Count me in. The problem has always been too little capitalism and too much government.

Rising health care costs have an insidious effect on the whole economy - they are inevitably passed on to every other segment of the economy. It (along with energy costs) are the engines that pull the inflation train.

Might I ask a q that I have asked in various other fora of lawyers but that never seems to merit an answer? It relates to the tort reform that you mention:

Why do punitive damages go to the defendant? Why not, instead:

1. Punitive damages go to a 3rd party charity.

2. Actual damages - e.g. ongoing medical bills - to be audited and/or paid thru a govt agency. So if I win $1m bucks to pay for my ongoing physiotherapy, the agency pays the physiotherapist directly. No pot o' gold for me!

3. Loser pays court costs [with some provisions here to not use this to drive the little guy outta the court altogether, just to prevent abusive suits].

Of the 3 sugg'ns, #1 is by far my favorite. So I ask my q again: why do punitive damages go to the defendant?

Ras:

Well actually, I'm not a lawyer. And I don't know the history of punitive damages, save that it has always gone to the plaintiff ever since there was any such thing as punitive damages.

Dafydd

Dafydd-

Excellent points all, with a quibble or two about your mandates position.

Question about your MSA quote: By any chance does it include a lifetime maximum insurance benefit? That is often a way insurers reduce premiums. I’d almost vote to outlaw lifetime maximums, because most people ignore them and jump at the lower premiums. (I say “almost” because outlawing them goes against my free market grain.)

But think about it: How many people can imagine that they might incur some humongous amount of medical costs -- say $1 million -- in their lifetime. It happens very rarely. But when it does, the total cost is likely to surpass $1 million by a significant amount. What do you do then? If you have the assets to pay the costs yourself, you’ll just have to live with a less luxurious retirement. If you’re not that fortunate, maybe you can qualify for state coverage. And there’s always bankruptcy.

I, for one, don’t like the options, so as long as I have a choice, I’ll never buy health insurance with a lifetime max. Even if it costs a lot more -- which, with my insurer, it does.

My other pet peeve about the medical business is how care providers (doctors, hospitals, etc.) charge different prices to different customers. Insurance companies and large employers dictate what they’ll pay for each procedure. With my insurance plan, I see the amounts the providers bill for their services. The insurance company tells the provider how much they will receive -- some from the insurer and some from me -- and the rest of the bill is “disallowed.” The amount disallowed may be 10% or it can be 50% or more.

If you don’t have medical insurance, some providers will take pity on you and give you a discount. But I know that many people have gone into bankruptcy because they needed emergency care and the providers insisted on charging full “retail.”

Why do we allow this? Well, for one thing the Robinson-Patman Act, which outlaws discriminatory pricing, doesn’t apply to such services. And besides, the only people this affects are the uninsured. Most of the rest of us don’t even know, or don’t care, that the practice exists.

The only justification I can think of for these pricing practices is that there might be more problems collecting from uninsured individuals. But 50% plus? Come on! (I know. My “free marketeer” credentials are fraying at the edges, but it still galls me.)

Government Mandates

With respect to mandates, I can’t speak to all of them, but I’m very glad mental health coverage was included in my last employer’s medical plan. As member of the committee that decided what coverage our company plan included, I can guarantee you that, if we had an option, we most definitely would not have covered mental health.

While I was working there, our youngest daughter was born. She’s a great kid -- bubbly, vivacious -- and mentally retarded. She has a whole range of other problems as well: Neurological, orthopedic, psychological and more. In our case, if the company plan hadn’t paid for mental health care, it would have been a financial burden, but we could have managed.

Recently, our oldest daughter has been coming home with stories about a co-worker who suffers from severe chronic depression. The girl, in her early twenties, recognizes her problem and plans to check herself in to an inpatient treatment center next week. Her family, at least two of whom also suffer from mental disease, are in total denial and have been trying to talk her out of going in for treatment. If this young lady didn’t have mental health coverage, she would never be able to pay for the plan of treatment she is (we hope) about to enter.

As for the “assigned risk” idea, I’m afraid it’s not the answer.

For auto insurance, the way it works is, all the auto insurers in the state are required to participate in the assigned risk pool. Each company is “assigned” a number of bad drivers to insure, at a premium the state dictates. The purpose is not to benefit the accident-prone driver, but to eliminate uninsured drivers, so that the rest of us can collect when one of the slobs rams into us. And one of the reasons the system works as it does is that the assigned risk premiums don’t necessarily have to compensate for assigned risk losses. If the insurance company is losing money on its assigned risk business, they can, if they wish, and if the market allows, raise premiums on regular policy holders to make up the loss.

Now, if private medical insurance didn’t cover mental health (which few plans would, if left to their own devices), who would buy the state-offered mental health coverage? Answer: Only those who think they need it.

So let’s say a state sets up assigned risk mental health coverage, requiring all health insurers to participate in the pool. Now, how do you set the premiums to charge the purchasers of pool coverage? Well, since the only people who buy the insurance are the ones likely to use it, you certainly can’t charge the actual cost of benefits paid divided by the number of policy holders. The premiums would be astronomical. The state would have to set a much more “affordable” premium.

But that means the insurers would be losing a bundle on mental health coverage. What’s a poor insurance company to do? Answer: The same thing they do with assigned risk auto policy holders -- they raise the premiums charged to the rest of their non-assigned risk customers. End result: A few people who need mental health coverage pay a premium to buy it. Everyone else pays a higher premium for their policies that don’t cover mental health in order to subsidize the assigned risk customers. So we’re all paying for mental health coverage, but only a few of us get the benefits. Pretty slick deal, huh?

And we get the ancillary benefit of having low wage workers and their families go untreated for their mental illnesses, because, while they get fully-paid medical coverage from their employers, they can’t afford the assigned risk mental health premium.

The big difference between this and the assigned risk model for auto insurance is that everybody who drives is required to have auto liability insurance, whether they have losses or not. (By the way, isn’t that a kind of mandate?) By setting up a separate category of insurance, covering losses only a few people are likely to incur, and making participation in the plan voluntary, only those who are likely to have losses, and those among us who are ultra risk-averse, would buy mental health coverage. It just won’t work.

Dick E:

The three plans each have a lifetime maximum payout, and in each case it's $6,000,000.

By setting up a separate category of insurance, covering losses only a few people are likely to incur, and making participation in the plan voluntary, only those who are likely to have losses, and those among us who are ultra risk-averse, would buy mental health coverage. It just won’t work.

On the other hand, as mandates pile up, premiums get so high that many people can't pay them and don't have any health insurance at all. Then if they have a daughter who needs medical care, she can't get anything other than emergency-room services.

So that's pretty bad, too.

Do you have a solution?

I have a strong bias that whoever issues a mandate is responsible for funding it... so maybe the feds or the states who mandate coverage of this or that should be required to reimburse the insurance companies (or the providers directly) up to a certain amount (as with Medicare, though I'd rather see it done as a tax credit) for up to but not to exceed X number of such patients, calculated as a percent of the company's total number of insured/patients.

Something like that.

Dafydd

Great start, utilization and personal responsibility is the main driver of inflation that all the liberal solutions ignore.

Instead of MSAs you should go with the HSAs which allows both tax advantaged employer contributions and employee contributions. It's also owned by the employee and they can take it with them through a lifetime of jobs.

A couple other items to consider;
1. Insurance is mandatory, everyone must have it with subsides for the poor, as long as a large porporation of the population doesn't pay anything cost will be schewed. Minimum legal requirement would be a deductible of 25K or more which would only cost about $50 a month.
2. Pools that sell this high deductible coverage to individuals and employers. Employers could then supplement that high deductible and bring it down to the 3-5K you were looking at.

Great Post Dafydd! Why don't ideas like this ever get to congress? I guess you answered that too.

Anyway, I think part of the problem is that employer sponsored care isn't all that different from state-sponsored. That said, when I was an employer, I offered some of the younger guys that worked for me an MSA and I not only paid the lower premiums, I subsidized their accounts with the difference between the premiums. The benefit to me is that my very small group was immune to rate increases in case someone got really sick because high-deductible rates don't go up as much as group plan HMO/PPO rates. The benefit to the employee was obvious.

Also, I work on the low-income tax credit housing industry. The tax-credit incentives have been a boon to affordable housing and I don't see any reason the same concept couldn't work for health care for the poor. The good thing about this type of program is that there is a free-market incentive that makes the tax dollars much more efficient than just pure subsidization.

If CA can "try" their state-sponsored loser program, why can't a different state try your type of program? Find a governor that would support it and let's go!!

Nate:

Insurance is mandatory, everyone must have it with subsides for the poor, as long as a large porporation of the population doesn't pay anything cost will be schewed.

I absolutely, utterly oppose any mandate for anyone to have health insurance. It's completely different from mandated car insurance... because the only element of auto insurance that is mandated is liability insurance; that is, you're not required to have insurance to cover yourself -- only to cover damage you do to somebody else.

A mandate for people to have insurance to cover themselves would be a staggering precedent and would likely be the first step heading to full HillaryCare for the whole nation. If the government can mandate that you have coverage, it can mandate what kind of coverage you have -- and it can eventually mandate the exact same kind of coverage for everyone.

Dafydd

Ideally it would not be required but as long as the system is forced to treat people that choose to not pay for it there will be financial problems. I would have no problem telling people that don't have insurance your not entitled to care but that would never pass. How do you fund catostrophic care for people capable of paying but choosing not to? If you require they buy insurance you can also pass the responsibility of what care they will receive to them. If someone wants a policy that covers expensive experimental treatment then they must pay for it otherwise if they get that rare expensive illness they won't get the treatment. Personality responsibility and consumption applies as much to the large claims as the small routine claims. I don't like the idea of the mandate but it is better then taxpayers and insureds paying for it right?

Good post, LizardMan -- but you've skirted around the elephant in the room:

What exactly is "health insurance"?

Traditional insurance products are designed to transfer risk of catastrophe from individuals to companies who can pool these risks and profit from clever bets.

And when I was a lad, health insurance was exactly this -- one bought "hospitalizaton" coverage (Blue Cross), and perhaps coverage for doctors' bills (Blue Shield), and rarely, an umbrella policy for "major medical".

But nowadays people (well, Democrats) think health insurance is like an "all-you-can-eat" buffet. For a small monthly premium (which the Democrats think ought to be borne by the government) you should get all health related goods and services you might imagine you are in need of. Hence these government mandates to cover chiropractors and psychiatric care and such.

This difference is important, because a large portion of the "uninsured" are really "self-insured". These people know that no one is denied emergency health care -- so why pay for health insurance?

And I do think MSA's are a wonderful idea.

Dafydd-

$6 million. That sounds pretty generous. But you have to ask yourself: Why is there a lifetime max of any amount? Since this is, presumably, an individual/family plan, they probably only offer new policies to reasonably healthy people. They’re unlikely to cover significant pre-existing conditions, or, more likely, they’ll just refuse coverage to people so afflicted. But even with such a carefully chosen group of new policy holders, they obviously expect some of them to have more than $6 million in lifetime claims. I just hope you’re not one of them. Your life. Your money. Your choices. I know what I’d do -- but that’s just me.

“Do you have a solution?”

Unfortunately, no. (Well … maybe. See below.)

But I’m certainly not alone. To my knowledge, nobody, anywhere in the world, has come up with a method of providing medical coverage that is fair to all, costs a reasonable amount, and doesn’t subject medical care to the bona fides of government bureaucrats.

The problem with offering separate policies to cover different health issues is the same thing affecting all individual decisions about buying health coverage. I alluded to it earlier, and it’s called “adverse selection.” It’s the simple notion that those who think they will have a significant amount of medical bills to pay buy health coverage, and they tend to buy a low deductible and out-of-pocket maximum. (That’s abbreviated as OOP max and pronounced oop-max. I kid you not.) People who don’t think they will incur medical costs tend to buy the higher deductibles and OOP maxes. And unless you offer a really cheap plan, some of them -- mainly the young, healthy, stupid ones -- will opt for no coverage at all.

You have noted that the reason for mandatory auto insurance is to protect the public at large, not the policy owner. Agreed (with caveat -- see below). But the mandate is really only needed because of the minority of people who: A. Won’t buy auto insurance unless forced to do so, and, B. Don’t have the financial resources to compensate victims of their driving mishaps. (An oversimplification, but stick with me.)

Now try thinking about health coverage in terms similar to auto insurance. In an auto accident, the victim’s injury is something for which the driver at fault is legally liable, and the beneficiary is the injured party. When someone gets sick, they are legally liable to pay their medical bills, and the beneficiary is the medical service provider. The main difference is what happens if the liable party is uninsured and without financial resources. In the auto accident, the injured party relies on his own medical coverage, if he has any. If he lacks medical coverage, he is in exactly the same position as any other person who becomes sick or injured without coverage or money: The doctor/hospital/clinic that treated the uninsured and impecunious patient absorbs the cost of treatment and passes it on to the rest of us in increased fees for services.

Think about it. That’s exactly the same for auto injuries and for any other kind of illness or injury. One kind of insurance is mandatory, the other is not.

“A mandate for people to have insurance to cover themselves would be a staggering precedent and would likely be the first step heading to full HillaryCare for the whole nation.”

Sorry, Dafydd, but we’re already there. In my state and, I believe, several others, we require auto owners to have “no fault personal injury protection” as well as liability insurance. The PIP covers the first $X,000 of medical costs and is paid by each party’s own insurance, regardless of fault

De Plan, Boss, De Plan!

Now I get on the soap box. I think it is a travesty for us to allow people who can afford medical insurance to go without it. When they have big medical bills (open heart surgery, bone marrow transplants, premature babies), they may be able to declare bankruptcy, but the rest of us have to pay the bills. The best way I can think of around this and the adverse selection issue is to mandate (shudder) universal health care coverage. I don’t mean a single payer system. I have yet to see a proposal for one that is likely to work better than the systems in the countries you refer to.

No, I just mean requiring everyone who can afford it to buy health coverage from a private insurance company, at premiums determined by the marketplace. I haven’t worked out all the details, but then I’m just a humble former bean counter, not a health care or insurance professional. But here are the main points:

Everyone would have to certify on their Federal tax return that they and their dependents have had medical insurance throughout the year. The insurance companies would have to report to the Feds the names and policy numbers (or SSNs?) of all covered individuals and periods of coverage. Until the government’s electronic checking system is fully up to speed, maybe the companies will need to send out 1099-like forms that taxpayers attach to their returns as proof of insurance.

Insurers would be required to charge everyone the same premium, and they would have to accept all applicants. There could be different plans with more than minimum coverage, and there could be different deductibles and OOP maxes. We could probably also require the same premium regardless of age -- companies that offer medical coverage to employees do it, so why couldn’t it be part of this plan? Remember, everyone has to participate, so no adverse selection.

Employer provided coverage would, of course, qualify.

Anyone who refused to get coverage voluntarily would automatically be assigned a policy and charged a premium to be added to their tax bill.

People who can’t afford medical coverage, would get it through a Medicaid-like plan, or maybe a risk pool. The premium could be a sliding fee based on ability to pay. I don’t know what criteria would be used for ability to pay, but they would have to include both income and assets. (Some people have remarkably low income, but substantial assets.)

People who choose high deductibles and OOP maxes would have to qualify, again probably using income (and assets if necessary) as criteria. That’s to keep the guy flipping burgers and pulling down a cool ten grand a year from choosing a $50,000 deductible.

There could be an exemption for people who are wealthy enough to not need insurance. They’d probably have to provide some guarantee of financial responsibility. I don’t know the details of how it works, but I know people today who don’t have medical coverage, but they have cards that doctors and hospitals accept just like insurance cards. The left would, of course, scream bloody murder if we allowed the rich to get off without paying for medical coverage like everybody else, so this little tidbit would probably have to either be buried so deeply in the bill that nobody sees it or added at a later date in a similar fashion to an “omnibus” bill.

There would be no way to keep Uncle Sam from mandating what needs to be covered (as happens today), but I’d like the enabling legislation to state that any mandate relating to coverage or cost would have to be in a statute passed by Congress and signed by the President, not snuck through by bureaucratic regulations. (I know -- dream on.)

There would be a few people who wouldn’t be caught by the tax return reporting method, but I doubt they would be much of a problem. After all, if they don’t file tax returns, they can’t earn much money. They may be in the “special needs” population and probably already on Medicaid. Or they may be indigent and eligible for Medicaid. That could be handled when they show up at the ER for care: The hospital gets whatever ID they can from the patient. They are reimbursed by the insurance pool or Medicaid or whatever system is used for the indigent. The payor enters the claim and identifying information (hopefully a SSN) into a data base where the IRS or whoever is monitoring the system can find out whether the person really is indigent or is trying to avoid paying for coverage.

* * * * * *

You may note that I try to consistently refer to medical “coverage” rather than “insurance.” That’s because what is paid for by a typical policy goes far beyond the normal definition of insurance, which historically means indemnification for calamitous losses. Today, medical plans cover lots of non-calamitous things. The best example is pregnancy and childbirth. Now I know, for some people pregnancy is a disaster, but some people actually arrive at that condition voluntarily. It happens. And when it does, why should it be considered an insurable (i.e. calamitous) event? Then there are things like immunizations and routine check-ups. Sure, failure to do these things might occasionally result in calamities for a few people, but these are also steps that we take voluntarily. What other kind of “insurance” reimburses us for our own voluntary acts that have positive outcomes?

The reason for the disconnect is, of course, that medical coverage is a “benefit”, normally provided by employers. And believe me, employers of any size definitely regard it as a benefit, not insurance.

But why is medical coverage usually an employee benefit? Well, as you probably know, it’s an accident of history. During WWII, employers wanted to find ways to increase employees’ pay, but there were wage controls in place. So they started providing benefits instead. Health care was one of the biggies, and we’ve never been able to change back to the pre-war system.

Norman Rogers-

Good points, Norman, but the people you are talking about aren't really self insured. That refers to folks who have the wherewithal to pay their own way without insurance.

The ones you refer to are the "else insured", who rely on somebody (anybody) else to pay the freight.

Dick E:

Dude, you're not getting the point.

I'm not advocating anyone take any of these policies, nor am I saying I have any of these policies, or even that I use that company.

I was only illustrating that when you take substantially similar policies, you can drastically reduce your monthly premium by opting for a high-deductable policy coupled with an MSA.

In other words, MSAs are a good way to reduce the cost of health insurance.

It has nothing to do with the specific friggin' policies I looked at -- just the fact that the only difference between them was the deductable and co-pay.

Yeesh!

Dafydd

Dafydd-

Gomen nasai.

Dafydd-

I just thought of another reason for making medical service providers charge the same price to all patients, regardless of insurance coverage:

How can consumers compare medical coverage options if they don’t know how much of a discount each carrier has negotiated with (or imposed on) care providers? (I’m not referring to plans where all one pays is a fixed, per-visit co-pay.)

Let’s say you’re offered policies by two companies, both offering the same coverage: Same deductible, co-pay and out-of-pocket maximum; covered medical procedures are equivalent. If both policies are offered by quality companies, you’d probably just take the one with the lower premium.

But what if the company that offers the lower premium hasn’t persuaded medical care providers to accept prices as low as their competitor? The lower premium policy could actually end up costing more. There’s no way for a policy shopper to know.

* * * * * *

Related matters:

I’ve talked to some medical service providers (physicians and physical therapists), and they are usually totally in the dark as to how much an insurer will pay for a given procedure. They don’t send a list of their prices to the insurer for approval; nor does the insurer send out a list of maximum amounts they will pay. No, the service provider just submits their bills and waits to see how much they will be paid. If dissatisfied their only recourse is to refuse to accept future patients with certain insurance plans.

I keep hearing that consumers should be given more information about medical care providers in order to take a more active role in their own medical care. Isn’t knowing what a procedure will cost an important piece of this puzzle?

My devious mind can even conjure up a scheme where an insurance company negotiates two-tier pricing. They allow providers to receive higher prices (i.e. they disallow a smaller percentage of medical bills) up to the point the patient exceeds the deductible. Then they reduce the amount clinics and hospitals receive when the insurance company has to start paying part of the bills. I’m not aware of any impediment to such practices, although they would probably only be attempted with larger hospitals and clinics, where only the bean counters who negotiated the pricing scam would actually see the bills. (I haven’t worked out the math, so I‘m not sure what numbers would make this scheme work for both the insurer and the clinic. I’m just trying to show that there might be ways to screw the unaware patient/policyholder to the benefit of others.)

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