Health Care: Two Democrats Sound A Warning

http://www.whitehouse.gov/agenda/health_care/
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Establish a National Health Insurance Exchange with a range of private insurance options as well as a new public plan based on benefits available to members of Congress that will allow individuals and small businesses to buy affordable health coverage.

"Insurance companies say that is a non-starter from their point of view, as it would put them at an unfair disadvantage"
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What's the old line? "Have the chaplin punch your TS card"
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If their case is that it will be too hard for them to make a profit with the competion then it really shouldn't be taken into account by consumers. By which I mean us.
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Also, having any private sector entity telling the government that an issue is a "non-started" is pretty sickening. It may be how business is done but that's pretty brazen.

Dooooo it!
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I love how the blowhards like Levin and the rest are forced to say they are against universal health care.
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The nerve of those poor people wanting medical care!

I do not see how they can have it both ways--that the private sector delivers better care at a lower price than a government bureaucracy, AND that the government represents unfair competition.
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I'd like to see this model adopted in other places where the public sector in other countries provide service. Like telecommunication services.

It is absolutely ludicrous not to include a public option in health insurance. Just as the bankers need to come to grips with a new paradigm, the ground has also shifted for the for-profit insurance industry and they need to tailor their services to expect a lower profit margin if they want to stay in business. Sorry folks, but it's not just about the shareholders anymore even the institutional ones investing my retirement.

I don't see private insurance "competing" with public insurance. I see the private insurance offering shallow insurance to the healthiest people for a respectable profit margin and then dumping them into a public insurance program when the payout gets a little high. It's what the auto insurers already do in some states.
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I've always thought the most effective role of government was regulation and outlining "best practices"... basically saying "if you're in the medical insurance business you play by these rules and if you're going to corner a niche in medicine with a service or drug thou shalt not charge an arm to save a leg".
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"What? No free market?" you scream. Give me a price on the health of your family and you'll convince me that pure free market works for medicine.

"less of a threat to insurers" = public plan is hobbled from the start, eventually spurring Rethuglican efforts to privatize it/dismantle it a la Bush '05.
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Like telecommunication services.
A-freaking-men. Yet another sector where total deregulation and absence of government has failed miserably. I bet Sprint would've been less likely to throw thousands of customers off their services so cavalierly if there was "unfair competition" to consider.

Wow, a "warning" from a couple of "our" representatives in Congress that they're not going to let private corporations continue to determine the entire makeup of healthcare system of the United States. That's change I'll believe when I see it.

The willingness of the Democrats to fold to the insurance industry lobbyists is why no one should be celebrating the Specter decision. The Democrats MUST provide a public alternative to the private insurance companies. It simply doesn't make any sense that a public good like access to a doctor should be held hostage by insurance companies who aren't in the business of providing health care. I just don't understand what value private insurance companies provide that can't be better provided by a government-run entity.
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What I don't understand is why the AMA isn't all for sticking it to the insurance industry. Seems to me that cutting out the middle men, e.g, the insurance industry, would leave a lot more money for, say, doctors, nurses, and hospitals.

By all means, lets keep insurance companies in the mix so they can continue skimming health care dollars.

And don't forget, we don't want government bureaucrats or medical professionals making decisions on health care. Leave it in the hands of insurance company bureaucrats. They have been doing such a fine job. Remember, the most important part of health care is profit!

Paul-no not that one: I think the concern from private insurers is that a government insurance agency would sell policies to the public below cost. This doesn't seem like an unrealistic fear to me.
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It's nice to believe that high health care costs are the sole work of greedy insurance companies, but doesn't square with reality. An overview of the industry from Yahoo finance reveals that the industry-wide profit margin is 5.4%. I don't think lowering premiums a mere 5% is suddenly going to make health insurance more affordable.
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The real problem with health care in this country isn't that too many people are uninsured -- it's that health care costs too much. Much of this is due to mis-aligned incentives: neither hospitals nor patients have any incentive to keeps costs down, and insurance companies have little ability to control hospital or patients expenses.

choska:

I just don't understand what value private insurance companies provide that can't be better provided by a government-run entity.

The problem is that you have to deal with the government inefficiency penalty. Because of the way incentives line up in government, you're going to pay a 20-40% inefficiency penalty. Now there are certain things that only government can do, such as policing our streets, regulating industry, overseeing construction of highways, etc. -- but it's important to be aware that we pay a penalty in efficiency. That doesn't mean private industry can do better: often it's too difficult to design incentives that will align private industry with the public good, in which case we default to government.
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The VA is a great example of this: VA hopsitals aren't located where our veterans need them most, they're located based on where Congress wants them most. The result is plenty of VA capacity in districts with powerful congressman and a lack of capacity in districts with plenty of veterans but weaker members of congress. Any government run health care system is sure to have similar problems.

Thanks for this important update, KT.
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I guess Baucus will have to re-consider the "unique American-ness" of the public option Americans should be able to choose, if we so desire.
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As Jay Ackroyd says, if the private insurers are the best at health care delivery for the lowest cost, then they should have nothing to worry about, right?
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Also: in an ideal world, would private insurers be "at the table" at all? Baucus seems to treat this inclusion as a wonderful feature of his approach, instead of the obvious bug that it is.

Peter –
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That 5.4% undoubtedly factors in the significant administrative cost of attempting to deny coverage whenever possible. I don't know whether it might be more profitable not to incur all of that expense, but the presence of a public alternative would give the private carriers a motive to experiment.
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As it stands, the Wall Street obsession with the bottom line and short-term "shareholder value" assures that a system with only private providers will, sooner or later, guarantee a race to the bottom in quality of service and reliability of benefits paid.

I am strongly opposed to the original white house plan, of offering a Cadillac public plan to the American public. Members of Congress should have to pay up for that overly-rich level of benefits. In my opinion, the public plan offered to everyone should be Medicare. Make everyone eligible for Medicare. Now you have a defined minimum level of benefits that business can agree to, and you have a role that private insurance already knows how to play (Medicare supplement plans). Want more coverage than Medicare? Pay for it yourself.

"Much of this is due to mis-aligned incentives: neither hospitals nor patients have any incentive to keeps costs down, and insurance companies have little ability to control hospital or patients expenses."
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The insurance industry most certainly has the ability to control costs. They could encourage and provide easy access to primary and wellness care to keep people from getting so goddamn sick in the first place but, instead, they throw up barriers to that access specifically to "control costs". They just happen to be too greedy and short-sighted (quarterly profit motive and all) to do what's in the their own long-term self interest as well as that of their customers and the society as a whole.

Wait, I'm like, totally confused.
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The insurance companies say they provide better health care service for less cost than the government could.
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The insurance companies say there can't be a public option because it would be unfair competition and drive them out of business because the government could offer cheaper and better care.
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These statements are contradictory. Like, 100% opposite. So the only question is are the insurance companies lying with the first comment, or are they lying with the second?

"I think the concern from private insurers is that a government insurance agency would sell policies to the public below cost."
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Why would they do that?
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"Because of the way incentives line up in government, you're going to pay a 20-40% inefficiency penalty"
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Hmmm that smells of something.

Paul-no not that one Why would a government agency sell insurance policies below cost? Let's go through a thought exercise. Assume we wipe out the 5.4% health insurance industry profits. Let's also assume (in our fantasy world) that government health care is 10% more efficient because they're not too "greedy and short-sighted to do what's in the their own long-term self interest." Now we've lowered health care premiums 15%. Are they suddenly affordable? No, they're not. The vast majority of ininsured are still uninsured. The only way to fix this will be to sell the policies below cost, and so to avoid public outcry Congress fixes the maximum price the public insurer can charge.
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shepherdwong: As Megan McArdle explains, the idea that the majority companies forgo long term profitability for the sake of short term revenue really doesn't match academic research. Unfortunately for your argument, investers are generally pretty good at figuring out when a company is sacrificing its long term viability for the sake of a single quarter's revenue.
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Fianlly, I'd note that we can't even provide adaquate health care for our returning combat wounded. What makes you think government is capable of providing it to the citizenry as a whole?

Maybe I'm wrong about this, but it seems to me (just from thinking about it, I have no concrete evidence) that all these new, cutting-edge, super-expensive treatments we're developing have to play a fairly significant role in the exploding cost of health care. As much as I'd like to believe that a system could be created to make health care available to everyone, I don't really see anything being offered to address or even acknowledge the fact that, yes, good health care does cost money. No matter how much inefficiency we cut out of the system, expensive treatments are still going to be expensive, aren't they? So, I mean, how do we deal with that? The way I see it, our choices look something like this:
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A. Don't administer them unless the patient can pay themselves
2. Force medical providers to administer them at a loss*
D. Go ahead and incorporate them into the system and admit that health care is going to stay expensive, but at least everyone will have it now**
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*Yes, you can argue that insurance companies are making too much profit, that there is too much waste inherent in the system, etc, but I still suspect that the actual costs of the medical care are pretty significant. If you have numbers that suggest otherwise, please post them.
**Again, you can argue that different models of care (a more prevention-oriented approach, whatever) will reduce this cost. Again, if you have numbers, please post them. I don't disagree that it's a good idea, but I don't think it will result in a massive change to the number of people who get sick.
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Again, I think that we should cover everyone, whatever it costs. It just seems to me that hoping we can both improve the availability of healthcare and significantly reduce the cost is kinda audacious.

Peter-Is Medicare inefficient? Shouldn't your arguement extend to ending that program?

"As Megan McArdle explains, the idea that the majority companies forgo long term profitability for the sake of short term revenue really doesn't match academic research."
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The problem is revealed. You don't know (libertarian) sh*t from (rational) Shinola. You mean this Megan McArdle? She's a hack who doesn't know sh*t about what the academic research actually means.
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"Unfortunately for your argument, investers are generally pretty good at figuring out when a company is sacrificing its long term viability for the sake of a single quarter's revenue."
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I have only two words for you, my corporatist Kool-Aid-swilling friend: Wall Street.

Did Megan McArdle really say that "the idea that the majority of companies forgo long term profitability for the sake of short term revenue really doesn't match academic research?"

She should go back to writing about her diet.

I see that my two senators from Maryland, Ben Cardin and Barbara Mikulski, are not on the list of eighteen senators supporting the public option. I am calling now to ask them why not.

Paul-no not that one:

Peter-Is Medicare inefficient? Shouldn't your arguement extend to ending that program?

Of course Medicare is inefficient. The military is inefficient. The police are inefficient. The National Park Service is inefficient. Government as a whole is inefficient. There are, of course, certain things that only government can do or that we would only want government to do. So no, I do not support ending Medicare.