Category Archives: junglenomics

War on Healthcare

Today’s word: medical underwriting. “the use of medical or health status information in the evaluation of an applicant for coverage”

As I’ve pointed out before McCain’s healthcare plan relies heavily on state-run high-risk pools; it would essentially eliminate employer-sponsored group insurance by making group premiums non-deductible for employers. Everyone would be given a tax credit for $2500-$5000 and pushed into the individual market. It would likely be a nightmare for many people. It also bears a striking similarity to the plan offered by the health insurance lobbying group, AHIP. Shocking, I know.

I have suffered through publicly financed healthcare my entire life.  I will waiver in my efforts to save the American people from that fate.  --John McCain

"I have suffered through publicly financed healthcare my entire life. I will not waiver in my efforts to save the American people from a similar fate." --John McCain

If McCain and AHIP are successful in implementing their plan they will have delivered a gold mine to private insurers and a minefield to state governments. Private insurers will be working in the most profitable demographic imaginable: healthy people with money. Everyone else–literally those most likely to need healthcare–will be looking to government at all levels to help them out: the old (Medicare), the poor (Medicaid), and the sick (state high risk pools). As a taxpayer my question would be this: if we taxpayers are going to provide health insurance to all the high risk folks, why not the low risk too? At this point what exactly is the point of having private insurers around?

Moreover, let’s take a look at the process by which insurers would identify these potentially costly customers, medical underwriting. Insurers say they need to screen out high risk people, like people with pre-existing conditions, people with a family history of certain diseases, age, gender, and so forth—so that they can keep premiums affordable for everyone else. This might make some sense if they were planning to actually exclude someone from the healthcare system. But no one, to my knowledge. actually proposes to do that.

That’s not to say it doesn’t happen all the time (for more on that subject, I highly recommend Jonathan Cohn’s book, Sick). No, insurance companies don’t explicitly say they want to exclude people from the healthcare system, they just want to exclude certain people from their healthcare system.

What private insurers propose to do is to use medical underwriting to shift costs from private insurers to the government. In other words, if the health insurance system worked exactly as the insurance industry says they want it to, medical underwriting would be merely an expensive, useless process that shifts costs to the public. However, since our healthcare system doesn’t work as advertised, medical underwriting is an evil process, tossing random people into the giant cracks and crevices of our patchwork healthcare system–in addition to being expensive and useless.

It’s for this reason that our healthcare system cannot work without mandatory participation. Everyone gets coverage; everyone pays something. That requires an end to the vast majority of medical underwriting. if McCain and the health insurance companies had one ounce of dignity they would be begging the government to stop them from medical underwriting. Like slavery and child labor it’s a morally bankrupt practice that has been outlawed in other countries for decades. But, instead of ending it, they want to expand it. They want to refine it, fine tune it, devote vast resources to it, so that they can more efficiently identify those who are at risk of costing them money.  So that they can more efficiently dump them on the taxpayers.  So that they can more efficiently mine their particular niche of the healthcare system for gold.

They call this proposal—I’m not making this up—“a plan for guaranteed access” and “covering the uninsured“. Although the medical underwriting they propose to use has precisely the opposite effect—it excludes people from the system—they call their proposal “guaranteed access” because… ummm…they’re going to ask taxpayers to guarantee it. As AHIP puts it on their website, they will “encourage states to develop and implement access proposals”. McCain’s website assures us that “as President, John McCain will work with governors to develop a best practice model that states can follow – a Guaranteed Access Plan or GAP”.

Right. Is there one person in America who believes the GOP has any intention of raising $1 of tax money to pay for this? As I write they are working as hard as they can to defund social insurance and social programs all across the country. Even children cannot escape the GOP attack on government financed healthcare. Now they are proposing that state governments (with their vast resources!) start covering millions of people who would be uninsurable under McCain’s plan? Please.

Its hard to avoid seeing this as a cynical ploy to protect the private insurance industry’s turf. I imagine McCain and his AHIP buddies sitting around the planning table trying to figure out what to do about financing their “Guaranteed Access Plan”.

McCain: OK, we’ve done what we need to do, consulted industry, packaged our plan with the right buzz words—how can we best insure that in never actually happens?

Adviser: John, let’s get the states involved. Obviously a weaker taxing authority than the federal government; divided into 50 separate jurisdictions; they have constant budget problems, 17 states don’t even have high risk pools, and as a rule, our party operatives have been very successful at demagoguing the tax issues for years.

McCain: OK, excellent. Our plan will be to “work with the states”.

In my humble opinion its a total outrage that McCain and the health insurance industry are taken seriously. Especially McCain, having spent his entire life covered by publicly financed health insurance; where does he get off recommending this type of program for the rest of us?

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Filed under economics, healthcare finance, junglenomics, social insurance

Slimymarketing Alert

Have you purchased health insurance through a college or university recently? Be advised that those seemingly trustworthy institutions are selling some slimy merchandise: health insurance. BusinessWeek reports that many people with claims under those policies are finding themselves not-so-insured:

More than half of the insurance plans recommended by colleges offer benefits of $30,000 or less, according to a survey published in March by the General Accounting Office

Really? $30,000? The average group policy I’m familiar with has benefits of $2,000,000. If something really goes wrong—and isn’t that what insurance is for?— $30K is nothing, as several of the people in the article found out.

The policies were marketed using terms like “major medical coverage” and “catastrophic accident”, but there is nothing “major” about $30K of coverage. Of course, one can argue than parents and students should be reading the policies closely and shopping around. But, realistically, how many people have the time and skill to compare stuff like this. In addition to being on the lookout for overall caps on benefits, anyone looking to buy one of these policies needs to be aware that insurers are increasingly using “interior caps”– limitations on what they will pay for specific incidents and procedures. The intentionally confusing marketing and misplaced trust of parents and students has led to a “veritable gold mine” for some of the insurers, according to BusinessWeek.

And who were those insurers? Where did the colleges get those policies? The name “UnitedHealth” runs throughout the article. Let’s see, UnitedHealth. Isn’t that the company that was scammed by it’s own CEO?

Yes it is! William McGuire ran the company until 2006 when the Wall Street Journal revealed that he and fellow directors had been illegally backdating stock options to increase their compensation. Under pressure McGuire bailed in December 2006 with the largest golden parachute in the history of corporate America, $1.1 billion. Once a scammer always a scammer.

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McCain GAP revisited

In a previous post I noted McCain’s plan to guarantee everyone access to health insurance–or GAP–consists of dumping millions of people into the dysfunctional state high-risk pools. I know this is going to be hard to believe but that’s precisely the solution favored by the advocacy group formed by private insurance carriers, Council for Affordable Health Insurance.

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Waiting for McCain’s Health Plan

A few weeks ago I noted that McCain has no healthcare plan. Well, he does, but it amounts to

“throw[ing] you to the market wolves–an individual health insurance market that gives the best prices to the young and healthy and sends the sick off to government-run risk pools that fall way short of giving people decent coverage.”

Elizabeth Edwards has been keeping the heat on McCain, telling us that the market wolves would devour both she and McCain under his proposa–since they both have pre-existing conditions. On Sunday McCain was pressed on this point on “This Week with George Stephanopolous”. McCain has a plan, he says: cover everyone with pre-existing conditions under a “special Medicaid Trust Fund”.

And how might that work?  At ThinkProgress’ Wonkroom Elizabeth Edwards examined his proposal:

“A recent study showed that nearly nine out of every ten people seeking individual coverage on the private insurance market never got it. Insurers will disqualify you for just taking certain medicines because of the possibility of future costs, including common drugs as Lipitor, Zocor, Nexium, and Advair. People who have had cancer are denied coverage and those who get cancer run the risk of simply being dropped by their insurer for any excuse that can be found. And insurers make it a practice to deny coverage to individuals in high risk occupations, such as firefighting, lumber work, telecom installation, and pretty much anything more risky than working in an office.

McCain opposes universal health care because he claims it represents a “big government takeover and mandates.” But yesterday, he said he would help cover people with preexisting conditions by creating a “special Medicaid trust fund.”

A “special Medicaid trust fund”? Talk about a big government takeover. Tens of millions of Americans have preexisting conditions. If he is going to expand Medicaid to cover Americans with preexisting conditions, he is talking about a massive, massive increase in the Medicaid program. He says he opposes more government involvement in health care, but his idea really would be government-run health care.”

I think she’s giving him too much credit.  For one thing, Medicaid is a means-tested program, so presumably McCain is talking about denying insurance to the millions of people with pre-existing conditions until they have spent themselves into poverty. Is that the America McCain envisions?  Sickness = poverty?  I’d like to see him take that slogan on the campaign trail.

Not only is Medicaid a poverty program; it’s an impoverished program. Services are being cut back as we speak; physicians increasingly refuse to see Medicaid patients because reimbursements are so low. As Kevin Drum observed a few weeks ago, Medicaid is the poster child for the truism that “programs for the poor are poor programs”.

This is McCain’s healthcare plan?  Its not a plan.

Still waiting.

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It’s the solidarity, stupid!

Maggie Mahar has an interesting post on why we don’t have national healthcare.

“[inequality], says Princeton economist Uwe Reinhardt, is what makes health care reform so much more difficult in the U.S. than in countries such as Finland, Canada, Belgium, the Netherlands, Switzerland, Sweden, France, Denmark, Germany and Norway. In these largely middle-class countries, the gap between the most affluent and the least affluent is much narrower… . When you compare the incomes of the top 20 percent to the bottom 20 percent in most developed countries, the ratio is less than 6:1 ; in the U.S. the ratio is roughly 9:1.

Why do narrower income gaps make it easier to build a universal health care system? In countries where most people are “middle class,” groups living on different rungs of the income ladder still identify with each other. Some earn more; some earn less—but they are not living in different worlds. As Princeton economist Uwe Reinhardt put it at the World Health Care Conference in Berlin earlier this month, in countries like the Netherlands and France, there is more “solidarity.”

By contrast, in the U.S, Reinhardt pointed out, the divisions are much sharper. “We have our fabulously wealthy ‘corporate aristocracy’—people who are not part of the U.S. They don’t participate in American life anymore; they have five homes all over the world.” Then we have a class of very affluent families… . Move down another rung or two and you find an entirely different world of middle-class Americans. This group covers a wide swathe of society ranging from those who are “comfortable” to those who worry about making the mortgage, sending their children to college, and paying off credit-card debt. Then finally, says Reinhardt, “America has its very poor—these are the people who were in New Orleans when Katrina hit, and who receive no services.”

Following his lecture, I asked Reinhardt whether he thought that, if we made a real commitment to healthcare reform, the U.S. could build a system that provided high-quality affordable care for most Americans. I pointed to Germany, where even though affluent citizens (earning over roughly $75,000 a year) have a choice between public-sector healthcare and more expensive private insurance, the majority of wealthier Germans pick the public system. It’s good enough that they are satisfied with the quality of care. Couldn’t we do something similar in the U.S.?

Reinhardt didn’t hesitate: “No, never.”

Why not? I asked

“Because there is no social solidarity in the U.S.”

And why don’t we have solidarity? The legacy of race and slavery is no doubt one reason. It’s possible to win elections in the US by pitting one ethnic group against the other and one economic group against another. Given the country’s ethnic diversity its not entirely hard to believe that solidarity would be hard to achieve. Still, the country was founded on the idea that all men are created equal, that they are endowed by their creator with certain inalienable rights…

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Faith in markets

Now that housing and credit market fiasco is clear to all observers it might be a good idea to ask how we got here. Answer: regulators asleep at the wheel. Or, more precisely, blind regulators. Blinded by ideology. It worth re-reading something Paul Krugman had to say on this subject several months:

“[D]uring the bubble years, the mortgage industry lured millions of people into borrowing more than they could afford, and simultaneously duped investors into investing vast sums in risky assets wrongly labeled AAA. Reasonable estimates suggest that more than 10 million American families will end up owing more than their homes are worth, and investors will suffer $400 billion or more in losses.

So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.

But Mr. Greenspan wasn’t the only top official who put ideology above public protection. Consider the press conference held on June 3, 2003 — just about the time subprime lending was starting to go wild — to announce a new initiative aimed at reducing the regulatory burden on banks. Representatives of four of the five government agencies responsible for financial supervision used tree shears to attack a stack of paper representing bank regulations. The fifth representative, James Gilleran of the Office of Thrift Supervision, wielded a chainsaw.

Also in attendance were representatives of financial industry trade associations, which had been lobbying for deregulation. As far as I can tell from press reports, there were no representatives of consumer interests on the scene.redtape

Two months after that event the Office of the Comptroller of the Currency, one of the tree-shears-wielding agencies, moved to exempt national banks from state regulations that protect consumers against predatory lending. If, say, New York State wanted to protect its own residents — well, sorry, that wasn’t allowed.

Of course, now that it has all gone bad, people with ties to the financial industry are rethinking their belief in the perfection of free markets. Mr. Greenspan has come out in favor of, yes, a government bailout. “Cash is available,” he says — meaning taxpayer money — “and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this.”

One quibble. I don’t think there is much evidence that they are “rethinking their belief in the perfection of free markets”. It’s worth remembering that the same people who brought us the current crisis in housing and credit markets, and have the economy headed toward the worst recession in decades, have their eyes on the biggest prize of all. They propose to fix the healthcare “industry” by more of the same: deregulation.

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I like this strategy

Quotable:

Robert Laszewski at Healthcare Policy and Marketplace Review:

“There is an old salesman’s axiom, “Don’t ever ask a question you don’t already know the answer to.”

Key House Democrats have asked the Government Accountability Office (GAO) to investigate the individual health insurance market. They also want the GAO to review the operation of the state high risk pools designed to provide a safety net for those who can’t get coverage in the private market.

Democratic House Committee Chairmen Dingell, Waxman, and Pallone told the GAO, “The individual market for health insurance coverage is seriously flawed. Many people who need insurance and apply for it are denied coverage in the individual market or are offered insurance coverage that turns out to be inadequate or it is too expensive or both.”

What’s really going on here is that John McCain is offering a standard Republican prescription for health care reform–which includes the rebuilding of the health insurance market on an individual platform that would emphasize personal responsibility, consumer choice, individual ownership and portability of coverage. In short, McCain and the Republicans want to revitalize the individual health insurance market–often by deregulating it.

The Democratic response to that will be that McCain and the Republicans just want to throw you to the market wolves–an individual health insurance market that gives the best prices to the young and healthy and sends the sick off to government-run risk pools that fall way short of giving people decent coverage.

The problem for McCain is that is in fact how the individual health insurance market works today. The Republican nominee is going to have to tell the voters how his reinvigorated individual health insurance market will work better than that. So, far he is short on the details.

The Democrats are about to get themselves a report that will condemn the operation of the individual market and give the a lot of ammunition against McCain.

Economists have pointed out before that most of the GOP presidential candidates would be denied coverage under their own healthcare proposals. Welcome to the free market guys.

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