as you are.

 

[daylatedollarshort]

It make no more sense to lose your health insurance when you lose your job than it does to lose your car insurance or homeowners insurance. People really got hit with with triple whammies in this country when they lost a job pre-ACA - no income, unaffordable individual policies and billings for services many times over what insurance companies negotiate. It is no mystery why medical bills are the cause of 62% of bankruptcies.

 

[samclem]

It is no mystery why medical bills are the cause of 62% of bankruptcies.

You've said this before, and it is as inaccurate now as it was then. Medical bills are the cause of about 5% of bankruptcies (pre ACA), not 62%.