The Devil’s in the Details

September 10, 2009 at 12:41 am (By Ennui)

Quick impressions of the speech tonight.  First third (description of the problem): enormously effective.  He had me asking “can I trust my insurance?” and answering “probably not.”  Second third (description of the solution):  The wheels fell off.  Or is it that the plan outlined had too many wheels within wheels, too many moving parts.  Mind you, parts of this section of the speech were effective upon first listening but if you break it down, you get,

1.  We want insurance companies, a huge part of the economy, to stay in business.

2.  Insurance companies make too much money and we will pay for much of this plan by cutting back their executive salaries and profits.

3.  The uninsured (the young) aren’t paying their fair share so they will be required to buy insurance.

4.  The insurance companies will participate willingly in order to make money (profits) selling insurance to the formerly uninsured (the youth).

Something doesn’t balance out here.  Does he want insurance companies to be profitable or not?  Does this plan effectively throw young adults under the bus?  They seem to be the only profit center in the plan as described.

Add to this the “Prime Minister’s Question Hour” feel of congressional reaction to this part of the speech and you have … well, a not very effective part of the speech.

The peroration was effective and seemed heartfelt.  A good description of the relation between man and the city as understood by the progressive mind.

Conclusion: I came off impressed with Obama personally and still believing that the plan is half baked at best.  In other words, par for the course.

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15 Comments

  1. Charlie (Colorado) said,

    Amba, back a while ago I wrote a PJM piece on why “health insurance isn’t insurance” that goes into more details, but the gist is that any insurance scheme is a bet: you bet that something bad will happen, and the insurer bets against. If you “win” your bet, the insurance pays off, but if the insurer loses too many times, they go broke. The premiums have got to make up for the expenditures.

    The nasty little secret of these insurance mandate schemes is that they have to include healthy young people who don’t use much health care in order to bring down the premiums for the older folks who do.

  2. Charlie (Colorado) said,

    Sorry, “ennui” not Amba.

  3. PatHMV said,

    That’s absolutely correct, Charlie. Even our existing health “insurance” is not really insurance. My sister and her new husband do not need “insurance” to pay the costs of having children, they need a financing plan…. they expect and are trying to get pregnant, as are the vast majority of new young couples.

    If 20 to 40 year old men could buy insurance priced based on the real actuarial costs of covering their risk-group, it would cost exceedingly little. It is expensive only because the insurance companies (and the proposed government program) use their contributions mostly to pay for benefits provided to other risk groups. The excess cost is a tax.

    One acquaintance of mine recently told me that the only reason insurance companies are actually profitable is because of the investments they make. They actually pay out more than they take in in premiums; the extra and their profits come from investment earnings on the incoming premiums. I haven’t verified this, but he claims to have worked for insurance companies and seen this himself. I’ll have to do more research.

    The President doesn’t like to go into details, because he’ll see that even when you take out ALL of the insurance companies’ profits, you still don’t bring the costs down anywhere close to where he claims he can get them.

  4. Donna B. said,

    We can’t even define health accurately.

    For most young women, pregnancy is healthy; it is not an illness. For some, say… type I diabetics, pregnancy is a risk to their health, but it is still not “unhealthy”.

    Some women are at risk for pre-eclampsia, but they do not necessarily know this until they are in the latter stages of pregnancy. Is this “unhealthy” or is it a natural risk?

    Many disabled people are healthy. Their heart function, blood pressure, and endocrine systems work just fine. Yet, they may not have full use of all their limbs. Are they “unhealthy”?

    Beyond being unable to define “health” we are also not able to define “quality of life” in any certain terms.

    Depression is quite likely to lead to a lesser quality of life than is disability. The two may be tied together in some cases… but which is the determining factor? A “healthy” depressed person may experience lesser quality than a non-depressed person with incurable cancer.

    Life itself is unhealthy as it ultimately leads to death — the ultimate unhealthy state. How can we possibly insure against that? The risk is 100%.

  5. wj said,

    It rather sounds to me like any insurance (not just health insurance), if you want to look at it that way: you bet that something dire will happen and the insurance company bets that few enough people will have dire things happen that the premiums will cover those who do. A health insurance mandate is just like an auto insurance mandate (which California, for example, has had for decades): the good drivers have to be charged enough to pay for the accidents of those who have them.

    Or am I missing some special feature of health insurance?

  6. realpc said,

    The government could provide inexpensive high-deductible catastrophic insurance for young adults. It seems very unfair to force them to buy expensive insurance plans they do not need, especially in this economy. And they could try to control malpractice law suits. Did he say anything about any of that? I didn’t hear the speech.

  7. PatHMV said,

    wj…. yes, there is a difference. Imagine that car insurance paid for every scheduled maintenance, every oil change, every break-down, every tow-in, every locked key in the car, every tire change, every brake pad replacement, every single conceivable repair that could be done on the car.

    That’s mostly what health insurance does. Part of that is due to competitive pressures (since the employer, not the consumer, is writing the check for health insurance, they’re less competitive on price and more competitive on comprehensiveness), but a large part of it is also due to legislation imposed by each state mandating all sorts of coverages.

    The premiums of the healthy young 20 year old are being used primarily to pay for services consumed by others who work for his same employer (and thus are in the same risk pool). The actual cost to provide catastrophic insurance, insurance which requires the consumer to pay for routine check ups and doctor visits, etc., would be very, very small for a pool of 20 year old men.

    Because the young man is very unlikely to be with that insurance company for a long time, it makes no sense for him to want to participate in the very bad deal he gets. In order to align the interests properly, we need to change the fundamental nature of health insurance as it exists now. We need to find a model much more like some types of life insurance. You could enroll in a plan at age 20, if you bought a long-term plan which guarantees you coverage for 30 or 40 years (so long, of course, as you paid the premiums). Then the premiums are being used much more for his potential benefit, and it really is insurance rather than a tax on him.

    realpc… the President through out a rather pathetic, transparent sop on malpractice reform. He said he would direct his Secretary of DHH to perform a study on implementing some pilot projects in a few states on some vague malpractice reforms. In other words, it’s not going to be in the bill, and it won’t ever actually see the light of day.

  8. Ennui said,

    realpc,

    Yes, I failed to mention that he did throw a sop to Republicans in the form of what I understood (or misunderstood) to be state or regional pilot programs for tort reform.

  9. Peter Hoh said,

    Employer-funded health insurance is the model in this country, and it trained people to expect health-related services for relatively little cost out of pocket. Vision and dental plans are largely about spreading the cost of routine expenses out over time with pre-tax dollars. They aren’t insurance, but they are what we have come to expect.

  10. realpc said,

    “Vision and dental plans are largely about spreading the cost of routine expenses out over time with pre-tax dollars. They aren’t insurance, but they are what we have come to expect.”

    They really do us very little good. Routine dental exams are not expensive, by today’s standards, and there is no reason to cover them with insurance. Expensive procedures often wind up being only half covered, at best. It gives the illusion of employers giving generous benefits, but is actually a waste of everyone’s money, helping only the insurance companies.

    Our employers could pay us a lot more if they weren’t wasting thousands of dollars on each of us every year for benefits that we don’t need. I only want to be covered for unexpected expensive treatments, and I can pay for the low cost routine stuff myself.

    And we could probably afford our own sensible low-cost insurance if our employers paid us more.

    Did Obama talk about any of that? I doubt it. The assumption is that health insurance should cover prevention (inexpensive check ups), and that it should provide for patients with chronic diseases who need expensive tests and prescriptions.

    Someone I know at work recently paid many thousands of dollars for surgery on an infected tooth, even though we have dental coverage. It covers our $50 check up — wonderful.

  11. realpc said,

    Oh and another thing — doctor’s offices inflate their prices to whatever the insurance companies will pay. If no one had insurance, prices would be much lower. Very often, the patient’s co-pay is about what the total bill would have been, if no one had insurance.

  12. Peter Hoh said,

    Actually, insurance companies broker deals with providers and often pay less than “list price” for various services.

  13. PatHMV said,

    I think, Peter, that doctors and hospitals inflate the “list price” tremendously, for the same reason that car dealers inflate the sticker price so far above what they actually expect to get paid for it. Otherwise, they have no room to negotiate with the HMOs and such. In reality the “list price” of medical services has little relationship to much of anything. Even if you’re not insured, you can usually negotiate for lower rates.

  14. amba12 said,

    I remain impressed by the notion of people paying for their own routine care and insurance being catastrophic. Anyone can use catastrophic insurance. Young people have accidents.

    Paying for routine care (with perhaps tax breaks, etc.) would control costs because we would care what we paid (we don’t care or often even know what our insurance company pays).

    I still favor Medicare because older people have so many health costs (although, of course, they are often overmedicated and then over-overmedicated to compensate for the side effects of being overmedicated). I don’t get Social Security for everyone at all, but I don’t see how we can get out of it.

  15. PatHMV said,

    One could conceivably develop a health insurance policy aimed at insuring long-term health care availability. Some life insurance policies are structured so that you can keep them to any age, so long as you start paying the premiums early enough and never stop. You could do a health care policy in a similar manner; you buy not only the right to health care now, but the right to maintain the insurance indefinitely. To prevent being permanently locked-in to one company, the law could provide for the right to transfer from one company to another, with one company transferring the accrued premiums and reasonable interest to the other (with the person perhaps having to pay additional funds if they move from a bare-bones policy or cheap-ass company to a gold-plated, top-dollar company).

    The only way that health care costs will come down will be if we require consumers to bear more of the costs directly, so that they will have an incentive to question prices, to question whether they really need the name-brand prescription instead of the generic, etc.

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