Category: Health plans

When socialism is good for capitalism

published date
March 27th, 2007 by

A major barrier to entrepreneurship is the real fear of getting health insurance. How many people stay in stifling jobs just for this reason? It’s a cause of labor market rigidity, which is bad for the economy.
Massachusetts’ heavily regulated insurance market may keep premiums high, but guaranteed issue and community rating mean that insurance coverage is available and premiums don’t rise for the sick. People who are thinking of starting their own business often ask me about whether they’ll be able to get and keep health insurance. I tell them to relax –if they’re in Massachusetts.

But as an article in the Los Angeles Times explains, health insurance is becoming harder and harder for the self-employed to get, at least in other parts of the country:

A major source of health insurance for people who work for themselves is disappearing, casting thousands of contractors, freelancers and solo practitioners into the ranks of the uninsured with little hope of obtaining new coverage.

Health plans offered by professional associations were once havens for millions of people who couldn’t get coverage anywhere else. But as medical costs have soared, groups representing professions as varied as law and golf have been forced to stop offering the benefit or been dropped by insurers.

Among uninsured workers, nearly 63% are self-employed or work in small firms, Todd Stottlemyer, president of the National Federation of Independent Business, told Congress recently.

There’s a strong case to be made that  universal coverage would encourage business formation and increase economic growth.

What market is he talking about?

published date
March 23rd, 2007 by

The House Ways and Means Health Subcommittee has been holding hearings on whether to reduce payments to Medicare Advantage plans. These so-called managed care plans cost on average 12% more than fee for service Medicare! Cutting them would be a good idea. The Congressional Budget Office says just reducing expenditures to the level of regular Medicare would save $65 billion over a five year period.

Subcommittee Chair Pete Stark and Senate Finance Committe Chair Max Baucus had the bright idea to use the money to pay for an extension of SCHIP, (the State Children’s Health Insurance Program).  But HHS Secretary Mike Leavitt thinks that’s a bad idea:

Cutting Medicare Advantage payments would lead to a…

government-run, one-size-fits-all plan. There are those who want the government to do the market’s job. The President and I are for competition. If the world has learned anything from the 20th century, it is that the marketplace beats government at controlling costs and delivering value

What a bunch of baloney. I think markets and competition are great, too. But the reality is that the government is paying the premiums here. What kind of a market is that?

Meanwhile, ever-expanding Medicare benefits go to rich seniors while kids suffer.

The right idea on generic co-pays

published date
March 22nd, 2007 by

With Wal-Mart and others charging low, low prices for generics –below that of typical co-pays, some health plans are realizing that the right out-of-pocket price for generics might be $0. Independence Blue Cross in Pennsylvania has extended its “no-pay co-pay” initiative for the rest of the year and is beginning to incorporate the concept into benefit designs. There’s nothing like free to get people to speak to their physicians about generics and counter advertising of brand name drugs. With so much competition in the generics market health plans don’t need to pay much for generics anyway, if they buy wisely.

It’s not a brand new idea, but maybe in the coming months and years we’ll see greater use of negative co-pays: paying patients to take generic drugs for chronic conditions where there’s a return on investment for the health plan in terms of lower costs for hospitalization.

Upgrade or downgrade?

published date
March 20th, 2007 by

As Massachusetts works through the details of its universal health plan requirements, there is some danger that we’re going backwards in the area of prescription drug coverage. Consumer advocates have argued successfully that the health insurance plans endorsed by the Connector should include prescription drug coverage. I’m sympathetic with that notion.

On the other hand, it now appears that tens of thousands of already insured residents are going to be forced to “upgrade” their policies to include prescription coverage. That’s unfortunate. If everyone had such insurance, no one in this state would bother going to Costco or Sam’s Club for low-priced generics –and overall spending on drugs would be higher.

When I started my company, we considered buying insurance without prescription benefits. The price difference between plans with and without pharmacy coverage was substantial, and we weren’t taking any prescription drugs at the time. I figured we could save the difference and if we ended up needing expensive drugs we could just suck it up for a while until we could change policies and ride out the waiting period for drug coverage. The only reason we didn’t do it was the tax implications. Health insurance premiums were deductible, but out-of-pocket spending on drugs was not.

There’s a danger in trying to protect consumers by dictating what coverage is adequate. I faced a similar situation in looking into long-term care insurance for a relative. This relative didn’t mind paying up to $500,000 or even $1 million in nursing home costs, but wanted to protect her estate above that. But due to the wisdom of the state legislature, it was impossible to buy coverage where the benefits didn’t kick in immediately. Of course the government was trying to protect people from getting tricked into buying policies they didn’t understand, but the result for my relative was that the available coverage wasn’t worth it.

Let’s be careful in micro-managing health insurance benefit design.

If all politics really is local, health care reform has a shot

published date
March 15th, 2007 by

Our local newspaper, the Brookline Tab has been filled lately with news of the town’s impending budget deficit and the consequences for town services. Today’s lead story is Fire chief flames station shutdown; warns response time could triple. Basically, the town may shut down one of its fire stations. Recent articles have discussed the need to cut the schools’ budgets. Not good.

There are variety of reasons that this town and many, many others (not to mention cities, states, and the Federal government) have budget problems, but health care costs for current employees and retirees is a big part of it. In my view a lot could be accomplished for the town’s finances by following private industry and being less generous with coverage. Meanwhile, a letter to the editor uses the budget problem to argue for single payer:

The gloom-and-doom article in the… TAB.. about Brookline’s $3.2 million budget shortfall… neglected to mention the easiest way to save money for the town and the commonwealth. We need single-payer health-care reform.

She goes on to lay out some arguments for single payer that I’m not sure follow directly from the budget issue, but it’s intriguing nonetheless that she’s made the linkage between the town budget and health care costs.
Most people in this town have health insurance and –despite the high and rising costs– aren’t too worried about losing it. But they will be hopping mad about fire station closures, school de-funding and other negative consequences. When it comes to making tradeoffs, I bet a lot of the towns’ citizens would favor doing something about health care costs rather than losing vital services or paying higher taxes. Count me among them.