Older Americans may have to postpone retirement under New health bill

[Al in Ohio]

I've said multiple times, the ACA was not in existence a few "short" years ago, yet people figured out how to ER.

I'll be more blunt. If you can't make a plan to ER without counting on other peoples money in the form of "subsidy", then you need to go back to FIRECALC, and build another plan.

Yes they did, but with healthcare costs projected to be 10%-50% of your annual expenses to worry about via either COBRA ( appropriate name : snake that will slowly kill you) or previous open market insurance ( no online state sponsored comparison shopping) most had to wait til 65 even if all other finances were in line. Then with the onset of the ACA came more affordable healthcare for those not yet Medicare eligible. This created a notable spike in early retirees from 2012 until the present. There were entire groups on this board that all ER'd solely after having that piece of the equation resolved.

 

[Johanson]

I have spent time in Canada. That's way overblown. The vast majority of Canadian's love their healthcare system and in fact have greater satisfaction with their care. Also the Canadian med system is proven to have less mis- diagnoses and lab errors. Emergency care and routine care wait times are only slightly longer (days) while appointments for specialists for elective procedures can take 4 weeks or longer. Very few Canadians travel south in actuality for care in the US. They truly laugh at our health care system in comparison to theirs. They like the Netherlands have 3 out of 3 of the above criteria pretty close. I am pretty sure there are more, but those more well traveled will weigh in is my guess.

They are also 10% the size of the USA. Add another 300 million people to their system and see how they do.

 

[Al in Ohio]

They are also 10% the size of the USA. Add another 300 million people to their system and see how they do.

Not sure. I was in Toronto at the time. You know, the 3rd largest city in North America with almost 3 million in city limits and 8.7 million in greater Toronto. Yeah that little berg.

 

[Hyperborea]

They are also 10% the size of the USA. Add another 300 million people to their system and see how they do.

You mean adding economies of scale won't help make it even cheaper?

 

[jimbee]

I 100% agree that the big driver of HI cost is the underlying cost of care. But insurers can affect the cost of care, and increasing competition among insurers can induce them to help reduce care costs.
Imagine there's one insurer in a market, and lots of medical care providers. The insurer has very little incentive to drive down the underlying cost of care--the insurer effectively gets a 20% "commission" on top of whatever the medical costs are. They can charge higher premiums if MRIs cost $500 than if they cost $100. And they can pass it all on to policyholders, who have no choice but to pay it. But if there's competition between insurers, the insurers have a reason to get a good deal on the MRI, knee replacements etc because customers will be shopping among many insurers in a competitive marketplace for the best value. So the insurers will seek to get the best value, too.
The market can work, but I have big concerns that enough info will be available to consumers, in a readily digestible manner, to allow competition to work.

Ok, I can see the insurers possibly affecting the 80% portion if they can negotiate lower prices from medical providers.

I agree with your last point, price transparency is a big problem. Whenever my doctor recommends a test or procedure, I ask for a price quote, and it can take a few weeks to get it.

 

[travelover]

Ok, I can see the insurers possibly affecting the 80% portion if they can negotiate lower prices from medical providers.
.............

But the negotiated price between the insurer and the medical provider depends on agreement on both sides. What is the incentive for a very big hospital system to give much of a break to a tiny insurer, who may even be out of state? It seems to me that some insurer competition is good, but there needs to be a match in bargaining power between the insurer and medical provider to drive down prices.

 

[MichaelB]

I 100% agree that the big driver of HI cost is the underlying cost of care. But insurers can affect the cost of care, and increasing competition among insurers can induce them to help reduce care costs.
./.
The market can work, but I have big concerns that enough info will be available to consumers, in a readily digestible manner, to allow competition to work.

"Free market" economics do not apply to health care. We know this, Kenneth Arrow was awarded the Nobel Prize for economics when he demonstrated it.

The more extensive coverage and lower cost of health care among other developed OECD countries (Euro Area, Japan, Australia, Canada) is not the result of a "free market" approach, it is the outcome of a heavily regulated approach where all the constituents share common objectives. In the US this is not likely to happen, as the participants have defined objectives that are not compatible with each other. There is no example in the world of a large diverse free market in health care that is extensive and cost effective.

Back to our health care proposals, insurers are not required to offer insurance everywhere to everyone. They are free to pick and choose where to sell. Insurers and providers have put in place a multi-tiered pricing system that discriminates against the individual consumer and forces the consumer to use the insurer as a price intermediary. This is (continues to be) a major disadvantage for the consumer, who is forced to use an insurer, while the insurer has no reciprocal obligation.

It looks as if the problem of insurers leaving some markets around the country will continue, and health care providers will continue to price as aggressively as they can, uninterrupted and undeterred.

 

[euro]

Many years ago, we overheard a conversation between several high school aged girls.

"I work with an older woman at <clothing store>. She is sorta different, but I guess she is OK."

"How old is she? She sounds nice."

"Oh, she's old, probably something like 28."

Yep, it's all relative, isn't it? Compared to Methuselah, we are all rookie greenhorns...

 

[jimbee]

What is the incentive for a very big hospital system to give much of a break to a tiny insurer, who may even be out of state?

Not much. I just said I could see it possibly affecting the cost, I didn't say it would drive costs to affordable levels. I agree that the impact is likely to be low.

 

[Chuckanut]

I also agree that both the ACA, and the new proposal are WAY too focused on paying for premiums through "breaks" of some kind, rather than cost control.

I agree. Focusing just on premiums is not getting to the root of the issue.

There are things that can be done. What are the Canadians doing that allows them to get Rx drugs so much cheaper? I think we know that answer to that, so let's implement it.

A friend was in India a few years ago. Her traveling companion had broken an arm so they went to the hospital. They spoke to a Harvard Med School trained doctor. He worked on her friend's arm then asked if either of them had any other problems. My friend mentioned a shoulder issue that had plagued her for years. They did an MRI and he diagnosed some small problem in the shoulder - total cost for for the MRI and consultation was $65!!

Ok, India is a far less expensive third world country. But, Belgium isn't.

I think most of us know about the guy in the NY Times article who had a hip replacement done in Belgium. He was looking at a $78,000 bill in the NY.

he ultimately chose to have his hip replaced in 2007 at a private hospital outside Brussels for $13,660. That price included not only a hip joint, made by Warsaw-based Zimmer Holdings, but also all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.

http://www.nytimes.com/2013/08/04/health/for-medical-tourists-simple-math.html?pagewanted=all

Or this:

http://www.nytimes.com/2013/08/07/us/the-growing-popularity-of-having-surgery-overseas.html

Services like MediBid allow patients to shop online for lower-priced medical care, whether local or in another state. Ralph Weber, the chief executive of MediBid, said the service recently sent a patient to Glendale, Calif., for a hip replacement for $14,450 and another to San Antonio for $19,000 — comparable to European rates.

 

[samclem]

There are things that can be done. What are the Canadians doing that allows them to get Rx drugs so much cheaper? I think we know that answer to that, so let's implement it.

We should find a giant, robust economy willing to shovel tons of money to fund the R& D of new drugs so we can buy them and pay just the marginal cost of their production? That would work, if we can find such a patsy.

 

[euro]

We should find a giant, robust economy willing to shovel tons of money to fund the R& D of new drugs so we can buy them and pay just the marginal cost of their production? That would work, if we can find such a patsy.

+1 !!!

 

[jimbee]

Here is an interesting article regarding new drug creation by country. From the abstract:

Objectives. We explored whether the United States, which does not regulate pharmaceutical prices, is responsible for the development of a disproportionate share of the new molecular entities (NMEs; a drug that does not contain an active moiety previously approved by the Food and Drug Administration) produced worldwide.

Methods. We collected data on NMEs approved between 1992 and 2004 and assigned each NME to an inventor country. We examined the relation between the proportion of total NMEs developed in each country and the proportion of total prescription drug spending and gross domestic product (GDP) of each country represented.

Results. The United States accounted for 42% of prescription drug spending and 40% of the total GDP among innovator countries and was responsible for the development of 43.7% of the NMEs. The United Kingdom, Switzerland, and a few other countries innovated proportionally more than their contribution to GDP or prescription drug spending, whereas Japan, South Korea, and a few other countries innovated less.

Conclusions. Higher prescription drug spending in the United States does not disproportionately privilege domestic innovation, and many countries with drug price regulation were significant contributors to pharmaceutical innovation.
​

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2866602/

 

[cyber888]

Under this Republican plan, if you are 50-64 years old, you pay 5x what 20-30 years old pay. Under Obamacare, it was only 3x. So, if a 30 yr old paid $180/ month, under Obamacare - a 50 yr old would pay no more than $540/mo. Under this Republican bill, a 50 yr old will pay $900/month (or 5x the $180). If this 50 yr old did not have insurance for 2 months, they slap a 30% penalty - that's $1170/month. Thats more than double the $540/month on Obamacare. It also has less subsidy than Obamacare.

 

[imoldernu]

Too early, too complex, too divisive. Maybe 6 months to a year before it shakes out.

 

[samclem]

Under this Republican plan, if you are 50-64 years old, you pay 5x what 20-30 years old pay. Under Obamacare, it was only 3x. So, if a 30 yr old paid $180/ month, under Obamacare - a 50 yr old would pay no more than $540/mo. Under this Republican bill, a 50 yr old will pay $900/month (or 5x the $180). If this 50 yr old did not have insurance for 2 months, they slap a 30% penalty - that's $1170/month. Thats more than double the $540/month on Obamacare. It also has less subsidy than Obamacare.

I guess we are just trying to awfullize this, taking the most negative view possible. Here's a take that is exactly as accurate:

"Under this[-] Republican plan[/-]proposal, if you are 30 years old, you pay only, at most, 20% of what a 50-64 year old pays. Under Obamacare, it was 33% : That's a decrease in premiums of over 39% compared to the present system! And under the present system the, IRS automatically "slaps on" a [-]fine[/-] tax of thousands of dollars if families have a lapse in coverage. Under the newly proposed system, there's no government penalty, but insurers can choose to add 30% to their premiums if you go without insurance for 60 days."

 

[scrabbler1]

Under this Republican plan, if you are 50-64 years old, you pay 5x what 20-30 years old pay. Under Obamacare, it was only 3x. So, if a 30 yr old paid $180/ month, under Obamacare - a 50 yr old would pay no more than $540/mo. Under this Republican bill, a 50 yr old will pay $900/month (or 5x the $180). If this 50 yr old did not have insurance for 2 months, they slap a 30% penalty - that's $1170/month. Thats more than double the $540/month on Obamacare. It also has less subsidy than Obamacare.

From my years working in the actuarial field, whenever a rule change such as changing the age ratio was introduced, it was done on a revenue-neutral basis. That is, changing the age ratio from 3:1 to 5:1 could not, in the aggregate, generate more or less revenue than before the rule change. We often filed revenue-neutral rule changes with state insurance departments and they were always approved unless the state insurance department disagreed with the underlying rule change itself.

In order to accomplish that, there would be rate offsets to ensure that the rule change was revenue-neutral based on a given book of business. The amount of the rate offset would depend on how many people were in each of the rating categories and how much revenue each subgroup generated.

Using your $180 and $540 rates for younger and older people, let me first demonstrate 2 extreme examples. Suppose you have 10 people, all age 20-30. To ensure revenue-neutrality, the rate for the 50-60 class would increase to $900, as you wrote. But this assumes that nobody will be in that age class so the total revenue before and after would remain at $1,800 ($180 x 10). The other extreme would assume that all 10 people are age 50-60. There, the rate for the 20-30 would drop to $108, to assure revenue-neutrality ($540 x 10, or $5,400).

But neither scenario reflects the actual population, so what will happen is the rate for the age 20-30 will drop a little while the rate for the age 50-60 will increase a little, creating a 5:1 age ratio while generating the same overall revenue.

Suppose there are 5 people in each age group. Without going through all the algebra, to be revenue-neutral, the rate for the younger group would drop 33% to $120 while the rate for the older group would rise 11% to $600. The total revenue generated would be $3,600 before and after the age ratio change.

 

[samclem]

Here is an interesting article regarding new drug creation by country. From the abstract:

Objectives. We explored whether the United States, which does not regulate pharmaceutical prices, is responsible for the development of a disproportionate share of the new molecular entities (NMEs; a drug that does not contain an active moiety previously approved by the Food and Drug Administration) produced worldwide.

Methods. We collected data on NMEs approved between 1992 and 2004 and assigned each NME to an inventor country. We examined the relation between the proportion of total NMEs developed in each country and the proportion of total prescription drug spending and gross domestic product (GDP) of each country represented.

Results. The United States accounted for 42% of prescription drug spending and 40% of the total GDP among innovator countries and was responsible for the development of 43.7% of the NMEs. The United Kingdom, Switzerland, and a few other countries innovated proportionally more than their contribution to GDP or prescription drug spending, whereas Japan, South Korea, and a few other countries innovated less.

Conclusions. Higher prescription drug spending in the United States does not disproportionately privilege domestic innovation, and many countries with drug price regulation were significant contributors to pharmaceutical innovation.
​

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2866602/

Sorry but I call "bogus" on this methodology.
- Look at their methodology for assigning "inventor countries" to the NMEs. Drug companies are international and money is fungible. Dough that gets pumped into Big Pharma by the US "Medical/Industrial Complex" through our higher drug prices funds research in labs all over the world.

 

[exnavynuke]

I guess we are just trying to awfullize this, taking the most negative view possible. Here's a take that is exactly as accurate:

"Under this[-] Republican plan[/-]proposal, if you are 30 years old, you pay only, at most, 20% of what a 50-64 year old pays. Under Obamacare, it was 33% : That's a decrease in premiums of over 39% compared to the present system! And under the present system the, IRS could [-]fine[/-] tax families thousands of dollars if they had a lapse in coverage. Under the newly proposed system, there's no government penalty, but insurers can choose to add 30% to their premiums if you go without insurance for 60 days."

From my years working in the actuarial field, whenever a rule change such as changing the age ratio was introduced, it was done on a revenue-neutral basis. That is, changing the age ratio from 3:1 to 5:1 could not, in the aggregate, generate more or less revenue than before the rule change. We often filed revenue-neutral rule changes with state insurance departments and they were always approved unless the state insurance department disagreed with the underlying rule change itself.

In order to accomplish that, there would be rate offsets to ensure that the rule change was revenue-neutral based on a given book of business. The amount of the rate offset would depend on how many people were in each of the rating categories and how much revenue each subgroup generated.

Using your $180 and $540 rates for younger and older people, let me first demonstrate 2 extreme examples. Suppose you have 10 people, all age 20-30. To ensure revenue-neutrality, the rate for the 50-60 class would increase to $900, as you wrote. But this assumes that nobody will be in that age class so the total revenue before and after would remain at $1,800 ($180 x 10). The other extreme would assume that all 10 people are age 50-60. There, the rate for the 20-30 would drop to $108, to assure revenue-neutrality ($540 x 10, or $5,400).

But neither scenario reflects the actual population, so what will happen is the rate for the age 20-30 will drop a little while the rate for the age 50-60 will increase a little, creating a 5:1 age ratio while generating the same overall revenue.

Suppose there are 5 people in each age group. Without going through all the algebra, to be revenue-neutral, the rate for the younger group would drop 33% to $120 while the rate for the older group would rise 11% to $600. The total revenue generated would be $3,600 before and after the age ratio change.

Both of these posts seem to assume the rule change is required to be a revenue neutral change. I've seen nothing in the current bills that require that to be the case. If the rule change is not revenue neutral, then there is no reason that the "cheaper" price (younger people's) plans wouldn't stay the same and let the insurers just raise the 'higher" price (older people's) plans.

 

[Chuckanut]

We should find a giant, robust economy willing to shovel tons of money to fund the R& D of new drugs so we can buy them and pay just the marginal cost of their production? That would work, if we can find such a patsy.

Looking for a patsy is a waste of time. We need to look at why drugs in the USA are so much more expensive than the same or similar drugs in places like Canada and Europe. I suspect it is a combination of factors including everything from greed to government rules and regs that make it hard to have a truly competitive market for drugs.

 

[samclem]

Both of these posts seem to assume the rule change is required to be a revenue neutral change. I've seen nothing in the current bills that require that to be the case. If the rule change is not revenue neutral, then there is no reason that the "cheaper" price (younger people's) plans wouldn't stay the same and let the insurers just raise the 'higher" price (older people's) plans.

There's no reason they couldn't charge 30 year olds $6000 per month and 60 year olds $30,000 per month. Except for market forces--assuming there are options. There's no "reason" McD's can't charge $100 for a Big Mac, but they don't because that's not the price at which they make the most profit.

 

[MichaelB]

I think insurers are not free to set any price, they are subject to review, approval and compliance with state regulations.

 

[samclem]

I think insurers are not free to set any price, they are subject to review, approval and compliance with state regulations.

Wait until the cross-state-lines sales get into full swing. The race to the bottom is on!

 

[scrabbler1]

Both of these posts seem to assume the rule change is required to be a revenue neutral change. I've seen nothing in the current bills that require that to be the case. If the rule change is not revenue neutral, then there is no reason that the "cheaper" price (younger people's) plans wouldn't stay the same and let the insurers just raise the 'higher" price (older people's) plans.

But this isn't how insurance rates are generally determined. First, the aggregate amount of premiums needed to cover losses are determined. Then, how those premiums are allocated among the insureds is determined next. If more premiums are to be collected from one subgroup of people via a rule change, then less will be collected from another subgroup of people.

If there is an overall need to raise rates, then that will be levied among all the insureds in the book of business. This will be combined with any rule changes and offsets to determine a final, overall change for each subgroup. The rule change alone won't be used to increase rates overall.

 

[euro]

Sorry but I call "bogus" on this methodology.
- Look at their methodology for assigning "inventor countries" to the NMEs. Drug companies are international and money is fungible. Dough that gets pumped into Big Pharma by the US "Medical/Industrial Complex" through our higher drug prices funds research in labs all over the world.

Absolutely correct!