• Republicans get to work

    House Republicans are getting to work on the “replace” part of their health reform agenda. I’ll be very interested to see what they come up with. So far, the dominating concern seems to be costs, which is understandable and appropriate. It really is the next major issue. (Yes, “next.” I’ll come back to that.) Coverage expansion, in their thinking, follows from cost control. Jennifer Haberkorn explains, quoting Ways and Means Committee Chairman Dave Camp (R-Mich.).

    Republicans say they’re more likely to introduce small bills than a large replacement package to counter the Democrats’ law. They also dismissed the idea that their plans have to provide insurance coverage to as many Americans as the Democrats plan does. The Congressional Budget Office said the new health law will provide coverage to 32 million uninsured Americans.

    “I think one of the focuses needs to be getting the costs down in health care,” Camp said. “Polls show that people are most concerned about cost. Obviously if we can get more costs down, the opportunity to afford health care goes up and you get more coverage.”

    I think this would be great. If health care or insurance for it really could be made more affordable, many more people would be able to purchase coverage. It makes sense. So, it would make sense to look at where those high health costs are coming from. Insurers play a role, naturally, but they cannot be the major driver of cost.* This is obvious when you look at the numbers.

    Over the last fifty years (i.e., from before Medicare, before managed care, etc.) the average additional cost insurers have layered on top of medical costs has been in the 8 to 14 percent range. Flip that around. Over that entire span of time, medical costs (actual payment for health care to providers) has accounted for over 85% of premiums.

    I have no doubt that there are ways to squeeze some efficiency out of the insurance system. But how much? If you think you can solve this country’s health care cost problem by focusing on insurance reforms alone, you don’t understand basic math. This is precisely why the ACA, which is mostly an insurance reform law, itself may not do that much on cost control. A lot depends on the new, experimental ideas in it. And that is why we need to let those experiments play out and to keep at this problem.

    If most of the cost is not in the insurance system (though they pass through it), where is it? It’s in medical care. Thus, providers need to be part of the solution. Last I checked they have some very politically powerful organizations representing their interests. I wonder how we might get them to go along with some cost-saving reform, if any?

    I’ll stop there. I don’t want to prejudge what the Republicans might propose. But I do want them to think this through. I have my own reasons for favoring coverage expansion, not all of them pertaining to the politics of cost control. However, maybe one could obtain even more cost control in the bargain? Tell me how! I’m listening.

    * Some will say it isn’t the insurers but the insurance products. They are too generous. Deductibles are too low, moral hazard too high. It’s likely true that if one shifts the cost risk more toward individuals, others (the government in the case of publicly subsidized care) would pay less. The body of evidence does not suggest there are large overall cost (or curve-bending) savings or that people are really any wiser shoppers. Even high-deductible plans don’t do anything about spending above the deductible, which is where most of it is (the vast majority of health spending is concentrated in a small minority of patients). Yet, I think high-deductible coverage is precisely the way premiums will be held in check, at least for a subset of the population that is relatively low-risk, like young, healthy workers. So we’ll have more opportunity to study the effect of such plans.

    • I think, correct me if you are wrong, that the 8%-14% number you use is the MLR number. As a provider, I am always aware of the administrative costs on my side incurred by our insurance system. The Kahn paper suggests there is at least another 10% in billing costs added on the provider side. Still, your main point holds. Their proposals for cutting costs while defending Medicare should be interesting.


    • Oops. Sure you know it, but for others.



    • With regard to the generosity of insurance products, I was recently directed to a CDC publication showing the change in the proportion of health care paid for out-of-pocket (as opposed to via insurance of one form or another) since 1960.

      The numbers are pretty astonishing – from 55.2% out-of-pocket in 1960 to 39.6% in 1970 (the first post Medicare/Medicaid data point) to 14.3% in 2007. It’s hard to see how that decrease in the incremental cost to the patient of additional care would not influence the rate of increase of health care spending.

      Found it – Table 127 (p. 410) here:


      • @Morgan – But it is important to see why those figures moved as they did. It’s largely, but not entirely, Medicare and Medicaid. Both were introduced to help populations that could not obtain coverage due to experience-rating (Medicare) or low income (Medicaid) or both. This tells you very little about how much a working-age person pays. Also, the right proportions are relative to income, not the distribution across payers.

        Finally, you can’t tell if it is due to a lot of extra low-cost care or a lot of high-cost, high-intensity care. The former could be addressed with high-deductible plans, the latter cannot.

        I think there’s much more to the story than those few numbers suggest. I wouldn’t read too much into it.

    • @ Austin Frakt

      I can’t bring myself to disregard the possibility of a significant aggregate impact on utilization (and cost per service and decisions regarding whether a service is “worth it”) of this kind of change. But I will heed your warning and try to avoid reading *too much* into it.

    • Just Imagine the Profits you can make if you force people into HSA’s with High premiums and High Deductables. Just imagine how well you can controll behaviors by extending excessive and extrensive penalities for acquiring Care.

      Death Panels? Oh , Know ,not at all. People are making the choice to die on their own. So can we say this is true? No, Not at all!! The truth is that the system is designed to provide a sense of business ethics and upstanding environment but it is much more sinister and inhumane then most understand. You must endeavor to expand your mind to understand that Health Insurance is a business like no other. They use contracts and fuzzy math to make you think your getting a deal. However,it only benefits the wealthiest Americans,while the rest of the population has to deal with the ability to pay that have been exploited by insurers and providers have exhausted patients out of pocket expenses with excessive testing . Premiums,copays,exceptions,deductions ,are designed to create these obsticles to exploit their clients and make them cause harm to themselves.
      No Wonder they want to save this Highly profitable Death Panel of profitbility. Way to go GOP!!

    • Hard to believe. People pay for services that are not intended to save lives or keep you well. You pay for their entitlement to profit off from you. So why allow fear to keep you from paying for a service that is intended to fail?
      If everyone would drop them.Then they would be more inclined to allow the consumer to have a seat at the table. This is something that has been too long in the making.