<p>One of the problems with health insurance as a whole is that few people really understand how it works. For example, I have heard people griping who get individual plans on how much it costs them and then they see what a group plan from an employer costs, get all upset that it is cheaper. What they are missing is that the reason employer plans are cheaper isn’t the government subsidizes them or collusion, it is that when you are in a group plan the risk is spread over a large pool of people, so for example, the relatively young and healthy participants mean that their premiums offset costs of those who use more. It is why Obama care forces people to get insurance, because the larger the pool, the less risk, and the less the premiums will be for everyone. It is why in theory a national health plan would be cheaper to run, a pool of that size would have a lot less risk (I am talking national insurance, not a true national health plan here). Every group plan works on that model, and yes, those who are healthier subsidize those who are in poorer health, but guess what, those in poorer health once subsidized those that weren’t. In theory, the insurance company could simply make their entire company one pool and call it a group plan, so whether you come in individually or through an employer, you would share the savings, but they obviously aren’t going to do that, by nailing individual policy holders they jack up their profits (and if one more person tries singing the blues about health insurers, please, the head of UMR/United Health care makes close to 100 million dollars a year in compensation)</p>
<p>One of the things that Obama care is supposed to help is the worse subsidy of all, what is known as cost shifting, and it is the 500 pound gorilla in the room. Our hodgepodge of insurance systems,the hybrid of government programs, private insurance and charity care, has gaps in it large enough to drive a fleet of Titanics through it, and it also has some ‘cost savings’ that are not. I have heard touted, for example, how medicare is so efficient and its cost of services is relatively cheap, but the reality of it is that medicare cut back how much they pay for stuff, and because of regulations and the sheer size of medicare and the fear of being seen as callous of not treating older people, doctor’s and hospitals have to take it. When medicare underpays compared to what other plans pay, the doctors and hospital make up the difference by cost shifting, they jack up the fees for services. I went to the emergency room with a gash in my hand from a utility knife, and the total charge to put 10 stitches in it and bandage it was over 1 thousand dollars, when the total treatment time was about 15 minutes. </p>
<p>Then, too, when people come into the hospital without insurance, it is the same thing (despite what Rick Santorum claimed on the campaign trail last time, going to the ER when you don’t have insurance is neither full coverage, nor is it cost efficiency). My local hospital sent out a mailing recently, and they said in a typical year they had about 25 million dollars in treating the uninsured, of which about 3 million dollars was covered by government pools for the uninsured, and that 22 million comes from somewhere. </p>
<p>It is like everything else, a lot of claims of “I paid my own way”, “I pay and get nothing back”, are often more the result of myopia and ignorance than reality. For example, a lot of the places that claim to be anti government, don’t want government ‘running our lives’ and so forth, are also places that often get a lot of services from the government. States that are proudly anti tax receive a lot of money from the feds to pay for education (on whole, it averages 9% of all spending from the feds; but some states get close to 25% of their ed funding from the feds). A whole array of block grant programs, subsidies, transfers and the like benefit states, but yet anti government fever is often strong in those places. The reality is that almost everyone does get benefits from the government, whether they realize it or not. Banks love to whine about government regulation, yet if it wasn’t for those regulations, and specifically FDIC, no one would put money in a bank. Government corporations like the TVA have allowed for industry to bloom in certain quarters, and federal power plants (mostly hydro), have subsizided businesses and homeowners in places for many, many years (hint: federal power production is charged at the cost of producing it, typically 10c/KWH; utility companies charge twice that in most places)…</p>
<p>As far as ‘largesse’ goes, all I can say is people who feel that what they pay in taxes or premiums is largesse, are ignoring that it is likely that in their lives, they have been the recipient of the same ‘largesse’ they give others. As David McCollough the historian said, show me a ‘self made man’ and I’ll show you at least 10 people who have helped that person, subsidized them or otherwise help make them.</p>
<p>It is the same with health care, there is a lot of obfuscation, a lot of claims that aren’t true about it, because it is such a hidden and confusing maze.Among other things, one of the reasons rates have gone up isn’t lawsuits, it isn’t pain and suffering, it isn’t CYA, it is that health insurance companies have changed how they make money. Up until about 20 years ago, health insurers like most insurance companies pretty much broke even on premiums, the way they made money was they invested the premiums they got and made money of those investments (don’t believe me? At one point, the large insurance companies had huge financial units, long before they merged with investment firms; Travellers, Aetna, et al, were some of the largest buy side or institutional investors out there). When the markets became shaky, they changed their model, and basically started raising rates even high than before, to make money off the premiums. At one point, companies figured on a 5% ‘float’ about costs in terms of premiums, today last thing I read it was 20-25%. It wasn’t lawsuits, it wasn’t the cost of any one thing, it was in grinding out maximum profits out of premiums, which are a lot more controllable than a fluctuating stock market. On top of that, it also pleases stock analysts, which is huge to the CEO’s and executives of those firms, not to mention well heeled investors, to make money off the premiums. Health insurance executives were not generally in the higher ranks of CEO pay in the past,they made good money, but not crazy money. Thanks to stock grants being a large part of compensation, health care insurance CEO’s do very, very well, like I said, the head of UMR typically makes in the range of upper 8-9 figures, for example.</p>
<p>One other little side note, never believe when they talk about the tax burden on businesses. There is a slight of hand here, one that is thrown around and is a lie. It is true that the US has some of the highest nominal business tax rates in the world, but what that leaves out is unlike other countries, the plethora of deductions and incentives means that in terms of real rates (what the firms actually pay), the US is not even mid tier.</p>