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View Diary: BREAKING: Dems offer largest deficit-reduction bill since '93 (248 comments)

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  •  If they pay too many claims (0+ / 0-)

    thhey will have to charge more in premiums. If they charge more in premiums they get less competitive on the exchange.

    It's kind of like a balancing act on the exchange:

    1. if you charge a low premium, you'll get more customres.

    1a. If you charge too low a premium you'll have to be stingy in paying claims. Once you get a reputation for denying claims, customers will flee.

    1. if you never deny any claims, customers will like that. They will come to you.

    2a. if you never deny any claims, you'l have to raise premiums. You increase the premiums too much then customers will flee.

    In other words, it's the fre market at work. It will find its own perfect middle ground balance. Realistically I suspect most insurers will go the first route- charge low premium; deny more claims. The hidden reason is this: healthy people tend to go for the cheapest insurance and don't pay any attention to the claim denial part. So if I was running the insurance companies I would definitely go that cheap route. I'd much rather cover healthy people than sickly people.

    •  too bad we have state exchanges (0+ / 0-)

      I fear they'll be far less effective a signal national one that the house passed.

      •  allowed to sell across state lines (0+ / 0-)

        The HCR bill explicitly allows insurance co.s to sell across state lines PROVIDED the state government agrees to it. So I expect the smaller red states (if they have an ounce of smarts) to allow across-state-line competition.
        The larger states should be OK on their own.

    •  Unless everybody works on a steady growth (0+ / 0-)

      model, which they will.

      And variances in that won't actually serve as competition because we got State exchanges.

      We got our asses kicked on all fronts on this.

      Might as well come to acceptance on that and move to Progressive movement building to eventually take over the Democratic Party.

      That is the only way some material reform will occur on this, and many other issues where private corporations are currently making a ton of money.


      by potatohead on Fri Mar 19, 2010 at 11:29:09 AM PDT

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      •  Variances in that won't serve as competition? (0+ / 0-)

        Can you elaborate? Variances in what? And why wouldn't there be competition?

        •  They will simply ALL focus on (0+ / 0-)

          the "all you can eat" model.

          That's the path to their growth.  If they all do that, then "variances" in how aggressive they are about it won't actually be meaningful competition, because there won't be an alternative LOWER COST model.

          The product of this reform is:  "do some good at top dollar".  That's what we are about to legislate.

          That means cover everybody, but don't worry about the cost impact, which moves all the private insurers into the all you can eat model.  Processing claims then becomes very productive, because Uncle Sam will be backing those through the subsidy.

          Trust me.  Wait until this kicks in, then the discussion will about HOW MUCH MORE MONEY private insurers need to pay those claims, and won't change, until we take the profit out of paying claims.

          We have NO ENTITY that will operate differently to highlight the fact that we get NO VALUE for the profit and operating costs of the private insurers.  The product of that is simply they will grow by servicing people, and do so at a nice premium.

          Instead of paying TWICE the amount of money France does per person, for example, we may well pay THREE times that amount of money, but everybody will be covered.


          by potatohead on Fri Mar 19, 2010 at 11:52:12 AM PDT

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          •  You haven't addressed my point (0+ / 0-)

            which is: if they pay every claim without any denials, then the premium will go up. If the premium goes up then people will shop elsewhere. Uncle Sam is not covering 100% of the premiums. Not even close. So patients will be shopping for the insruance plans very carefully. There is no "all you can eat" at work. In fact quite the opposite, if the premium increases outpace wages or inflation, the increase is absorbed by the patient/consumer. The government doesn't pay out anymore. So people will be very cost coscious.

            Also- all plans on the exchange are PPO plans. The patient himself will be the cost conscious driver. You're not going to willy nilly have a CAT scan because that $5000 CAT scan will cost you at least $500 out of pocket. A big disincentive for you to spend wastefully.

            Another point is that in Canada- a lot of the providers are private. Same thing in France. How come they don't have that 'all you can eat' problem as you mentioned? Are you sure you're not overestimating how much unnecessary medical services people use?

          •  I think I know what your misunderstanding is (0+ / 0-)

            The subsidies under the HCR uses a very misleading terminology. They say, if your income is 300% FPL, for example, then your insurance premium is capped at 9.8% of your income.

            So if you read that sentence you might think- OK, so I fork over $6000 out-of-pocket, and Unca Sam will pick up the rest of the tab. I can pick a plan that costs $1 million dollars. I only need to pay my cap of $6000, and Unca Sam will pay the other $994,000. Of course I'd go for the best and most generous plan out there.

            WRONG!!!!!!! Actually the subsidies is like this: They look at your profile, look up the 2nd cheapest 'silver' plan for you on the exchange, check the price of that plan. Then subtract your cap of $6000 from that hypothetical premium; and then they hand over that cash to you as subsidies. It's entirely up to you whether you then turn around and buy the cheapest, cheesiest plan on the exchange, or the most expensive Rolls Royce plan. It's your call. Uncle Sam will only pay you a fixed amount. You pony up the rest.

            So in other words, there will be price competition on the exchange, and theconsumers will be absolutely price conscious.

            •  We shall see. (0+ / 0-)

              I get that dynamic.  

              Most people will not choose from the exchange, because they have employer insurance.  For those people the excise tax will encourage progressive dilution of the coverage over time as costs approach the tax over time.  That will occur because the insurers will price dilute to avoid paying the tax, selling the "savings" to the employers, who will then switch to that plan.  The trick here is that the employer and insurer will pocket their savings, pushing cost and risk onto captive employees.

              So we are really talking about those people able to participate in the exchange.

              What I'm getting at is all plans on the exchange operate at the much higher operating costs, essentially hiding them from the equation.  If we had a plan on there, operating at Medicare like rates, we would see a clear difference in overall cost / benefit, but we don't, which takes that up to 30 percent operating cost out of the equation!  

              They will compete in lots of ways, but all of those will have a nearly 1 in 3 dollar loss, for operations and profit, and that cost won't be one that we see significant competition on, because no competition of that form was presented.

              We get no value for those operating dollars.  There are some provisions that cut it back some, but what will occur there is they will honor those ratios for those on the exchange, BUT DON'T HAVE TO for those not on the exchange.

              In the end, we shall see.  I know what my costs are, and what they are projected to be.  They doubled over the last 4 years.  They are projected to go up 50 percent more before this kicks in for real.  The time delay alone means they get to raise rates well past the savings numbers I've seen, meaning a cap on cost growth at best, and no significant savings.

              An entity that didn't operate at those high rates, like Medicare where only a few percent of the dollars are operating dollars, would have meant an actual REDUCTION, with more or less constant pressure to reduce from there.

              What I see here is a CAP ON GROWTH, with pressure on the cap, which limits the damage, but does not really bring significant cost and risk exposure change to the majority of the middle class.

              I would love to be wrong, and we will see whether or not that's true.  Trust me, I will have watched, documented, and know absolutely whether or not we just got fucked on this.

              My default position here is that we did, in that we cover everybody (which is really great), but that we do so at high margin rates (which is very bad), limiting only the cost growth, not so much the overall cost itself, which will have been pushed up during the ramp up time, for a modest overall gain on their part.

              Reform would have been an actual COST REDUCTION, not COST GROWTH REDUCTION.


              by potatohead on Fri Mar 19, 2010 at 06:04:35 PM PDT

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              •  loss ratio capped at 15-20% (0+ / 0-)

                first of all- wrt loss ratio, it's capped at 15-20%. So it's not 30% admin cost as you've stated.

                Medicare for all or single payer would be ideal. However keep in mind that there are quite a few countries that do not have single payer, and still cover everyone: France, Germany, Sitzerland, Netherlands. Granted they mostly have non-profit insurers (or non-profit dividion of for-profit insurers) But here i the US we'll have the loss ratio cap, a hefty new tax, and also controls over rate increases. So our insurer will be more like regulated utility companies than pure for-profits.

                Also, the HCR actualy does have alot of experimntal provisions to decrease costs. It's a shotgun approach. But they are trying everything. There are no guarantees in this life. Except that if you do nothing, then you're guaranteed to to fail.

                •  That ratio means nothing. (1+ / 0-)
                  Recommended by:
                  denise b

                  Right now it's 30 percent.  For the next few years it will be 30 percent.  When it does drop, then...

                  it does mean that more dollars going to pay for HC so we can feel better about it.  Bear in mind, Medicare operates at a few percent tops, so this is a COST GROWTH REDUCTION, not an actual SAVINGS. For ordinary people, who can pay for insurance, this would be a nice 10 percent roll back.  Given their rates doubled in 4 years, it's welcome, but not really relief they can point to and change lives.  It just rolls back the monthly grind a little, that's all.

                  You absolutely are not going to sell me on this being a savings.  I'll have to see that in play.  What it will do is get a lot more services to people, but it will do so at a price premium.

                  Remember, no matter how you shake it, that 15 to 20 percent goes to private insurers and we get NO VALUE for it.  NONE.

                  Now, consider little Aunt Tillie.  She's not yet able to buy on to Medicare, and so will do the exchange.

                  She can afford $250 for a policy tops.  So she pays that, and hopes that she doesn't really get sick, using the hell out of the mandatory preventative care.

                  That preventative care is a good thing.  No question.

                  Now, she does get sick, and what happens?  Those claims get paid, and she grows a bill.  It's enough of a bill, at many thousand per year, to make sure she doesn't do much but pay for meds, and her policy.  That's better than the emergency room, but not by much.

                  Little Aunt Tillie could still lose her house in a scenario like that, just like I did when I had no insurance.  Still the chances of that are less, and that too is good.

                  Now, all those people getting care, and underpaying does what?  Costs money, that's what.  And where do we think that money is going to come from?

                  That's right, the subsidies.  They will come back, each year, just like I say they are going to, and the discussion will be how much more money do they need to get those claims paid, each one being paid through a 20 percent margin that we get no value for.

                  All the loss ratio does is encourage payment of claims.  That's good, really good, but it's not a cost containment at all.

                  In that scenario, all those people mean cost drains on our economy.  The upper percenters will see a tax rate, but you can bet they will scream bloody murder, and some of that will absolutely fall on the middle class.  I've already told you how they will do it too.

                  The excise tax puts an upper limit on the cost of a policy offering.  Now, what does that do?

                  That encourages the insurer to dilute the coverage where possible, pushing cost and risk onto people, and for those with employer plans, which is most of us, we won't have an exchange to compete in will we.  No.  We won't, meaning we shoulder that cost and risk, and that keeps our out of pocket PREMIUM costs below that cap, without significantly impacting out of pocket.  Again, they will do this by diluting the plans, saving them dollars pushing risk and cost onto us.  Employers will enjoy the savings, take it, pocket it, and the employees see nothing but a modest cost change, with all those cost and risk deltas rolling up for pretty significant savings for the insurer.  Neat huh?

                  The end product is a lot of dollars going through private insurers, who will rapidly figure out that paying claims is the best way to profit, particularly with Uncle Sam on the hook for those people on the lower end, who can only pay so much, or not much at all.

                  I can understand the for profit motive and full on competition with enough people to really matter.  I can't understand it with most of the competition being at the subsidy level, where most people can't choose because their employer already does.

                  At that subsidy level, it makes NO sense at all to run that at a profit, as that is our tax dollars, enriching itself, at a nice margin I might add, on our need to take care of our own people.

                  It's a lot like some of those rather lousy churches, who make a business caring for the poor, while at the same time crying that they are a charity case, in need of every savings possible.

                  Sorry man.  The upside is more claims paid, some regulation, and a lot more coverage.  Cost is a downside, and anybody that thinks this thing will hit the numbers has a rude awakening about 7 years from now.

                  I'll be there, and I've archived my costs, claims, and the dynamics of this time to compare.  

                  We shall see.  I want to be wrong, hope I am wrong, and will gladly admit to being wrong, but I don't think I am.  Since when has a big corporation actually stepped up to the plate and done the right thing cost wise?

                  It doesn't happen.  Why?

                  Because they report to Wall Street, who puts seriously stiff expectations on them, and punishes them for failure to extract every dollar possible by devaluing their stock.  I do think the actual non-profits will show a cost advantage, but I seriously doubt it will exceed 20 percent.

                  In the overall scheme of things, health care is the fastest growing cost center for most small to mid sized business.  If we see a 20 percent reduction, on the non-profits, and we see it without significant dilution, by the time this kicks in, that will be a 20 percent roll back on what is likely to be a 50 percent gain, and completely unacceptable at that time.

                  ...or, if the subsidies really do work well, Uncle Sam will be bleeding dollars huge, in trouble, putting other things at risk.

                  I know people want to run around and say, "WE BEAT THE INSURERS!", but that just didn't happen.  We got our asses kicked on this one, with the only saving grace being more people covered for more things more of the time, but at a very significant cost.

                  That's how it is.  If I'm wrong on it, we will see in 5-7 years.


                  by potatohead on Fri Mar 19, 2010 at 10:16:06 PM PDT

                  [ Parent ]

                •  Those countries you mentioned (0+ / 0-)

                  also don't have the kind of poverty that we do.

                  It is even harder for the average ape to believe that he has descended from man. --H.L. Mencken

                  by denise b on Sat Mar 20, 2010 at 12:21:45 AM PDT

                  [ Parent ]

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