This is the eighth of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report argues that the passed health-care bill fails to reform but rather aggravates the health-care cost crisis.
Although initially interested in the health-care reform debate as a physician in the system, I have become passionately engaged as a father and uncle, and as a traditional American. I am the son and grandson of immigrants, but ultimately, as Americans we are all sons and daughters of immigrants. Until the last generation or two, parents and grandparents working hard and sacrificing for their children to have a better life had been a hallowed American tradition and, in fact, a critical underpinning of our American society. Now, this proud institution has been turned on its head by ever increasing deficit spending for entitlements. We are spending the future resources of our children and grandchildren so we can benefit now. Inherently, this robbing from our posterity also means we are not saving and investing in our country now so our children could have a better life tomorrow.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
The Passed Health-Care Bill – Why It Will Make the Health-Care Crisis Worse and Not Better
Irrefutably, health-care cost growth is fiscally unsustainable. Medicare has an estimated $89 trillion unfunded liability. Medicaid costs continue to sky rocket, driving most of the state budgets into significant deficit. Estimates of annual health-care fraud range from a low of $60 billion to nearly $200 billion , and, as a percentage, are higher for the government programs than for the private insurance industry. Currently, Federal and state government pay for nearly 60% of all health-care expenditure. Only a tremendous leap of faith or naiveté could allow a person to believe that the solution to the health-care fiscal crisis could possibly come from turning the other 40% of health-care over to the Federal government.
Predictably, the recently passed government health-care “reform” fails to address any of the significant underlying cost drivers, but rather contributes further to them. As argued above, the third party payer system that shields the consumer of health-care services from the cost of the services is the critical underlying driver of our unsustainable health-care cost growth. The recently passed “health-care reform” fails to address this principal root cause. Instead, the new bill adds an estimated 32 million more people e.g. uninsured and those with pre-existing conditions, into the same faulty 3rd party payer system, exacerbating the current health-care cost crisis.
Similarly, the new bill does not address governmental regulation that has restricted health-care insurance industry competition. Rather, adding additional regulation and mandates will drive smaller insurance companies out of the business leaving just the few large players who will reap the benefits of Federal Government guaranteed, albeit regulated, profits. While such a model may be necessary for utilities because of the gross inefficiency and expense of duplicated infrastructure in that industry, such a model is inappropriate for the health-care insurance industry and restricts the salutary competitive market forces that result in higher customer service and lower costs.
Further, the bill includes no tort reform. And lastly, the bill does not recognize or address the significant contribution to the numbers of the uninsured as well as the increased health-care service expenditure that results from the Federal tax policy that effectively promotes employer-provided health-care insurance over individual-purchased insurance.
In the final analysis, since this “health-care reform” does not address any of the critical underlying drivers of health-care cost growth, government takeover of health-care can only control costs by taking away the individual’s ability to make their own health-care decisions and severely rationing health-care services. As it turns out, the passed health-care “reform” legislation creates a presidentially appointed Independent Payment Advisory Board (IPAB) empowered to create regulations, without Congressional approval, to slow Medicare spending i.e. rationing. Given that the demand for health-care services exceeds supply of those resources, rationing must and does occur. In our current system, utilization and rationing of health-care is by no means ideal. None the less, we can do better, from both an efficiency and moral perspective, than simply turning that process over to Federal bureaucrats.
The Passed Health-Care Bill – Will Increase the Federal Fiscal Deficit
Supporters of the passed health-care bill proudly highlight the CBO report that estimated the passed bill will result in a $181 billion reduction over the first 10 years. Sounds good but, Congressman Paul Ryan at President Obama’s health-care summit pointed out the CBO scoring of the bill was based on unreasonable assumptions and as such is grossly misleading. These assumptions included a budget that pays for 6 years of the new health-care program spending with 10 years of new program tax collections. Further, that estimate includes $52 billion dollars already assigned to Social Security (a program also rapidly approaching insolvency) to now also be assigned (yes, the same $52 billion) to this new medical entitlement. Similarly, $78 billion of premiums for the CLASS long term care supplemental insurance program (a new Federal subsidy created in this bill) were also double assigned. Most egregiously, the CBO was instructed to assume $500 billion of “Medicare savings” would be shifted into this new entitlement. Yes, the same Medicare program that currently has an estimated $89 trillion dollar unfunded liability. Congressman Ryan further pointed out the Medicare’s Chief Actuary predicted that diverting $500 billion from Medicare would result in 20% of providers dropping Medicare patients and also result in millions of seniors losing their Medicare Advantage coverage.
Recalculating the CBO estimate without these unreasonable assumptions, Congressman Ryan concluded this new entitlement would expand the deficit by $460 billion dollars over 10 years, not reduce the deficit by $131 billion deficit reduction as claimed in the CBO report. Further, over the 2nd ten years, the program would further expand the deficit an additional $1.4 trillion.
This more accurate estimate, disturbing as it is, in all likelihood, reflects a best case scenario. The Federal government health-care cost estimates have been notoriously inaccurate. Two such examples: 1. in its first year, 1987, Medicaid was expected to cost $238 million but wound up costing over $ 1 billion. (In fiscal 2009, Medicaid cost $251 billion.) 2. In 1965, the CBO estimated that Medicare costs would be $12 billion in 1990. Turns out the “reality” number was $90 billion – off by more than a factor of 7.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America!
Monday, May 31, 2010
Monday, May 24, 2010
Sensible Health-Care Reform (Part 7): Health-Care Costs Drivers, V
This is the seventh of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report discusses medical malpractice expenses as an underlying cost driver of our health-care system.
Although initially interested in the health-care reform debate as a physician in the system, I have become passionately engaged as a father and uncle, and as a traditional American. I am the son and grandson of immigrants, but ultimately, as Americans we are all sons and daughters of immigrants. Until the last generation or two, parents and grandparents working hard and sacrificing for their children to have a better life had been a hallowed American tradition and, in fact, a critical underpinning of our American society. Now, this proud institution has been turned on its head by ever increasing deficit spending for entitlements. We are spending the future resources of our children and grandchildren so we can benefit now. Inherently, this robbing from our posterity also means we are not saving and investing in our country now so our children could have a better life tomorrow.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – Malpractice Litigation Expenses
Complete analysis of health-care cost drivers requires examination of medical malpractice issues. A New England Journal study reviewed 1254 random medical malpractice litigation cases and found 40% involved no injury or any medical errors. That same study found for claims awarded, 54% of the award went to administrative costs including lawyer and expert witness fees. In another analysis of medical malpractice costs, the CBO estimated that 2009 direct medical malpractice expenses, e.g. malpractice premiums, awards, and trial costs, amounted to only 2% of all health-care expenditure or $35 billion. However, that number does not include the estimates of the cost of practicing defensive medicine. Those estimates range from 190 to 239 billion dollars annually. In the same report, the CBO estimated that a package of tort reform, including a cap on non-economic damages, would decrease Federal health-care outlays by $54 billion over 10 years. Government health-care expenditure now approaches nearly 60% of all health-care expenditure and therefore, presumably, tort reform would result in a similar magnitude of saving for the 40% of the total health-care expenditure spent in the private sector.
Medical malpractice litigation expenses also have ramifications with regard to patient access to specialist care. Senator John Cornyn of Texas in a 2009 discussion described the malpractice experience in his state. By 2001 because of tort lawyer friendly state laws, Texas had lost all but 4 insurers who wrote medical malpractice policies and premiums for those policies had doubled. From 2001 to 2003, 99 of 254 counties had lost at least 1 high risk specialist. Twenty-six counties lost obstetricians, including 6 counties that had lost all their obstetricians. Five counties lost all their thoracic surgeons. Because of this crisis, in 2003 Texas enacted tort reform, including a $750,000 cap on non-economic damages and raising the standards for medical expert witnesses. Once reform was enacted, the results were dramatic. Malpractice premiums fell by an average of 27%. From 2004 to 2008, physicians including specialists flowed back into the state. One hundred and twenty-five counties added high risk specialists, including 52 counties that added obstetricians – 10 that had none prior to the malpractice reform.
The next Dr. Right will begin the discussion regarding the failings of the passed so called ‘health-care reform bill’, including its failure to address the underlying causes of unsustainable health-care cost growth.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
Although initially interested in the health-care reform debate as a physician in the system, I have become passionately engaged as a father and uncle, and as a traditional American. I am the son and grandson of immigrants, but ultimately, as Americans we are all sons and daughters of immigrants. Until the last generation or two, parents and grandparents working hard and sacrificing for their children to have a better life had been a hallowed American tradition and, in fact, a critical underpinning of our American society. Now, this proud institution has been turned on its head by ever increasing deficit spending for entitlements. We are spending the future resources of our children and grandchildren so we can benefit now. Inherently, this robbing from our posterity also means we are not saving and investing in our country now so our children could have a better life tomorrow.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – Malpractice Litigation Expenses
Complete analysis of health-care cost drivers requires examination of medical malpractice issues. A New England Journal study reviewed 1254 random medical malpractice litigation cases and found 40% involved no injury or any medical errors. That same study found for claims awarded, 54% of the award went to administrative costs including lawyer and expert witness fees. In another analysis of medical malpractice costs, the CBO estimated that 2009 direct medical malpractice expenses, e.g. malpractice premiums, awards, and trial costs, amounted to only 2% of all health-care expenditure or $35 billion. However, that number does not include the estimates of the cost of practicing defensive medicine. Those estimates range from 190 to 239 billion dollars annually. In the same report, the CBO estimated that a package of tort reform, including a cap on non-economic damages, would decrease Federal health-care outlays by $54 billion over 10 years. Government health-care expenditure now approaches nearly 60% of all health-care expenditure and therefore, presumably, tort reform would result in a similar magnitude of saving for the 40% of the total health-care expenditure spent in the private sector.
Medical malpractice litigation expenses also have ramifications with regard to patient access to specialist care. Senator John Cornyn of Texas in a 2009 discussion described the malpractice experience in his state. By 2001 because of tort lawyer friendly state laws, Texas had lost all but 4 insurers who wrote medical malpractice policies and premiums for those policies had doubled. From 2001 to 2003, 99 of 254 counties had lost at least 1 high risk specialist. Twenty-six counties lost obstetricians, including 6 counties that had lost all their obstetricians. Five counties lost all their thoracic surgeons. Because of this crisis, in 2003 Texas enacted tort reform, including a $750,000 cap on non-economic damages and raising the standards for medical expert witnesses. Once reform was enacted, the results were dramatic. Malpractice premiums fell by an average of 27%. From 2004 to 2008, physicians including specialists flowed back into the state. One hundred and twenty-five counties added high risk specialists, including 52 counties that added obstetricians – 10 that had none prior to the malpractice reform.
The next Dr. Right will begin the discussion regarding the failings of the passed so called ‘health-care reform bill’, including its failure to address the underlying causes of unsustainable health-care cost growth.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
Monday, May 17, 2010
Sensible Health-Care Reform (Part 6): Health-Care Costs Drivers, IV
This is the sixth of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report discusses the preferential Federal tax treatment of employer-provided health-care insurance compared to that of individual-purchased health-care insurance as an underlying cost driver of our health-care system.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – Federal Tax Policy
While government insurance industry regulation has unintentionally and indirectly led to higher insurance costs and lower customer service, Federal tax policy with regard to health-care insurance premiums has also unintentionally and indirectly exacerbated the health-care costs crisis and has increased the numbers of the uninsured. Because of the preferential Federal tax treatment for employer-provided insurance over that for individual-purchased insurance, employer-provided insurance costs less than individual-purchased insurance and results in most individuals obtaining health-care insurance through their employer. Though relatively less costly than individual-purchased plans, employer-provided health-care insurance still comes at the expense of higher wages. As previously discussed, as health-care costs have skyrocketed, an increasing share of compensation has been allotted to the health-care benefit and actual take-home wages have significantly decreased. To some degree, those employees then feel obligated and entitled to make the most of that benefit, which increases utilization and therefore costs.
The tax favored status of employer-provided insurance also, to a great extent, makes health-care insurance dependent on employment. Those persons who don’t receive health-care coverage as an employee benefit must purchase their own insurance without the equivalent tax advantage of employer-provided coverage. Further, those individuals do not have the ability to negotiate as part of a larger group (association health plans) to obtain lower rates. As a result of these 2 factors, individual purchased insurance costs significantly more than employer provided coverage. Not infrequently, many of those individuals cannot afford or decide not to buy health-care insurance. As a result, they too end up in the uninsured count.
For those with employer-provided insurance, loss of employment results in loss of health-care coverage and many of those persons subsequently, albeit often transiently, join the ranks of the uninsured. Although that loss can be delayed because of COBRA benefits, the cost of COBRA insurance often is prohibitively high. Further once COBRA has expired, purchasing insurance as an individual typically is even more expensive.
The next Dr Right installment will examine medical malpractice costs as a significant health-care cost driver.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – Federal Tax Policy
While government insurance industry regulation has unintentionally and indirectly led to higher insurance costs and lower customer service, Federal tax policy with regard to health-care insurance premiums has also unintentionally and indirectly exacerbated the health-care costs crisis and has increased the numbers of the uninsured. Because of the preferential Federal tax treatment for employer-provided insurance over that for individual-purchased insurance, employer-provided insurance costs less than individual-purchased insurance and results in most individuals obtaining health-care insurance through their employer. Though relatively less costly than individual-purchased plans, employer-provided health-care insurance still comes at the expense of higher wages. As previously discussed, as health-care costs have skyrocketed, an increasing share of compensation has been allotted to the health-care benefit and actual take-home wages have significantly decreased. To some degree, those employees then feel obligated and entitled to make the most of that benefit, which increases utilization and therefore costs.
The tax favored status of employer-provided insurance also, to a great extent, makes health-care insurance dependent on employment. Those persons who don’t receive health-care coverage as an employee benefit must purchase their own insurance without the equivalent tax advantage of employer-provided coverage. Further, those individuals do not have the ability to negotiate as part of a larger group (association health plans) to obtain lower rates. As a result of these 2 factors, individual purchased insurance costs significantly more than employer provided coverage. Not infrequently, many of those individuals cannot afford or decide not to buy health-care insurance. As a result, they too end up in the uninsured count.
For those with employer-provided insurance, loss of employment results in loss of health-care coverage and many of those persons subsequently, albeit often transiently, join the ranks of the uninsured. Although that loss can be delayed because of COBRA benefits, the cost of COBRA insurance often is prohibitively high. Further once COBRA has expired, purchasing insurance as an individual typically is even more expensive.
The next Dr Right installment will examine medical malpractice costs as a significant health-care cost driver.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
Sunday, May 9, 2010
Sensible Health-Care Reform (Part 5): Health-Care Costs Drivers, III
This is the fifth of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report discussed misconceived insurance regulation as an underlying cost drivers of our health-care system.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator
Health-Care Costs Drivers – Government Regulation Restricting Insurance Industry Competition
While the 3rd party payer system creates detrimental incentives that primarily drive the unsustainable cost growth in both the government as well as the commercial health-care insurance systems, there are additional governmental policies and regulations that disrupt beneficial free market competitive forces and unnecessarily add to the cost of private health-care insurance. State legislated coverage mandates significantly add to the cost of health-care insurance. The mandates are of 2 general forms. The first type requires insurers to provide coverage for particular services that may include, for example, drug/alcohol rehabilitation, smoking cessation, infertility, autism care, hair restoration, etc.; may further require coverage for provider services such as chiropractic, massage, acupuncture, etc.; and finally may also require coverage extension to include grandchildren, dependent family members, domestic partners, etc. The Council for Affordable Health-Care recently compiled a state by state accounting of the number of mandates and estimated the cost effect on premium prices. The number of these types of mandates differed from state to state from as few as 20 to as many as 60. The estimated increased premium cost of insurance because of these mandates ranged from 20 to 50% among the 50 states.
While not intrinsically inappropriate, these mandates increase the cost of health insurance. Many individuals or families who presently can not afford health-care insurance could afford simpler and more limited coverage insurance. They could choose policies that do not include coverage for services they personally would likely never need e.g. drug or alcohol rehabilitation or perhaps infertility services, etc., while still getting essential medical care coverage. Worse yet, not infrequently, mandates for less standard services e.g. acupuncture, hair restoration, etc., more likely resulted from that service’s special interest group making a campaign contribution to a state legislator rather than a convincing argument made to that legislator that such mandated service benefits the insured and is worth the additional premium cost.
“Guaranteed issue” and/or “community rating” requirements comprise the 2nd form of mandates. Guaranteed issue requires insurers to issue policies regardless of a person’s health status while community rating requires insurers to blend the utilization of services risk of a particular (higher risk) person with the risks of a broad group of persons. Insurance companies set premiums by actuarial calculations; that is they make estimates, based on huge data bases of statistics, of likely expenditure costs for a specific pool of insured persons. “Guaranteed issue” mandates, which require inclusion of persons with pre-existing conditions, increase the expected medical care benefit costs for a particular insurance pool, and therefore the overall premium cost of insurance for that group. “Community rating” mandates prevent an insurance company from setting premium cost for an individual in a given insurance pool to reflect the risk that particular individual contributes to the overall pool of risk. Instead, the increased anticipated care costs are spread across the entire pool of the insured. As a result, a healthy young person would be unable to get a health-care insurance policy premium that accurately reflects their much lower likelihood of utilizing services than that of an older or less healthy person. A WellPoint Study found that “guaranteed issue” and “community rating” mandates in the now passed health-care reform bill will increase the premium cost for a healthy 25 year-old by more than 150%. In the end, as a result of increased premium cost, many younger healthier people will opt out of buying health-care insurance, leaving less healthy persons in the insured pool, further driving up the cost of insurance for those persons left in that insured pool. And those young healthy persons, who elect not to buy insurance because of the increased costs, now get counted in the ranks of the uninsured.
Mandates not only increase the cost of insurance but, along with other insurance regulations, distort market forces and lead to decreased competition among insurance providers. Current insurance regulations further require individuals and businesses to purchase health-care insurance within state boundaries. Mandates and regulations vary from state to state, variably complicating the business environment for insurance companies. In any given state, there are only a few providers large enough to comply with the varied regulatory environment and still operate profitably. With fewer providers competing to sell policies, premium prices are higher and customer service is inferior. Further, current insurance regulations do not allow groups of individuals or individuals to band together to form so-called “association health plans” that would increase their purchasing power and lower their premium costs.
The next Dr Right installment will examine Federal tax policy on health-care premiums an additional significant health-care cost driver.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator
Health-Care Costs Drivers – Government Regulation Restricting Insurance Industry Competition
While the 3rd party payer system creates detrimental incentives that primarily drive the unsustainable cost growth in both the government as well as the commercial health-care insurance systems, there are additional governmental policies and regulations that disrupt beneficial free market competitive forces and unnecessarily add to the cost of private health-care insurance. State legislated coverage mandates significantly add to the cost of health-care insurance. The mandates are of 2 general forms. The first type requires insurers to provide coverage for particular services that may include, for example, drug/alcohol rehabilitation, smoking cessation, infertility, autism care, hair restoration, etc.; may further require coverage for provider services such as chiropractic, massage, acupuncture, etc.; and finally may also require coverage extension to include grandchildren, dependent family members, domestic partners, etc. The Council for Affordable Health-Care recently compiled a state by state accounting of the number of mandates and estimated the cost effect on premium prices. The number of these types of mandates differed from state to state from as few as 20 to as many as 60. The estimated increased premium cost of insurance because of these mandates ranged from 20 to 50% among the 50 states.
While not intrinsically inappropriate, these mandates increase the cost of health insurance. Many individuals or families who presently can not afford health-care insurance could afford simpler and more limited coverage insurance. They could choose policies that do not include coverage for services they personally would likely never need e.g. drug or alcohol rehabilitation or perhaps infertility services, etc., while still getting essential medical care coverage. Worse yet, not infrequently, mandates for less standard services e.g. acupuncture, hair restoration, etc., more likely resulted from that service’s special interest group making a campaign contribution to a state legislator rather than a convincing argument made to that legislator that such mandated service benefits the insured and is worth the additional premium cost.
“Guaranteed issue” and/or “community rating” requirements comprise the 2nd form of mandates. Guaranteed issue requires insurers to issue policies regardless of a person’s health status while community rating requires insurers to blend the utilization of services risk of a particular (higher risk) person with the risks of a broad group of persons. Insurance companies set premiums by actuarial calculations; that is they make estimates, based on huge data bases of statistics, of likely expenditure costs for a specific pool of insured persons. “Guaranteed issue” mandates, which require inclusion of persons with pre-existing conditions, increase the expected medical care benefit costs for a particular insurance pool, and therefore the overall premium cost of insurance for that group. “Community rating” mandates prevent an insurance company from setting premium cost for an individual in a given insurance pool to reflect the risk that particular individual contributes to the overall pool of risk. Instead, the increased anticipated care costs are spread across the entire pool of the insured. As a result, a healthy young person would be unable to get a health-care insurance policy premium that accurately reflects their much lower likelihood of utilizing services than that of an older or less healthy person. A WellPoint Study found that “guaranteed issue” and “community rating” mandates in the now passed health-care reform bill will increase the premium cost for a healthy 25 year-old by more than 150%. In the end, as a result of increased premium cost, many younger healthier people will opt out of buying health-care insurance, leaving less healthy persons in the insured pool, further driving up the cost of insurance for those persons left in that insured pool. And those young healthy persons, who elect not to buy insurance because of the increased costs, now get counted in the ranks of the uninsured.
Mandates not only increase the cost of insurance but, along with other insurance regulations, distort market forces and lead to decreased competition among insurance providers. Current insurance regulations further require individuals and businesses to purchase health-care insurance within state boundaries. Mandates and regulations vary from state to state, variably complicating the business environment for insurance companies. In any given state, there are only a few providers large enough to comply with the varied regulatory environment and still operate profitably. With fewer providers competing to sell policies, premium prices are higher and customer service is inferior. Further, current insurance regulations do not allow groups of individuals or individuals to band together to form so-called “association health plans” that would increase their purchasing power and lower their premium costs.
The next Dr Right installment will examine Federal tax policy on health-care premiums an additional significant health-care cost driver.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
Sunday, May 2, 2010
Sensible Health-Care Reform (Part 4): Health-Care Costs Drivers, II
This is the third of a series of commentaries, written from a free market, individual-centered perspective, examining the serious deficiencies of our current health-care system, the underlying root causes of those problems, the looming government fiscal catastrophe secondary to health-care entitlement spending, the failure of the recently passed health-care “reform” to address the grave problems facing our nation related to health-care delivery, the harm the recently passed health-care “reform” will cause to our seriously ill economy; and a proposal for a framework to truly, effectively, and sustainably reform our health-care delivery system. This report continues the discussion on the underlying cost drivers of our health-care system.
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – The 3rd Party Payer System
While the pursuit of progress in the medical field ultimately brings us significant benefits, other major drivers contribute to escalating health-care costs that add no such value. Of those, the third party payer system is the central critical driver of health-care costs. It is estimated that 5 out every 6 health-care dollars spent are paid by a 3rd party payer. The 3rd party system effectively disconnects the patient (consumer) who utilizes health-care from the cost of that care. For both private and government provided health-care insurance, the consumer of health-care services has little or no incentive to utilize health-care dollars wisely. We have all seen “The Scooter Store” commercials. “Attention Medicare beneficiaries, if we pre-qualify you for a scooter, you won’t have to pay one cent for your scooter.” Or another example commonly experienced in orthopaedic practice: a patient demanding an MRI be done to evaluate a problem even though the physician does not feel it is indicated.
It is natural to value little something that costs little. Further, to some extent, many consumers feel obligated to utilize as much of their health-care benefit as possible. Those with employer provided insurance understand that they have deferred significant direct compensation for their health-care and want to get their (deferred) money’s worth. Similarly, many of those with government funded insurance feel entitled to utilize that government benefit as much as desired. This arrangement creates an unlimited demand for health-care spending. The truth of this situation is evident in the legislation that requires certificates of need (CON) in many states for opening MRIs, surgical centers, and other costly health services. CONs control cost by limiting supply of those services. In the current health-care system, our “real world” experience has demonstrated the more capacity that exists for a particular health-care service, the more that service is utilized and the greater the expenditure on that service. In the rest of our economy where free market incentives do function, the greater the available supply of a particular service mainly results in lower costs and greater quality of that service.
This same uncoupling of the consumer of services from the cost of those services also discourages competitive pricing and transparency of pricing and as a result pricing for health-care service varies considerably. The most common response to inquiries regarding the cost of a particular service made to hospitals or providers is “What is your insurance?” Similarly, because the service costs little to the consumer of that service, there is little demand for accountability or transparency with regard to cost, quality or appropriateness of that service. Many times tests are repeated simply because no one has asked if the test has been done or because it is easier to repeat the test than to track down results done elsewhere. Additionally, the 3rd party payer system neither rewards higher quality care nor discourages lesser quality care and as a result quality of care varies more than we would like to admit. Further, the third party payer system, by effectively guaranteeing payment to hospitals and providers, encourages increased expenditure and does not promote competitive pricing for services.
Over the last few years, the spiraling upward costs for medical and surgical treatment in this country have spawned an out of the country nascent industry known as “medical tourism” . For individuals or companies that pay for all or most of their medical care, medical tourism offshore surgical programs provide a cost effective alternative for costly surgical procedures. These surgeries are performed by Western or Western-trained physicians in state-of the-art facilities. These programs operate on a consumer cash basis, provide equivalent or better surgical outcomes, and cost 25% to 80% less than the same surgeries performed in our country. Part of the savings results from elimination of insurance administration overhead, but consumer oriented market forces primarily spur the cost efficiencies, as well as the quality outcomes.
One final thought with regard to the driving of health-care costs by the 3rd party payer system – envision the cost of auto insurance if that insurance not only covered accidents but also routine maintenance, improvements, or even a new car. And further to put the magnitude of some of these costs in perspective – a recent review of an Explanation of Benefits insurance form for a lumbar decompression and fusion, an elective operation, indicated the private insurance company paid, (including preoperative evaluation and treatment, hospital services, and physician services), nearly $35,000. One could buy a top of the line Honda Accord for $30,000.
The next Dr Right installment will examine an additional significant health-care cost driver – government regulation restricting competition among health-care insurance companies.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
The author feels obligated to disclose underlying bias: 1. this analysis reflects the author’s strong belief in the efficiencies and fairness of truly free markets as well in the individual’s right and responsibility of self-determination and of self-reliance. 2. I have 3 daughters, 3 nieces, and 9 nephews who deserve their opportunity to live the American Dream – a dream made possible by the protection of our unalienable rights endowed by our Creator.
Health-Care Costs Drivers – The 3rd Party Payer System
While the pursuit of progress in the medical field ultimately brings us significant benefits, other major drivers contribute to escalating health-care costs that add no such value. Of those, the third party payer system is the central critical driver of health-care costs. It is estimated that 5 out every 6 health-care dollars spent are paid by a 3rd party payer. The 3rd party system effectively disconnects the patient (consumer) who utilizes health-care from the cost of that care. For both private and government provided health-care insurance, the consumer of health-care services has little or no incentive to utilize health-care dollars wisely. We have all seen “The Scooter Store” commercials. “Attention Medicare beneficiaries, if we pre-qualify you for a scooter, you won’t have to pay one cent for your scooter.” Or another example commonly experienced in orthopaedic practice: a patient demanding an MRI be done to evaluate a problem even though the physician does not feel it is indicated.
It is natural to value little something that costs little. Further, to some extent, many consumers feel obligated to utilize as much of their health-care benefit as possible. Those with employer provided insurance understand that they have deferred significant direct compensation for their health-care and want to get their (deferred) money’s worth. Similarly, many of those with government funded insurance feel entitled to utilize that government benefit as much as desired. This arrangement creates an unlimited demand for health-care spending. The truth of this situation is evident in the legislation that requires certificates of need (CON) in many states for opening MRIs, surgical centers, and other costly health services. CONs control cost by limiting supply of those services. In the current health-care system, our “real world” experience has demonstrated the more capacity that exists for a particular health-care service, the more that service is utilized and the greater the expenditure on that service. In the rest of our economy where free market incentives do function, the greater the available supply of a particular service mainly results in lower costs and greater quality of that service.
This same uncoupling of the consumer of services from the cost of those services also discourages competitive pricing and transparency of pricing and as a result pricing for health-care service varies considerably. The most common response to inquiries regarding the cost of a particular service made to hospitals or providers is “What is your insurance?” Similarly, because the service costs little to the consumer of that service, there is little demand for accountability or transparency with regard to cost, quality or appropriateness of that service. Many times tests are repeated simply because no one has asked if the test has been done or because it is easier to repeat the test than to track down results done elsewhere. Additionally, the 3rd party payer system neither rewards higher quality care nor discourages lesser quality care and as a result quality of care varies more than we would like to admit. Further, the third party payer system, by effectively guaranteeing payment to hospitals and providers, encourages increased expenditure and does not promote competitive pricing for services.
Over the last few years, the spiraling upward costs for medical and surgical treatment in this country have spawned an out of the country nascent industry known as “medical tourism” . For individuals or companies that pay for all or most of their medical care, medical tourism offshore surgical programs provide a cost effective alternative for costly surgical procedures. These surgeries are performed by Western or Western-trained physicians in state-of the-art facilities. These programs operate on a consumer cash basis, provide equivalent or better surgical outcomes, and cost 25% to 80% less than the same surgeries performed in our country. Part of the savings results from elimination of insurance administration overhead, but consumer oriented market forces primarily spur the cost efficiencies, as well as the quality outcomes.
One final thought with regard to the driving of health-care costs by the 3rd party payer system – envision the cost of auto insurance if that insurance not only covered accidents but also routine maintenance, improvements, or even a new car. And further to put the magnitude of some of these costs in perspective – a recent review of an Explanation of Benefits insurance form for a lumbar decompression and fusion, an elective operation, indicated the private insurance company paid, (including preoperative evaluation and treatment, hospital services, and physician services), nearly $35,000. One could buy a top of the line Honda Accord for $30,000.
The next Dr Right installment will examine an additional significant health-care cost driver – government regulation restricting competition among health-care insurance companies.
Call to Action: Though passed by an appalling political process and with complete disregard of our Constitution, though containing ineffective and even harmful policy, though disregarding the inalienable rights given to us by our Creator, the passed health-care reform bill is not the end of the debate but rather a new beginning. It is an opportunity to contrast irresponsible policy with prudent policy, to contrast misconceived policy with thoughtful policy, and to contrast policy that places government in the center with policy that places the individual in the center. Get in the fight and stay in the fight. We have learned, the hard way, the consequences of leaving it up to the career politicians. Contact your legislators and demand they exercise the privilege the voters gave them to represent us to effectively address health-care delivery and the other problems facing our states and nation. Learn about the issues and talk to others about the issues. We must join and financially support conservative think tanks that promote traditional American economic principles, personal freedoms, and values; and that shine the light of accountability on irresponsible or faulty government action and policy. Those organizations include The Heritage Foundation, The State Policy Network, The Commonwealth Foundation and your state’s conservative think tank (see SPN for your state’s organization). We must join and support our local grass roots organizations like the York 9-12 Patriots, York County Action, York Campaign for Liberty, and others, so we can take back the political process that has become corrupt and ineffective. We must work to bring up, from the grass root level, candidates – principled persons (Republicans, Democrats, and Independents) who will actually solve problems, who will respect the Constitution of the United States, and who will honor the “consent of the governed” entrusted to them by the citizens of our counties, states, and country.
God Bless and God Bless America
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