The whole point of free speech is not to make ideas exempt from criticism but to expose them to it.

Monday, August 31, 2009

A free market solution?

Existing laws are forcing the increased problems with health care.

I'm sure there are multiple flaws with my solution below and invite criticism of it:

1. Group insurance drives down the cost of insurance to the individual who is a member of the group. The larger the group, the better the savings. Insurance companies may provide coverage only to employee groups, such as Sears, Target, Unions, Government workers, etc. They may not "create" groups. I suggest lifting restrictions on insurance companies so they may create new groups, such as the self-employed, employed without benefits, etc. In exchange for allowing these new groups, the insurance industry must then make available on a sliding scale similar to that used in Rapid City Community Health, insurance for the permanently disabled, the unemployable, the profoundly poor and those working but below the poverty level.

2. Tort reform to prevent frivolous lawsuits and outrageous judgments, to reduce premiums.

3. Allow oversight of the insurance industry to the individual states' insurance commissions, with federal guidelines for penalizing insurance companies who do not promptly pay covered costs.

4. If you are employed and your employer provides health insurance, you do not qualify.

5. Create federal regulations for portability and pre-existing condition coverage.

I'm sure the insurance and legal Forumpians can poke a bunch of holes in this solution. But, it provides a free market solution and keeps the government out of the insurance business, while allowing competitive choices for those currently not covered, while providing a new market niche for insurance companies, who for the price of covering the truly needy, will see additional profits for their profit hungry companies. The tort reform would eliminate the excuse that large judgments are driving premiums up.

Okay, Frankenfeld et al what's wrong with this solution?

6 comments:

Thad Wasson said...

Alot of individual liberties still intact. 98% better than the U.S. House bill.

Douglas said...

Not sure what Frankenfeld thinks about this, but using the government to guarantee profits by private insurers is not a true free market no matter how you "market" it.

Private insurers can put together pools, but the ultimate "pool" is every citizen which would reduce costs and prevent cherry picking to fill pools with only the currently healthy.

The problems with employer-related insurance plans should be obvious after the current meltdown of the economy and parallel job losses (and thus insurance losses).

Insurers with a "pool" that is the employees of a small business, can pay out a large amount on the health coverage of a single employee who happens to get very sick and the next time that "pool" is insured, the insurers will present the business with price increases that make certain they will be dropped as the insurer which will then leave the very sick with pre-existing conditions which make them uninsurable.

Health insurance companies really don't provide any useful function that isn't guaranteed by government action and inaction. There is no free market in health care no matter how it is put together.

Michael Sanborn said...

Douglas,

I see your point about small businesses with larger pools, one or more of whom are sick. But isn't this true of all insurance? Aren't the insurance companies simply gambling that enough of us will stay healthy and pay the premiums to pay for those who don't stay healthy? Isn't my car insurance company gambling that I won't have an accident that is my fault?

Maybe you get rid of employer based insurance and allow the insurance industry to develop their own groups.

The insurance industry seems to be doing pretty well. Do we really believe the government can do it better? Is there not a way to develop a plan the insurance industry can execute at their risk instead of the taxpayers'?

Don said...

Pretty good, Mr. Sanborn, with a couple of important qualifiers. First, giving insurers "permission" to create groups is probably a non-starter. Instead, you should insist that they create groups, in such a way that the groups are collectively exhaustive--in other words, universal coverage. Second, no, I don't think there is a way to make the insurance industry assume the risk of health care coverage, as their very reason for existence is the pooling of risk in such a way that the companies themselves take little or no risk.

Douglas said...

About 35 years ago, Prudential put together a group plan that got good reviews in Consumer Reports. One of my wife's aunts worked in an insurance agency and at the time she and a very intelligent coworker also viewed it as a very good policy.

It worked for use for a few years, but the premiums kept going up and the deductibles increased greatly. When we did finally have children, it became nearly unaffordable and useless because of deductibles

If my memory is correct it seems like the acronym was CHIP for something like comprehensive or coordinated health insurance plan.

My wife started working again and that allowed us to get into another group plan. At the time, the CHIP deductible had gone up to something like $10,000 and the premiums were several hundred per month. Note: CHIP is now an acronym for some insurance for Children.

Anyway, what Prudential apparently did was close the pool to new entries. After a few years, the only people who could afford to stay in the plan were those who had no other options whether or not it was actually affordable.

For all I know the group essentially was allowed to die...which may have been the intention from day one.

The health insurance industry is doing very well..for itself.. on the other hand, peeling off 30% of the premiums paid for overhead and grotesque executive salaries and bonuses is much less efficient than many of the actual government plans which run on 4% or so.

The multitude of plans also adds greatly to the expense of the hospitals and clinics trying to collect from the insurance companies. This is an added cost in the US system that is not present in the Canadian system for example.

Michael Sanborn said...

Don,
I've no problem with compelling an insurance company to develop these new groups, and I've little doubt they would be happy to comply if they saw as an option a single payer program that will surely get them out of the health insurance business.

The choice, it seems to me, for the insurance companies is to take on a little more risk in exchange for keeping a good portion of their gross (read putrid) profits.

I suspect, but have no figures to back it up, that the vast majority of those who are uninsured, are likely pretty healthy. Such groups as sole proprietors and working but uninsured, seem to me to be a potentially profit rich niche.

Obviously, I believe there are enough of those folks out there who would buy health insurance if it was available at a reasonable rate, to cover the cost of those who remain unemployed or are unemployable.

Douglas suggests above that the additional administrative costs at the hospitals would be prohibitive. I'm not buying that. It's just another field in their collection program.

But, in addition to tort reform, I don't think it is unreasonable to take a good hard look at hospitals' non-profit status and the profit-rich practices they now employ, including $60 Tylenol and $30 boxes of Kleenex.

Also, tort reform could end some of the utterly goofy rules and regulations that drive up the cost of a hospital stay.

For example: I have a child with severe asthma. When she was young, we almost lost her to an asthma episode (they don't call them attacks anymore). She was several days in ICU and several more days in the Pediatric Ward. My wife and I had been medicating her (nebulizer treatments) for several years. Once out of ICU, we had to buy her meds from the hospital pharmacy at literally 10 times the cost of buying it elsewhere. Then, we were not allowed to administer the nebulizer treatment. We had to pay a respiratory therapist $300+ every hour on the hour for three days...more than $20,000. My wife and I never left her side. We could have done it for less than $20.

Don't get me wrong. I love those respiratory therapists. They saved her life when she presented at the emergency room. But I PAID for that emergency room and the ICU and the bed in pediatriacs. BOY did I pay, for years to come, compounded by two more similar episodes later in her life.

But, health care providers are not blameless in the creation of the mess in which we now find ourselves.

I think we can look at the entire problem and come up with a solution that makes everyone a little unhappy, which usually defines a successful negotiation.