Thursday, December 17, 2009

An Interview About the Health Insurance Mandates, the Public Option and Health Care Costs

The Disease Management Care Blog typically doesn't do 'interviews,' but it often speaks to itself. It's therapeutic and it beats staring at the television's fatuous offerings. This interview is with a typical medical director from a regional and free standing not-for-profit health insurance plan.

DMCB: What do you think about the current status of health reform?

Not-for-profit Medical Director (NFPMD): Enabling the uninsured to obtain commercial health insurance through a mandate plus premium assistance for persons less well off will be a bonanza for us. Let the good times roll.

DMCB: What about those new requirements that you can't refuse to cover anyone or charge a higher premium for someone with pre-exisiting conditions?

NFPMD: Not a problem if the mandate forces everyone to buy insurance, because that spreads the risk around. We always knew the individuals' ability to afford insurance was a problem and this seems like a good fix.

DMCB: Were you out to screw these individuals with your evil insurance ways?

NFPMD: I can't speak for the large for-profit insurers, but us small not-for-profit insurers had our share of problems with individuals seeking insurance: 1) too many persons who needed it applied for it, usually because paying for their health care out of pocket was going to be more expensive than their monthly insurance bill. For us, that was a guaranteed loss, 2) just like other businesses, things are cheaper if you buy in bulk. Large employers can buy insurance and command a discount. Individuals can't do that, and 3) the ' law of large numbers ' says large insurance pools are more stable than small insurance pools. The threat of a loss is mathematically higher among individuals, so we have to charge more. It's not evil, it's business. By forcing people who don't technically 'need' insurance to buy it, the playing field becomes level.

DMCB: Your reference to 'it's just business' sounds like someone out of a Godfather movie.

NFPMD: Michael Corleone didn't get to where he was by accepting a 3% margin. That is our reality.

DMCB: And what about the public option?

NFPMD: Once again, I can't speak for the large for-profit insurers, but the talk about keeping us not-for-profits 'honest' was insulting. We don't have profits, we have surpluses that can't go anywere and that help provide financial stability. They're a rainy day fund. We have no stockholders, so the money we 'make' is kept in trust.

DMCB: Critics say you don't like the public option because you can't 'compete' against its higher quality, lower prices and lower overhead.

NFPMD: The National Committee for Quality Assurance has a widely and long recognized approach that measures quality and those numbers say we are doing pretty good. Medicare - which is held up as the poster child for the public option - does not participate in the NCQA and has only just begun to measure quality in ways that makes it hard for me to compare their apples to our oranges. As for lower prices, duh.....isn't Medicare isn't going bankrupt? And finally, Medicare's lower overhead is possible because it uses regulations instead of employees. Other companies that are off Medicare's books have to carry the cost of the employees to carry out those Medicare regulations, which are growing more complex every year. Even then, they don't work very well.

DMCB: You seem to feel pretty strongly about this.

NFPMD: I can't blame our trade association for really digging their heels in on this. If the public option came about, all of us small regional not-for-profits would be the first to go out of business. Ironically, it'd be the bigger insurers that would have the best chance to survive and they're the ones with the worst reputation.

DMCB: Well if there is no public option, critics charge you should be more heavily regulated.

NFPMD: I personally think the State's health insurance commissioners have done a pretty good job of that. They don't get appointed or voted into office unless they can show that they're prepared to beat up on a health insurer. That being said, I know you read the Libertanian CATO blog from time to time, so you probably saw the report from the Congressional Budget Office that pointed out that more stringent regulation of the insurance industry - specifically over their medical loss ratios - may well effectively turn it into a government function. According to the CBO, that means all its costs would need to be put into the government budget.

DMCB: Ha ha! Little chance of that happening!

NFPMD: Ha ha! We'll see. I may yet become a government employee.

DMCB: How about health care costs?

NFPMD: They're going to continue to go up up up, but the average person won't see it because those costs will be spread around in taxes, premium assistance and larger risk pools that force previously uninsured people to pay in. In fact, it's going to be worse because the non-insured have pent-up demand and the additional dollars will enable hospitals to build more wings and doctors to buy more devices, which create their own demand. My colleagues in the insurance industry doubt the 'reforms' in the current legislation will really reduce costs because that is what our actuaries are telling us - and the CBO would seem to agree. Instead, if legislation passes, it may be a replay of Massachusetts, which did insurance reform first and decided to tackle costs later. Regardless, there will be a day of reckoning, hopefully after the economy has recovered. I bet it'll be the second half of the Obama Administration or, who knows, during a McCain Administration.

DMCB: Anything else you'd like to say?

NPFMD: Dr. Howard Dean's pain couldn't happen to a nicer guy.

DMCB: Good night.

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