Tuesday, December 9, 2008

Open Topic Tuesday

Sorry guys - I forgot.

Anyway, here's your weekly chance to comment on whatever you want.

9 comments:

  1. every week or so I get about a hundred "World" magazines delivered to my classroom fr me to hand out to my students. Today I opened the packages and found that instead of "World" I got dozens of copies of "The Nation" magazine. whoops. is someone trying to tell me something?

    ReplyDelete
  2. John,
    You said in your comment under Janet's post,

    "I'd rather see health insurance entirely divorced from employment. For one thing, the money employers must set aside for employee benefits is money that counts against the overal cost of hiring. I would rather see the money go toward salaries and allow individuals to search for their own health care."

    I couldn't agree more. I would like to see the topic of high heath insurance costs addressed.

    A lot of people who cannot afford health insurance depend on either their employer of the govenment to provide it. I like your idea of letting the individual find their own insurance. The problem is that it is unaffordable. So many people are looking to the government to create a universal plan. No one seems to see that this plan does not address the root of the problem. If the root of the problem is not dealt with, then health insurance costs will keep rising no matter who pays for it.

    Correct me if I am wrong, but the way I see it is that the root problem is lawsuits. There are so many frivilous lawsuits that the health care providers are not able to pay. They pay for insurance to protect them when (not if) they are sued. Because people sue at the drop of a hat, the insurance company is dishing out billions of dollars. The only way that they can provide the coverage and still make a profit themselves is to jack up their rates. Well, the doctors need to pay those higher rates and make a living themselves so they jack up their rates. The people need the health service but they cannot afford the high rates of the health service. They make a claim to their health insurace and they have to pay it. Because the doctor's rates are higher and higher, the health insurace needs to raise it's premiums so that they can pay the health bills and still pull in a profit. If there is some way to reduce the amount of lawsuits or the amount that someone is allowed to sue for, then potentially the health insurance rate would be able to drop allowing the average Joe to afford it. Am I right?

    The question I have is, If this is true, how would you suggest that we regulate lawsuits? Maybe there is a root problem beyond lawsuits. I don't know. What do you think?

    ReplyDelete
  3. First - regarding individual coverage vs employer provided coverage, the cost difference isn't that much. When you factor in what the employer pays. The mistake most people make is in thinking that the employer provided portion is on TOP of their salary - in fact employer themselves even tout it as such. In reality, if employers were did not have to factor health insurance into the costs of hiring employees, there would be more money available for salary - I'm sure some of that would go into the companies bottom line, however, to remain competitive, a large portion would go into employee salaries. Employer health care benefits in reality reduce salaries.

    Lawsuits are certainly a significant part of the issue when it comes to health care and is something that needs to be addressed - regardless of what other action is taken to address health care in the US.

    For one - as you stated, they drive up the provider's malpractice premiums - which in turn requires them to either charge more for services or make less money for practicing.

    Secondly, the fear of lawsuits cause providers to recommend procedures that for the vast majority of individuals are unnecessary.

    The other major contributor to the high cost of health care is that individuals expect their insurance to cover every single procedure and checkup. This would be akin to filing an insurance claim for having your brakes repaired, tires rotated or oil changed.

    Historically, insurance was just that - protection against catastrophic circumstances. However, when it comes to health care, it has morphed into an entity that pays for anything health related. Next time you have a procedure, take the time to look at the "explanation of benefits" (usually your insurance company - if you have one - mails it to you within a month). It doesn't take much to exceed your monthly or weekly premiums.

    Any "insurance" provider - whether provided to everyone by the government, needs to collect more from those subscribing than it pays out for care. In a single payer system, this is done by requiring providers to accept their terms.

    Universal health care would dramatically increase the numbers of individuals seeking care (since in their mind, it costs them nothing to see the doctor). The increase in demand would necessitate an increase in the price demanded by providers - the markets way of signaling a need for more of a commodity (in this case doctors).

    However, since there is only one entity actually paying for the service, it will need to decrease the benefits provided (meaning individuals who had insurance before will see a drop in benefits), increase the premiums charged (in this case - an increase in taxes), or limit the price doctors would be permitted to charge (negating the market signal for more doctors).

    If we are to maintain private sector coverage, lawsuits would have to be addressed - as well as the types of procedures to be covered. Either way (private sector or single payer), individuals need to change their thinking about what they expect from insurance companies.

    ReplyDelete
  4. One other consequence of frivilous lawsuits: It makes healthcare unavailable to unisured. If a doctor knows the patient will not be able to pay for the myriad of tests he normally would prescribe, he's not going to take them on at all - after all, on the off chance something is undetected, he's going to be in court.

    So rather than providing the minor care actually necessary and affordable, the doctor turns the patient away. The uninsured's only alternative is to head to the overcrowded emergency room (where they are required by law to provide care)

    ReplyDelete
  5. So the question, then, is this: How in the world do we legislate these lawsuits? Isn't more legislation going to result in more of those "unintended consequences" we all talk about? I mean, what do we legislate and who decides what the definition of "frivilous" actually is? I haven't heard too many solutions to this up till now. I'd love to hear your ideas.

    ReplyDelete
  6. I don't want to leave health insurance up to the individual because it will be more expensive than group health insurance through an employer:

    There is a notion in insurance called anti-selection. Basically, you don’t want to design an insurance plan where people can easily make choices that favor themselves and take advantage of the plan. This is more likely to occur when health insurance is not tied to employment. (Anti-selection is difficult if one has to change jobs in order to take advantage of a plan.) Premiums are set based on any anti-selection that might occur against a plan, so individual health insurance, where people are free to enter and leave a plan, will be higher.

    Individual health insurance premium will be higher because the insurance company will find it more difficult to quantify the risk of an individual versus a relatively stable population of employees. The insurance company can see the frequency and severity of the claims happening within a group and alter premium charges from year to year. If the group is more volatile, there is less the insurance company can do, and so will charge more.

    Also, within a large group of people, there will be some large losses, but they can spread among the entire group which are somewhat locked together by their. There is no where to spread that risk with an individual, so an individual health premium is higher. If you group a bunch of individuals based on choice, the healthy ones will leave a group when the claims are high (and premiums increase). The unhealthy ones won’t be able to find a replacement group and will be stuck and may not be able to even afford the premiums.

    Then, there is the business side of things. Transaction costs are lower when an employer makes premium payments for a group of people. Risk of non-payment of premium is probably lower when an employer makes the payment. Think of how many people would stop paying premium if there was a denied claim – that doesn’t happen when the employer is making the payments. Insurance companies are more willing to make certain contracts with an employer than they would with an individual. Also, many times the employer splits the insurance based on different types of risk and may even self insure a portion of a plan. These can make things cheaper and aren’t available to individuals.

    ReplyDelete
  7. NTOA, How about the small business that cannot afford to provide health insurance? What happens to those employees?

    ReplyDelete
  8. Melodie: Frivilous litigation is by no means limited to the medical profession. This could be handled in a couple of ways: 1) require those filing suit to be liable for the defendants legal expenses should they lose. 2) post hard caps on the damages that can be awarded - a significant factor in the cost of Malpractice Insurance is that it is difficult for insurers to identify their potential liability in the event of a claim

    NTOA: That was a well thought out response which (along w/ JDS' original post to this thread) has prompted me to address it more fully - I've started on a post for Monday moring to tackle this issue.

    A question: Would you favor something along the lines of Mitt Romney's plan - which required Massachusetts residents to purchase health care? This would prevent healthy individuals opting out. NOTE: I don't necessarily support his plan, but am interested in your thoughts on it.

    ReplyDelete