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You can view the recently passed HR 3962, the “Affordable Health Care for America” act, at http://docs.house.gov/rules/health/111_ahcaa.pdf. While there is still quite a bit of change anticipated before this bill is consolidated with the upcoming Senate effort, we can at least see the text of the current proposal.

The bill has several “immediate reforms” in Title 1 that are interesting. The first such reform is the “National High-Risk Pool” program described in Title 1 Section 101, a $5 billion dollar “temporary” program intended to bridge the gap until the “Health Insurance Exchange” program is implemented.

Many states have “high-risk pools” already, and HR 3962 builds on that idea.

So how does the “National High Risk Pool” work? Like many state programs, it prohibits denial of coverage for pre-existing conditions. The list of qualifications for enrollment seems daunting, but are mainly to limit participation to people who cannot obtain group health coverage and are not eligible for other subsidized programs such as Medicare. Because COBRA eligibility does not disqualify someone, people between jobs could take advantage of the pool.

It is the cost structure I find interesting. Monthly premiums cannot be greater than 125% of a similar private plan. Annual deductibles cannot exceed $1,500 per person, with “cost sharing” (co-pays, co-insurance, etc.) limited to $5,000 per year per person, or $10,000 per family. Not cheap. The intent seems to provide health insurance at about the same cost to those who have been denied coverage due to pre-existing conditions, or have lost their group insurance coverage.

And what if the money runs out? From page 24 and 25:

INSUFFICIENT FUNDS.—If the Secretary estimates for any fiscal year that the aggregate amounts available for payment of expenses of the high-risk pool will be less than the amount of the expenses, the Secretary shall make such adjustments as are necessary to eliminate such deficit, including reducing benefits, increasing premiums, or establishing waiting lists.

Wait, isn’t that what those evil health insurance companies do? Hey, everybody, jump into the Pool!

Cross-posted to Donklephant.

Politics health care reform, health insurance, HR 3962

Recently, Washington Post columnist Ezra Klein interviewed Kaiser Permanente CEO George Halvorson and talked about health care costs. Halvorson provided Ezra with a series of charts (PDF) that purported to show health care cost comparisons with several other countries.

But the costs are not accurate, at least in my real-world experience. Digging into the slide show Halvorson provided, we see that the costs for the other countries are provided by their government health systems while the US costs are from “independent data bases” and “online cost comparison sites”. My family has had the unfortunate experience of having several of the procedures covered in the report this past year, and my insurance carrier pays nothing close to the amounts in the report. The amounts they actually pay is closer to the Canadian costs.

The only procedure that comes out higher than the others is “routine office visits”. The report states the range is $59 to $151, with Canada’s system reporting $30. While my doctor’s office does charge my insurer $75 for the visit, the negotiated amount that Aetna pays him is $43. Add my $20 co-pay, and the doctor’s visit is $63. That’s the rate paid to every doctor in the area who accepts Aetna’s PPO health insurance. I can make an appointment today for an opening in their schedule tomorrow, and I’ve never had a problem getting in on the same day if I’m in pain. I’ll pay a $33 premium for that kind of service. And I’m in better shape than Argentina, where a “routine office visit” is $75.

The slide show really goes off the rails in respect to medical imaging charges. It shows a CT scan of the head ranging from $950 to $1,800 in the US, yet the first “online price comparison site” I went to shows an average cost at $200 to $400, in line with all the other countries except Spain and the UK. The costs listed at Scan Directory are an example of “free market” costs where consumers choose to have the scans as a preventative health measure. These costs are rarely reimbursed by insurance, but are equal in every respect to the prescribed scans from your doctor (including review by a radiologist).

Why is the true cost of these vanity scans so much less than the “list prices” the study has? Because the provider is expecting people to pay the asking price. I have found that the insurers pay about that same amount, and not the list price.

For example, my wife’s MRI was billed to the insurance at $2,800, but paid at $520 when you include our share of costs and the actual insurance payment, an amount comparable to Canada’s wait-prone system. We got her MRI within a week of it being prescribed.

So why is Kaiser Permanente’s CEO publicizing these inaccurate costs? Perhaps he doesn’t know what his company is actually paying for these services (someone should tell the stockholders!) The large health insurers have much to gain from government mandated health insurance coverage. Even with the reforms of eliminating pre-existing conditions, forcing every American to sign up with a health insurer means that Kaiser’s rolls will swell with millions of low-cost (read: healthy) enrollees into the system, and force others with minimal coverage to enroll in plans that meet the government standard.

The Cato Institute’s director of health policy studies Michael Canon notes:

Compulsory health insurance could require nearly 100 million Americans to switch to a more expensive health plan and would therefore violate President Barack Obama’s pledge to let people keep their current health insurance. In particular, the legislation before Congress could eliminate many or all health savings account plans. Making health insurance compulsory would also spark an unnecessary fight over abortion and would enable government to ration care to those with private health insurance.

Canon goes on to explain how experience has shown that compulsory insurance necessarily means increased government influence in health care:

The experience in Massachusetts belies the claim that compulsory health insurance brings down health care costs. The “shared responsibility” ruse allows Massachusetts politicians to declare success for a compulsory health insurance scheme whose actual costs reveal it to be a failure. Massachusetts also demonstrates that compulsory health insurance enables, and ultimately requires, politicians and government bureaus to control nearly all aspects of health care and medical practice.

Giving up freedom for security is often a risky business, but when you relinquish freedom in exchange for less security, based upon less-than-true statistics, you have made a poor choice. Let’s hope Congress fails to make that choice this weekend.

Politics compulsory health insurance, health care cost, health care reform, health insurance, MASS Health

Now that the public option appears to have been declared really, really dead, focus can brought upon the areas of health care reform that most people want. One of those is “portability”, the promise that someone with health insurance will be able to retain it after losing their job.

The problem with most of the promised reforms is that they ignore the principles that make insurance possible in the first place. As Howard Audsley notes in Conversations Around a Wood Stove:

insurance is a social mechanism for the transfer of the risk of monetary loss from the individual to a larger group. The concept is that risk of loss fits a random pattern of probability. It works very well for things like lightning strikes, hail, wind, etc. Risk and the premiums charged for insurance vary directly with the probability of loss. Hurricane insurance premiums are greater for folks living in Pensacola than for those in Minneapolis. Car insurance premiums for a guy with 3 DWI’s and two at-fault accidents are higher than for grandma, who only drives to church on Sunday. Life insurance premiums for an aging rodeo clown who smokes and has a bottle hidden behind chute #9 are higher than for a young (straight) desk clerk. You get the idea.

Insurance doesn’t work when the pool is exposed to catastrophic losses (exclusions for acts of war, earthquakes, etc), or when the pool as a whole is exposed to a high probability of loss. Assuming a guy with 3 DWI’s still has his license to drive, he isn’t going to be able to buy insurance from a commercial company. It will have to be a low limit, state fund that sells him insurance. How about $1,500 a quarter for $10,000 liability only coverage? That is the way it works.

So how does insurance work when the premiums can’t be paid at all? The short answer: it doesn’t.

Most people don’t realize that their employer often picks up 80% or more of the monthly health insurance premium. The guy who thinks he is paying too much for health insurance at $300 a month doesn’t realize the full bill is $1,500. When he loses his job he finds that COBRA payments are the full amount (the law allows up to 102% of the total cost). So you can get your health insurance coverage, for up to 18 months, but it will cost you dearly. Right at a time when you cannot afford to pay for it.

It is unreasonable to assume that insurance companies will be able to pick up the cost of covering people who are not paying for coverage. There is no free lunch, so premiums have to increase from the paying customers to cover those who are between jobs … and sometimes people are “between jobs” for a long time, especially if all their needs are met.

Portability could be provided, and without using tax dollars to do it. Allow insurance companies to offer “loss of job” riders, allowing employees to pay extra each month to insure specifically for COBRA payments for unemployment. Some insurance companies already offer “loss of job” insurance; an example plan pays out $1,500 a month for up to four months for a premium of $70 per month. A similar product is found in the “mortgage protection plans” that pay your mortgage payments for up to six months (cost is about $40 per $1,000 of monthly payment).

If we must, we could structure such a plan the same way we do the horribly inefficient “Worker’s Compensation” plans, with a state payroll tax of one to two percent of all worker’s wages. The problem is, like all government give-aways, such a plan is ripe for the same kind of fraud as Worker’s Compensation.

Politics health care reform, health insurance, public option

President Obama’s address to Congress to jump-start his floundering health care/health insurance reform efforts did not reveal anything new. Instead, in classic Obama style, he started brilliantly, ended brilliantly, and put us to sleep in the middle.

Perhaps a highlight to most people in these speeches are the little heart-rending stories politicians love to sprinkle in; the stories are intended to make you believe that the politician and his ivy league educated speech writers are just like regular people. But they often “condense” the human interest story to fit the purpose of the speech. Let’s call it a lie by omission:

More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won’t pay the full cost of care. It happens every day…. [A] woman from Texas was about to get a double mastectomy when her insurance company canceled her policy because she forgot to declare a case of acne. By the time she had her insurance reinstated, her breast cancer more than doubled in size. That is heart-breaking, it is wrong, and no one should be treated that way in the United States of America.”

This woman was a “victim” of the practice of rescission, canceling a health insurance policy because the applicant “lied” on the application. In the case above, President Obama neglected to tell the whole truth … her policy was rescinded because she neglected to mention acne and a rapid heart beat. A rapid heart beat is a serious health concern, and an insurance company cannot assess the risk of the applicant if the applicant “doesn’t think” the medical issue is a “concern”:

Earlier in my life off and on I had a fast beating of my heart which was not a current problem, just something that happened when I was upset.

Rep. Joe Barton (R-TX) is the one who brought this particular case forward, and Republicans and Democrats alike view the practice of rescission as troubling. A sensible reform would be to allow insurance companies 90 days to rescind a policy for most omissions like the heart trouble indicated above, and the power to reclassify the applicant into a higher risk pool after that period.

Otherwise, people will forgo health insurance until they have a problem, and then lie about their condition to get favorable health insurance rates. The way to have a health insurance pool that is sound and sustainable is to have wide participation. You need a lot of healthy people paying into the system in order for it to be able to afford quality health care for the sick people. Limiting rescission and reclassification after a certain period of time serves as an important incentive for younger, healthier people to join the system. Allowing people to wait until they are sick is the quickest way to bankrupt the entire system.

Politics health insurance, rescission