Obamacare, Brave New World revisited

[Gerry Clinchy]

On the lighter side, I received an email that offered a suggestion to elder care.

At age 65, you get a gun and 4 bullets. You shoot 2 Congressman and 2 Senators. For this you get a life sentence in prison. No health insurance premiums. No income tax. 3 squares a day, and the best health care you don't have to be able to afford.

[Gerry Clinchy]

Illegal immigrants are excluded from receiving any government subsidized coverage under HR 3200.

I realize I may not have been clear.

Although these illegals immigrants will not be receiving benefits under HR3200, some have estimated that the cost for medical care for these millions of people runs into billions each year. If I count the zeros correctly, if each of them cost $10,000 in health care each year, it would be $11 billion. It would be safe to say it probably runs somewhere between $1,000 to $10,000 (average). I've seen quoted that each anchor baby delivered costs $10,000. That could be about right.

So, it would appear that any cost controls for health care must also encompass the problem of illegal immigrants.

[Bob Gutermuth]

Why should illegals get anything from the US Taxpayer except a one way trip back where they came from?

[Gerry Clinchy]

Agreed, Bob. And doing something about those free services for people who are not citizens, is a significant cost control measure.

Medi-Gap coverage must be a money-maker for insurance carriers. I've received no less than 3 solicitations in the past week. I haven't done the research yet, but I'm told that Medi-Gap coverage will be as much as I pay for just regular health insurance right now.

[M&K's Retrievers]

My insurance premiums have gone through the roof, I don't know about yours! There has been triple-digit increases in health premiums from private insurers.

I haven't seen any insurance CEOs nailed to crosses...rather they are doing quite nicely, with increased bonuses and compensations.

There has to be a happy medium.

I've been marketing group and individual health insurance for 35 years. When I first started in the business, there were hundreds of companies competing for your business. Now after years of increasing state and federal regulations and manadated coverage that number of companies has reduced to a handful. If health insurance was such a cash cow wouldn't there would be more players not less.

Out patient drugs account for 30% of medical expenses. Wonder why there are drug stores on every corner. I don't believe it's to sell film, magazines and asprin.

Another number is that 80% of an individuals medical expenses are incured within 12 days of death. What is Obama really telling you....

[Gerry Clinchy]

M&K, it would be interesting to see if there are any other statistics you could find that would help us all better evaluate where costs are heaviest, and what ways cost controls could be effective. Obviously, if 80% of med expenses occur in the last 12 days of life, then there is a gorilla sitting in the middle of the room when it comes to cost control.

If they could accurately computerize drug comparisons (as was discussed somewhere earlier) ... which generic drugs could harmlessly be substituted for non-generics, that could make a big difference with Walmart and Walgreens (and other pharmacies) offering 90 days of generics for $10, and some free antibiotics as well.

Cost controls have to be at the core of having any kind of universal health insurance without breaking the bank.

I think there is a lesson in the fact that smaller insurors have not been able to survive government regulations. One cannot be sure which regulations may have had the most impact, but that deserves further investigation. This kind of legislation is just too important for the long term to "rush" into it.

What do the health insurors say they would charge for the universal plan that O proposes? That might give us some idea of what the government "alternative" might cost, at least at the outset.

I get a terrible feeling that they have not done the arithmetic on what the true costs will be. It is well and good to formulate a plan around what one believes is needed, but then you should fully investigate the honest cost of such a plan. Thus far, one of O's failings has been, I believe, that statements he made campaigning about what he would change, seem to indicate that he made these statements without recognizing the full ramifications of the changes he proposed. Either the homework wasn't done thoroughly, or the results of the research were not acknowledged.

[dnf777]

If health insurance was such a cash cow wouldn't there would be more players not less.

Another number is that 80% of an individuals medical expenses are incured within 12 days of death. What is Obama really telling you....

Your first questions can be looked at different ways. Let me ask you this to answer your question. The banking industry has merged from hundreds if not thousands of independent banks into just a handful of large conglomerates "too big to fail", right? Are they not raping profits from us? What about insurance industry? What about defense contractors? Lockheed, Martin, Marietta, Boeing, Northrup, Grumman.....I think they're now merged into Boeing and LMM, two giants representing around a dozen former independent companies.

If all the other companies failed, then I would see your point. But if they have been bullied out of the market, or into a merger aquisition by a monopolizing company, they I wouldn't say that supports the argument that it's not a profitable market.

As for your second point regarding end of life issues, this is a very personal, delicate subject. The fact is, there ARE decisions that need to be made. WHERE to draw the line is the issue. I don't think anyone would argue with denying a 103 year old with renal failure, liver failure, and heart disease a heart transplant??? That's one extreme we can all probably agree upon, without debate. The other is a retired 65 year old who needs hip surgery to relive pain. Again, another example at the other end of the spectrum, with little debate. The problem arises with say an 80 year old, who's spouse, all the doctors, and patients' friends agree has reached the "end of the line" and would wish NOT to be kept alive by artificial means. Then comes the long, lost son out of the woodwork, threatening to sue if dear ol' Dad (who he hasn't seen in 40 years) is taken off life-support. Guess what, that person will now spend more in futile care to be kept alive for another week or two, because of defensive medicine, then they've spent their entire life.

I'm not saying what is right or wrong, but please don't think the big insurance companies will be your guardian angel when YOU start racking up big bills in the sunset years! THAT would take a LOT of kool-aid!

[Gerry Clinchy]

Agree with you, Dave. These are personal decisions.

On organ transplants: Aren't these decisions already being made with organ transplants already ... by doctors' committees on how to choose between two recipients when only one organ is available?

It would also be interesting to study whether the acquisitions that may have occurred in the health insurance industry were a result of "healthy" companies being absorbed, or whether the acquisition was the result of the smaller co. seeking "survival".

In the title insurance business, there are only about 7 (I think) insurors in the whole country. It is an industry rule (don't know exactly what to call it) ... that if a title insuror goes belly-up, the other remaining companies assume the failed company's liabilities. This is to protect the consumers who had their titles insured with the busted company. Thus, this is what has constricted that particular insurance industry. Similar "mergers" have occurred in the life insurance industry as well at times in the past.

And what happens in situations like you described (of the one son demanding extended measures for his father) if the patient is indigent ... a nursing home resident whose total assets have been used up?

Certain nursing homes will keep patients when only their SS check is their monthly payment. (Not all nursing homes will accept this plan) The cost of nursing homes is off the chart for those who are paying their bills from personal funds ... let's say $4000/month. Yet the SS patient may be paying only $1000/mo. I suspect that the real cost of care is something between those two extremes.

With the total limitation of $5000 out-of-pocket/year, a chronic disease patient would become to the insuror much like the SS patient is to the nursing home. The premiums even on the government alternative would continue to increase.

I do not trust that the government (the legislators and bureaucracy) would have the self-discipline to properly use the windfall of insuring younger people (or taxing them for non-insurance) to offset the costs of more expensive insureds ... while working on cost controls to minimize the rate of premium increases.

In fact, I think that they are already looking for the tax and/or insurance of younger people to save Medicare from bankruptcy ... which is going to get worse as the babyboomers hit 65.

While we can say that private businesses have provided for their profits and perks for high-end employees, as reflected in their high premiums, we see the same thing in government. Fed employees do not belong to SS; they have their own plan. (State and municipal entities can also choose to provide an SS alternative). Legislators have luxury retirement and health insurance plans. I just don't trust that bureaucrats and legislators will do any better than the private insurors in improving this system.

I agree that the system as it stands is, in many ways, not the best. Yet, I don't see the present legislation as the correct "fix" ... especially when nobody is talking about the cost of the whole thing. They should be able to go to a private insuror, find out what such a plan would cost from them, and then give us some idea of the costs for the government alternative.

I'm afraid that most people simply think that this new plan will be near-free, or so inexpensive as to be negligible. I would be very surprised if coverage for a family of 4 would be less than $500/mo. That is a good deal less than coverage is now, but there are definitely going to be people who are shocked that it is as high as $500/mo.

Back to arithmetic. $500 x 12 = $6000. That is 2.5% for someone making $240,000. That individual would likely pay for the insurance. However, for the fellow making $70,000/year, that $6000 is 8.57% of gross. Will the fellow making $70,000 a year buy the insurance? The "penalty" will have to be higher than we are being told now, if we want to get these people covered. Will the fellow making $70,000 be among those eligible for "subsidy" of the cost? Where is the chart for how subsidies will be applied?

How can we evaluate the proposal without the arithmetic?

Some have mentioned that Medicare has controlled costs ... by simply telling providers that this is what they'll pay, take it or leave it. I don't doubt for one minute that charges for procedures are inflated at the ground level because the providers know that the insuror (Medicare or otherwise) will pay them less than they ask for. That kind of "fix" can only work up to a point. More arithmetic.

[YardleyLabs]

While it is likely that end of life care is more expensive than it should be, I don't think the cost come anywhere close to 80%, Even under Medicare, spending per person in the last year of life is only about 3-4 times more expensive than spending on beneficiaries who are not in the last year of their lives. While many studies indicate that uniform standards and counseling on advance planning directives would significantly reduce costs, the savings would still be a small percentage of health care expenditures.

I suspect that some of the more difficult health care coverage decisions involve items that fall somewhere in the gray area between consumption and health insurance.

For example, when my first child was born (1973), normal childbirth was considered to be a consumption decision, not an illness covered by insurance. The cost of my daughter's birth -- including hospital and doctor -- was about $1,000 and we saved our money to be able to pay the bill. Had my daughter required special care, or had there been complications for my wife, insurance would have covered those bills. Today, child birth is considered to be a covered event.

If a pill were invented that, if taken daily, would completely prevent male pattern baldness, would that be covered as medical care, or would it be denied as pure consumption?

For pharmaceutical companies and manufacturers of medical devices, the golden goose is a chronic, non life threatening ailment for which the right drug or the right device can alleviate symptoms. When such treatments are identified, the first trick is to get the problem to be defined as a disease and then to advertise the "cure" to consumers who will be offered the contact information for physicians willing to prescribe the cure. Now, in fact, the treatment offered is never a cure. Rather, it is a palliative designed to reduce symptoms only if you continue the treatment forever.

A perfect example are sales of treatments for erectile dysfunction that now total around $4 billion, much of which is paid by insurance.

Another area of abuse are drugs that offer minimal benefits in comparison with over the counter or generic drugs but are marketed heavily to physicians and consumers to stimulate demand that is not warranted medically. Lipitor is a perfect example of this. It offers few benefits in comparison with drugs such as Zocor (simvastatin), but had sales of over $12 billion in 2005. Only through aggressive cost control efforts by insurance companies has this begun to change, but sales are still in the billions. 90% of that cost would go away if patients for whom simvastatin is appropriate took that instead.

Finally, there are the drugs that offer little real symptomatic relief but have an exclusive market and a large population in need. An example of this is Flomax. It offers some relief to men with enlarged prostates, but the benefits are relatively marginal. It is covered by almost all drug plans and therefore costs users almost nothing. However, it costs insurance programs more than $100/month per prescription with sales of more than $1 billion. Sales are sustained primarily by intensive marketing to consumers to, in the words of one business school case study, "intensify disease state awareness."

Similarly, NSAIDS such as VIOXX and Celebrex offer few benefits in pain relief relative to drugs such as ibuprophen and aspirin. The primary benefit is reduced gastric distress which is actually only an issue for a small percentage of those taking the generic drugs. However, sales of those NSAIDS were skyrocketing into the billions and were only brought closer to earth by the discovery that those same drugs increased the likelihood of coronary problems. Despite that, Celebrex sales remain in the billions with heavy direct to consumer advertising.

Effective health care cost control requires wading into a number of these issues and that will not be easy. It is clear that direct to consumer advertising is being used to stimulate demand for "treatments" that are best marginally useful, but where is the line between inappropriate marketing and beneficial consumer education? Where is the line between consumption and necessary care? Who should make that decision? It is not a question of whether or not the treatments should be available. The question is whether or not they should be covered by insurance. In fact, one can make a good case for saying that quality foods do more to improve health than many drugs. Why shouldn't my groceries be covered by health insurance?

Right now, the pharmaceutical companies are moving to become the biggest backers of national health insurance. They are sufficiently interested in the market expansion offered by universal coverage that they have agreed to give up some of the freebies they now receive totalling $80 billion over 10 years. How interested are they? The have reportedly committed $250 million for advertising over the next few months to support reform efforts. That does not bode well for cost control.

[Gerry Clinchy]

Jeff, this would be the very crux of the problem.

I believe to show their competency, the legislators and administrators of existing programs, should delve into this cost control before they expect us to believe they will fix that later. What if they don't do any better at fixing that later, than they have so far?

If the cost savings are as significant as you would indicate, then they should tackle that first ... should have addressed it long before now.

Again, if government is going to put its hand in the machinery with all kinds of regulation ... they should have been able to compel the pharma companies to set up the computerization for drug comparisons already.

FWIW, the mfrs of all drugs used in Medicare/Medicaid pay the government back a "rebate" each year, based on the average wholesale price of the drug. Their method of compulsion? Pay the rebate or the drug will not be approved for use in the programs. This includes OTC, as well as scrip drugs. I filled out the forms for a company I worked for that mfg'd an OTC.

Since they haven't done things that they could have done to control a cost like this, I simply don't believe they will be any better at doing it once they have this massive program in place.