America's Health Insurers to the Rescue . . . of themselves.
AHIP has a new website ahipbelieves.com that lets them jump on the "Health Care Reform" bandwagon. (Warning. You may want to shower after visiting this site.)
Their plan has 5 "key elements:"
Expanding the State Children's Health Insurance Program (SCHIP) to make eligible all uninsured children from families with incomes under 200 percent of the Federal Poverty Level (FPL).
Improving and expanding Medicaid to make eligible all uninsured adults, including single adults, with incomes under 100 percent of the Federal Poverty Line.
Establishing a Universal Health Account (UHA) to allow all individuals to purchase any type of health care coverage and pay for qualified medical expenses with pre-tax dollars, with federal matching grants for contributions made by working families to the UHA.
Establishing a health tax credit of up to $500 for low-income families who secure health insurance for their children.
Establishing a new $50-billion Federal Performance Grant to assist states in expanding access to coverage.
Now let's pick these apart in detail.
First, for those of you who haven't read other things I've written on health care, I do work for an insurance company, but not one that writes much medical coverage. I think that most of the people in the health insurance industry are good people and that most of the ills are caused by the system, but I do believe that the system should be radically changed. My first choice is single payer, but I'd be willing to settle for other reforms that guarantee universal access and tighter and more intelligent government regulation.
The first proposal from AHIP is something that would help incrementally:
Expanding the State Children's Health Insurance Program (SCHIP) to make eligible all uninsured children from families with incomes under 200 percent of the Federal Poverty Level (FPL).
More children would be covered, which is a good thing, but this doesn't address any of the underlying issues with the system. It would put more of your federal tax dollars to work subsidizing an inefficient industry. Medicare has shown itself to be more efficient than private insurance for the elderly. Why not try it for children if we want to cover them all?
There are those who question Medicare's efficiency advantage, claiming that the federal government spends money administering tax collection and other tasks critical to Medicare's success that are not reflected in the Medicare budget. For this reason, and because He's an Actuary, I am partial to a 2006 analysis by Mark E. Litow, FSA posted on the Council for Affordable Health Insurance website.
This study compares the administrative costs of Medicare to those for the private insurance industry on average. Medicare costs include those reported by Medicare, plus an allocation of some overhead costs that are included in other parts of the Federal Budget, but are estimated per this study to belong to Medicare. Private market costs recognize the aggregate average cost as estimated across all three private markets (individual, small group and large group). All overhead costs are included as private companies must allocate costs by function. Private market costs for commissions, premium taxes, and profit are shown separately as government does not have such costs.
The bottom line for 2003:
Medicare spent approximately 5.2% of its costs on administration, while the private industry spent 8.9%. When you add in profits for the insurers and commissions for the salesmen, private plans increase to 16.7%
This may overstate things slightly. Medicare covers the elderly, who have high expenses per person, which can lower the cost per person. Litow estimates that Medicare administrative costs per person might go up 1-3% if they covered the same population.
So, Medicare administers claims more efficiently by approx 9%.
This also does not include any administrative efficiencies that providers would realize by having to deal with one payer instead of many. Regulations could be proposed to create uniformity among payers to ease this burden on doctors without moving to single payer, but of course AHIP does not propose any.
Proposal #2:
Improving and expanding Medicaid to make eligible all uninsured adults, including single adults, with incomes under 100 percent of the Federal Poverty Line.
This is a polite way for the industry to cherry-pick. There is a orrelation between socio-economic-status and health, so that people with low incomes tend to have more health needs. The industry is saying "please pick up the tab." What they leave for the fine print is that some states already offer medicaid to families up to 275% of the poverty line, and they would give states "flexibility" on the length of time to meet this standard, while recommending that states take steps to make sure that the increased medicaid coverage does not "crowd out" private insurance.
Proposal #3:
Establishing a Universal Health Account (UHA) to allow all individuals to purchase any type of health care coverage and pay for qualified medical expenses with pre-tax dollars, with federal matching grants for contributions made by working families to the UHA.
UHA's are an expansion of current Healthcare Savings Accounts (HSAs). HSAs allow people to accumulate money in an IRA-like savings account. This money can be used tax-free to pay for medical expenses. Currently, HSA's can only be used in conjunction with "High-Deductible" insurance plans, and there is no direct government contribution although employers may contribute. UHA's would be available for everyone and the government would match 50% of individuals contributions up to $1,000 for those up to 300% of the poverty line.
What's wrong with this? Well, according to a pro-HSA site, only 60% of workers eligible for HSA's actually set up an account at a bank. Why don't more people? My guess is that they don't have savings to put away; people are too busy meeting today's expenses to sock away significant amounts of money for future health costs. Would the 50% match help? Probably for some people, but not for all; only 77% of workers who are eligible for 401k's participate. (401k.org) Who wouldn't participate? The poorest people who need the most help. HSA's and their relatives are not progressive.
The proponents of HSA's say that they are an ideal way to introduce market cost controls into medicine because they give consumers a big stake in keeping their own costs low. Unfortunately, this doesn't work, according to this Health System Change Issue Brief:
The potential of higher cost sharing as a cost-control strategy is also limited because a relatively small proportion of patients accounts for a large portion of medical spending. Studies indicate that about 10 percent of patients account for 70 percent of spending in a given year.1 As a result, a large portion of spending is beyond the reach of patient financial incentives, even in a high-deductible plan. Spending that exceeds the deductible is subject to relatively weak financial incentives, and spending that exceeds a plan’s annual out-of-pocket maximum is not subject to any financial incentives at all. As a result, high-deductible plans are unlikely to have much impact on the utilization of the sickest patients who account for a large part of health spending.
The issue brief goes on to describe changes that could make HSA's more effective, but AHIP doesn't touch any of that.
Finally, HSA's are perfectly compatible with single payer health insurance. They are a side issue that is not progressive, will not help cover the uninsured, and do not control costs well.
AHIP's fourth proposal:
Establishing a health tax credit of up to $500 for low-income families who secure health insurance for their children.
This is modestly progressive tax relief for families with children who make less than 300% of the poverty limit, but it will not significantly increase coverage of the uninsured.
Fifth and last:
Establishing a new $50-billion Federal Performance Grant to assist states in expanding access to coverage
This sounds like a reasonable proposal. Give some money to the states and let them come up with good ways to cover the uninsured. Aside from the fact that we already know how to cover the uninsured, there has to be a catch somewhere. Ah yes. There it is:
The proposed plan must undergo rigorous budget review and demonstrate that individuals have exhausted private coverage before they
are eligible for public programs.
As Barack would say, "They want to buy every seat at the table."
What does AHIP say about its plan in total:
The new reform plan follows seven months of analysis and deliberation among AHIP board members. "Thanks to the tireless efforts of the senior leadership of our industry, we have established a set of practical policy initiatives that can, for the first time, provide millions of uninsured Americans with access to affordable health insurance coverage," said Jay M. Gellert, President and CEO, Health Net, Inc; and Chairman, AHIP Policy Committee
Well. I don't doubt the tireless efforts that led to this marketing spin, but but their plan sure sounds like a way to increase government subsidies of the insurance industry while offering no new ideas.
When I say that I respect and trust most of my colleagues who work in health insurance, I clearly must exclude the AHIP board.