I was doing some research for piece this week — “Health Reform for Dime” is the working title — and came across an interesting stat. We all know that the U.S. Senate proposal was initially scored by the Congressional Budget Office at $1.6 trillion dollars and the health insurance coverage would be expanded by just 10 million people (from 47 million uninsured to 37 million uninsured). If you are keeping score at home that is roughly $16,000 per insured person.
Of course, these large numbers are necessary because the proposed expansion will double premiums for most people. This forces Congress to subsidize health insurance all the way to 500% of poverty (over $100,000/year for a family of four) because they do not want people chasing after them as happened back in the late ’80’s over senior’s health insurance.
While those number are startling, what really surprised me was the amount of money currently allocated to high risk pools. A grand total of $75 million dollars. These programs that provide health insurance to the sick who can not qualify for individual health insurance were budgeted at less and 1/2 of one hundredth of a percent of the proposed health care expansion.
Let’s suppose Congress used a more realistic number — say 1% of the proposed budget. High risk pools would be budgeted at $16 billion dollars exceeding the total losses of all high risk pools combined. This valuable safety net would provide guaranteed access whenever anyone needed, and at a price they could afford. It would also eliminate the need to require guaranteed issue and community rating (which when combined more than double health insurance rates), and eliminate the need to provide extensive subsidies to ensure health insurance remains affordable.
It would also eliminate the billions in assessments paid by insurers to fund these pools, which would actually lead to lower health insurance premiums.
All for just 1% of the Senate proposal.
Of course, it won’t lead to a new government program and the resulting favorable press.
Why Can’t Insurers Compete with a Government Plan?
President Obama has claimed a public plan would keep
insurers honest, and that if insurers are efficient, they should have no
problem competing with the public plan. Insurers, on the other hand, have
pointed to a Lewin group study in which one scenario devastated private
choices. They cite a generic platitude that you can’t compete against team that
also referees the game.
Beyond all the platitudes, the reality of competing against
a government plan can be daunting to near impossible for any number of reasons:
In short, creation of a government plan is a straw man argument.
The claim is that it creates competition but in reality it is intended to start
the process of moving closer to a government-run system.
In his 1962 novel, The Man in the High Castle, Philip Dick has an alternate vision of a future in which Nazi Germany and Japan win WW II. In a typical Dickian twist, a best seller in his alternative history is vision of the future in which the allies actually win the war.
The editorial page of the Wall Street Journal rarely indulges in fantasy, but a recent piece (located here) by Holman W. Jenkins Jr. indulges in the opposite of Dick’s uncomfortable look at an alternative future. He posits a time when Americans make their own decisions about health care, its costs, and consequences:
Though the realization was slow in dawning, policy experts would
eventually rediscover what they had known all along (but had
conveniently forgotten in order to lend their voices to “solutions”
that required ever more government spending) — that tax reform, in the
American context, is health-care reform.
And, lo, it proved true, as 100 million intelligent, well-educated
employees of Corporate America were allowed to see for the first time
what “tax free” health insurance was really costing them. They saw how
it distorted their behavior and caused them to allocate far more of
their incomes to the medical-industrial complex than they would have
chosen for themselves.
Eyes newly opened, they demanded cheaper insurance options, covering
fewer services (cancer wigs, family counseling, in-vitro
fertilization), and opted for plans with higher deductibles and co-pays
in return for much lower monthly rates.
Because consumers were now spending their “own” money on health
care, doctors and hospitals found it necessary to publish and even
advertise their prices. A hospital that specialized in heart surgery,
performing thousands of procedures a year, found it had both the
highest quality and lowest cost — and now marketed itself as such.
Ditto specialists in cancer, diabetes and other conditions.
For the first time, Americans spent less and got more. Spending fell
overnight by 13%, which happened to be exactly what economists had
predicted if the price tags were restored to health care and consumers
were allowed to see clearly what they were getting (or not getting) for
their money. As predicted, too, spending thereafter rose only in line
with incomes.
The Congressional Budget Office has completed its initial analysis of the proposed Kennedy bill, and the price tag is huge — 1 trillion dollars.:
A health care reform bill proposed by Sen. Ted Kennedy’s committee
would cost more than $1 trillion over 10 years while still leaving
millions of people uninsured, according to a preliminary estimate
released Monday by the Congressional Budget Office.
The analysis projected that about 37 million people would still go
without insurance once the bill is fully implemented, falling far short
of President Barack Obama’s promise to extend coverage to all Americans
(The full text can be found here)
The problem with this approach is that it misses the point. It focuses on the problem as a single huge issue rather than looking at the several distinct problems which can be solved.Take the issue of the uninsured who have health conditions — those typically covered by high risk pools. These individuals are some of the most vulnerable — they are sick and as a result at financial risk. The feds have approved a paltry $75 million in funding for high risk pools in 2009, far less than 75 hundredths of of one percent of the proposed health reform budget.
Spending just 1/10th of percent — a billion dollars — would transform high risk pools. No longer an unaffordable option for the medically uninsurable. This would provide a significant safety net — one that would be affordable regardless of income.
From CAHI Visiting Fellow Roy Ramthun:
Consumer-driven health (CDH) plans cost 25 to 40 percent less than traditional plans like PPOs and HMOs. Last fall the Kaiser Family Foundation’s annual employer survey found the average family premium for an HMO was $13,100, while a health savings account (HSA) plan cost only $9,100. And this is not “one time” savings — cost increases from year to year for HSA plans are growing at one-third the rate of PPOs and HMOs – generally tracking the general rate of inflation instead of three to five times higher. Evidence from some plans has even show decreases in premiums over a multi-year period – something unheard of in health care for decades.
From our previous Health Care Central, Merrill Matthews on the health industry groups pledging to save money:
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by Merrill Matthews, CAHI Executive Director |
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The Real Trojan Horse But the real Trojan horse isn’t coming from the private sector, but the health care reform advocates. They want a “public plan” modeled on Medicare, presumably with myriad restrictions and price controls. But because it has become clear that a heavy- handed public plan is a deal breaker for many of the groups that now have a seat at the table — or, at least that’s what the groups say — public-plan proponents have begun to soften the public option. Thus, my friend economist Len Nichols has been tossing out a public-plan option he thinks won’t be that onerous. And others, including Senator Chuck Schumer, have made similar suggestions. I can’t speak to the motives of these proponents; but any public plan, even a neutered one, could be the vehicle for creating a government-run plan that won’t just compete with the private sector, but seek to destroy it. Not at first, perhaps, but eventually. Senator Baucus may hold out for a workable public plan, but the Pete Starks and Henry Waxmans would keep coming back with efforts to undermine any reasonably structured public plan. Remember that the State Children’s Health Insurance Program (SCHIP) was only intended to be a safety net program covering poor children with incomes too high for Medicaid. And it was for years, until Democrats pushed through a massive increase this year. The only thing that kept Congress from pushing the expansion earlier was a Republican-controlled Congress for most of those years — and a Bush administration that would veto it. That’s all gone now. President Obama campaigned on the creation of a public plan, and most Democrats want one. Give it to them, in any form, and expect it to grow into a Medicare-like (or probably Medicaid-like) monster that consumes everything in its path — especially the private sector.
Happenings in various states:
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While we may not agree with all of Ezra Klein’s conclusions he has an interesting interpretation of the Coburn-Burr bill:
A superficial read of the Patients’ Choice Act — which I’ve uploaded here — would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues.
Whole article here. Now we await the proposal of the “moderates”.
A number of states have proposed using something called a “loss ratio” to measure the efficiency of health insurance plans. (for more specific information on loss ratios please see our Short Cuts loss ratio paper located here). The loss ratio measures the percentage of premium spent on direct patient care — doctor visits, hospital stays etc. In theory, the higher the loss ratio more is spent on patient care and less on administrative expenses. Proponents believe this is the best way to control insurance company expenses.
Only it isn’t true.
Its similar the problems automakers faced with increasing gas prices. Producing an inventory of Hummers and big trucks provided the automakers with high profits - while they sold. When gas neared $4 a gallon, vehicles which were not only expensive to purchase but also expensive to maintain were not popular. Detroit’s focus on these vehicles may have made them a good deal of money in the short term, but they again found themselves behind the eight ball in an economic downturn.
Similarly, high loss ratios may encourage plans to be more efficient if set appropriately (although competition naturally encourages companies to set higher loss ratios to sell more business). However, the loss ratio is based on a percentage of premium. Inefficient companies have a very simple solution to keep their profits artificially high — focus on more expensive health benefit plans.
Suppose an insurer offers two benefit plans — Plan A and Plan B. Plan A is a high deductible plan and costs $100 a month. Plan B is a very rich benefit plan with almost no cost sharing but costs $1,000 a month. With a 70% loss ratio, the Plan B spends $300/month on administration while the Plan A may spend $40 if its loss ratio is 60%.
Which plan is more efficient?
The truth is using a loss ratio as a measure of efficiency makes little sense. The best way to ensure rates are low is to encourage a competitive market.
In this month’s The Atlantic, Virginia Postrel highlights the very human elements of a nationalized health care system. After discussing her medical treatment for cancer, and her successful treatment with a drug, Herceptin, that cost $60,000 /year, she outlines the medical issues facing “rich countries” who have national health care systems. The article is located here. The following paragraph summarizes the issues in the article nicely.
Not everyone in similarly rich countries is so lucky—something to
remember the next time you hear a call to “tame runaway medical
spending.” Consider New Zealand. There, a government agency called
Pharmac evaluates the efficacy of new drugs, decides which drugs are
cost-effective, and negotiates the prices to be paid by the national
health-care system. These functions are separate in most countries, but
thanks to this integrated approach, Pharmac has indeed tamed the
national drug budget. New Zealand spent $303 per capita on drugs in
2006, compared with $843 in the United States. Unfortunately for
patients, Pharmac gets those impressive results by saying no to new
treatments. New Zealand “is a good tourist destination, but options for
cancer treatment are not so attractive there right now,” Richard
Isaacs, an oncologist in Palmerston North, on New Zealand’s North
Island, told me in October.
A more centralized U.S. health-care system might reap some one-time
administrative savings, but over the long term, cutting costs requires
the kinds of controls that make Americans hate managed care. You have
to deny patients some of the things they want, including cancer drugs
that are promising but expensive. Policy wonks dream of objective
technocrats (perhaps at the “independent institute to guide reviews and
research on comparative effectiveness” proposed by Barack Obama) who
will rationally “scrutinize new treatments for effectiveness,” as The New Republic’s Jonathan Cohn puts it. But neither science nor liberal democracy works quite so neatly.
New Mexico
As the 2009 session gets underway it is more of the same in New Mexico. Embattled Gov. Bill Richardson (D) is back in control of the state after withdrawing from consideration as President Obama’s secretary of commerce. In his recent state of the state address, Richardson suggested that he would propose the same reforms previously rejected by the New Mexico Senate. On his agenda — guaranteed issue, community rating, and an 85 percent loss ratio.
Wisconsin
George Orwell would have loved Wisconsin’s Jason Helgerson as the embodiment of doublespeak (as popularized in Orwell’s novel 1984).
Mr. Helgerson is Wisconsin’s Medicaid Director and the architect of “Badger Choice,” which is supposed to help small businesses find affordable health coverage. But the program actually removes most insurance choices from the existing market.
Mr. Helgerson has proposed abolishing agents from insurance transactions — requiring all small businesses to purchase health insurance through a state-run health insurance exchange — and limiting their choice of benefit plans. All employees of small business would be eligible to sign-up for only the state-approved plan designs. Premiums would be tightly controlled and issued on a community-rated basis.
The program concept is based on assumptions similar to those of the goofy Heritage plan, and assumes government employee plans are somehow “markets.” In fact, it is a return of the Community Health Purchasing Alliances (CHPA) proposed and passed in the 1990s. CHPAs made similar promises, including the claim that pooling would lead to lower prices. With the exception of a Cleveland-area CHPA, all of them failed.
Fortunately, small businesses appear engaged on the issue. They have written and called the governor’s office to keep Badger Choice out of the budget.
Rhode Island
Gov. Carcieri (R) continues to pursue a sweeping initiative to cap overall Medicaid spending as part of what may ultimately result in the most dramatic changes to a state Medicaid plan in the country.
The state’s Medicaid plan amendment, approved by the outgoing Bush administration, would limit Medicaid spending to $12 billion over the next five years. Gary Alexander, director of the state’s Department of Human Services, asserts that Rhode Island’s Medicaid rolls have been dropping over the last year, freeing the state up to pursue a longer-range spending initiative.
Rhode Island spends about $1.7 billion annually, a quarter of its total budget, on Medicaid programs for the poor, disabled and elderly. Medicaid costs have risen by an average of more than 6 percent a year recently, but state revenue growth has been much smaller.
The General Assembly is now reviewing the measure and is expected to approve the plan, on the condition that lawmakers would retain the power to review substantive changes to existing Medicaid programs. Legislative approval would put state lawmakers at odds with the Rhode Island congressional delegation, which condemned the proposal in a recent letter to the governor.
One benefit that could be most directly affected by the spending cap is nursing home care, the fastest growing component of most state Medicaid budgets. Director Alexander has said that more people would be cared for in their own homes or group homes under the plan, but that no current residents of nursing homes would be forced out.
One of the main fiscal benefits of the arrangement is that instead of having to pay any willing provider for surgery or other intensive medical services, the state will be able to collect bids and negotiate rates with participating providers.
Maryland
CAHI and other industry representatives recently met with Commissioner Ralph Tyler and Deputy Commissioner Beth Sammis to discuss the Maryland Insurance Administration’s (MIA) sponsorship of S.B. 79, which seeks to raise minimum medical loss ratios (MLRs) in the state’s individual, small group and Medicare supplemental markets. The commissioner asserted that because the state had no immediate prospects for health insurance competition, he was duty-bound to protect consumers from excessive premium rates.
Following the session, which was marked by frank and occasionally combative exchanges between the MIA and the industry, Ms. Sammis advised that the MIA was no longer willing to support amendments they had previously drafted to reduce proposed MLRs in all three lines by 5 percent.
For more information on state issues please contact JP Wieske, CAHI Director of State Affairs, or Kevin Wrege, CAHI Regional Director.
The House passed SCHIP reauthorization legislation (H.R. 2) on January 14, followed by the Senate which passed it late on January 29, after defeating repeated Republican attempts to narrow the scope of the bill. The SCHIP bill will greatly expand a government health insurance program originally intended for low- income children, further crowding out private insurance for children.
On January 28 the House passed H.R. 1, the American Recovery and Reinvestment Tax Act, otherwise known as the Economic Stimulus bill, by a vote of 244 to 188. The fact that the House passed the bill is not a surprise. What is a surprise is that it is the first time in a long time that the House passed legislation without one Republican vote. The Democrats have a large enough majority negating the need for Republican votes, but it puts a fairly quick end to what was promised to be a new era of bipartisanship. A similar bill (S.1) has been approved by the Senate Finance Committee with the support of one Republican, Olympia Snowe of Maine.
H.R. 1 contains a number of health care related provisions. It includes $20 billion for Health IT (information technology) infrastructure, training and state grants. Physicians may be eligible for thousands of dollars — and hospitals millions of dollars — for demonstrating Health IT use. It also contains some new privacy protections that exceed HIPAA and could have an adverse impact on consumers. One such provision would require the HHS Secretary to issue regulations to restrict information that could be exchanged for health promotion, disease management, and care coordination programs.
The legislation also includes $39 billion for an extension of COBRA coverage for workers who have lost their jobs. A COBRA subsidy of 65 percent of premium is provided for those eligible for unemployment insurance. Individuals who are over 55 years of age and have been with the same employer for at least 10 years could sign up and stay on COBRA until they are Medicare eligible. Individuals within a certain income range who are ineligible for COBRA or whose employer no longer exists, may gain coverage through Medicaid. The unemployed health coverage assistance is limited to employer-based, with the COBRA payment going directly to the COBRA administrator or government program (Medicaid). Unemployed and uninsured individuals who may be HIPAA eligible and enrolled in state high risk pools are not eligible for the subsidy. Individuals are not subsidized - effectively eliminating their choice - if they would like to gain coverage through the individual market.
Finally, the legislation provides $1.1 billion to establish a Federal Coordinating Council for Comparative Effectiveness Research (CER). The purpose of the CER is to determine what practices and procedures are the most beneficial for patients as well as the most cost effective. This is a laudable goal. It remains to be seen however, how this information will be used and applied, or, more importantly, potentially enforced.
Congress’ recent actions hope to expand health care coverage by propping up the employer-based system (COBRA-only subsidies in the economic stimulus package) and growing government health care programs (SCHIP and Medicaid). Soon, Congress is expected to start considering universal health care coverage legislation. If recent action is any indication, is there any doubt how universal coverage will be achieved?
For more information on federal issues please email Angie Hunter, CAHI Director of Federal Affairs.
In 1993, during the height of the Clinton health care reform debate, I was called in to then-Senator Phil Gramm’s (R-TX) office to discuss some alternative solutions to the Clinton plan.
While our employer-based health insurance system (which covers some 160 million Americans) has a number of pluses, one problem is that employees lose their coverage when they change jobs.
Mr. Gramm had an idea for solving the “portability” problem: require employers that provide health insurance to allow a former employee to keep the coverage as long as he paid the premiums.
I pointed out that most large employers self-insure, which means they pay their employees’ claims themselves, rather than using an insurance company to bear the risk. And so an employee leaving a large company wouldn’t necessarily have an insurance company’s policy to keep. I explained it would be very problematic for a company to keep a former employee on the insurance roll and paying the claims for 20 or 30 years after that worker had left the payroll.
Mr. Gramm leaned back in his chair and said, “I’m the big- picture guy; you work out the details.”
Well, we never solved that problem; and Congress’ efforts to solve it now, at least for some people, by amending COBRA provisions will be just as problematic.
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) allows employees — if the company offers coverage and has 20 or more employees — to continue their health insurance in most cases for up to 18 months after they leave their job. However, employees must pay the full cost of the premium, plus a 2 percent administration fee.
It’s a well-intended Band-Aid on our health insurance portability problem, but it’s a useful Band-Aid because it helps people keep their coverage in job transition. It does impose a significant burden on employers, but at least it’s currently a time-limited burden.
When employees leave an employer, most of them get sticker shock when they see what health insurance actually costs. As a result, only 20 percent or fewer — primarily those with expensive medical conditions — exercise their COBRA option when leaving a company. The rest usually take their chances by going uninsured, hoping nothing bad happens before they get another job.
The COBRA provision in the stimulus package provides a subsidy that would pay 65 percent of the premiums for up to 12 months. Whether there would be a significant uptake of the COBRA option is a matter of some disagreement. It does significantly reduce the effective out-of-pocket cost for eligible candidates, but skeptics say the remaining 35 percent of the premium — perhaps $350 to $400 a month for a comprehensive family policy — might still be prohibitively expensive for most families. But the employer also feels the pinch. Although the former employee is paying the premium, the actual cost to the company of covering the typically sicker COBRA population can be perhaps a third to a half more than the premiums.
And that’s why one of the bill’s real problems is its extension of the eligibility period for older workers and widows — in some cases for up to 10 years. A person age 55 who loses his job could go on COBRA coverage and stay on it until qualifying for Medicare at age 65.
Now, if the legislation let those displaced workers use that same tax credit to buy an individual policy, former employees would likely choose a much-less expensive policy available in the individual market, saving employee, employer and the government a fair amount of money. And the legislation should at least give the exiting worker the choice of going into the state’s high risk pool if it has one, with the same credit applying.
Solving the health insurance portability problem isn’t necessarily simple, but trying to expand COBRA for up to 10 years is just plain dumb.
-Merrill Matthews, Executive Director, Council for Affordable Health Insurance
CAHI Releases the 2009 State Legislators’ Guide to Health Insurance Solutions
Today the Council for Affordable Health Insurance (CAHI) and the American Legislative Exchange Council (ALEC) jointly released the “2009 State Legislators’ Guide to Health Insurance Solutions.” This guide will help state legislators keep health insurance affordable while protecting and expanding consumer choices.
“State legislators have the ability to lower the cost of health insurance by enacting policies that create a vibrant and competitive marketplace. Unfortunately, state mandates and regulations such as guaranteed issue have led to a limited and stagnant market for health insurance in many states,” said CAHI State Affairs Director J.P. Wieske.
In the State Legislators’ Guide, all of the major health insurance issues are explained and possible solutions are offered. The guide will allow state policymakers to navigate the complex arena of health insurance regulation and give them a solid starting point for reform.
Click the link to read: 2009 State Legislators Guide to Health Insurance Solutions
About the Council for Affordable Health Insurance
Founded in 1992, CAHI is a nonprofit, nonpartisan research and advocacy association whose mission is to promote access, affordability and choice in American health care. CAHI’s membership includes health insurance companies (active in the individual, small group, HSA and senior markets), small businesses, physicians, actuaries and insurance producers and brokers.
By
Beth Hale
Last updated at 6:30 PM on 26th January 2009
A little girl with a very rare medical condition died after
a hospital threatened her parents with a police protection order if they did
not comply with a new treatment plan, it has been claimed.
Francesca Blair-Robinson, 12, died five months after her
father says he and her mother were forced to withdraw their opposition to new
treatment.
Father Malcolm, who had taken the lead in his daughter’s
care, believes the change in treatment led to her death and that Francesca
would be alive today if his hand wasn’t forced with the threat of police
intervention.
Last night the devoted father-of-six spoke out about the
tragic circumstances of his daughter’s death, calling for a change in the way
vulnerable children are treated.
Speaking of the hospital’s decision to pursue a ‘much more
aggressive’ therapy plan he said: ‘I had warned in writing that such a medical
approach may prove fatal, based upon the fact that I had been Francesca’s
full-time carer for almost the whole of her life and had studied her medical
condition and her response to treatment 24/7 for 11 years.
‘I have conducted significant research into her case since
her death and I am entirely satisfied that the treatment killed her and that
neither I nor her mother nor Francesca herself would have agreed to this
approach but for the intervention of child protection procedures.’
In 2007, CAHI testified against House Bill 1355. We argued that the bill would cause significant price increases, but the legislative committee didn’t believe us. The bill passed. The Aspen Times reported the results in the story below.
ASPEN — As the second part of a law reforming state health insurance takes effect this month, some Aspenites with group health plans could see their premiums rise by as much as 25 percent. The bump is in addition to regular annual increases.
“We have seen rate increases as high as 60-plus percent on some groups,” said Mark Devlin, owner of Aspen-based Devlin Financial Services.
This January, 15 new state laws took effect, including one that requires auto insurance companies to offer $5,000 of medical insurance per vehicle, one that raises the qualifying income level for state-sponsored children’s health insurance, and one that requires all pets released from animal shelters to be spayed or neutered.
But the one that could hit pocketbooks the most involves a change in the rules for issuing health insurance premiums for groups of 50 or fewer employees.
Prior to the passage of House Bill 1355, insurance companies had the option of lowering the premium for a relatively healthy group by up to 25 percent, and raising the premium for a less-healthy group by up to 10 percent, Devlin explained.
But state lawmakers worried that the policy was discriminatory, he said.
So in 2007, they passed House Bill 1355, banning the practice. By January 2008, insurance companies were required to cease the practice of charging less-healthy groups more, and by January 2009, companies had to cease the practice of charging healthier groups less.
But health insurance agents argue that the new law has driven up costs for many consumers.
“That flexibility gave insurance companies the ability to target better rates, and now they don’t have that flexibility anymore. That’s one of the reasons we’re seeing these incredible rate increases,” Devlin said.
We’ve had some questions recently from some bloggers on how CAHI creates the “price” for its mandate chart. Unfortunately, we responded on their blog with a bit of corporate speak, focusing on the wrong issues. Fortunately, the process is simple and clear and we’ll re-explain it here.
CAHI is fortunate to have a number of actuaries who donate their time to us on various projects, and the mandate chart is one of them. We begin by creating a common definition for each of the mandates (listed below).
http://www.cahi.org/cahi_contents/resources/pdf/MandateBenefitMemoJan08.pdf
we then ask our actuarial committee, which consists of actuaries at insurance companies and consulting actuaries to review the information. We ask them, individually, to assess the price of each mandate based on the definition of the mandate and the products their company (or companies) sell in the marketplace. The actuaries are asked to assess the rate they would increase real premiums on real policies based on the definition of the mandate. Since these actuaries have actually priced these mandates for insurers already, they have significant expertise in this matter.Once their individual analysis is complete, we ask all the actuaries to come to a consensus on the cost estimation. These costs are in a range since an exact estimate is impossible. As stated in our chart:
Besides listing the state mandated benefits, we provide a cost assessment of each one. CAHI’s
Actuarial Working Group on State Mandated Benefits analyzed company data and their experience and provided cost-range estimates
— less than 1%, 1-3%, 3-5% and 5-10% — if the mandate were added to a policy that did not include the coverage. However,
mandate legislation differs from bill to bill and from state to state. For example, one state may require insurance to cover a
limited number of chiropractor visits per year, while another state may require chiropractors to be covered equally with medical
doctors. The second will have a greater impact on the cost of a health insurance policy than the first. It would be impossible to
make a detailed assessment of the cost of each state’s mandates without evaluating each piece of legislation (more than 1,900 of
them). Thus, the estimated cost level indicated in the chart is considered typical but may not apply to all variations of that mandate.
Further, the additional cost of a mandate depends on the benefits of the policy to which it is attached. Example: A prescription
drug mandate costs nothing if a policy already covers drugs, but can be very costly if added to a policy that doesn’t cover
drugs.
It is important to note that most mandates are estimated at less than 1% which can mean no increase or even cost decreases in a few cases ( Some have argued mandates like a second surgical opinion will actually lower premiums). On the other hand, some mandates can be more or less costly depending on the policy. For example a mandate to provide first dollar (i.e. without a deductible or co-pay) coverage for routine care will cost very little on most low co-pay policies. The premiums are high enough to absorb the cost, and many of them cover it anyway. A high deductible plan that provides no first dollar coverage, and has low premiums will see a significant impact from the mandate. The same impact could be felt from a prescription drug mandate — again low co-pay plans already cover them, high deductible plans may not. On the flip side, the autism mandate (which may cover daily eductional therapy) may have no impact on high deductible plans but may have a large impact on costs of low-copay plans.
Its interesting that our estimates are actually middle of the road. On many individual mandates, state insurer groups often have higher cost estimates, and mandate advocates lower. We think our methodology, and re-examination every year has helped make us more consistently accurate.
While we appreciate that many state studies show small impact on premiums, it is important to understand that many of our members serve very small groups (2-5) and individual consumers. These plans tend to be much less expensive and often less comprehensive than large employer plans. Many of the studies are never implemented in the real world or focus on state employees — different plans and different population than small employers and individuals. In the real world, mandates can lead to changes in utilization and what providers charge.
The growth of chiropractic care is a great example of this. Once considered a fringe provider group, you can now find a chiropractor in almost every strip mall. Make no mistake, mandating coverage has impacted their business as well as the cost of health insurance.
A lot of reports have been coming out saying the Massachusetts health reform plan is a great model to achieve “near universal coverage.” The most recent is a report by the Commonwealth Fund. However, the program has been getting a tremendous amount of outside help. Angela Hunter, CAHI’s Director of Federal Affairs, has pointed out how much the feds have been forking over:
The amount of money the federal government has expended on this program is staggering. Under the extension of their Medicaid waiver approved September 30,
It is easy to tout a model for health reform – which is what all these reports are doing – when
States are likely going to be facing significant revenue shortfalls in the next few years, and you know what that means: Governors will trek up to Washington with their hands out.
The National Governors Association just sent a letter to congressional leaders asking them to increase Medicaid funding. According to BNA, the letter says that “Congress should consider tax changes and additional Medicaid funding for states to stimulate growth and counter the slowing economy . . . .”
This is part of the same silliness that comes out of Families USA, which says that increased Medicaid spending spurs economic growth by paying for health care services and therefore creating jobs.
The but the government can’t give away that money without taking it from taxpayers first, and then only after it takes its share to pay for government bureaucrats for shuffling the funds.
The point is that it does nothing to spur economic growth when the government takes a dollar away from Peter and hands 80 cents of it to Peter’s neighbor, Paul.
Now there may be good reasons for the federal government to boost Medicaid spending — or better yet, provide low-income families with a voucher so they can buy their own coverage — in an economic downturn to offset declining state budgets.
But it’s foolish to try to defend the handout as a “pro-growth” economic policy.
A few months ago a reporter asked presidential candidate John McCain about his opinion on health insurance covering Viagra and not birth control. This is a very common assertion that has become somewhat common knowledge. However, Factcheck.org points out that like a lot of things that become common knowlege, the facts are a bit more complex.
A Sept. 2 article from the Maine State House Reporter reads: “The state’s subsidized Dirigo Health insurance plan has run up nearly a $20 million deficit since November — a shortage that has just come to light, even though funding for the program has been a topic of heated debate among legislators for more than a year.”
No, wait! Surely that can’t be right. For several years the pro-government-run health care crowd, and their minions in the media, assured us that Maine’s Dirigo Health was a model for the country.
How many articles did I read pondering, if not pontificating, whether other states shouldn’t follow Maine’s lead in covering their uninsured?
Well, we’re about five years into the program and no one seems to be pointing to Maine anymore — more like laughing at Maine. Indeed, all we hear about is budget shortfalls and the need to raise taxes. And, of course, far fewer people actually getting coverage than was predicted.
That’s because Gov. Baldacci (D), like every politician pushing a government-run system, oversold the benefits and undersold the costs. Which leads to higher taxes and/or benefit cuts — and lots of excuses.
Keep that in mind when you read the positive stories coming out of Massachusetts. State officials are already facing significant budget shortfalls. They, and the New York Times, claim it’s because the program is so successful.
Or, as they call in the PR world, spin.