Health Care Reform—the Charade of Regulation

[eridani]

Advocates of passing some form of the health care “reform” measures on the table as of January 2010 are claiming that a fresh new regulatory regime will control costs to the point where imposing mandates on everyone to buy overpriced underinsurance would be justified. This claim rests mainly on four features—

• An end to refusing policies and price discrimination for people with pre-existing conditions
• An end to recissions of existing policies when people get expensively sick
• Immediate sunshine on price gouging to discourage excessive price increases by insurance companies through review and disclosure of insurance rate increases
• Requiring premium refunds if insurance companies exceed a specified medical loss ratio (MLR)

Unfortunately, none of these proposals, however helpful in and of themselves, will have any effect whatsoever on controlling health care costs.

Ending pre-existing condition discrimination

For one thing, the Senate bill Ensign Amendment(1), effectively eliminates this policy by allowing insurance companies to offer discounts for people meeting certain “wellness” goals. Even if that amendment fails to make it into the final bill, there is nothing in the legislation to restrict insurance companies from using this as a justification to jack their premiums sky-high for everybody. For another, all versions of reform retain the policy of charging older people two to five times more, and age certainly has to qualify as a pre-existing condition. Also, there is no mention of what recourse you have should you be turned down for having a bad credit record.

Ending recissions

That would be nice, and I really wish that the legislation as written actually said that. What it does say is that recissions will be eliminated except in the case of fraud. Can somebody please explain why the insurance companies will not be able to drive a whole fleet of very large trucks through that loophole? And there is no mention of what happens when you get dropped because you are unable to afford the premium one month.

The sunshine provision

It’s astonishing that anyone could call this regulation and still keep a straight face. What it amounts to is a list of very naughty boys and girls. And they’d better watch out, because if they don’t straighten up and fly right, they’re going to wind up on that very same list again next year.

Medical loss ratio requirements

Unfortunately, 15 states either have these requirements now or have had them in the past(2), and they have not had even the slightest effect on escalating health care costs. Of course it’s helpful for some people to get premium rebates, but despite that, the cost of premiums keeps on skyrocketing, 45,000 a year keep dying for lack of the money to pay for health care, and 300,000+ keep going bankrupt due to medical bills (the majority of whom had insurance that was mostly better than the strictly catastrophic underinsurance that will be mandated under “reform”).

Locking the barn door after the horse gets away is not regulation in any sense of the word, as demonstrated by the following real life example.

Dear Mr. and Mrs. Sarkisian:

We were sorry to hear that your daughter Nataline died because CIGNA denied your claim for her liver transplant. However, you will be glad to know that we have analyzed CIGNA’s medical loss ratio and that all of their customers are entitled to premium refunds. Isn’t that wonderful?

Yours truly,
Dr. Pangloss

Another possibility—allowing lawsuits against insurance companies for claims denial

None of the current proposals have any restrictions whatsoever against denials of particular claims, and it is this practice that is a major cause of so many deaths and bankruptcies. People are not allowed to sue companies for denying claims. Representative Jim McDermott (WA-07) is drafting an amendment which would allow such lawsuits. I think it’s a very good idea, but it suffers from the same problem as attempting regulation by mandating specific medical loss ratios—the remedy comes too late to do any good. Mr. and Mrs. Sarkisian would undoubtedly appreciate the money if they sued CIGNA and won, but they would surely prefer that their daughter had gotten the treatment she needed in the first place.

In addition, legal remedies generally increase health care costs. This is already true of medical malpractice lawsuits (even though the cost increases as a cause of our high per capita medical costs are vastly overrated by the tort reform crowd). In no other developed country do people constantly make use of the legal system to get the money needed to pay for the ongoing medical bills necessitated by poor medical outcomes. Note that this motivation to sue is exactly the same regardless of whether or not such outcomes were caused by actual malpractice. The reason for this is that those extra costs are automatically paid by societies which guarantee health care as a right, and therefore there is no need for anyone to initiate a tort lawsuit in order get the money to pay them.

(One of the reasons that we lead the developed world in medical error rates(3) is that private employer-based insurers are constantly forcing people to change providers with their endlessly mutating preferred provider lists. Nothing in the proposed legislation deals with this issue.)

Real regulation

Because the largest risk pools will always be the cheapest, health insurance will always trend toward being a monopoly. Wherever natural monopolies exist, society absolutely must regulate them so that citizens do not get ripped off for huge sums of money. We learned this more than a hundred years ago with respect to electrical power grids. At that time, many publicly owned utilities were established and the remainder were put under strict regulation by public utility commissions. When historical amnesia finally set in during the last years of the 20th century, deregulation insured that Enron and Reliant were able to rob energy consumers on the west coast of billions of dollars during a fake “energy crisis”. The corporate-controlled media rarely pointed out that cities with municipally owned utilities didn’t have any brownouts during the “crisis”. All American health insurance companies are Enron. Just as Enron withheld energy from the market to drive up prices and profits, so do insurance companies deny care in order to increase profits.

There is no such thing as health care reform without strict regulation of health care costs. It can be done by outright government ownership of the health care delivery system (Britain, Scandinavia), government monopoly of health insurance (Canada, Taiwan), or strict government regulation of private insurance (the Netherlands, France, Japan). The third method can certainly work as well as the first two in practice—too bad that nothing in current “reform” proposals comes remotely close to it.

Real regulation of mandated private insurance in the Netherlands results in policies that cost 100 euros/month/adult ($95-$145 depending on exchange rates), with NO deductibles, NO co-pays and NO age rating. In addition, many countries regulating private health insurance also directly control provider prices. In 1996, my husband got an emergency root canal in the Netherlands for 100 guilders, or $25 American. In Japan, an overnight hospital stay costs the equivalent of $20. And yes indeed, the number of zeros in those prices are perfectly correct, though they could probably stand to be raised and in fact may have been.

Mussolini once said, “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” Without a public option open to anyone and without real regulation, that definition applies to the mandatory purchase of overpriced underinsurance. It’s certainly true that, given the hugely complex nature of the legislation, it does include a number of useful provisions, mostly related to expansion and improvement of Medicare and Medicaid. In my opinion, these useful proposals are analogous to an expensive balsamic vinegar dressing being poured all over a poison ivy salad. Why can’t we just keep the dressing in its bottle and buy it separately?

(1) http://www.thenation.com/blogs/notion/514042/the_ensign_healthcare_loophole
(2) http://www.familiesusa.org/assets/pdfs/medical-loss-ratio.pdf
(3) http://www.truthout.org/111908HA

[eridani]

1. No comments at ALL?

I thought I raised some substantive issues, and that McDermott's proposal would come as news to people.

[kudzu22]

2. On the recission thing

fraud is already the only justifiable cause for recission -- lying about your health status on your application, failing to disclose pre-ex conditions, etc. It's not that big a loophole anyway, since if the bill becomes law and you get rescinded for fraud, you just reapply with a truthful application and they have to take you.

[amborin]

4. Not so! State of CA has had to drop its anti-Recission lawsuits against

big insurers

"fraud" is a huge loophole, for corps to rescind policies/coverage

CA was out-gunned and out-spent by Anthem Blue Cross, as just one example

""California recently dropped an attempt to enforce its anti-rescission law against a major insurer, saying that it was financially outgunned by the insurer's legal team.

The rescission law, according to the legislation, "shall not apply to a covered individual who has performed an act or practice that constitutes fraud or makes an intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage."

Insurers today routinely claim that patients engaged in "fraud" or "intentional misrepresentation" when dropping them from coverage. Much depends on who defines the terms in the bill.

It won't be the federal government. There will be no federal agency tasked with overseeing the enforcement of the bill's rules. Rather, a Senate leadership aide told reporters in a briefing Saturday, individual states will police the new system.

That's a task the California Department of Managed Health Care was unable to perform when battling Anthem Blue Cross, which has rescinded 1,770 policies since 2004.

"In each and every one of those rescissions, the right to contest each, and that could tie us up in court forever," the department's director, Cindy Ehnes, told The Associated Press. A million-dollar fine was announced in March 2007, but has not been enforced.

If the enforcement for these regulations falls on the individual states, and the individual states will have to litigate them, which could take a very long time in each case. The regulations are unlikely to be uniformly enforced state to state--some of them have extremely proactive insurance commissioners and strong regulatory structures in place, others don't. And in the states that don't, don't expect insurers to end some of these practices out of the goodness of their hearts."

common dreams.org

[eridani]

5. Found a link for that California thing

http://cbs5.com/business/anthem.blue.cross.2.763636.html

[leftstreet]

3. K&R

[Greyhound]

6. K&R. Excellent.

This is typical of why I first got hooked here and the lack of substance that currently reigns is why I spend so little time here anymore, and thus nearly missed your piece.

Thanks:hi:

[laughingliberal]

7. It is like a nightmare from which we can't awake

From Baucus having the doctors and nurses for single payer arrested through the whole thing, the Senate bill was like a bad car crash you can't stand to look at but can't look away. And it is becoming the beast that will not die. I was hopeful when a few things were getting changed in the conference with the House (even that was scraping for crumbs) but now, pffft.

[eridani]

8. Can someone explain to me that whenever a substantive thread on HCR is posted by anyone--

--not a single person who insists that we must pass the Senate bill or give up entirely has one single rational argument about the issues raised? I haven't seen anything other that "But Begala sais....but Krugman said, but Potter said", etc. etc. That is to say, appeals to authority and not a damned thing in addition to that.

[uponit7771]

12. This is more proof IMHO that the KillBillers on DU are freepers or pony people and not informed....

...progressives.

Every time I ask a couple of logical arguments for the bill I get little to no response and if there is a response it's done with a straw man.

[Tom Rinaldo]

9. K&R. Thanks for this post

One reason why so many of us were dismayed that a robust public option open to all never made it into any of the final legislation is that direct competition from a viable public plan would create so called "market incentives" for private insurers to clean up their act or get dumped or phased out completely.

[Phoebe Loosinhouse]

10. I always like to follow the logic process of Chuck Schumer's level playing field Public Option

We need a public option to be competition for the privates and create a market force to drive down costs. But that would reduce the private's profits. I know! We will create a public option that is not competitive and is based on the for profit's premium -that way we will have a public option that does not "compete" and will not create a market force to drive down costs! Mission accomplished.

Wouldn't want to compete "unfairly", would we Chuck?

[Juche]

11. Which is why it didn't happen

A public option and prescription reimportations would force insurance companies and pharma to treat people more decently by giving them alternatives. So they had to be removed.

The best way to sell a product to a customer is to mandate he is forced to buy it, and to force him to buy it from you by eliminating competition. Insurance companies got both of those things.

[Tom Rinaldo]

13. Perfect summary n/t