That old adage, "lies, damn lies, and statistics," popped into my head after finishing my story tonight. How much will a public health care plan cost? The House bill allows for $2 billion dollars to seed a public option plan. That money would pay for administrative start-up costs and initial reserves. The bill expects the plan to pay back that money over ten years. The American Academy of Actuaries and the Society of Actuaries figures it would take between $1 billion and $42 billion in the first ten years to start up a public plan. The wide range depends on how many people enroll, how high their claims are, and how much they pay in premiums.
As Cori Uccello of the American Academy of Actuaries explained to me, pricing is the key. She said, "If the plan is under priced then there is more likelihood that there is going to be insolvency." Lawmakers seem sensitive to that. A portion of the bill, under Section 322 reads, "NO BAILOUTS - In no case shall the public health insurance option receive any Federal funds for purposes of insolvency in any manner similar to the manner in which entities receive Federal funding under the Troubled Assets Relief Program."
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Energy companies cashed in on commodity speculation (except the ones that got killed on bad hedges) while insurance companies lost big time on high-risk credit derivative contracts. Their relative profitability changes a lot over time.
I suppose you are right that insurance companies are not responsible for setting the prices. I just ask whether they could have used their considerable weight as customers to drive us further toward the more efficient, lower cost care that our government says is its goal now. Individual patients don't have bargaining power, as you said, but insurance companies do if they choose to use it.
I know on my old PPO plan (not Indemnity?) many years ago that the doctors agreed to eat any amount above the R&C you mentioned, in exchange for being on the list of preferred providers for the insurance company. I did not know this until an HR administrator told me one day, because the insurance company never mentions it anywhere. The doctors would always send me the bill for the difference anyway, and then quickly change their minds when I wrote them and told them I know they are not allowed to charge me. Maybe they could make this clear to the insured in the first place?
James,
First of all, you can have the 1.5% profit on an insurance carrier's $19 billion in revenue. Personally, I'd rather have an oil company's 10% profit on $490 billion in revenue.
I don't completely understand your comparison of furniture and PPOs but I think you're making my point. If the doctor contracts with an insurance carrier a $500 PPO reimbursement for a $1,200 service, but that doctor charges his/her non-PPO patients the full $1,200, isn't the doctor---not the carrier---driving that cost to $1,200? Granted another carrier will still reimburse more than the $500 for the non-PPO service, but isn't the doctor charging, as you say, full retail for that non-PPO service? On one hand the doctor says he can do the service for $500 but on the other, he charges $1,200. Maybe in the furniture business only a huge sucker customer pays full retail, but what choice does the patient have?
Another point---Indemnity plans have a Reasonable and Customary amount set by the carrier. The carrier won't consider in their reimbursement formula any charges in excess of R&C. If a doctor charges more than R&C the patient pays the difference. Can't blame the carrier for that either.
@Plan Administrator, the insurance companies seem only too happy to comply with any demand for higher payouts for any goods or services requested, and pass it along to employers as higher premiums. Or are you saying those triple-digit increases in health insurance premiums were just slight adjustments for inflation? Of course the percentage they skim off the top grows as the total costs grow, so why would the industry take responsibility and stop participating in the abuse?
If the health care industry thinks its profits are insigificantly small, it can go ahead and send them to my bank account. Oh, that's right, we're talking thousands of times more money than any of us will see in our lifetimes - but yeah I feel sorry for them being so "unprofitable". Maybe they would have more profitability if they stopped paying their own executives too much of their corporate earnings.
And the idea that the PPO is getting a great deal because doctors gouge the uninsured even more is flawed. The local clothing and furniture stores tell me I'll save 50 percent or more off the "retail" price on everything I buy from them, but they're really giving me the retail price. Only complete idiots pay the huge sucker price, and a responsible company doesn't settle for the lousy sale price underneath that either.
I HAVE A PLAN AT WALMART , I PAY $32.00 A PAYDAY SO THAT IS 26 PAYDAYS A YEAR , AND THE DEDUCTABLES ARE GETTING BIGGER BUT WHAT HAPPEN WHEN THE LITTLE GUY LIKE ME CAN NOT PAY HIS DEDUCTABLE ALL AT ONCE! MY IDEA IS HAVE HEALTHCARE SAVING ACCOUNT COMBINED WITH YOUR 401K CAUSE IT IS ALREADY FUNDED AND MINE IS ALREADY $28,000 FOR 13 YEARS AT WALMART BUT RIGHT NOW I CAN NOT GET TO IT TO PAY THIS DEDUCTABLE WITHOUT A PENLTY THIS IS NOT FAIR AND HARD ON MY BUDGET FOR EXTRA $25 DOLLARS EACH MONTH TRYING TO PAY $1250. WHICH IS THE DEDUCTABLE IT IS TIME TO FIX THIS SO YOU ONLY NEED ONE FUND THEN ALL PEOPLE HAVE TO DO IS ADD A % TO IT AND THE COMPANY FUNDS IT TOO AND IF THE PERSON DOES NOT GET SICK IT IS YOU 401K IF YOU DO IT IS YOUR HEALTH CARE SAVING ACCOUNT!!!
It's not the industry that has the abusive hold on health care costs---the abuse is with the individuals, the doctors and the hospitals. A recent report showed the health care industry's profits for 2008 ranked 35th out of 53 industries. Check out the the fact that a doctor in a particular PPO will sign a contract with the carrier and will accept payment from that carrier of less than half what he/she will charge their non-PPO patients---for the same service or procedure.
Want to talk about abusive holds? Let's start will the oil companies.
Actuarial mathematics is fascinating stuff, though there's a steep learning curve to it's statistical prerequisites. I considered taking the exams several times - it might be a good career change now. Economics is sometimes called the dismal science, but actuaries literally practice the mathematics of death ;)
If the public option went insolvent while private insurance companies succeed, that would mean either the industry was forced to innovate and provide more care more efficiently or that it was able to sabotage the public option and restore its abusive hold on health care costs.
When federal, state and local governments can't effectively manage the costs of services, they privatize those services---turn them over to the private sector.
If the public option becomes insolvent and the government won't bail it out, will the federal government have to privatize health care? If so, wouldn't that mean they would turn it over to the insurance industry? How ironic would that be?