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.