Wednesday, September 30, 2009

Parliment of Whores

Insurance, it seems to me, is a pretty simple thing.

The rationale for insurance is similar to the rationale for government; it's a way of using the strength of people as a group to help us do things we couldn't do as individuals.

So you get a bunch of people together and everybody kicks in a little. That little ends up being pretty big, because you've got a lot of people kicking in. And when one of the people has a problem: gets sick or hurt, house catches fire...or maybe gets a great idea, like buying another cow or expanding the widget plant...the group "kitty" kicks out a little money or a little extra help, so that the person can get back to being a productive citizen again, or make a little more and thus contribute a little more to the group.

People have been doing this since Sumer.

Now since then we've learned that for most of the truly "critical" parts of our lives, we've actually gone to the extent of bringing the actual government to do the insuring.

For example: we wouldn't trust the companies building airplanes and running airlines to verify their own safety inspections, or trust airports to coordinate their air traffic control with other airports and other private companies. So we have a Federal Aviation Administration that does all this.

We wouldn't trust private owners to build and maintain our roads and bridges, so we have state DOT's and the Federal Highway Administration to build them, inspect them and maintain them.

We've learned from experience that private for-profit companies have one duty; to make profits. This is not a bad thing - profits help these companies make better products, more cheaply, and get them into our hands in a timely way.

But profits can also be made by making shoddy, dangerous products, selling them as quickly as possible and then skipping town. Or lawyering up and beating the lawsuits. Or declaring bankruptcy. We've learned this the hard way, through potholed roads, failed bridges, burned toddlers, limbless workers. So where our health and safety is concerned, we usually take the approach "trust, but verify".

Insurance, whether it's auto, health, fire, or life, is an unusual sort of "business". An insurance company has no real capital investment; it has no "product line", no physical plant it cannot rent, no real assets other than the people that work for it and the records of those it insures. So when an insurance company makes a profit there is no chance that profit will be spend researching a better life insurance policy, designing a safer health insurance policy, or retooling the car insurance plant. That profit is, in fact, PURE profit, and can be used to pay the insurance company's owners, investors or workers, or used for some sort of financial transaction (like buying other companies...).

And an insurance company can only make money if it takes in more in premiums then it lays out in coverage. So if you take an insurance company and tell it to make more profit, it can do this only three ways:

1. It can charge more for its policies
2. It can pay less to its policyholders, or
3. It can keep the same receivable-payable balance and try and invest existing profits more shrewdly.

#1 is risky, since theoretically in a "free market" pricing too far above the mean will drive your customers to your competetors, and

#3 is difficult to manage - even the cleverest stock/bond brokers seldom make profits of the sort of scale possible if you work exceptionally hard at

#2: the real payoff for a smart company is figuring out how to chisel away at the payouts. It's a trick any smart carnie knows. You make the game just attractive enough to keep the rubes coming in...but hard enough so that they never get ahead of the House.

So insurance companies can - and many have - figure out how to make more money in the same ethical sense as the construction company taking a contract and then shorting the mix on the asphalt so that the pavement falls apart in a year instead of fifteen, or the garment outfit skimping on the fire-resistant material so that the kiddies' PJs go up like flash paper.

Many developed nations have figured this out.

And they've ALSO figured out that medical insurance is different from other forms of insurance. You can wear your seatbelt and drive can put up smoke detectors and fireproof your house...but you can't change your genes to keep out cancer. You can't armor your tibia to prevent fracture.

Medical insurance is, by definition, the chanciest, most liable to fear, panic and irrational need of all the insurance varieties.

Medicine, too, is very vulnerable to the kind of profit-mining schemes that are attractive to insurance companies. When you're in pain, afraid, sick, you're not in a good position to make rational judgements. Especially now, with medicine increasingly complex and the workings of diagnosis and treatment opaque to the layman. The $40 dollar aspirin and the unneeded CAT scan are unlikely to be questioned by the battered character in the bed.

This is why almost all these other nations have taken steps to ensure that medical costs are controlled, and that insurance profits are limited. It's not "socialism" or some sort of strange, Euro-fashion need to put government in control. It's as simple as this:

Medicine and money are limited. Therefore there will ALWAYS be someone "standing between" you and all the medical care you want.

This person can be a third party, an agent of some government, whose primary interest is that you can be made sound as quickly and efficiently as possible so you can go back to paying taxes, or

It can be a private party whose profit depends on spending as little on you as possible, so unless you can be made sound for less than you've paid him you might as well die so he can write you off soonest.

Everyone seems to get this except the Democrats in the U.S. Congress and that entire portion of the U.S. public associated with the GOP.

The GOP has an excuse: they are morally and intellectually bankrupt, and utterly owned by the individual and corporate malefactors of great wealth whose sole purpose it is to keep the groundlings befuddled as they continue to reap largesse from the public purse.

But the Democrats..?

The rationale of the Democratic Party since the 1960's defection of the Slavery Wing to the GOP has supposedly been the welfare of the Little Guy; to look out for the weal of those of us NOT in a two-yacht family. And yet in the Senate yesterday the D's couldn't even keep their own party together to defend the central idea that insurance should be there to help people who are sick or injured and not enrich the healthy and wealthy.

To be middle-class - let alone poor - in the U.S. has always been to be relatively powerless, to have your fate determined by the powerful and the well-to-do. The genius of America has always been to convince these poor slobs that they're NOT just peasants, to keep them "inside the tent", and to prevent the fracturing of the nation on social or regional lines. Think about it - the entire New Deal wasn't a softhearted FDR wanting to cuddle to poor widdle urchins - it was the hardheaded dealmaking of an old patrician takig the elites that had just driven the U.S. economy into a ditch (sound familiar?) by the throat and pointing to flaming Red Russia and inquiring like a snarling Columbian cartel lord whether they wanted plombo o plata - lead from the angry mob or silver to keep the mob quiet?

The existence of a "liberal" wing of the more "liberal" of the two parties has kept a happy face on American poverty and a sexy veil on the impotence of the middle class for the hundred years since the Gilded Age, when Men were Men and poor people ate their own dead (screw 'em, if they weren't worthless why were they poor, then?).

The existence of that wing - or, at least, the ability of that wing to influence actual policy - seems increasingly fictional.

So my question is: what happens to a republic based on a powerfully representative parliment when that parliment demonstrates that it is packed with idiots and whores?


  1. Ignoring the quality of politicians for a while:

    I observed the health insurance drama in the U.S. and would like to add that it's not really about insurance ethics.
    Insurance companies could not sustain ethical behaviour due to well-known market defects. The problem is called adverse selection, and it's the state's job to address this problem because no-one else can do it (and it needs to be addressed).

    So much about the coverage and service denial problem.

    The efficiency problem (cost) is a different one and I'm skeptical whether the existing proposals will have much impact on it. Many (if not all) industrial countries are struggling to keep the health care costs under control. We better get used to this as a permanent struggle.

  2. Sven: That was my point: in an unrestricted market, the "ethical" insurance company is not profitable. Therefor it profits the companies to deny coverage, drop clients who get really sick, etc., etc... The "state" (and here you can get sidetracked into the whole federalism issue)CAN regulate these issues but - as I also pointed out - this would require politicians with the balls to take on the insurance companies, and - as I pointed out - the whorish nature of U.S. politics precludes this. The regulation of the sort of predatory insurance company policies that end up bankrupting sick people will not happen.

    So, "so much" for the possibility of dealing with the service denial and coverage problem through political action.

    Medical costs are rising, in part, because there is no systemic check on them. The main payers for medicine are the private insurers, who make their profits by squeezing their marks - sorry, clients - not the health providers (although they do that, too...). And - this is my opinion - because few people, either in government or in private insurance - are willing to tell people that spending insane amounts of money during the two or three years before their deaths isn't reasonable (something like 30-35% of American health care expenses come in the final 2-4 years of life, as we try increasingly expensive and dubious measures to stay alive). A lot of this may have to do with the fact that old people vote and young people don't, relatively speaking.

    The bottom line is there is no real "reason" for for-profit insurance. As I said, insurance companies don't "need" profit - they have minimal infrastructure and no product line. For-profit medical providers have more excuse; hospitals need new bed linen and doctors need new computers, after all. But the notion that a "public option" is unthinkable for the Senate Democrats because it might compete with private insurance?

    That virtually DEFINES laughable.

  3. Chief,

    There are some fundamental mistakes in this post that I think lead you to a wrong conclusion:

    1. Insurance profits traditionally don't come from collecting more in payments than they pay in claims. They come from returns on the investment of those payments before claims are paid, sometimes called the "float." More recently, insurance companies have used excess payments to account for the majority of profits, mainly because they can't earn much return on investment because of the ridiculously low interest rates we've had since the 1990's. so, in an "unrestricted market," insurance companies can make a decent profit from investments alone and that's traditionally what they've done.

    2. Insurance company "profit" isn't any different from any other kind of profit and insurance company profit isn't used much differently that profit from other kinds of businesses. Like anywhere else it is used to pay investors, expand/improve the business or it is invested. Your comment on the legitimacy of for-profit medical providers (linen, doctors, new computers) misunderstands what profit is - all those things are not funded from profits, but are normal costs of operating the business and are counted against income to determine if there is a profit or loss.

    3. Medical insurance isn't really like other kinds of insurance. I'm not sure it should be called insurance at all. Insurance normally depends on some significant portion of the covered to make no claims and receive no payments, like life insurance, auto insurance, homeowners insurance, etc. Most people don't ever make a claim. Medical "insurance" is different because everyone who is covered will be receiving a lot of payments over their lifetimes. For 2009 that amount averages to over $8k per person in the US. The only medical insurance that's akin to traditional types of insurance is probably catastrophic coverage.

    4. You're completely wrong when you say that the main payers of medicine are private insurers. Public and private spending are about evenly split, and, of the private portion, about 64% is from "private insurance." But "private insurance" is not just the private insurance companies since it also includes employers who self-insure, which is what most large employers do and accounts for a huge portion of private insurance spending. Then there is the fact that many private insurers are not-for-profit insurers. I don't have the exact figures in front of me, but when you take out self-insurance and not-for-profits, the private, for profit insurance industry accounts for a relatively small portion of health care spending and even a small portion of private spending.

    So, I don't get all the hand-wringing over for-profit insurance companies. Maybe there is or isn't a "real reason" to have for-profit insurance companies. That question, it seems to me, is irrelevant since the rise in health care costs (2-3 times inflation and GDP growth since the 1970's) is not due to private insurance profits or the private, for profit insurance industry. I fear you have bought into the progressive narrative which blames the evil greedy insurance companies for our health care ills. That's simply not the case and it's why I, personally, oppose the "reforms" they are advocating for. Those reforms, including the "public option" won't do what they claim they will to solve the biggest problem with our system, which is rising costs.

  4. Hmm,

    Canada struggles with health care costs. However, given the fact that supply /demand price curves don't work very well for sick people, I am glad that we have an essentially "single payer" system.

    Is it perfect? Not even close! However, I will not end up in a situation where if my wife gets sick, I have choose between having a house for my kids or treatment for my wife.

  5. Or you could be stuck in Texas, Ael.

    I recall a story of a free health clinic in Texas a few days ago, near Austin IIRC. Just like the one publicized in West Virginia that shamed Rockefeller to the side of light and another one in Southern California.

    At least those of us who want at the very least a strong public option now know who Democratic Quislings are.

    If this issue is important to anyone reading this, go to or any other of the progressive blogs which are running ads against the likes of Lincoln of Ark., just to name one.

    A bit from my link above.

    We'd led the nation when the 2005-2006 numbers were released. Nice to know we've stayed atop the rankings in the interim. And don't worry, we also still top the nation in uninsured children. But that's no surprise: just look at the numbers.

    5,900,000: total uninsured Texans.

    82%: Percent of uninsured Texans in working families.

    1,400,000: total uninsured children in Texas.
    89.5%: Percent of uninsured Texas children in working families.

    The numbers are infuriating. Working Texans and their families are literally dying from lack of care. Where's the outrage from the supposed "family values" crowd? By the way, who has the lowest rate of uninsured residents? That would be Massachusetts, with 5.4%. The Massachusetts system--though not perfect--is one model for the nationwide health insurance reforms proposed by President Obama, reforms which Rick Perry opposes.

  6. Here it is:

    and here:


  7. I'm not too good at this, aren't I?


  8. Andy

    Health care costs are rising because Insurance companies had no incentive to contain them. Price goes up, raise premiums. Went on for decades, and no one complained because the cost of premiums for many people were paid by employers and therefore invisible. It wasn't until they were pricing themselves out of reach that insurers began hollering "Costs are rising too quickly". New stop on the line:- deny claims.

    Medical insurance is no different from any other insurance. It is an actuarial exercise in risk spreading/sharing.

    We have both National Health Care and private here. National (basically free) holds down private rates. The private clinic here charges about 175 Euro for a complete physical, including bloodwork (includes PSA). My bloods alone in the US were billed at about $275, and the doctor billed $175. Roughly twice what I would pay for a private physical here. Of course I go the National Health Care route, as I like the doc and she and the bloodwork cost ZIP.

    Something is wrong with the US system, and it can be placed squarely in the laps of the private sector.

    BTW, there is no advertizing by pharmaceutical companies here, or hospitals (public or private) or insurance companies. That's several tens of billions added to your health care bill in the US that fools you into thinking you are informed, but contributes nothing to your health.



  9. Al,

    Health care costs are rising because Insurance companies had no incentive to contain them. Price goes up, raise premiums.


    Something is wrong with the US system, and it can be placed squarely in the laps of the private sector.

    No, that's not quite right. It's not just the insurance companies. Employers who self-employ have not been able to contain costs. Medicare has not been able to contain costs. Even military medicine, the closest thing we have to a true single-payer system, has not been able to contain costs. All these groups would like to contain costs - even the insurance companies - yet they haven't been able to since the 1960's. The reality is that there isn't any payment method in this country - insurance, government, employers - that have been able to keep costs even close to the rate of GDP growth or inflation. That tells me there is a systemic problem with our health care system, not a problem with health insurance. Banning insurance companies completely, even if that were possible or desirable, is unlikely to solve those underlying systemic issues or do much to contain costs.

  10. Andy: Al pretty much rips you on what I would have said; Costs are largely a factor of what the seller can get. Government rates are pretty fixed; it's the private payers that approve most of this stuff. I don't think I've bought a line - you, rather, have bought the insurance outfits' line that they're not the problem, it's the greedy docs and the greedy hospitals and the greedy government.

    Again, there's no point in for-profit insurance. You pretty much admit that when all you can find to use the profits for are 1) pay the investors (if you are a non-profit you don't have investors), 2) expand/improve the business (which you go on to say is NOT a function of profits but rather an operating cost) and 3) invest (which, like #1, is a pure "extra" - it's a luxury, something you don't need if what you're doing is just operating as a sort of floating money pool.

    All this bilgewater would impress me a hell of a lot more if these poor, hard-working decent little insurance companies were willing to take the challenge of competing with a Medicare/Medicaid-type public insurance plan. If the private plans are such hot shit, why not man up and take on those nasty gummint bureaucrats?

    Somehow the Medicare, military and veterans health systems - the latter two I'm quite familiar with - manage to provide decent service at rates well below what the private plans charge. Somehow the rest of the industrialized world has managed pretty damn well without those critically important private insurers. Somehow I find it hard to weep bitter, bitter tears at the notion that a U.S. government lead by people unwilling to whore for the wealthy and powerful might be able to scrape a couple of dollars off a "George H.W. Bush" carrier here and a missle defense scam there and fund a trial public health option.

    If it doesn't work, hell, scrap it in ten years.

    But the very vigor with which the big insurers and the big medical providers are fighting this thing suggests to me that it may be the right way to go. After all, the nature of your enemies says something about you, and they don't come more loathsome than people who're willing to cut off poor and sick people when they need help the most.

  11. Employers who self-employ have not been able to contain costs. This is largely because self-employment means you either go without insurance or you have to insure from the hideously expensive "options" available to those without a group plan - my wife, a contractor, looked into these options and they're appalling. Self-employed people are not even a factor in medical cost control; they are, instead, among those most at the mercy of the private system and its costs.

    Medicare has not been able to contain costs. Medicare pays at a fixed rate. The biggest problems with the Medicare/Medicaid system is that providers are dropping out, refusing to provide fee-for-service at the low government rates.

    Even military medicine, the closest thing we have to a true single-payer system, has not been able to contain costs. But it has grown at a substantially lower rate than the private medical system and the private insurance system.

    You ARE correct in that private insurance is not the ONLY problem. Fee-for-service is another huge one. One good way to compare is to look at the Mayo Clinic system, which is at battom salary-based, with the typical fee-for-service provider. The differences are immediate; fee-for-service is vastly more expensive, while producing nearly identical outcomes.

    And her's my "big picture" question; the U.S. system is effectively equal, in capabilities, in patient outcomes, to most of the rest of the industrialized world. Where there are differences, the differences are in their favor, not ours. We are the unquestioned leader in ONE category - cost.

    So it seems like instead of starting from the point "Let's find reasons NOT to make changes in the U.S. system" most people, looking at these conditions, would be asking "Why NOT make changes?" You seem adamant that "We have the BEST health system and any and all of these proposed changes would be harmful."


  12. Questions to ask yourself about this issue:

    1. What do private insurers provide that a single entity, government-provided service could or would not?

    2. Health care has to be paid for by someone. Under our present system, your premiums are pooled and pays for it (less the overhead and profit to the insurance company). In a single-payer, your taxes are pooled and pay for it (less the overhead to the government). Why should we assume that private insurance can do this more efficiently?

    I am - as you can tell - EXTREMELY suspicious of the claims made by the for-profit health care industry and the private insurers about "cost containment". ISTM that this sudden surge in health care costs seems to coincide with the massive increase in deregulation and the boom in the financial industry, which seems to have coincided with a huge influx of private investment in "health care".

    Maybe private, for-profit, fee-for-service health care is the best there is. I'm not convinced - the experience of most other industrialized nations appears to contradict that - but I'd argue that at the very least there's a case to be made for experimenting with several options to try and see if they help deal with what seem to be to be two crucial issues:

    1. Medical costs, and
    2. The uninsured.

    Right now Andy's arguments seem to represent what we're hearing from the GOP and the Blue Dogs: nooooooo, it's too expensive! It'll wreck the system! It's not fair to the poor insurers! To me, this is like saying in 1901 that heavier-than-air flight was impractical and bad because of the technical uncertainties, the risk and the unfair competition for the zeppelin makers.

    Maybe so; certainly in 1880 you would have been right. But times change, and solutions should, too.

  13. Chief,

    You seem adamant that "We have the BEST health system and any and all of these proposed changes would be harmful."

    Wow, where did I ever say that? That is all assumption/projection on your part. I said I'm against the current bills (from both the Democrats and GoP actually) because they don't fundamentally address cost control. Being against the "public option" bills in Congress is not saying that we have the best healthcare system, nor is it saying that reform isn't necessary - quite the contrary.

    Government rates are pretty fixed; it's the private payers that approve most of this stuff.

    Government rates are fixed for many medical procedures yet the cost per-enrollee is not fixed and on that basis, medicare is doing no better than other types of insurance. Medicare payments have gone up an average of 6% a year since 1994 which is 2-3 times the rate of inflation. Why do you think medicare is going bankrupt? It's because of unsustainable cost growth.

    Again, there's no point in for-profit insurance.

    That's opinion, but so what if there isn't? Eliminating for-profit insurance isn't going make health care coverage cheaper or even bring the rate of increase in line with inflation and/or GDP growth because that cost growth is happening everywhere no matter who pays the bills.

    If the private plans are such hot shit, why not man up and take on those nasty gummint bureaucrats?

    I've got no problem with that as long as the playing field is level. I think it's unlikely the Congrescritters who draft the public option plan are going to make the field level. Call me crazy.

    I should make clear that I'm not against a "public option" - heck, I'm not even against single-payer - it's just that I don't think it will do anything about the future train wreck of unsustainable cost growth. That's my worry. I think single-payer will only work if most of the healthcare system is nationalized - something that's not remotely possible - at least for now.

    The opportunity for healthcare reform only comes once in a generation and in my opinion the plans out there, including the public option, don't address fundamental systemic problems.

    Somehow the Medicare, military and veterans health systems - the latter two I'm quite familiar with - manage to provide decent service at rates well below what the private plans charge.

    The amount that people pay out of pocket is definitely less with Medicare, Tricare and the VA, but the amount spent per insured individual isn't all that different after accounting for population differences (ie. military members are younger and healthier and cheaper, medicare patients are older, sicker and more expensive). Regardless, costs for all are rising at an unsustainable rate.

  14. Part 2:

    This is largely because self-employment means you either go without insurance...

    I was talking about self insurance, not self employment. Most large companies self insure meaning they pay for medical care out of their own operating budgets and hire a third party administrator to implement the program. There is no insurance company involved (unless it is the administrator - some do that as a side business) Self-insurance falls under the "private insurance" category, but does not involved either an insurance company or the payment of premiums to an insurance company. Most union medical benefits, for example, are self-insured systems.

    Where there are differences, the differences are in their favor, not ours. We are the unquestioned leader in ONE category - cost.

    Exactly, so why don't any of the major plans out there from either party address this issue in a fundamental way? How does getting rid of private insurance, much less a "public option" make Tricare, Medicare, Medicaid, not-for profit private insurance and self-insurance growth rates sustainable? If you want to convince me the insurance companies are at the root of our health insurance problems and that the competition of a "public option" will have any effect on costs, you need to answer that question.

    Ok, you posted another comment while I was typing:

    What do private insurers provide that a single entity, government-provided service could or would not?

    One could ask the reverse question. Look, I don't have any particular love for health insurance companies. I just don't think that punishing them, or getting rid of them, as you'd like to do, will solve any of the fundamental problems facing our healthcare system.

    ISTM that this sudden surge in health care costs seems to coincide with the massive increase in deregulation and the boom in the financial industry, which seems to have coincided with a huge influx of private investment in "health care".

    Except it isn't sudden, cost growth has outpaced inflation every year since at least 1970. It just hasn't been a huge problem until the last decade or so because the compounding growth rate took a while to really take off. Read this for more:

    Health care spending has exceeded economic growth in every recent decade. Over the last four decades, the average growth in health spending has exceeded the
    growth of the economy as a whole by between 1.3 and 3.0 percentage points (Figure 2). Since 1970, health care spending has grown at an average annual rate of 9.6 percent or 2.4 percentage points faster than nominal GDP.

    That growth is not limited to the private sector much less for profit insurance.

    Right now Andy's arguments seem to represent what we're hearing from the GOP and the Blue Dogs: nooooooo, it's too expensive! It'll wreck the system! It's not fair to the poor insurers!

    Oh please. My point is that the system is already well on it's way to wrecking and the progressive liberal plan won't stop it. FWIW neither will the GOP plan. The CBO analysis on the Democratic plan is pretty clear - it is "paid for" through cuts to medicare, a tax on the wealthy and assumed savings through efficiencies. The problem is that it's only "paid for" for about 8-10 years and then it goes into the red. Why? Because of cost growth which outpace the revenue streams used to fund the new benefit. A plan that is only sustainable for a decade is irresponsible IMO.

  15. I'm generally impressed with the level of discourse we are getting here at the 'pub. People are screaming at each other out there and it ain't pretty because most of what they have to say doesn't bear much resemblance to the truth.

    Andy's properly identified the root of the problem which is that long-term trends have finally brought the system to the breaking point (mostly without us noticing until the last couple of years, which doesn't say much good about us).

    He's also right that everything Congress has proposed has major faults. I've stopped researching the cause and effects of health care bills because the numbers never did add up and were mutating so fast that it was an exercise in futility.

    I'm saddened but not surprised by the Democratic retreat on health care but their complete route on closing Guantanamo Bay showed me just how weak the Democrats have become. (C'mon guys, you get elected in part based on your promise to close the prison and you wind up voting 98-2 to keep it open, that's beyond ridiculous)

    However there is one area where I must respectfully disagree with Andy, and that is on the subject of the Chief's original question. Andy has shown that the government would be hard put to actually contain the costs but the question remains, with the current system functioning less and less efficiently every month, how can the average American get reasonably good health care at a reasonable price?

    Doing nothing is no longer an option considering the rate health care costs are going up. The current "system" has at most another 5-10 years left before it collapses under the weight of its own assumptions. We, as a country, need to start experimenting right now.

    We need to find out what works and what doesn't and why and then experiment again. We probably need to amputate the entire current system in favor of something so radically different that we can't imagine it at this time.

    The Chief's first point, that medical care has to be rationed somehow is accurate (this happens today through money and employee insurance benefits but that just isn't working well enough) but it cuts so sharply against the grain of the American Dream that it is going to take tremendous national willpower (or desperation) to take the first step.

    Hang on folks, the rough ride is just beginning.

  16. Pluto,

    I agree that serious rationing is probably what's going to happen long term. It doesn't have to be that way, but I don't have much faith in our venal, gerrymandered Congress to make the serious changes necessary before the system in on the precipice.

  17. Andy: Serious rationing is happening right now. All limited commodities are "rationed"; medicine, like any expensive good, is limited. Right now we ration it by cost; if you're poor - or, more particularly, if you're just poor enough - you get hosed.

    It seems to me that this form of rationing is particularly odious. Wealth gives you all sorts of advantage and immunity in America - it shouldn't immunize you from heart disease and cancer, too.

    So. The problem isn't insurance companies (snort); it's Expansive Health Care. So let's go there. ISTM that health care is probably expensive for a number of reasons, including:

    1. Technical advances and improvement in practice,
    2. Longer lifespans, which is related to
    3. Increased intensity of end-of-life care,
    4. The rise of "health care" as a profit-making investment, coupled with,
    5. Lack of limitations in the private insurance system regarding coverage (that is, the limitations of coverage are typically denials of service, increased premiums or cancellation of policies, not refusal to pay $6,000 for a scan rather than $4,000)
    6. To a minor extent, litigation.

    And that's off the top of my head.

    So, if we - that is, our "leaders" - were serious about doing something about the "health care crisis", they could take some very simple steps that would leave the private system in place and help restrain costs. Again, I can think of a couple right off the top of my head:

    1. Focus government medical spending on basic health: annual checkups, prenatal, pediatric and well-baby care, lifestyle modification services (fancy way of saying "help people get off their dead asses, eat better and exercise more"), vaccinations.
    2. Eliminate the fee-for-service system, put medical professionals on salary.
    3. Eliminate all prescription drug advertisement, as well as direct payments from pharmaceutical companies to health care professionals and providers. In fact, eliminate most medical advertising, period.
    4. Legislate some simple rules for private insurance coverage to prevent things like arbitrary recission or denial of service - or at least provide an impartial Review Board where such acts could be appealed.
    5. Provide a not-for-profit public health insurance plan modelled on Tricare/Medicare to compete with the private plans.


  18. 6. Fund research into treatment outcomes (this sounds silly, but it's no joke - what research has been done suggests that many physicians have no real idea whether a given course of treatment is better than another, or even IF a better option exists. There is a fairly simple reason for this, when you think about it - there's no constituency to fund this. Drug maker A or implant manufacturer B have no vested interest in funding a study that concludes that diet and exercise - or a placebo - work as well or better than their product. A medical organization that wasn't in the pocket of the big industry players might. So why hasn't the AMA or the NAHSE done this? The answer is, they have, to a small extent. But the real bottom line is that only a big, neutral, outside party - i.e. the government - has both the clout and the cash to do this) and disseminate the results to health care providers AND monitor their reception of this data.

    As a note I think this might be the most effective way to help curb the insane rise in end-of-life expenses. If you can show people and physicians that all that surgery and chemo and transplants and so on aren't really getting them any more really GOOD life - quality, pain-free, life - we might accept the idea that after a certain point you gotta man up, go home and die in your own bed...

    I'll agree that the present "health care" options are all crap. But I don't think it's because the Hill players are trying to break the national piggy bank or socialize medicine or some such. I think it's largely because to really step up and do something about medical costs and insurance coverage would require pissing a lot of people off, from fatheaded John Q. Public to insurers to Big Pharma to hospitals and physicians to medical schools to the end of Pennsylvania Avenue. I no more believe that the people in our corrupted, craven system will do that than I believe that the corpse of Tom Jefferson will rise and walk back down to the White House and start signing legislation again.

    And that was my point. There's LOTS of things we COULD do. But we're not doing them. We're not even TRYING to do them. Instead we're bullshitting and demagoging each other.

    And you're right in this - the abyss waits for us if we can't.

  19. Chief,

    Good couple of posts in which there is much to agree with, particularly this, which bears repeating:

    I'll agree that the present "health care" options are all crap. But I don't think it's because the Hill players are trying to break the national piggy bank or socialize medicine or some such. I think it's largely because to really step up and do something about medical costs and insurance coverage would require pissing a lot of people off, from fatheaded John Q. Public to insurers to Big Pharma to hospitals and physicians to medical schools to the end of Pennsylvania Avenue. I no more believe that the people in our corrupted, craven system will do that than I believe that the corpse of Tom Jefferson will rise and walk back down to the White House and start signing legislation again.

    Also this:

    2. Eliminate the fee-for-service system, put medical professionals on salary.

    You'll note in one of the links I gave earlier a breakdown of where healthcare money is spent. About 53% goes to Hospitals and physician/clinical services and guess what their biggest expense is? Salaries. Now I don't think doctors are evil, but they have certainly been looking after their own interests and their compensation has consistently outpaced that of similar professionals like lawyers and engineers. I think reduced compensation will have to be part of the package - maybe in exchange for reducing the cost to individuals for attending med school. We also need to provide better incentives so that more doctors choose primary care over lucrative specialties.

    There's also the problem of not enough doctors and other healthcare providers in this country - we are near last of OECD nations for the number of doctors per capita. I was shocked to learn a few months ago that we graduate the same number of doctors in this country today as we did in 1950. We are importing doctors from the third world like crazy to partially make up the difference, but even this isn't enough. So in a lot of areas of the country, even if someone has insurance coverage, there isn't a local doctor. This is one area where government could make a difference through creation of more med student slots and subsidizing their education.

    IMO, the biggest problem is that almost no one in the system has any incentive to spend less and there's no transparency. How much, for example, does a knee surgery cost? No one really knows. What actually gets charged is unrelated to the cost of the procedure.

    The incentives within the system and transparency is something the politicos don't want to touch. Instead we get ideological solutions. On one hand, there's the public option that doesn't solve any of the fundamental issues and is pretty obviously meant simply as an interim measure to single payer. On the other hand we get platitudes about health savings accounts, the market, and tort reform which won't do much of anything either.

    So I'm cynical and don't believe any real change will happen until Congress and the American people find themselves on the edge of the precipice.

  20. BTW, this guy has written some interesting stuff you all may be interested in.

  21. I personally dislike FabMax. It's always the same with him

    * He writes too much per day, quality is not impressive

    * He's jumping on fashionable band wagons (deflation, peak oil, U.S. republic going down) and spams remorselessly about the topic till the fashion is gone.

    * He is closed to arguments.

    I got in conflict with him over his naive deflation fear. I was qualified to question his stuff because of a diploma in economic science (emphasis on macro) - while he had 'discussed his stuff with some place where economics hang around' or so.
    He was absolutely closed to my arguments, and - of course - wrong.

  22. Andy-

    I do not claim that insurance companies are THE cause. They have simply been a catalyst and enabler to run away cost explosion. While they still had an ignorant customer base and could simply pass on rising costs willy-nilly, they did so. So called "cost containment" didn't enter the equation until it started driving customers off.

    I will say, on the other hand, that the numerous insurance companies in existence do raise costs of the total package by the increased overhead arising from the staffing required in the various provider's businesses just to deal with the plethora of different benefit filing systems. That drives health care overhead costs up, which is billed to the patient (insurance). And, if the insurer is a profit maker, premiums rise not just by the cost of the higher fee the provider charges, but by the objective profit percentage of the insurer. It's like charging sales tax on excise tax.

    Sadly, the system needs to be given major shock therapy, followed by major invasive surgery, and no one has the balls to prescribe that.

  23. My goodness, some posters seem to be saying that private health insurance companies are blackhearted thieves, run by those who trade on the desperation of sick people and their relatives, as well as their inability to slog through a bloated bureaucracy.

    Count me among those posters.

    Let's expand on FDChief's characterization of US politics as "whorish." The Common Cause organization found that healthcare interests have spent upwards of $1.4M per day, this year, in lobbying Congress. In 2007, Congress decided that Medicare Part D should not be allowed to negotiate bulk drug purchases.

    Now, you can call corporations a lot of things, but "stupid" is not one of them. They are quite familiar with calculating Return On Investment. Oh, and lobbyist money goes 2-1 to Repubs over Dems.

    And the notion that private healthcare is competing in a free market -- capitalism at its best -- is laughable.

    There were 400 mergers in the healthcare industry between 1996 and 2006.

    According to MarketWatch, which part of the digital network of the Wall Street journal (that notorious bastion of far-left-wing radicals):

    "Critics say that carriers are not only creating monopolies and oligopolies in many regions, they also control the other side of the equation in what is known as monopsony power. That means in addition to having the most enrollees, they're also the biggest purchasers of health care and can dictate prices and coverage terms.

    It also makes it harder for new carriers to emerge as pricing already has been set by the dominant carrier."


    But such trusts are regulated, right? From the same source:

    "The AMA says it has taken up this antitrust issue with the U.S. Department of Justice but says it has run into roadblocks with regulators. AMA officials say regulators seem uninterested, even though government officials are more than willing to target doctors' groups and hospitals on antitrust matters.

    Justice Department officials did not respond to requests for comment."

    Oh, and Republicans are now in favor of allowing healthcare insurers to sell policies across state lines, purportedly "to provide nationwide competition." In fact, this would allow insurers to move an office to the state with the weakest insurance regulation, and bypass stronger regulations in other states. In other words, flags of convenience.

    It's enough to make you sick.



    And this has effectively shut new competition out of these markets. These companies have the most enrollees, they are the biggest purchasers of healthcare and can dictate prices and coverage terms.

  24. Sorry for the spurious paragraph at the end of my post...



  25. Sven,

    Thanks for the comments - I discovered the blog a few days ago, read a post or two and found them interesting.


    Good point about overhead costs, which currently give major advantages to large corporations that can self-insure. Self-insurance operates under federal rules, not the arcane state rules where the administrative overhead is much more (double, by some counts). Small businesses usually have to buy insurance, which comes from after-tax earnings - corporations fund their insurance with pre-tax earnings. That's a huge tax break to large businesses. I read somewhere recently that the additional administrative cost plus the tax penalty means that for small businesses (and the self-employed) coverage is 30-40% more expensive depending on the state.

    There are a few possible ways to fix that, but sadly, few politicians seem interested.

  26. Andy

    My point concerned the overhead costs in doctors' offices, clinics and hospitals that arise from administering the claims of patients with insurance from a variety of insurers. One study attributes billions in costs from such burden, all of which is passed on in these providers' charges.

  27. Al,

    No disagreement there.

    We all are identifying a lot of problems with the system - where are the solutions in Congress? MIA. That's my point.

  28. There is no sanity in the current debate. A fellow from the town where we lived in the States wrote a letter to the editor about a "Town Hall Meeting" on health care. He's in his early 70's and said he is against any and all "government takeover" of insurance. I wonder where he thinks his Medicare comes from. A local GOP state representative was at the meeting and she spoke out against any government involvement in health care. He described her input as, "arguments that were well stated, common sense statements based on the fact that when government usurps private sector activities, the results are 3 to 5 fold higher costs, lower quality, loss of freedoms and failure."

    Now, this guy is a retired chemist, with a PhD. If the state rep had said, 20 or 50% higher costs, perhaps it might be believable. but he accepts 300 to 500% higher costs without question. I know the state rep, and if there is one thing that is consistent about her, it is her regular and routine citing of outlandish numbers with no sources to back her up. And the masses love it.

    No one in the Congress has a spine because the public is stupid and will throw them out of office if they do something smart or responsible. I am willing to bet that 25% of the population still "knows" that Saddam had WMD and was the prime mover behind 9/11.


  29. The reason Congress won't tackle health care in a realistic way is fairly obvious if you think about it from the right angle. We've all agreed that tweaking the system won't do it. A major redesign is necessary. This will obviously require a lot of forethought and tinkering after the initial design is in place and a lot of people are going to suffer.

    When was the last time Congress boldly stepped forward and totally changed a major part of the American social/political landscape? I'd say it was when Lyndon Johnson created his "Great Society" programs while the country was distracted by Vietnam.

    You'll note this happened because that one man (the President) used his vast power and legislative experience to hijack the system to get something he desperately wanted. While his motives were good the old saying about the road to Hell has always been true...

    We don't currently have anybody that motivated and experienced who wants to tackle the issue, including the Current Occupant at the White House.

    But we will when the pain of our current system gets too high and that's going to happen in the next 5-10 years. Then we'll get to try to make rational decisions for the future while the system is collapsing under its own weight. What a truly GREAT way to run a country!