Resistance Begins at Ohm!

Tuesday, March 2, 2010

The web behind the teensie spider

OK, lame title. But hang with me here. This is about why the healthcare package doesn't break down into little pieces and parts so well.

Start with "No pre-existing conditions." If that is the rule, then people won't get insurance until they need it. Kind of a no-brainer. Insurance companies don't like it because it presents a risk - a really large risk - that anyone applying for health insurance is actually sick to begin with. That isn't insurance folks, that's having someone else pay your bills. Insurance is for the unexpected.

Then there is removing the caps or ceilings on how much an insurance company is going to pay for someone's health care over a lifetime.  Not that the ceilings are a problem for a lot of people, but for insurance companies, it means there is no limit to the amount they have to pay, and that is simply an incalculable risk.

If insurance companies have to insure these two risks, the premiums are going to increase like you cannot imagine. They can't just say "let's see what happens" as the government requires them to carry cash reserves sufficient to cover the people they are underwriting and to reasonably measure their risks (including their investment risks). They are audited according to government standards.

But the insurance companies are going along if (big if) a lot more people, presumably young healthy people pay monthly insurance premiums. Makes sense. If they can't control the risk coming into the pool, then they want to make the pool wider and deeper - dilute it so to speak. Forget for the moment that sooner or later those young healthy people aren't going to be young and healthy anymore.

So, in order to get rid of the pre-existing condition rule, Congress has to give insurance companies a lot more paying policy holders.

But, not everyone can afford health insurance, so some people are going to require government subsidies. There is a lot of back and forth about what sort of stick goes with what sort of carrot, but bottom line, government is going to pay a big chunk of the cost for eliminating pre-existing conditions and upper limits. It's not cheap - where will the money come from? Well, it is coming in large part from medicare. Seniors on medicare will have to pay more (premiums, copays, uncovered costs) and medicare physicians are going to lose some of their medicare revenue. And that money will go to subsidize the premiums for the new (poor) people that the insurance companies need to make the numbers work. As much as people like to demonize insurance companies, the reality is that their income from premiums must be larger than their outgo in claims. If you don't get premiums from more people, then you will have to get more premiums from the people you have.

Two things are wrong with this picture.
1) What does this have to do with reducing the cost of medical care????? What exactly are we doing to solve that problem????? Nothing.
2) Why on earth would we think it is fair to take money from seniors and from their physicians and give it to insurance companies to cover other people? This is robin hood government.

Taking away money from medicare and giving it to someone else is NOT the same as reducing medicare costs. If someone steals your wallet, they aren't reducing your monthly bills any. Which shell is the pea under here? What a joke. Except it isn't funny.

One more thing is really troubling. Why are we looking at solving these coverage limit problems (pre-existing conditions and no upper limits) with the same policies and companies? Why not just issue rider policies from the government (if you accept that only the government can really guarantee this risk)? Think AFLAC. I was going to say think AIG, but never mind, we don't want to go there. That truly makes me wonder that Congress isn't really in the bag for the insurance companies (and maybe the unions) and you feeling good about your insurance policy has not a darn thing to do with it.

Is government looking out for you? I don't think so.

Will this help keep physicians in economically viable practices? No.
Will this help seniors pay for ever increasing health care costs? No.
Will this help government reduce the cost of senior and subsidized health care? No
Will this lower your health insurance premiums? Hell no.
Will this increase your taxes in order to make up the difference? You have to ask?
Will this help to reduce the cost of health care? No, it has nothing to do with reducing costs.

Who are the winners here? Insurance companies, pharmaceuticals, low income individuals who do not have insurance, unions who get a by on the taxes but reap the benefits, government bureaucrats.

Who are the losers? Physicians, seniors, working middle class, upper income tax payers (who will never see any sort of benefit comparable to their tax contributions), states because of the unfunded increases in medicaid costs, medical device manufacturers (more taxes, less revenue), employers (and by extenion their employees), and ultimately the economy as more and more money is sucked up into no-value-added activities (unproductive costs).

It is really sad that the debate has come down to heart strings about people who didn't get insurance before they were sick, or exceeded their ceiling. It isn't a lot of people, but the stories make for good politics. This was supposed to be about reducing the cost of health care and it has become the opposite.

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