Reading the fine print

Health Care OverhaulThe Baucus Bill (aka: what’s left of Obamacare-Hillarycare-Nixoncare-Roseveltcare (aka: Insurance-Lobby-Care-Less)) doesn’t go into effect until after (yes, AFTER) the next presidential election. November 2013? Right. Over 3 years from now. That’s the one, sorta. The non-health insurance “subsidies” in the bill (the health insurance companies will receive most of their subsidies earlier) Democrat-designed to make the mandate requiring we all have health insurance “affordable” (if you consider 20% of your income affordable) for those who are near or below the poverty line are tax credits. Hmmm. The benefit of Baucus health reform tax credits will arrive sometime around or after April 15th, 2015 – if you make enough. Long enough. This is what’s in the fine print.

15 thoughts on “Reading the fine print

  1. C Smith

    Lee, I would like to know if there is a non-political solution to the health care problem and what is the hurry? I have just reached the age of retirement and the proposed increases in the cost of Medicare and Medicare supplement being talked about, already almost out of reach, price-wise, scare me because of what will be my fixed income. I don’t understand why the government can’t start by “improving” or “fixing”, whichever word you want to use, what we have at this point, keep what works and remove or change what does not work. If I understand your point here, do we know what will actually be in our health care bill considering all the fine print that is included in most government bills?
    To me, when President Obama continued shoving Bush’s bail-outs down the taxpayers throats, caused distrust among taxpayers and this has been carried forward to health care. I believe if he would use a duller sword to push for health care but keep a sharp razor close in case Congress and the Senate get lazy a better solution to health care can be reached that will benefit most Americans.

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  2. Lee Leslie Post author

    If by “non-political”, you mean a solution based on common sense or fact rather than special interest protection, no. Over the years, complex rules have evolved along with sweetheart clauses and subsidies to make the system so complicated, that minor rule changes made now at the executive level have little impact on the long-term toilet spiral we are caught in. On top of that, the health insurance industry is regulated by the states -- each with their own system, and each elected official with their own needs to fund campaigns from the parties interested in keeping their place at the government teet.
    Could “reform” be broken down in to steps that could lead us there? Sure. Wish we had.
    For instance:
    Kill the Medicare Advantage subsidy which offers no additional benefit to retirees, but simply shovels treasure dollars into private insurance companies for administering the program and you’ll save $160 billion over ten years.
    Allow everyone who wishes to, to buy into Medicare (at full price) and you’ll lower the average cost of Medicare and create a safety net for those who are uninsurable without costing the taxpayer a dime.
    Allow Medicare to negotiate prescription prices rather than paying the highest prices in the world, and many tens of billions will be saved.
    Allow individuals and small businesses to buy insurance from a pool and their costs will go down.
    Get the justice department to apply anti-trust laws on health insurance companies; start allowing insurance companies to operate across state lines with regional of federal supervision -- and, maybe we’d get a little competition.
    Go through the tax code line by line and put a sunset provision on every special interest benefit requiring a new vote.
    Require doctors/physcian groups to disclose financial interests they have in the tests and procedures they order; ditto health insurance companies; then require reporting on effectiveness, create incentives for performance, etc., and those costs might become more responsible.
    But what is more likely: reform will be little more than huge new subsidies for private insurance companies and increase costs for the everyone. Their (the Dems) plan all along was to get something on the books and try and fix it over time. The Republican plan all along is make the Dems look at least as stupid and greedy as the Republicans (it has worked well), protect those who contribute to their campaigns (the Dems are competing for those dollars), and hope to get control of Congress in the mid-terms.
    The best bet hope for seniors is for the census to add medical costs in determining the poverty line -- then, you might get some help. For most of modest means on Medicare, the best plan seems to be: if one gets sick, divorce, let the healthy former spouse keep the assets and let the other go on Medicaid (just don’t get caught in Georgia).
    And, no. We don’t know the fine print of what will be passed, if it will be passed in the House or the Senate -- or how it might change in conference. This fine print is from the bill that just left the Senate Finance Committee and will likely have some amendment before it gets a full vote.
    Glad you stopped by. Wish I had a better answer. Maybe another reader will.

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  3. Brenden

    Any hope of gov’t improving anything is false, unless they adopt the “addition by subtraction” methodology and remove themselves. Lee acurately points out that the gov’t has so larded up the healthcare system with subsidies, set-offs, tax rebates, welfare transfers, regulation, romantic fiction, etc., that price discovery mechanisms do not work. One doctor can charge 3x as much as the same doctor down the road and insurers reimburse both as if that wasn’t absurd. If you want prices to fall, you must let producers and consumers freely exchange to find the optimal prices — get gov’t out of the way. And then, of course, there’s the issue of legal liability for doctors, defensive medicine, tort reform.

    Hence, this statement will compound existing problems rather than solve them: “Allow everyone who wishes to, to buy into Medicare (at full price) and you’ll lower the average cost of Medicare and create a safety net for those who are uninsurable without costing the taxpayer a dime.”

    Medicare reimburses doctors below market rates for procedures, and premium payers receive the benefits of gov’t subsidy. And make no mistake, it is by definition a subsidy because the gov’t administers it and sets prices. If you adopt this Medicare public option, eventually you will be left with a two-teir public/private system. And the public system will suck. It will suck because specialists will either go out of business or migrate to the private system where they will recoup their marginal production costs like any sensible business owner. They gov’t will only pay them flat rates which they will not accept in the the long term. But, Lee, good on ya for the deregulation stuff.

    obama will sign anything that comes out of Congress, even if it’s the most pro-market document since “Wealth of Nations” (but I won’t hold my breath). The president is an utter failure so far on this issue because he cannot lead his own party, let alone anyone else. Another log on the bonfire of failure and incompetence.

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  4. Lee Leslie Post author

    “Medicare reimbursements at below market rates” is largely myth -- some too low, many too high -- insurance reimbursements follow or is it the other way around? The only reimbursements at market rates are people of some wealth without an insurance card. Paying retail is for chumps. The billing rates are all inflated to overstate costs when they beg their states for destitute reimbursement. With no real competition, reimbursement rates became one of the few ways to control costs and attempt to control abuse. Unfair to providers? Sure. But to dismantle the controls without attempting to correct the competitive environment, would lead to chaos. Too few providers; too few insurance companies; too much money; too many consumers is why we are in the mess. In a non-critical business, just deregulate, step back and wait for the market to settle or the planes to crash.
    But if we don’t have the stomach to do it for banks or automobiles, it isn’t going to happen in an industry that sells life and death. An orderly dismantling could be a worthy goal, but the multi-trillion dollar conundrum is, who you gonna trust to do it?
    I totally agree that Obama will sign whatever comes to his desk and that his failure has been in leading his party. Though, I suggest it has been naivety (those in power on the hill have been there longer and aren’t going to give up their place to get the payoffs of power and corruption) and not yet incompetence.

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  5. Brenden

    “The billing rates are all inflated to overstate costs when they beg their states for destitute reimbursement. With no real competition, reimbursement rates became one of the few ways to control costs and attempt to control abuse. Unfair to providers? Sure. But to dismantle the controls without attempting to correct the competitive environment, would lead to chaos.”

    Coupla problems here. As it relates to inflated and overstated costs — well, Lee, what are the costs? Do you know? The only person who does is the doctor because she’s the one who went to years of medical school, hires the staff, buys the equipment and undertakes the risk of starting the practice. The patients are the ones who know how much they can afford to pay. If these two folks can get together where the doctor can afford to stay in business and the patient can afford the treatment — then you’ve got yourself a real price!

    And that was my whole point: the system is so larded up with gov’t incentives, pay-offs, set-offs, etc., that no one really knows how much anything costs in healthcare. The gov’t wants patients to do certain things and not others to sustain its corrupt regime of subsidies, political plunder, vote-buying or whatever. Certainly not informed medical opinion. If the gov’t got out of the way, producers and consumers could decide the real prices. Once we have stable, rational, discoverable prices we can decide how to pay for indigent care. With $2 trillion sloshing around DC there ought to be a way.

    You keep hammering away at this point that the gov’t is “competing” with the private system. This is a false premise. The gov’t decides how much it will pay, and the providers can take it or leave it. I opine that they will leave it. As I’ve explained before, the only way the gov’t can find out how much anything costs from toilets to transplants is to 1) poll the practicioners which is obviously costly and redunant or 2) hire all the doctors. There is no competetion involved. Please explain how you think Medicare “competes” with private insurance.

    And if you are naive, likely are you not also incompetent?

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  6. C Smith

    As you might know at my age I have been inundated with health care programs with the Advantage program offering “caps” on the medical bills as a selling point. They also claim the Medicare premium is all they will charge. Sounds good? With a closer look at the policy they don’t pay for the small everyday type medical bills (sugar test products&etc) that regular Medicare does and these mount up the longer we live. This is just one of the decisions an ever growing retireing public has facing them and I believe if Congress does not pay attention to this age group November one year from now could have them looking for a job. These people vote most every election. Not just the Presidential election. My belief is there is no magic wand here and it is going to take work and study and time to come up with health care that all can agree upon.

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  7. C Smith

    The “discussions” happening here between Lee and Brendan I hope are going on between our Congressmen instead of under the table deals.

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  8. Lee Leslie Post author

    Brenden -- it does not take medical school to determine cost. Just an accountant. As in any business, the physician bases expenses on projected income making decisions on rent, salaries and the like. Not rocket science. Nor are capital expenses and how they amortized. As an industry, physicians do quite well in the present system and I opine they will not leave it. Were government to get out of the equation, insurance companies would almost certainly continue their reimbursement policies, just exercising more clout in the negotiation.
    Your argument that producers and consumers could decide real prices is wonderful to think it could work, but insurance companies also set the prices. And individuals, facing life threatening illness, make lousy negotiators and lousy consumers. Your argument that “once we have stable, rational, discoverable prices, we can decide how to pay for indigent care” begs the same question we have now -- who decides? Government. We already have that.
    Listen, I love the idea we could have a private system where the market could be free of monopolies, people have a transparent choice, income is determined by the market, work and brilliance of providers, and everyone lives happily ever after. It just isn’t real. Real is that without regulation the good providers would be crushed, rural markets would be under-served, monopolies would become more entrenched and too big too fail, cost of service and insurance would continue to escalate, our economy would suffer and our health care would be diminished. Real is that healthcare costs need to be amortized over a lifetime and over the population. Real is that patient care cannot and should not operate like Wall Street. Real is that the vested interests are too great to ever allow dramatic change. Real is that we must act soon. Real is that no matter what they do, some of it will be wrong, but the price of not doing something is greater. Real is that you won’t get what you want and neither will I. Real is that it is about power and the next election -- and the future be damned.
    As to the naive and incompetent… our current system of government requires that laws come from Congress, not the executive. A failure to bully the people’s representatives is not necessarily a measure of competence. New presidents often find that Congress doesn’t act like sheep. Or that an issue gets co-opted by another. Or that principled (and unprincipled) people disagree on the details or timing. Or that, this is one complicated, important and expensive program that has been debated for more than a half century and it ends up being more difficult that hubris-filled newly elected politicians first thought. Or that they are all incompetent. Or that our government is so corrupt and partisan, it doesn’t work any more for anyone not connected.

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  9. Brenden

    I’m going to abstract a little more here and you’ll counter with something to the effect of, “but I’m talking about REAL life…” when, in fact, you are not. This is also, by the way, an invidious form of argumentation designed to dismiss me. Please dispense with invokations of the “REAL” world. Your conclusions don’t follow from the premise that only you can recognize reality. This statement undermines your entire thesis.

    Your statement: “it does not take medical school to determine cost. Just an accountant. As in any business, the physician bases expenses on projected income making decisions on rent, salaries and the like.” This statement implies that the cost/price comes from some exogenous list from the platonic realm. That a practicioner opens a price list and says, “Gee: this liver transplant costs $70,000 in staff time and equipment, plus liver, so adding my overhead plus profit margin I’ll bill Aetna/Medicare about $120,000. I can do 50 of these a year at 4.5% a year and send junior to Johns Hopkins.” Healthcare doesn’t work this way.

    The prices for anything: labor, rent, equipment, etc., are set by interactions between consumers and producers. We see this in our housing markets: incomes fall, home prices fall. Demand for oil goes down, price falls. Prices are falling all around us. Yay (since I rent). What is available to be produced and sold to consumers comes to us by means of the available technology. Example: a builder can frame 25 houses a year with hammer and nails, but maybe 45 if he invests in nailguns. The nailgun costs more but makes him more productive.

    Medicine is perhaps the most labor and technology intensive industry that exists. There are huge risks of failure in medical school because it costs so much and the course of study is so difficult. Medical equipment makers and pharmaceutical companies bet billions on uncertain outcomes. If yourself or your business is going to undertake such tremendous risk, you expect a high return or you wouldn’t bother. If you as a consumer want high-quality medical coverage — you must expect to pay a whole hell of a lot for it. It is this cycle or risk-reward/success and failure that determines the price level for the healthcare industry along with patient outcomes. But the prices don’t come from some list handed down by Moses; the risk-takers determined it endogeneously. So, to refute your point: it does take medical school to determine cost.

    The problem with healthcare today is that gov’t is a giant informational black hole between consumers and producers. Gov’t publishes reimbursement lists that private insurers follow. One day you have Medicare part D program that covers some drugs but not others. Who knows what regulations will come out next? There are donut holes. There are uncertain legal liabilities. Healthcare is dynamic; gov’t is static. Further, gov’t controls so much of the reimbursement rate for doctors that it effectively sets the prices which do not account for industry dynamics. Also, you keep saying the gov’t will protect us from monopolies when in fact they are promulgating the monopolies through unnecessary state-to-state regulation! Monopolies and too-big-to-fail are products of Uncle Sam. You know this!

    I’m not saying there’s no place for gov’t. But they must fundementally remove themselves to the point where free market interactions can occur between patients and doctors so everyone knows how much stuff costs. Price discovery: without it, gov’t will continue to administer healthcare to maintain their statist plunder.

    Don’t substitute reason for panic, the whole frantic “DO SOMETHING!!!” attitude toward gov’t brought us too-big-to-fail, housing bubbles, credit crises, etc. Sometimes gov’t doing nothing is the best possible option from making a bad situation worse.

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  10. Lee Leslie Post author

    Brenden -- the real life thing was not meant to dismiss you nor did I intend to suggest my handle on the real world was more than perception. On the contrary, my desire was to engage you in a more practical discussion of what could or should be done in Congress short of your ideal or mine.
    While I appreciate your patience toward my better understanding the economics of medicine, I suggest that the huge risk and expense of medical school’s impact on pricing has more to do with limits on capacity (limiting the number of physicians) then on actual pricing -- just as it does in other professions. Managing investment and risk, on the other hand, do impact pricing strategies, but good bets or bad are the responsibility of the company not the government or insurance company to guarantee a market. No. When equipment is purchased or a drug patent purchased for manufacture, it is up to the investing company to make a good business decision. If reimbursements are driving down innovation and important new products, the consideration by the reimbursing entity should be on cost/benefit. To do otherwise would be offering a blank check.
    You argue about the uncertainty and changing government reimbursement policy at the same time accusing it of not being dynamic -- which is it? If your problem is with the process, then lets talk about how to change it so it can be more responsive to the needs of the market while being sensitive to those who pay for it.
    Your argument to that government must be fundamentally removed to where free market interactions can occur, totally ignores that private health insurers operate the same way. Removing one, doesn’t remove the other. Nor do I suspect there will ever be adequate transparency on cost by large corporations to get to your price discovery.
    I’m not panicked nor do I want them to just “DO SOMETHING.” I , too, fear the something they will do will make it all worse. But the system is broken. The rational in me says start fixing it.
    Thanks for stopping by.

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  11. Brenden

    The fundemental difference between an insurance company and the gov’t is that the insurance company can go out of business. The gov’t doesn’t have that problem. Insurers must pay the doctors enough that they join the group and must have low enough premiums to attract policy holders. If a more competitive firm comes along with better risk management practices, then the old firm must adapt. We vote in and vote out politicians all the time and still the $2 trillion healthcare system sucks, according to you.

    I think the insurance company reimbursement model works with respect to price discovery because we know how much cars, homes and boats cost — and the repairs for same. All are insurable goods and those markets function quite effectively. The gov’t reimbursement obviously does not work because we never get a bridge, an aircraft carrier, a highway or anything else from them on time and on budget.

    Gov’t just pays docs what it decides it’s going to pay and there is no competition involved outside the corrupt two-party system. The gov’t’s reimbursement is based upon the politics of the moment. We have one program one day and another conflicting program the next. So, yes, in one sense it’s dynamic with respect to its whimsical, conflicted policy-making but it’s statist over the long term because any change serves the interests of the gov’t insiders. They’re not in it for the little guy, trust me. And they fob their mistakes off on the taxpayers and bond markets.

    If you’re saying open more medical schools, that’s fine. But however many doctors and specialists they still must recoup the costs of their education — and make their patients pay for it. The best med schools will always cost a lot. The best doctors coming from those schools will also cost a lot. And when it comes to healthcare everyone wants the best.

    I’m not sure what you mean by this: “If reimbursements are driving down innovation and important new products, the consideration by the reimbursing entity should be on cost/benefit. To do otherwise would be offering a blank check.”

    When a student undertakes a risk to attend med school, when a pharma invests in a new medicine, by definition you don’t know how it will result at the end. There is no third party reimbursing you on the other side to evaluate the benefit, and there are uncertainties related to the actual costs of the investment over time (med school may take longer than you thought; your drug discovery went in an unexpected direction). If you fail, you simply lose your investment. The gov’t doesn’t guarantee it. That’s why medical risk-taking must be unfettered by ignorant bureaucrats whose only loyalty is to their administrative turf and preserving the status quo.

    The system is less broken now than it will be if the gov’t passes the public option you want so badly. Now THAT will break the system, setting up a two-tier public vs. private healthcare system for haves and have-nots. The angry throngs will eventually demand the private system is shut down, and only those with gov’t connections will receive quality care. That is if any competent people bother to attend med school any more.

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  12. Lee Leslie Post author

    Brenden -- I have private insurance. That is the part of the system that really sucks. And while I admire your continued apologetics on behalf of pharmaceutical companies and medical equipment manufacturers, their incessant lobbying to extend patent life for old amortized drugs, market miracle cures to people who don’t need it and pressure to prevent competitive bidding plays a huge role in this mess. I hate that you’ve had such a poor experience with government workers, but have you ever spoken to someone who works for a health insurance company? Your prognostication of public option doom and gloom is totally counter to the experience of every other country in the civilized world including our own. There may be more perfect systems and your answer may even be among them, but quit the distortion. It is silly.

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  13. C Smith

    The dialog here between “Brendan” and “Lee” only proves to me there are no quick fixes or simple answers to a working health care system that does not add to national debt. Pay close attention Congress! Your job may depend on your participation.

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  14. Matthew Wright

    Fantastic debate gentlemen, and good point C Smith about real debate. I’ll admit, I’m not as well versed in the minutiae of the bills being sculpted now. I’m learning as we go. Clearly, as evidenced by this discussion, we see why this country is so split about health care reform.

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