> The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. That’s good in theory but it actually contributes to rising health care costs.
How did this little gem sneak into the ACA? It seems like it was put in by somebody who doesn't understand game theory.
It wasn’t snuck in. In theory, if you have sufficient # of health insurers, then the ones with lower costs will be able to offer lower premiums, and win more business.
Maybe make up to x% of health care premiums tax-deductible, and disallow employers from providing health insurance?
As far as I see, the only reason the employer pays health insurance is that the employee does not need to pay taxes on it.
It seems safe to say that, even at the time, the number of insurers was nowhere near sufficient (in any given geographic area). That number is even lower today, something feared by the law's critics.
There are some other shaky assumptions built in, as well, including the one that price alone is enough to win more business, even assuming identical/equivalent networks (another shaky assumption). A reputation for terrible claims practices might be enough to dissuade someone from saving that extra $3/month in premiums.
And in the far more common case in many parts of the US where you have exactly one insurer, which was already the case in 2010, you get the exasperated situation we have now.
Either Obama and the Democrat super majority of 2010 were complete idiots when they wrote the ACA or they fleeced the American people with a false bill of goods. Note that “or” is meant to be interpreted as the Boolean algebra definition.
Oh, stop. There's no way a bill of any substance -- on any matter, let alone health care -- makes it through congress without unintended consequences. You could just as easily point at any of a thousand other laws, passed by both parties, and conclude the same thing. In a functioning system of government, you go back and fix the things that break, and not just, say, throw an eight-year political tantrum that gridlocks government and ultimately leaves the system in a partially broken heap of half-repealed regulations, simply because you cannot have 100% of your way.
It certainly doesn't help that the GOP systematically blocks any attempt to reduce the influence of private industry in health care. Medicare manages to control costs, but a Medicare-for-all proposal never had a chance of making it through congress because it needed GOP votes to pass.
If one party consists of "complete idiots", the other consists of corporate lackeys and paid shills.
a Medicare-for-all proposal never had a chance of making it through congress because it needed GOP votes to pass.
Incorrect. For awhile, Democrats controlled the Presidency and the House, and the Senate Democrat caucus had a cloture-capable 60 vote supermajority. They didn't need a single GOP vote for anything. For ACA, no GOP amendments were even given the dignity of a simple up/down floor vote.
"the Democrat-controlled House and Senate committees adopted nearly 190 Republican amendments while writing the legislation, according to data compiled by The New York Times."
Look at the actual committee and floor votes in congress.gov (and that doesn't even count attempts that were not allowed a vote). NYT is a business, not an objective stenographer.
To this day, NYT will not acknowledge how phony their financial assessments are with respect to the billions of losses via just the Risk Corridors and community centers. There was more than a $5.3 billion deficit in Risk Corridor spending for 2015 alone[0]. Enrollment was overestimated by the CBO by over 100% even while Obama was still in office[1]. And the numbers are still in flux as insurers who didn't get all the bailouts they were "promised" successfully sue for hundreds of millions[2].
"For awhile, Democrats controlled the Presidency and the House, and the Senate Democrat caucus had a cloture-capable 60 vote supermajority. They didn't need a single GOP vote for anything. For ACA, no GOP amendments were even given the dignity of a simple up/down floor vote."
What crocodile tears! Democrats bent over backwards to convince moderate Republicans to support the bill, and adopted many changes in committee. No GOP senators were going to be caught dead actually voting for an amendment on the floor, so they made their changes in private. Plus, Scott Brown's election meant that the law couldn't be amended or reconciled anyway.
But this has nothing to do with Medicare-for-all: it was killed because Joe Lieberman refused to vote for any bill containing such a provision. So if even one GOP senator had supported the idea, we'd all have access to Medicare. I made a factually true statement.
What you describe the Democrats doing with the ACA did not happen, as others have pointed out. But it did happen last year, when the GOP blocked any amendments or involvement from Democrats in their failed healthcare reform process.
> How did this little gem sneak into the ACA? It seems like it was put in by somebody who doesn't understand game theory.
It didn't sneak in.
The issue was that before the ACA we had insurers that were below 60%.
They managed this by cutting people off of healthcare once they started using it aka recission panels.
The problem is that the ACA is a working solution and was meant to be updated once we got real data as to how things were or were not working. Of course, that was before Republican intransigence.
Personally, I'm glad for Republican intransigence. We're going to get to single payer long before I ever expected to.
> We're going to get to single payer long before I ever expected to.
I think you're right, but I think it will take a pair of full pendulum swings:
1. The GOP gets its way, and trashes the ACA more than it already has.
Followed by:
2. A huge backlash, including "middle America" who finally realize they shouldn't vote for the people most interested in cutting the programs they actually depend on.
I just worry the gap in time between #1 and #2 will be drawn-out, painful and; to some; deadly.
Maybe this is my blue city bubble talking, but I think we're slightly past the apogee of the right swing right now.
The GOP (barely) failed to hack up the ACA this Congressional term, and I would be shocked if they came out of the midterms in the same or better shape than they're in right now.
This is called Medical Loss Ratio (MLR), the thinking was to limit healthcare companies from charging exorbitant rates for "profit" and not care. It got strange though because "cost of care" also included wellness programs. So what do you think these insurance companies do coming into the year end when they are under their estimates for care?
A) Refund premium dollars to their members, HA!
or
B) Spend millions of dollars in the last days of the year building step counting programs and other half-baked wellness efforts
Healthcare in America is terminally ill. In it's current form, commercial insurance, like Aetna in this article, are rewarded for pumping up the total cost of care as big as possible while keeping their members just healthy enough to dump off at the doorstep of medicaid when they're old enough to qualify for it.
Healthcare is the most extreme example of Republicans clutching to the fantasy that the free market fixes everything. The ACA was pretty flawed, but it was better than nothing.
Free market? How is it a free market if you can't even find out the price before you pay? The Republicans are no help, but not because they purport to believe in free markets.
Agreed. We would call insanity on this pricing obfuscation in any other industry, but accept it for the most important part of our lives.
"How much does that big Mac cost?"
"Eat one. I will then send a bill to your food provider. They will tell you what share of the price, made up behind you back & after the fact, you are responsible for paying."
They call it that though. My whole family is hardcore Republicans. In their mind, lack of rules from the government = free market, period. Despite all evidence to the contrary, they still think the US has the best healthcare system in the world because it isn't run by the government. Seriously.
Would they be swayed by a discussion of how Medicare has a choke hold on the whole hospital system?
They are always a major payer and so hospitals will do what it takes to be Medicare certified. In high density areas there can be enough rich people for a hospital to not bother.
Milton Friedman said that the biggest enemies of the free market were academics and businessmen. The ACA law shows that they (along with Congress) collude to keep the appearance of a market while removing competition from health insurance and healthcare providers.
If you just apply common sense and think about it - it makes sense :) Insurance companies are not interested in lowering prices. They are interested in:
1) Not spending more than they captured in premiums in current year.
2) Increase of cash flow.
Once you combine these two you realize what insurance companies are looking to get steady increase in medical costs over long time. And medical service providers are playing along.
No, common sense says people and companies will chose providers with best coverage at lowest price. Insurance companies does have huge incentive to lower the premiums. I think the article is simply not well researched. The guy thinks of insurance company as middlemen who negotiates for him. That’s true only to an extent because insurance company does have to build a network. If they miss out on big players like NYU then their lower premiums are pointless. The most flexibility customers want is to chose any doctor they want. Hospitals have taken advantage of this since long and negotiatons are not simple for insurance company to build their network. Medicare is different beast.
Yeah, but when you're locked in to only choosing whichever your company provides you there's not much opportunity to switch, so there's really nothing you can do.
> No, common sense says people and companies will chose providers with best coverage at lowest price.
This is basically the argument Comcast uses to justify their de facto monopoly. In Comcast's case, their "competition" doesn't even exist on the same scale (which is hardly competition).
If the market were really a "free market" there would be viable options between insurance companies for the insured. Sure you can pick your doctor, and to some extent your plan, but does your company offer you multiple choices for where your health benefits come from?
"The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. That’s good in theory but it actually contributes to rising health care costs. If the insurance company has accurately built high costs into the premium, it can make more money. Here’s how: Let’s say administrative expenses eat up about 17 percent of each premium dollar and around 3 percent is profit. Making a 3 percent profit is better if the company spends more."
Wow. Great example of free market distortions that don't work. Now if there was true competition in the field, a company would never be able to get away with this.
Wants and necessities are not economically distinct, and that's not why health care and health insurance don't have the features there make free markets efficient.
Lack of transparent utilities at the time of transactions is more of an issue.
Outside of libertarian lala-land, most U.S. citizens are limited to three, two, or oftentimes, just one healthcare insurer. Also, most U.S. citizens will pay anything to not die.
"la la land" implies people are unaware of reality. Libertarian's by and large aren't naive. They know what reality is. They realize people don't have choice and want to change that by opening up competition for pharmaceutical sales and insurance across state borders and even country borders.
Just because something is far from the reality of current day does not mean it doesn't have merit or that the people who want it are la la land.
Imagine a world where if a drug is approved in the EU but not our FDA then we can still buy it. Or a world where if a drug is cheaper in Canada we can buy it from there. Or if the people on the other side of the border between two states has lower premiums than I can actually buy that plan without moving to the other state.
And further more, insurance and drug companies will feel the market pressure of consumers having real choice.
> Imagine a world where ... if a drug is cheaper in Canada we can buy it from there.
This assumes that the issue here is a regulatory failure, rather than intentional price discrimination on the price of drug companies.
Forcing the entire world into a single market with the same prices would raise drug prices on most of the world, without necessarily reducing prices meaningfully in the US.
One point to take note of is that the GP already knows the fact you're describing. He just chooses not to believe it.
He resents the implication that libertarians are delusional, and says that they "know reality". But then, attempting to buttress his realism, he implores the audience to "imagine" a world where everything works according to his will, or "imagine" a promised land just around the corner, or "imagine" this or that.
Correct, I am assuming that regulation drives up cost which may or may not be true. Let's assume that is wrong...
And I agree, taken in isolation you are right. There is no guarantee that opening up the markets will lower prices. In fact, as you say, the opposite might happen.
But, I am also assuming that opening free trade between markets (not merging into one giant market as you say) will produce competition. Not just with insurers but also with pharmaceutical companies and safety agencies.
On the safety front if there was some reciprocity between safety agencies that the pharma company doesn't have to have their drug approved in every country that they want to sell in.
Now, you will say there is no guarantee big pharma will pass along that savings but...
- These savings should allow new entrants into the market by lowering the barrier of entry
- It allows multiple drugs that treat the same illness (but are not patent infringing) to compete. As opposed to currently it can be years (if ever) for a foreign drug to enter the US marker.
Edit: To summarize. The pharma and insurance companies can charge what they want because they are a monopoly. You are assuming the monopoly will continue when trade is opened. I am more optimistic if it can be executed well as opposed to just blind deregulation.
> About 1 in 5 is currently being pursued by a collection agency over medical debt.
That's actually terrifying! In a situation like this, why can't the authorities finally admit that the society as a whole has a problem, and adopt the European model where everyone is given free medical care?
hehe, ok I see what you mean! Sure, if the consumer is receiving value (not dying thanks to thyroid medication or etc) then this is certainly a good thing.
however as you say, we want the cost of the product/service that is keeping you alive to be near the cost of what it actually costs to deliver that result.
In the case of nearly all drugs, a $100 brand name pill really only costs $1 per bottle to manufacture, with a lot of profit, legal and lobbying fees, and salary bloat baked into the margins along the way.
So $14,000 a year really honestly should be around $1,400 a year. Like, if i get my appendix out, and I pay $1,400, the hospital and surgeon are still making awesome money. It just so happens that in the US, they've inflated the price tag of that surgery to $80,000 lol
Many years ago my daughter had the same procedure twice in a the same year in the same hospital and the price approved by the healthcare was much higher for the firt time, when our deductible was not yet met. I can think of ways the "deductible left" may be used to maximize profit for both the hospital and the healthcare
"Those rising costs eat into every employee’s take-home pay."
"...every time health care costs rose by a dollar, an employee’s overall compensation got cut by 52 cents."
When you read things like this, you should be remembering all those articles you saw about "the widening wealth gap." This is one of the mechanisms by which wealth is extracted from what's left of the middle class and given to wealthy shareholders.
And when you read...
"The hospital and insurance company had agreed on a price and he was required to help pay it. It’s a three-party transaction in which only two of the parties know how the totals are tallied."
...you should be reminded of the now commonplace idea usually mentioned regarding Facebook et al: If you're not paying (your own medical costs, directly), you're the product. The analogy isn't quite one-to-one, but the insurer kind of sells you to the hospital. But then the hospital wants its cut too. So they work out a deal. Your illness, to either of the two companies, isn't a misfortune; it's an opportunity. They jack up the price and basically end up splitting the profit.
It needs to be regulated. But legislators beholden to those rich shareholders will fight that idea, and they'll tend to hide it behind some deep-sounding philosophical argument about free markets that they don't actually believe.
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[ 0.34 ms ] story [ 86.3 ms ] threadHow did this little gem sneak into the ACA? It seems like it was put in by somebody who doesn't understand game theory.
It seems safe to say that, even at the time, the number of insurers was nowhere near sufficient (in any given geographic area). That number is even lower today, something feared by the law's critics.
There are some other shaky assumptions built in, as well, including the one that price alone is enough to win more business, even assuming identical/equivalent networks (another shaky assumption). A reputation for terrible claims practices might be enough to dissuade someone from saving that extra $3/month in premiums.
Either Obama and the Democrat super majority of 2010 were complete idiots when they wrote the ACA or they fleeced the American people with a false bill of goods. Note that “or” is meant to be interpreted as the Boolean algebra definition.
It certainly doesn't help that the GOP systematically blocks any attempt to reduce the influence of private industry in health care. Medicare manages to control costs, but a Medicare-for-all proposal never had a chance of making it through congress because it needed GOP votes to pass.
If one party consists of "complete idiots", the other consists of corporate lackeys and paid shills.
"the Democrat-controlled House and Senate committees adopted nearly 190 Republican amendments while writing the legislation, according to data compiled by The New York Times."
Source: https://www.nytimes.com/interactive/2017/07/21/us/health-car...
To this day, NYT will not acknowledge how phony their financial assessments are with respect to the billions of losses via just the Risk Corridors and community centers. There was more than a $5.3 billion deficit in Risk Corridor spending for 2015 alone[0]. Enrollment was overestimated by the CBO by over 100% even while Obama was still in office[1]. And the numbers are still in flux as insurers who didn't get all the bailouts they were "promised" successfully sue for hundreds of millions[2].
[0] http://www.modernhealthcare.com/article/20161205/NEWS/161129...
[1] http://thehill.com/blogs/congress-blog/healthcare/309902-oba...
[2] https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2016cv...
What crocodile tears! Democrats bent over backwards to convince moderate Republicans to support the bill, and adopted many changes in committee. No GOP senators were going to be caught dead actually voting for an amendment on the floor, so they made their changes in private. Plus, Scott Brown's election meant that the law couldn't be amended or reconciled anyway.
But this has nothing to do with Medicare-for-all: it was killed because Joe Lieberman refused to vote for any bill containing such a provision. So if even one GOP senator had supported the idea, we'd all have access to Medicare. I made a factually true statement.
It didn't sneak in.
The issue was that before the ACA we had insurers that were below 60%.
They managed this by cutting people off of healthcare once they started using it aka recission panels.
The problem is that the ACA is a working solution and was meant to be updated once we got real data as to how things were or were not working. Of course, that was before Republican intransigence.
Personally, I'm glad for Republican intransigence. We're going to get to single payer long before I ever expected to.
I think you're right, but I think it will take a pair of full pendulum swings:
1. The GOP gets its way, and trashes the ACA more than it already has.
Followed by:
2. A huge backlash, including "middle America" who finally realize they shouldn't vote for the people most interested in cutting the programs they actually depend on.
I just worry the gap in time between #1 and #2 will be drawn-out, painful and; to some; deadly.
The GOP (barely) failed to hack up the ACA this Congressional term, and I would be shocked if they came out of the midterms in the same or better shape than they're in right now.
More shocked than when Trump won in 2016?
Healthcare in America is terminally ill. In it's current form, commercial insurance, like Aetna in this article, are rewarded for pumping up the total cost of care as big as possible while keeping their members just healthy enough to dump off at the doorstep of medicaid when they're old enough to qualify for it.
"How much does that big Mac cost?" "Eat one. I will then send a bill to your food provider. They will tell you what share of the price, made up behind you back & after the fact, you are responsible for paying."
They are always a major payer and so hospitals will do what it takes to be Medicare certified. In high density areas there can be enough rich people for a hospital to not bother.
1) Not spending more than they captured in premiums in current year.
2) Increase of cash flow.
Once you combine these two you realize what insurance companies are looking to get steady increase in medical costs over long time. And medical service providers are playing along.
> No, common sense says people and companies will chose providers with best coverage at lowest price.
This is basically the argument Comcast uses to justify their de facto monopoly. In Comcast's case, their "competition" doesn't even exist on the same scale (which is hardly competition).
If the market were really a "free market" there would be viable options between insurance companies for the insured. Sure you can pick your doctor, and to some extent your plan, but does your company offer you multiple choices for where your health benefits come from?
Wow. Great example of free market distortions that don't work. Now if there was true competition in the field, a company would never be able to get away with this.
Or, more technically: health care does not meet the requirements for a "free market", so cannot exist in principle.
Lack of transparent utilities at the time of transactions is more of an issue.
Outside of libertarian lala-land, most U.S. citizens are limited to three, two, or oftentimes, just one healthcare insurer. Also, most U.S. citizens will pay anything to not die.
"la la land" implies people are unaware of reality. Libertarian's by and large aren't naive. They know what reality is. They realize people don't have choice and want to change that by opening up competition for pharmaceutical sales and insurance across state borders and even country borders.
Just because something is far from the reality of current day does not mean it doesn't have merit or that the people who want it are la la land.
Imagine a world where if a drug is approved in the EU but not our FDA then we can still buy it. Or a world where if a drug is cheaper in Canada we can buy it from there. Or if the people on the other side of the border between two states has lower premiums than I can actually buy that plan without moving to the other state.
And further more, insurance and drug companies will feel the market pressure of consumers having real choice.
Doesn't seem that "La La" to me.
This assumes that the issue here is a regulatory failure, rather than intentional price discrimination on the price of drug companies.
Forcing the entire world into a single market with the same prices would raise drug prices on most of the world, without necessarily reducing prices meaningfully in the US.
He resents the implication that libertarians are delusional, and says that they "know reality". But then, attempting to buttress his realism, he implores the audience to "imagine" a world where everything works according to his will, or "imagine" a promised land just around the corner, or "imagine" this or that.
Religious cognitive dissonance is fairly weird.
And I agree, taken in isolation you are right. There is no guarantee that opening up the markets will lower prices. In fact, as you say, the opposite might happen.
But, I am also assuming that opening free trade between markets (not merging into one giant market as you say) will produce competition. Not just with insurers but also with pharmaceutical companies and safety agencies.
On the safety front if there was some reciprocity between safety agencies that the pharma company doesn't have to have their drug approved in every country that they want to sell in.
Now, you will say there is no guarantee big pharma will pass along that savings but...
- These savings should allow new entrants into the market by lowering the barrier of entry
- It allows multiple drugs that treat the same illness (but are not patent infringing) to compete. As opposed to currently it can be years (if ever) for a foreign drug to enter the US marker.
Edit: To summarize. The pharma and insurance companies can charge what they want because they are a monopoly. You are assuming the monopoly will continue when trade is opened. I am more optimistic if it can be executed well as opposed to just blind deregulation.
That's actually terrifying! In a situation like this, why can't the authorities finally admit that the society as a whole has a problem, and adopt the European model where everyone is given free medical care?
It's just that we'd like our health care costs to be closer to the cost of delivery than to the realized value.
And if you actually use it, then you are talking about another $5,000 - $7,000 in yearly out of pocket max spending.
So conceivably, a very sick person is spending $14,000 a year to keep themselves alive
Your argument is that this somehow isn't worth $14,000 a year?
Like I say, It'd be great if US prices were closer to cost of delivery (cost assuming reasonable regulation).
however as you say, we want the cost of the product/service that is keeping you alive to be near the cost of what it actually costs to deliver that result.
In the case of nearly all drugs, a $100 brand name pill really only costs $1 per bottle to manufacture, with a lot of profit, legal and lobbying fees, and salary bloat baked into the margins along the way.
So $14,000 a year really honestly should be around $1,400 a year. Like, if i get my appendix out, and I pay $1,400, the hospital and surgeon are still making awesome money. It just so happens that in the US, they've inflated the price tag of that surgery to $80,000 lol
"...every time health care costs rose by a dollar, an employee’s overall compensation got cut by 52 cents."
When you read things like this, you should be remembering all those articles you saw about "the widening wealth gap." This is one of the mechanisms by which wealth is extracted from what's left of the middle class and given to wealthy shareholders.
And when you read...
"The hospital and insurance company had agreed on a price and he was required to help pay it. It’s a three-party transaction in which only two of the parties know how the totals are tallied."
...you should be reminded of the now commonplace idea usually mentioned regarding Facebook et al: If you're not paying (your own medical costs, directly), you're the product. The analogy isn't quite one-to-one, but the insurer kind of sells you to the hospital. But then the hospital wants its cut too. So they work out a deal. Your illness, to either of the two companies, isn't a misfortune; it's an opportunity. They jack up the price and basically end up splitting the profit.
It needs to be regulated. But legislators beholden to those rich shareholders will fight that idea, and they'll tend to hide it behind some deep-sounding philosophical argument about free markets that they don't actually believe.