Its your private insurance premiums.
Faster than a speeding bullet, more powerful than a locomotive, its the inexorable, unbounded increases in the premiums insurance companies pull from employer coffers and employee pockets.
Some Senators appear to want to wholly entrust private insurance companies with critical roles in healthcare reform and to exclude any public option that might keep private insurers in check.
This diary revisits the screamingly obvious logic for why relying only on private insurers is a terrible idea.
The cost of private insurance is exploding. Not only is this an outrage. Not only is it helping to kill our healthcare system. It is also helping to grind wage growth to a halt. It is helping to kill US industry and the US economy.
Why are insurance rates in the US sky high, and spiraling ever skyward faster than a Titan IV rocket?
Let's start by noting that here are two huge problems to look at here:
Problem #1: Insurance costs are obscenely high
Problem #2: Premiums have been growing at a ridiculous rate
Let's take them in turn.
Why are insurance costs obscenely high?
One big component is the administrative costs and profits built into Insurance in the US. The McKinsey Global Institute did a rigorous and tidy analysis of US costs against those of 13 OECD countries with comparable per capita standards of living. The US spends nearly 3x as much as would be expected on insurance and administration:
There is a lot of red on this chart.
About 1/3 of this excess spending is private insurance company profits, and taxes on those profits.
About 1/3 is private insurance administrative expenses - more than half of which are related to marketing and underwriting. By underwriting, read: various methods to try to cherry-pick populations and price policies. (Note: private insurance starts with an enormous cherry-picking advantage under our system, as they can often avoid covering higher-risk people, and can drop coverage, shucking the most expensive patients in many cases onto Medicaid or Medicare, which are paid by taxpayers.)
The last 1/3 of the over-spend is public sector G&A.
"See!" scream the wingnuts. "Government doesn't work!"
In truth, this part of the overspend has exploded in recent years because of... wait for it... Republican-style healthcare reform: Medicare Part D!
Observes the MGI report:
"The public, rather than the private, sector has driven cost growth in [the SG&A] category. From 2003 to 2006, the administrative cost per Medicare enrollee grew by nearly 30 percent per year, largely reflecting payouts to private administrators of Medicare Advantage plans and the Part D drug benefit. From 2005 to 2006 alone, administration for all Medicare programs increased by nearly $8 billion."
Mmmmm - tasty pork for the private sector...
Medicare Part D was Republican-style healthcare reform in which boatloads of public money got funneled to private sector cronies with much higher administrative costs (see chart above).
Its all part of the elaborate patronage-building scheme that has defined the political economy of the Reagan Revolution. Its the K-Street project as applied to healthcare. And, hey, why wouldn't they try to expand the Haliburton / Blackwater model of government administration into healthcare - That's a big pot of money to go after!
"But... but..." scream the wingnuts, "Medicare Part D costs less than expected!"
The obvious answer: Who gives a crap if it costs less than the Bush administration expected?
They may slip that kind of crap past pea-brained infotainment professionals, but the irrefutable fact is that Medicare Part D costs way, way more than it should.
Republicans got the Part D cost projections wrong (didn't that happen in some other neocon initiative, too?). And that justifies overpaying for the program by about 30% for the rest of eternity? Maybe not.
But we digress.
Why are premiums growing at a ridiculous rate?
First let's revisit just how ridiculous this rate of growth is:
This data, from the Kaiser Family Foundation, never ceases to amaze. Premiums have grown at an average rate of 8.8%. At this rate, healthcare premiums are doubling about every 8 years.
At my small business, that means 6% of employee compensation that could be going into employee pockets today (if premium growth had matched inflation) instead gets sucked away into the black hole of insurance premiums.
Note: This is probably where 2 or 3 raises that you should have gotten over the last decade went, too.
Why are the rates doubling? Here's MGI wonkish take:
"In the case of the health system, it appears that stakeholders are either unwilling or unable to resist cost increases that are passed along to them. Unless the US health system addresses this dynamic, medical inflation cannot help but continue."
Translation:
Because MD groups, hospitals, and the pharma companies very often (though not always) make the insurance companies their bitches.
Let's be clear here: Market incentives work. That is why stakeholders in the healthcare industry fight like hell to keep purchasing power fragmented (thousands of individual employers contracting at staggered intervals with dozens of insurance companies).
Meanwhile, provision of services has become increasingly consolidated (more hospital chains, more group physician practices, etc.) boosting their negotiating power in most markets. (in evaluating acquisitions, private equity leeches look carefully at the degree to which hospitals are unencumbered by competition - and hence more able to dictate terms to payers.)
Now it is true that in some markets insurance companies have quasi-monopolies and hospitals compete, giving the insurers the ability to succeed in marginally squeezing hospitals and doctors. (Often, in such places, provider lobbies have to go to considerable trouble to completely capture state insurance regulatory bodies, and otherwise hamstring cost-conscious insurers through absurd legislation to disable market forces.)
In most places, however, hospitals and medical groups call the shots.
Example exchange between insurer and MD/Hospital group
Large MD group with its own hospitals: "Insureco - listen up. This year we're raising our rates 5%. You're going to take it. And you're going to like it!"
Insureco: "Oh, you loopy doctors!"
After which Insureco happily passes those price increases right along to you and your employer.
Here's an example of a reputedly strong insurer getting slapped around (note: Tufts won).
Its not like anyone is going to stop the insurance companies from just passing increases along. As I described in a diary a few months back, when the small business I partly own tried to conduct a competitive bidding process for healthcare insurance, our broker could barely contain his laughter - and (shock!) all the bids came in with almost exactly the same terms.
So let's recap:
> Profit margins and administrative waste make our private insurance system ridiculously expensive
> Insurance companies are also handicapped with respect to cost-control in most parts of the country, so they take the lead in driving explosive healthcare growth by raising premiums
Which kind of makes insurance companies useless the way our system is structured.
Insurance companies are the leechos di tutti leechi. The other leeching greedy special interests in healthcare all ride around on the back of the insurance leeches, which sink their fangs directly into employers and beneficiaries.
And these are the institutions that Joe Lieberman and other bottom-dwelling lamprays apparently want to entrust with critical roles in implementing key healthcare reforms?
Its like trusting a group of lyme ticks to implement hygienic improvements for your dog. It may look logical to the feeble minded - the ticks are in the right place, they know the terrain. But you can count on the fact that, at the end of the day, the ticks will have a fundamentally different agenda than the dog's health, and limited ability to do the appropriate things, anyway.
By the way, there is one other towering problem with current healthcare reform proposals:
Under current bills, it will take forever to implement most of the proposed reforms, while we wait for "moderate's" preferred leech intermediaries, and some new intermediaries designed to further intermediate for those intermediaries, to get ready.
There is an obvious alternative answer: Organize the expansion of healthcare coverage behind an entity with broad reach, high transparency, an existing infrastructure and - potentially - real teeth in cost negotiations.
Don't just create a token, crippled public option. Build on a proven platform - like Medicare.
This is an answer so blindingly obvious that every Senator knows - in his or her rational mind - that it is the right solution. The best solution to the problem is something like Medicare + 10% that could enroll large numbers of uninsured people quickly, utilizing an existing infrastructure, that could guarantee broadly predictable costs, and challenge therapeutically useless (if lucrative for MDs) spending.
We need to emerge from the current deliberations (perhaps through the reconciliation process) not just with a token "public option" but with an option that is going to work, and work within a reasonable time frame.
The current struggle is no longer just a test of healthcare reform. this is a test of whether the United States of America can still be governed by rational deliberation, or whether the waters of the patronage swamp have already risen so high as to drown those last bastions of collective critical reasoning ability that we have.
I guess the answer will come soon.