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The Shape Of ObamaCare To Come

A lot of people are looking at Massachusetts' health care system as a model for how ObamaCare will shape up. And it's a very fair comparison. For example, this morning the Boston Globe has a story on just one of the many disasters that the Bay State is facing.

Naturally, this being the Boston Glob (a wholly-owned subsidiary of the New York Slimes), they have to put their spin on it

Here's the Globe's version of the facts: in the last year, health insurers have submitted 274 requests for hikes in health insurance premiums. The state, which has taken the power of deciding what those rates should be, has denied 235 of them. And then the Glob goes into exceptional detail on how many small businesses are struggling under rising health care, and how difficult it is to keep up the state-mandated health insurance policies.

But buried down in the story is a key paragraph:

Insurers whose rates were rejected -- most of which posted operating losses for 2009 due to job cuts at companies they sell plans to -- received yesterday's decision with anger.emphasis added

That's right. These evil, greedy, selfish, malicious insurance companies actually lost money offering insurance in Massachusetts. And the primary cause: the firms they contracted with cut jobs, which meant that premium payments were also cut.

In most cases like this, the two businesses involved -- where the current arrangement isn't working for either of them -- would likely renegotiate and find a way to come to an agreement.

But this isn't most cases. This is Massachusetts, the home of mandatory health insurance, the bluest of blue states. (Quick recap: Democrats hold one of two US Senate seats, all 10 US House seats, every statewide elected office, and over 85% of the legislature. Further, the one Republican in a position of power is Scott Brown, who succeeded Ted Kennedy last January. And in what cannot be a coincidence, the last three Speakers of the Massachusetts House, all Democrats, were driven from office after being convicted of corruption.)

So, in Massachusetts, when a situation like this arises, it's the state's right to step in and settle the matter. In this case, they're deciding that the insurance companies can just suck up the losses better, so they get to.

Of course, what the article doesn't mention (and, apparently, the state didn't consider) the possibility that the insurance companies could look at their books and say "screw this, we don't need to lose this much money every year." In other words, they could just close up shop and get the hell outta Dodge.

How does this scale up on a national scale? Insurance companies, when confronted with a mandate to lose money, won't be able to just close up shop and focus in places where they are free of such regulation.

No, they could just get out of the health insurance business entirely.

Hell, under existing law, they'd have to. These insurance companies are publicly traded, and they have a fiduciary responsibility to make money for their investors. Any board of directors that continued operating in a field where they not only do not make a profit, but cannot make a profit, will get itself sued out of their seats by investors. And if the government ties in the health insurance business into other forms of insurance -- say, those that issue home or auto or life insurance also have to offer health insurance -- then they could just get out of business entirely.

That is the key element of incremental socialism. It's the theory that if you just make things a bit less friendly for capitalism, a little bit at a time, one nibble at a time, then people will adapt and adjust and accept it. The frog won't jump out of the pan. You don't eat a pig like that all at once.

But sooner or later, there comes a tipping point that sneaks up on nearly everyone. A few people realize that they're stuck in a losing game ("even if you win the rat race, you're still a rat") and will stop playing. And then a few more will "go Galt." And a few more. And before most people realize it, the driving engines of the economy have turned run themselves dry.

One of the first signs will be when the government starts deciding not only how much "profit" is acceptable, and who isn't allowed to make profits.

Just like in Massachusetts. Which most everyone agrees is a model for ObamaCare.


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Comments (35)

Doea anybody have stats on ... (Below threshold)
James H:

Doea anybody have stats on the average employer-provided health insurance? I'm working on a thesis: that employer-provided health insurance and low copays hide from individual consumers the true cost of healthcare, and this lack of information leads those consumers to make decisions that increase the overall cost of healthcare.

Tea Jay: Obamacare is step... (Below threshold)
Bob:

Tea Jay: Obamacare is step one in establishing a single-payer health system in the US. The President says that insurers will now have to cover all pre-existing conditions and cannot put any limit on the amount of payments either for one year or for the insured's lifetime. He also says that premiums will be LOWER. This is like saying McDonald's must give free fries and a free Coke with every Big Mac and then saying their prices should go down. When insurers either (a) raise premiums to pay for the increased coverage or (b) go out of business, it will be time for step two: having the government step in and take over for the insurers. This seems to me the only way this scenario can play out.

James - You can st... (Below threshold)
jim m:

James -

You can stop working. This has already ben asserted by many people. Health insurance, by masking the cost of health care at time of delivery does exactly what you suggest: it makes people consume more health care than might be necessary.

Additionally, by making employer based health care pre tax and by employers not disclosing how much they pay for a policy the true cost is further masked.

The logical extension of what you imply is tht in order to truly cut health care spending we should eliminate employer based health insurance and the pre tax exemption. By that reasoning Obamacare is exactly the wrong thing to do because it will further insulate the consumer form the real costs and encourage people to over consume even more thus raising the total spending on healthcare.

This is not new. Socialized medicine ultimately creates greater shortages by encouraging over consumption and hiding the cost to the individual. In the end socialized systems like in the UK are collapsing of their own out of control costs and rapidly increawsing inefficiencies.

Jim M:Thanks. I w... (Below threshold)
James H:

Jim M:

Thanks. I would actually do a couple things. I'd end the tax-deductibility of employer-based health insurance and shift the deductibility to individuals. It's going around your elbow to scratch your ass, I suppose, but my goal is to ensure that individuals have maximum information about the true costs of their healthcare.

Yes, health insurers can - ... (Below threshold)

Yes, health insurers can - and should - leave states in which they're unprofitable, similar to the way property insurers aren't writing new business in Florida due to caps on the rates they can charge for hurricane coverage.

I'm not sure I buy the correlation between employers shedding jobs and insurers losing money. Yes, insurance premiums would go down as the subscriber base goes down due to layoffs and closing but so would claims paid... and presumably, if the insurance companies priced their policies properly, in equal amounts.

Driving private insurers ou... (Below threshold)
sam:

Driving private insurers out of business is a feature of Obamacare, not a bug.

IIRC, Maine used to have 20+ health insurance companies doing business in the state. With government mandates, that number is down to 2.

And the ones that remain are nothing more than administrative paper-pushers for government care, not insurance providers who assess and cover risks.

And even those jobs will ultimately go off-shore.

James H ...I think... (Below threshold)
Jeff:

James H ...

I think you'll have alot of empirical evidence that shows your thesis to be correct ...

also don't forget that the below market rates of Medicaide and Medicare force prices up for everyone else to cover those losses.

don't forget that the "uninsured" already get heath care services from "free" clinics and hospital emergency rooms. We already pay for their care thru the prices that heath care providers charge. Just like we pay more for clothing because stores have to factor in "loses" due to theft into their prices. No, I'm not saying the uninsured are stealing health care just pointing out that any business must factor in alot of things for their final price structure.

Studies have also shown that emergency room visits do not go down when formerly uninsured get coverage. In most cases it is because there may not be enough doctors to go around and also because its just easier and familiar to those folks.

Remember that when the government sets the final price of a good or service that has little of no effect on the underlying "costs" associated with said good or service. You and I might think we are getting something cheaper but eventually the businesses providing that good or service will go out of business. Then it won't be cheaper goods or services but NO goods of services. Remember hearing about lines to buy bread in the Soviet Union ? Thats what price "controls" do ...

A better model, of course, ... (Below threshold)
astigafa:

A better model, of course, would be to simply allow the price of health care to skyrocket beyond the reach of people and businesses in this country to pay for it, while cutting taxes on the wealthiest one percent of Americans and deregulating the credit industry -- hell, deregulate every industry, privatize the wars, and invade Iran. Yeah, that would do it. We'd be so fucked up, no one would notice the price of health care. This is the Republican way.

Ast:You forgot tha... (Below threshold)
James H:

Ast:

You forgot that Republicans also eat puppies.

"I'm not sure I buy the cor... (Below threshold)
jim m:

"I'm not sure I buy the correlation between employers shedding jobs and insurers losing money. Yes, insurance premiums would go down as the subscriber base goes down due to layoffs and closing but so would claims paid... and presumably, if the insurance companies priced their policies properly, in equal amounts."

Steve, I suppose in the liberal world of 'business should never earn a profit' your thinking would be correct. But as the number of insured declines their variable revenue declines. However their fixed costs for staying in business do not change. So their revenues and profits go down as costs remain fixed.

If you are dealing with an industry that runs margins in the single digits, it does not take a lot to make a group of insured become unprofitable. I can see where an employer's group plan could easily go into the red based on what that plan was priced at and how many employees they shed.

Oh, astigafa, how I miss yo... (Below threshold)

Oh, astigafa, how I miss your particular brand of stupid. Any hesitation to accept your ideal is an outright embrace of its polar opposite.

The reality is that the more you regulate "profits" of companies, the fewer companies will be willing to play your little game. It happened in Maine. It's happening in Massachusetts.

Sure, you'll have the price of insurance down to a reasonable level. And no one to supply it. Congrats. You've found a way past the law of supply and demand.

Oops. No, you haven't. You've increased demand while reducing supply, and you're throwing fits because the suppliers don't want to keep supplying at their own expense.

You're awful generous with other people's stuff, asti. But then that's easy, when it's coming out of someone else's pockets.

Especially if it's the not-really-human "rich."

Who you define as anyone who either has more than you, or has something you want.

J.

Not only does government he... (Below threshold)
jim m:

Not only does government healthcare make the consumer insensitve to the cost of healthcare, it does not actually compensate the provider for the actual full cost of providing that care.

Medicare is now paying close to 45 cents on the dollar for care. Many hospitals lose money on these patients and some (like Michele Obama's U of C) have closed down their trauma services because they got too many medicaid patients and couldn't afford to keep treating them.

SO not only does Obama's plan tend to drive off insurance companies it tends to destroy hospitals and other providers. Obama has sold the gullible on the idea that he will cut costs and what he is really doing is just cutting payments. In the end it means poorer quality health care, fewer places to get it and longer waits to get treated.

Of course it won't be the government's fault, by then it will be the evil hospitals and doctors etc.

James H. is absolutely righ... (Below threshold)
Patriot Act:

James H. is absolutely right. One of the main driving forces behind skyrocketing health care expenses is the fact that consumers don't have to pay anything remotely proportional to the costs they incur. A guy that I work with must go to the doctor 20 or 30 times a year. If he had to pay $100/visit or 50% of a visit instead of 10 bucks, I'm quite sure he would go less and not be the worse for it.

Steve S. Yes,... (Below threshold)
JLawson:

Steve S.

Yes, insurance premiums would go down as the subscriber base goes down due to layoffs and closing but so would claims paid... and presumably, if the insurance companies priced their policies properly, in equal amounts.

Not... necessarily. I think (and I could be wrong here) that you're assuming, all things considered equal, that the cost of health care for 100 people is going to be 10 times the amount for 10 people.

But if, in that 100 you only have 2 or 3 people who need high-cost coverage in the course of a year, (which seems a reasonable number - most people are relatively healthy and won't need angioplasties or the like, and you likely aren't going to have more than one person in a hundred involved in a catastrophic accident requiring major medical expenses) you've got the other 97-98 covering the rest, for about 33 persons paying in for 1 person receiving care.

Shrink the company down to 10 people, with 1 person needing care, and you've got 9 paying for 1 getting. So you need to boost the cost for the 9 to what you'd get from the 33 - which would raise premiums about three times what the larger company would pay.

That's gonna hurt bad...

(I'm not talking about low-cost care, like the guy who goes in for a sinus infection and gets antibiotics and the like... I'm talking major medical...)

The larger the company, the more the risk is spread across the pool of people and the lower the individual cost can be.

Doesn't Mass have it's hand... (Below threshold)
GarandFan:

Doesn't Mass have it's hand out to the Feds for something like $600 million this year to prop up RomneyCare?

JLawson, thanks for making ... (Below threshold)
max:

JLawson, thanks for making a great argument for single payer. I couldn't have said it better myself.

Yeah, single payer, Max -</... (Below threshold)
JLawson:

Yeah, single payer, Max -

THE PERSON BEING RESPONSIBLE BUYING THEIR OWN INSURANCE - NOT BEGGING FOR A FUCKING HANDOUT FROM THE GOVERNMENT AFTER THEY TAKE IT AND LOSE 30% IN THE PROCESS!

Make it easy for the companies to compete, make it easy for them to form large pools to dilute risk. Don't have government collect the money, pay the IRS, pay the bureaucrats, pay the auditors, pay the unions, and then MAYBE have something left the fuck over to pay the insurance companies.

WE DON'T NEED GOVERNMENT TO PAY INSURANCE COMPANIES WITH OUR MONEY AFTER THEY SKIM THEIR SHARE OFF THE TOP!

Calm down, take a deep brea... (Below threshold)
max:

Calm down, take a deep breath, and wipe the spittle off your monitor, JL.

"The larger the company, the more the risk is spread across the pool of people and the lower the individual cost can be."

Replace "company" with "pool" and you've got single payer. You said it, not me. Don't blame me for your own cognitive dissonance.

So, max, what is the model ... (Below threshold)

So, max, what is the model you're using as the basis for how the government could do it better than the private sector? The Postal Service? Medicaid? HHS? The Department of Education? ("Billions spent, not one student educated!")

And also tell us how grand it will be with the 16,500 new IRS agents enforcing the health care mandate.

J.

So, max, what is t... (Below threshold)
iwogisdead:
So, max, what is the model you're using as the basis for how the government could do it better than the private sector? The Postal Service? Medicaid? HHS? The Department of Education? ("Billions spent, not one student educated!"

Resolved: The government does nothing (except for spaceflight, war, police and fire protection) better than private enterprise. And, even for those four items, the government depends on private enterprise.

Here's the left's big argument against private health insurance: it loses too much to administration and profit. And yet, my president says that Medicare and Medicaid lose "hundreds of billions" to waste and fraud.

Who can better "spread the risk"? Private enterprise or the government? That's the key.

Socialism does not work. It's been tried; it always fails.

The "pool" argument is the ... (Below threshold)
James H:

The "pool" argument is the main reason I'm sympathetic toward single-payer, at least for individuals suffering costly conditions. I know I'll get negatives out the wazoo here, but I'll say it anyway:

I think the federal goverment should extend a Medicare-like program to the entire population. Every American citizen, resident alien, illegal alien, and extaterrestrial alien would pay into this system through either payroll deductions or some sort of VAT.

This Medicare-like program, IMO, should have an annual deductible somewhere in the thousands of dollars. Five grand per person, 10 grand per family, perhaps?

There would be no requirement to purchase additional insurance, but individuals who want it would be free to purchase "gap" insurance to help them cover that $10k per year.

This would give individuals the knowledge that if they come down with cancer or another debilitating, high-cost disease, they will have treatment. Meanwhile, insurers would have the knowledge that no matter what, their annual liability would be limited to $10k per person. Those insurers could price accordingly.

There it is. A hybrid public-private system. Think of it what you will, that's what I think would work best.

James H,I... (Below threshold)
iwogisdead:

James H,

I'm sympathetic toward single-payer, at least for individuals suffering costly conditions

The problem is that "single-payer" doesn't merely provide care for "individuals suffering costly conditions," but, instead, completely screws up care for everybody. That's why it's called "single-payer" and not "multiple payer" or some such.

I believe most Americans are willing to pay some sort of tax to make sure that Americans who can't otherwise get coverage do get care.

Why not toss such folks into the present private enterprise system with some sort of premium voucher or whatever?

Whether it is "fair" or productive to make everybody pay for the care of a few is a different discussion, but a discussion irrelevant to Obamacare.

James H-if the poo... (Below threshold)
jim m:

James H-

if the pool argument makes you sympathetic toward single payer, ask yourself: why is it that the government actively prevents insurance companies from creating larger pools so people with costly conditions might afford some insurance?

The answer is that 1) the states wanted their own regulatory fiefdoms over insurance companies and 2) the socialists wanted to prevent healthcare insurance from being efficient enough to fix the problems.

In short, the reason we don't have affordable health insurance for people with costly conditions is government regulations that basically forbid insurance companies from doing what is necessary to provide it.

iwogisdead"And yet... (Below threshold)
retired military:

iwogisdead

"And yet, my president says that Medicare and Medicaid lose "hundreds of billions" to waste and fraud."

And ironically the govt runs both medicare and medicaid.

And ironically the... (Below threshold)
iwogisdead:
And ironically the govt runs both medicare and medicaid.

That's the whole point.

Conservatives fell behind on this "costs are skyrocketing" issue. The Dems have never shown any, not any, none, facts supporting the claim that Obamacare will stop "skyrocketing costs."

How will Obamacare stop "skyrocketing costs"? With more government programs that "lose hundreds of billions" each year?

Here's why "costs are skyrocketing." The very best and brightest people in the world are involved in American healthcare. They are expensive people. I wouldn't have it any other way.

Costs are skyrocketing, but... (Below threshold)
jim m:

Costs are skyrocketing, but they are decreasing the amount they are paying to providers. So where does the rest go? Government waste and fraudulent claims.

Has a single lib bothered to consider where the money for tens of thousands of new federal jobs is coming from? If Obamacare is going to save money that means that the salaries of the federal workers will come off the top and healthcare payments will have to subtract that AND any savings.

The money's coming out of healthcare jobs. How many hospital and doctor's office employees must lose their jobs to pay for the new government slugs?

Costs are skyrocke... (Below threshold)
iwogisdead:
Costs are skyrocketing, but they are decreasing the amount they are paying to providers.

Do you have a source for this claim?

As I've said numerous times... (Below threshold)
epador:

As I've said numerous times before, until the consumer is directly involved WITHOUT a middleman for health care costs, costs will increase. The "insurance" model for routine health care is bogus and needs to be removed (instead of expanded as Obamacare does). Real insurance for catastrophic illness/injury makes sense. "Cost sharing" for routine preventive and routine illness (as well as most chronic illnesses) encourages cost inflation and does nothing to ultimately protect (although short term offers an illusion of protection) the individual or society.

Nice start James H, but it doesn't matter whether the insurance is employer, government or self-paid.

Max -"Replace "... (Below threshold)
JLawson:

Max -

"Replace "company" with "pool" and you've got single payer. You said it, not me. Don't blame me for your own cognitive dissonance."

You know something? I'm tired of being polite to idiots like you who think nothing of twisting my words and meanings to their own ends, insulting me and laughing all the way as they take what I try to be as clear on as possible and ignore major sections of it to slap their own meaning in.

In case you weren't reading it - I was addressing my comments to Steve S. on why insurance costs would be higher for small companies than larger. YOU were the one interjecting the single payer argument, which wasn't part or parcel of anything being discussed.

And then you twist it to 'single payer' and attempt to tell ME to calm down when I object?

I don't think so.

You figure you can twist my words and meanings to support your own agenda. At this point, I think I've made it quite clear that the idea of having the government serve as a middleman, skimming off up 30% just in admin, collection costs and fraud, waste and abuse, and then grudgingly doling out the money as THEY see fit is objectionable.

I'm starting to really understand the Tea Party movement. There's no attempt at honest discussion from the left - it's all tricks and traps with the moral integrity of a used car salesman. You want what you want, you don't give a damn about side effects or costs, you don't give a damn about how many people you step on to get it, so long as YOU don't have to be responsible for yourself.

And then the left complains when the conservatives don't want to leap off the fiscal cliff with them.

Well - it's going to be interesting times for sure...

<a href="http://money.cnn.c... (Below threshold)
jim m:

http://money.cnn.com/2010/02/24/news/economy/doctors_ditching_medicare_patients/

CNN story: medicare cutting reimbursement by 21% to doctors this year.

There's more. Google it yourself.

"You know something? I'm ti... (Below threshold)
max:

"You know something? I'm tired of being polite to idiots like you..."

Quit pretending you've been the voice of reason. You've always been an arrogant condescending asshole and I don't expect that to change anytime soon.

"And then you twist it to 'single payer' and attempt to tell ME to calm down when I object?"

I pointed out that your "explanation" happened to be the argument for single payer. I told you to calm down because you were yelling and obviously not thinking clearly.


"There's no attempt at honest discussion from the left."

Quit being such a whiny little bitch. It's wizbang that discourages an honest discussion of any issue. Despite James H and Bruce Henrys valiant attempts.

You're just pissed because I caught you in a blatant inconsistency. Get over it. You'll survive to spout nonsense another day.

Quit being such an obnoxiou... (Below threshold)
JLawson:

Quit being such an obnoxious bastard then, you fucking asshole, playing your idiotic 'gotcha!' political shit.

"You've always been an arrogant condescending asshole and I don't expect that to change anytime soon."

Quit staring in the mirror and you might realize how much of a fucking prick you are. Look up Projection - and maybe you'll figure out why you've got to accuse everyone you disagree with of being arrogant, angry, condescending assholes.

"Quit being such a whiny little bitch. It's wizbang that discourages an honest discussion of any issue. Despite James H and Bruce Henrys valiant attempts."

Honest discussion? You take my words, twist them, and then expect ME to give YOU an honest discussion? To maybe RESPECT your point of view, when you obviously don't have any respect for mine, and eagerly imply onto what I write what wasn't there or intended in the first place?

In your fucking dreams, jerk.

I've got a hell of a lot more respect for James H and Bruce than I've got for you, fuckhead. THEY argue honestly, THEY don't excerpt and twist other people's words, THEY don't play the stupid 'gotcha' crap you did. Respect they've EARNED through being honest. We may disagree, but I feel they respect other's points of view.

You? No. You're just playing shitty games.

"You're just pissed because I caught you in a blatant inconsistency."

No, you stupid shit, I'm pissed because YOU took my conversation on a limited subject with Steve S and generalized the fuck out of it. And then YOU attempt to get all insulted and offended because I called you on it. I tried to explain it - you don't want to fucking LISTEN!

YOU fucked up, shithead, and you're trying to weasel out of the responsibility for what you did.

Ok, Mr. Manners, I'll leave... (Below threshold)
max:

Ok, Mr. Manners, I'll leave you alone. I knew you were a little off-kilter, but I didn't realize how mentally unstable you are.

Food for thought, perhaps it's YOU who needs to take a long look in the mirror.


Naaah. Couldn't be.

"I knew you were a littl... (Below threshold)
JLawson:

"I knew you were a little off-kilter, but I didn't realize how mentally unstable you are."

In Reagan's words - there you go again. Oh, it's just so typical it's ridiculous.

Insult, denigrate, handwave, call the person you disagree with crazy, and then you don't have to bother with what they say - they're 'unstable', so why bother? And if you can pretend to yourself that people who are anrgy at you are crazy, well, that sheds anything resembling responsibility for your actions, doesn't it?

Have a good evening, Max - and try to find some integrity and responsibility, okay?

Awesome page and awesome co... (Below threshold)
SeraxMD Author Profile Page:

Awesome page and awesome comments (well, until the end anyway).

Insure everyone, cover everything, and the costs will go down. Anybody with a clue would see that this is impossible. It's like having a Wendy's "free meal" card in Jamaica. It's useless if there are no Wendy's around. All this bill will do is restrict the availability of healthcare for every one.




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