29 Feb

Obama’s “Mission Accomplished” as HHS Sebelius pronounces private insurers in “a death spiral”

                                       

We have another of those “death panel” tail-chasing debates coming up … only this time it will be a “death spiral”. Just as many erroneously characterized the “death panels” of O’healthcare as the proposed approved payment for end of life counseling – when it was really the creation of the czar appointees on the IMAC/IPAB Medicare board – the defenders of the private insurer “death spirals” ride a dizzying vortex of distraction and mistruths as well.

Case in point? HHS Secretary, Kathleen Sebelius responded to Illinois congressman Peter Roskam’s question about the heightened decline of private insurers in the wake of the enactment of O’health care with the following euphemism…

“Well again, Congressman, what you’re seeing – It wouldn’t have mattered if we had passed the Affordable Care Act or not. The private market is in a death spiral”

Is this true? Yes and no. What is a fact is that those covered by private insurance has been on the decline since circa 2003-04.

What is also a fact is that O’healthcare has hastened it’s demise, in accordance with Obama’s principal goal – a path to single payer health insurance.

The notion that O’healthcare would lead to the demise of private insurers is neither new, nor a unique claim. Many of us did battle with liberals on this very subject prior to its sleazy passage in the back rooms of the WH. And I’m quite sure that many of those same advocates are going to show up on this thread, and attempt to lend their voices to Sebelius… that O’healthcare isn’t the cause.

But O’healthcare is indeed a factor… and in more ways than one. The most obvious is that Sebelius’ claim is countered by the study from McKinsey Quarterly last year, stating that the entire structure of employer provided benefits would be upturned with the nanny legislation. This is the part I call hastening the demise of the private insurer.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response. More information about the survey methodology is available on the McKinsey & Company Web site.

· Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.

· Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

· At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.

· Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

It’s also true that the demise of privately insured employees has also increased threefold since 2009. That dramatic increase is linked directly to our economy, and the demise of employers who provide insurance for their employees.

While this country was already in a recession in 2008, the economy sharply deteriorated in 2009. The unemployment rate increased from 5.8% to 9.3% between 2008 and 2009, the largest one-year increase on record. As most Americans, particularly those under 65 years old, rely on health insurance through the workplace, it is no surprise that employer-sponsored health insurance fell precipitously from 2008 to 2009. Employment-based coverage for the under 65 continued to erode for the ninth year in a row, falling 3.0 percentage points from 61.9% in 2008 to 58.9% in 2009.

But let’s go back even further as to why the decline prior to the O’healthcare passage … the cardboard bunker where Sebelius foolishly chooses to seek shelter. Because it can’t be denied that the status of private insurers is not a new problem, the more important reality is why they were declining.

And that fact is the prolific availability of charitable healthcare provided by the government… i.e. Medicare/Medicaid/Schips.

To illustrate, I’ll go back to a May 2005 study, “Charity Care, Risk Pooling, and the Decline
in Private Health Insurance”
published on the Harvard website, and conducted by economic braintrusts from Harvard, U of Michigan, and NBER – Michael Chernew, David Cutler and Patricia Seliger Keenan.

The evidence is clear that rising health-insurance costs lead to significant reductions in insurance coverage—as much as two-thirds of the overall decline in coverage in the 1990s. We estimate that up to half of this response to higher costs is related to the availability of charity care. This estimate is rough because our estimates of the availability of charity care are based solely on the availability of beds in public and teaching hospitals. Moreover, our charity care measure, which incorporates availability of beds in teaching hospitals, could reflect greater moral hazard over time. Nevertheless, the models consistently demonstrate that the availability of beds in facilities that are relied upon for charity care increases the sensitivity of coverage
to rising premiums.

By providing access for the uninsured, charity-care providers inadvertently create the conditions for crowding out of private health insurance.

We suspect that the remaining impact of premiums on coverage is due to diminished utility of coverage associated with rising premiums, particularly for the young and for low income individuals. The evidence we present is consistent with this, although not definitive. Of particular importance may be the pooling of high- and low-risk enrollees, which leads to identifiable transfers from the healthy to the sick. As medical costs increase, the size of these transfers rises, and the willingness of the healthy to make them declines.

The new era of rising medical spending we have recently entered could have a major impact on private insurance coverage. Moreover, the decline in coverage caused by rising premiums will place a greater burden on charity-care providers. Though important in a time of declining coverage, bolstering the strained charity-care system may further exacerbate the decline in coverage, posing a policy dilemma in responding to increases in the uninsured population.

Shall I summarize the above conclusion excerpts? Government provided healthcare, and government meddling over time, has had a notable and undeniable impact on the private health insurers market… and all of it negative.

Now I realize this is where the less informed O’healthcare supporter will enter and scream about the heartless who advocate letting the poor and children die in the streets. But they are missing the larger point. Instead of healthcare reforms that would genuinely make coverage more affordable, the government has exacerbated the problem for those that genuinely need health insurance. And nothing would make premiums more affordable than an environment that fosters highly competitive insurers, aided by increasing the ability for medical providers to keep their administration costs down, to acquire supplies with better pricing, and not be saddled with high risk litigation that tend to cause over administration of unneeded care – all unimpeded by overly broad charity care that destroys private market competition.

And this goes back to the heart of O’healthcare to begin with. The originally stated goals were to make it affordable. But instead of addressing what has caused private market competition to evaporate … the high costs of administering medical care, causing an uncontrollable increase in premium prices … Pelosi/Reid/Obama instead attempted price control of insurance premiums, accomplished by mandating a wider spread risk pool.

Economists.. including the Heritage Foundation economist, Gerald Butler, back in the early 90s… would agree that forcing every healthy individual into buying health insurance premiums would indeed spread the risk, and better cover the costs for the unhealthy who put more demands on the system. But then, as the lawsuits and constitutional authorities and more than a few Judges note today, this mandate lies outside of the powers of the central government, and infringes on our Constitutional rights.

But let’s assume, for argument’s sake, that this power did lie with the federal government. Because the costs of administering medical aid and pharmaceutical has risen astronomically, how long can even forcing the entire nation into paying for high premiums stem the tide against the rising costs?

The answer? It can’t. Because O’health was nothing more than a temporary bandage using unconstitutional federal powers. The real problem… the costs of providing medical attention… was never addressed.

In fact, not only has the increased government paid charity care become more prolific over the decades, but the state mandates have also added to the problem. Thus the recent contraceptives debate enters the fray as the perfect example of complaining about all the wrong problems, and fighting the war on the wrong battleground.

As the study linked above points out, the value of some services covered under policies is not sufficiently high to justify their costs. If consumers had the ability to exclude unwanted coverage/care they considered invaluable from their costs, they would.

But since States have the sole right (not the feds) to mandate minimum policy requirements in their respective jurisdiction, their penchant to cover every possible thing… including birth control pills… has driven up premiums for non valuable services.

And now, to make a bad situation worse, the federal government has decided they can nationally mandate minimum coverage by insurers… and they want amenities to the moon to be included.

Therefore, Ms. Sebelius’ claim that the “death spiral” for private insurers would have happened whether O’healthcare had passed or not is technically correct… in a sadistic sense. What she does not cop to is that the decline is due to other government interference in the private market in the form of charity care and frivolous mandates.

And to that end, it is O’healthcare that is finishing the job that charity care has begun. Combined with an administration derelict in it’s management of an overspending Congress, refusal to address real reforms that affect cost of providing medical services, and embarrassingly poor leadership in pulling the nation out of a recession, O’healthcare has provided the nails for pounding into the coffin of the private health insurers market.

And for Obama, Pelosi and Reid – that’s a “mission accomplished” moment. For the nation? That death spiral won’t be limited just to the extinction of private health insurers. Rather we will also find ourselves in the same spiral as we take the next step toward the Euro-socialist fiscal and medical care abyss.

About MataHarley

Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.
This entry was posted in Health Care. Bookmark the permalink. Wednesday, February 29th, 2012 at 5:47 pm
| 703 views

15 Responses to Obama’s “Mission Accomplished” as HHS Sebelius pronounces private insurers in “a death spiral”

  1. anticsrocks says: 1

    Cue Greg, Ivan Larry and the libdud brothers to begin screaming that the death spiral started under Bush! It’s clearly his fault!!!!!!!!!!

    Good OP, Mata. What is ironic is that the very mechanisms put in place by the federal government which have been crowding private health insurance out, are the some of the same arguments that were used to push Obamacare down our throats.

    ReplyReply
  2. drjohn says: 2

    This was always the goal of this adminstration.

    ReplyReply
  3. Liberal1 (objectivity) says: 3

    I agree. We would be much better off with Single Payer. Just think how much money could be saved, and re-directs toward medical care, if insurance companies didn’t have to pay for advertisements and expensive CEO’s. By the way, does France still have the best health protection in the world?

    ReplyReply
  4. RealAmerican says: 4

    I thought you were referring to Mission Accomplished in the MURDER of ANDREW BREITBART:
    BREITBART was MURDERED.
    Watch this video:
    http://www.mediaite.com/tv/watch-andrew-breitbarts-fiery-cpac-speech-i-have-college-days-obama-videos/
    This was the man who spoke out BRAVELY against the radical obama.
    So they SILENCED him….FOREVER
    DO YOU THINK THIS WAS A COINCIDENCE?
    Brietbart “died unexpectedly of natural causes” at 43?!?!? Are you KIDDING ME?!?!
    If you don’t stand up for this NOW they will be coming for us ALL later
    Please, spread the word.

    ReplyReply
  5. MataHarley says: 5

    libzero: Just think how much money could be saved, and re-directs toward medical care, if insurance companies didn’t have to pay for advertisements and expensive CEO’s. By the way, does France still have the best health protection in the world?

    And the gaffes keep on comin’….

    Insurance company profits are between 2-3%. Their advertising or CEO pay is not any more out of line than other corporations. Nor is it any of your business, unless you are a shareholder or board member.

    As for France and all that “money saved”…. LOL. Only the braindead think that healthcare is “free”. The French pay dearly with high taxes. Income tax rates for those making the equivalent of $5411 to $14,508 US dollars annually are at 30%. Above $14Kk annually? You pay 41%. The Socialist Party candidate, Francois Hollande wants to up that 41% category to 75%.

    Why would Hollande propose that, aside from the base philosophy ascribed that socialists believe private earnings should be confiscated and redistributed for the collective greater good? Because despite Sarkozy’s pension reform in 2010, that caused riots in the streets, the country is likely next on the severe debt watch list.

    Translation for the simple minds? As a Euro-socialist democracy with cradle to grave entitlement programs, they spend more than they can afford and the piper is asking to be paid.

    I’m quite sure that I, plus many others here, would be happy to gift you with a one way ticket to the country you prefer, libdud. When would you like to leave?

    ReplyReply
  6. johngalt says: 6

    @MataHarley:

    I’m quite sure that I, plus many others here, would be happy to gift you with a one way ticket to the country you prefer, libdud. When would you like to leave?

    Count me out, Mata. I don’t want to assume even a small part of responsibility over Lib1’s life, and given his history concerning political theory, he would most likely start asking for other handouts. All we would do is assume the place that the government has in his life, and I don’t feel like adding another dependent to those I already am responsible for. I would, however, happily give him a ride to the airport if my travel route was going that way.

    ReplyReply
  7. MataHarley says: 7

    RealAmerican, Breitbart had already had heart problems in the past couple of years. While he ruffled more than a few liberal feathers, I highly doubt that Breitbart’s death was murder or part of a larger conspiracy. It was that, like all of his, his number came up to move on.

    The subject of this post is government intrusion and charity care is destroying the private health insurers market, not off the wall conspiracy theories.

    ReplyReply
  8. MataHarley says: 8

    Just to add to my above education for libzero about profit margins for the health insurers industry, even O’healthcare advocate, Ezra Klein, doesn’t use lies to promote his agenda.

    The insurance industry is not a particularly profitable industry. To be more specific, they’re the 86th most profitable industry as measured by profit margins, with an average margin of 3.3 percent. That’s lower than drug manufacturers (16.5 percent), health information services (9.3 percent), home health care (8.4 percent), medical labs and research (8.2 percent), medical instruments and supplies (6.8 percent), biotech firms (6.7 percent), generic drug manufacturers (6.6 percent), and much else. That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending.

    The 2009 list of industries/profit… of which health insurers were 86th…

    ReplyReply
  9. Zelsdorf Ragshaft III says: 9

    I believe they have single payer health care in North Korea. Funny, the UK is moving away from that system because it has failed to meed the needs of the nation. We currently have a Marxist for President. He must be removed, by whatever means necessary. He cannot be reelected.

    ReplyReply
  10. blast says: 10

    @ mata, I just looked up the largest health care insurance company in the USA (UnitedHealth). For the 12 months ending 12/31/2011 they had (in millions) $101,862 in revenue, $16,681 in expenses/depreciation, $8,464 in operating income, and $5,142 in profit. That looks like roughly — 5% profit and 17% expense, or 22% not going to delivering care.

    I wonder how much they are spending on their corporate personhood and influence peddling to keep the broken system broken.

    ReplyReply
  11. MataHarley says: 11

    No clue what your question is, blast. If you look at the 4th Quarter SEC earnings release on this site, and go to pg 14 and after of that PDF, I suspect you’ll find out where they put their cash for investments, allocated to stockholders etc. And yes, those evil US American workers that are vested in United Health as part of their 401Ks or personal portfolios get to benefit from that profit. But I would suggest there are higher return corporations, if you are thinking of revamping your portfolio… as the above graph (even dated) suggests.

    If you want to know how much they are spending “influence peddling”, Open Secrets is your friend, and you’ll find they spent $2.94 bil in lobbying in 2011 (none of which went to Newt, in case you’re wondering…).

    As for their PAC and recipients, like most corporations that try to give more to the party they think will be in power, they were overwhelmingly donating to the Dems since 2006… .with 54% going to Dems and 45% going to the GOP in the 2010 cycle. (guess they bet on the wrong horse for the midterms…)

    This 2012 cycle, they seem to be pretty close and confused, with the GOP having the edge this year. But it’s early in the season yet.

    So what’s your point? That corporations lobby and that both parties reap the benefits, depending on who looks like the horse that is going to win? Wow… earth shattering and breaking news. Alert the presses.

    If you’ll remember, the entire bit about the supposed profit of health insurance companies began with libzero’s parroting of an old and debunked lib/prog mantra of heinous evil profits and supposed big money saved. As you can see, this isn’t true, thereby the “savings” libzero suggests happen by being a single payer system nation, and placing all costs on the taxpayers instead of the private market, are some off tangent, unrelated pipedreams.

    ReplyReply
  12. blast says: 13

    @ mata, My point is the system is completely broken. There is no free market in healthcare and they spend millions to keep the status quo, and even Obamacare does not break the strangle hold of these companies. They artificially inflate the costs of everything and then “negotiate” better prices for themselves. There is no way the average American can afford to self insure for even minor problems. It is a monopolistic cartel that is self perpetuation and sucking billions off and causing our costs to go up. So all that money has corrupted the system to the benefit to those companies at the expense of Americans.

    And back to the “evil Americans” (as you mentioned) invested through 401k etc. They have no voice in the system either. In fact UnitedHealth had a proxy vote that was near 47% (which was a huge but losing minority) wanted a change in corporate governance to manage the officers compensation. Of course those funds have control over the vote and not the average small investor and 401k holder. Another place where the system has a bad feedback loop of control. The corporate relationships are incestuous at best and criminal at worse. This f-ed up system created the climate for Obamacare to even be considered. If a real free market was available to Americans for healthcare they would not be turning to the government for a solution.

    ReplyReply
  13. MataHarley says: 14

    blast, apparently you missed the reason that the “system is completely broken”, and *why* “there is no freemarket in healthcare”. And that is because of the unsustainable government/taxpayer subsidized charity care.

    The suggestion that the same entity that is breaking the system, seize control of the system as a solution, is nothing more than a surrender by the stupid. What should be done is the opposite… get the government out of the charity care business… the cause that is destroying the free market competition system to begin with. There is nothing wrong with revamping reform that provides for health providers providing incremental tiered coverage packages nationwide with individual state addendum/riders that are specific to your state’s mandates. People should be able and encouraged to have HSA’s with tax incentives that are used for crap like contraceptives, office visits and routine check ups. Doctors should be able to negotiate flat fee services, outside of insurance carriers, for cheaper prices (elimination of all the paperwork overhead required for insurance reimbursement) with individuals. And most certainly O’healthcare, which is destroying the private, smaller practice, and encouraging hospital and health care provider monopolies, should be repealed.

    Nothing in the Constitution allows for the central government to be in the health care business as a provider, or middle man. And the only version of that I would support is care for our military and veterans. That should be an automatic perk for those that serve.

    As far as the say of 401K sharesholders, etc… well, welcome to “democracy”. That’s the way it works. The shareholders and board’s majority make the decisions. And perhaps that isn’t a bad thing… first because those with more invested in the company’s management and future are supposed to have a greater say because they have a greater risk. And secondly because there are likely those on the boards that are more familiar with how that industry’s business is supposed to run. Get serious… do you think you, yourself as an investor, are capable of making decisions for a multi-billion dollar corporation in an industry that you don’t know whit about?

    The solution for any small investor, unhappy with the direction of the company, is to move his shares and cash to another more appealing investment. You’re not stuck with what you don’t want, if you pay attention. Problem solved.

    ReplyReply
  14. Pingback: Bookworm Room » Clearing off the spindle, which creates an awesome series of links to cool stuff

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>