Wither the Public Option

House Democrats are already conceding that the public option will have to die to get the Senate to pass a final version of health care reform.

1-The public option had two purposes, the first was the (supposedly) create more competition for insurance companies, because the 1200 or so already selling health insurance don't have enough.

2-The more covert purpose, was to get enough people enrolled to make it a quasi universal plan. That was Joe Lieberman's objection to it.

So if number 1 is off the table, how does the government get to number 2? That's actually pretty easy. The choke hold of regulation. The Senate version of health care reform puts so many new regulations, from administrative overhead restrictions to documentation and litigation that they hope to drive insurance companies out of business.

Maine has already driven the vast majority of insurers out of the state with their Dirigo plan. Regulation on "for profit" insurers has left the state with it's own insurance (who's cost has gone up about 175% faster than anticipated) and a few not for profits selling policies.

My guess (educated, but without insider info) is that the conference bill that comes to the House and Senate will be designed to drive for profit insurers and the"non-protected" (see Longshoremen) classes out of the insurance business by making it nearly impossible to sell insurance without losing the proverbial shirt.

After a few years of States seeing their medicaid rolls (except Nebraska, the feds will pay for theirs) swell with those who's private insurers stop writing policies, the States will scream for DC to fix a new "national health care crisis" that is of Washington's own making.

Keep in mind, most of the legislation that's supposed to help the consumer doesn't go into effect until the law is on the books for 3 years. The taxes and regulations start immediately. This gives Congress the ability to say that insurers aren't doing their part before they are actually required to do anything, and insurers will most certainly have to look for ways to save money in that three year period.

There is a problem with the waiting period, though. The Democrats have to hope they hold onto enough seats, preferably majorities, in both Houses to make it possible to bring up the public option down the road as the "savior of the masses".

The GOP regaining control of either house would probably kill that idea in it's track, and require (gasp!) meaningful reform to be negotiated between both parties. Who knows, maybe then the President would have to hold true on his promise to televise the negotiations on C-SPAN so everyone could see what's going on.

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Is it Much Ado About Nothing?

The AP has a story out today asking if the uproar over the "Public Option" in the current health care reform bills is much ado about nothing. If you read only the public option portion of the bill, you'd probably have a hard time disagreeing with that assessment.

The reason they give for believing it's a lot of hot air over a little thing is the CBO estimates of the number of people who will opt for the public insurance program. The CBO says only about two percent of the population would take the public option. In the current House bill you can't get into the public option if you are covered by a plan through your job. To be eligible you'd have to work for a small enough company that the rest of the bill doesn't compel it provide coverage, or already be buying insurance on your own.

I think the CBO has done a good job in point out costs associated with all of the health care legislation, but as always, they do it with static numbers. They assume that no individuals or businesses will change their habits based on the new law. That's where the problem lies with their current estimate. I also understand that it would be nearly impossible for the CBO to run dynamic computer models on behavior in the short amount of time Congress gives them to review legislation. I often wonder if that isn't by Congressional design.

History has already shown in Maine, Massachusetts, New York and New Jersey that the guaranteed issuance and group rating methods drive private insurance companies out of the markets after raising costs to the point they can't be profitable. Both the House and Senate bills contain each of these provisions in them, and I doubt that history will suddenly undo itself, and they'll work without raising costs.

The result will be (as it has been already) that as costs go up insurance companies will drop out of the exchange program, and choices will dwindle to a few not-for profit companies and the public option. Don't think so, go online and try and get a health insurance quote in Maine. There are about 5 companies left doing business there.

Another cost driver in the bill, which seems innocuous at first, is the rescission rules. We all get to hear the breathless stories on the news of the woman who had her insurance dropped right before she started treatment for cancer. "Oh those heartless insurance companies!" the anchor will opine. What the news doesn't tell you is that for every one person who is wrongfully dropped about two hundred and fifty are rightfully dropped for fraudulently obtaining insurance.

The House fix for this is to compel insurance companies to pay for care for anyone they want to drop until a mediator has decided if it's a case of fraud where the person should be dropped. That sounds fair enough, if you are the patient. However, if you are the insurance company, you now get legal bills and medical bills for the 99% of people you can legally drop for fraudulently obtaining insurance. How much of that money does anyone think will be recouped from the fraudster? Who do you think will make it up to the insurance company? Congress isn't going to pay them for it, which means the folks who are legit will get higher premiums to pay for both the care, and legal bills of someone else.

I also think this is going to end up one of the bigger legal entanglements of the bill. Guaranteed issuance says you can't be denied coverage due to a pre-existing condition, and community ratings say you can't be charged more because of it, but the proposed law also says if you don't reveal it you have obtained insurance fraudulently. I'm pretty sure this will end up in court about as fast as any other provision in the bill.

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Continuing Contradictions

Could someone please tell the Democrats to get their stories straight! One day House Speaker Nancy Pelosi tells the world that health care reform won't leave the House without a public option. The next day Majority Leader Steny Hoyer says that the bill probably can't leave the House with a public option.

And of course the president is still swaying too and fro on the idea of it being either a necessity, or a single piece of a bigger puzzle.

If the Democrats want to know why American's are confused, and therefore distrustful of their plans, all they have to do is read their own words. Confusion seldom breads concensus and is never the foundation for trust.

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Lack of Competion, or Rules?

A new study claims that lack of competition among insurance companies is one of the reasons for our high health care costs. As an example the article points to Maine, where one company has 71% of the market.

What they don't mention is that MaineCare, a "government option" plan, and Maine's guaranteed issuance laws, along with community ratings laws have driven health care providers from the state. The Wall Street Journal just published a nice article about the failure of MaineCare.

The markets these studies find the least competition in are the markets in places like Maine, New York, and New Jersey, where guaranteed issuance and community ratings have made premiums high, and choice low as insurers leave due to losing too much money.

Since the Urban Institute did the study, and is a proponent of public option, it's not surprising that they chose Maine as an example. What better state than one who's public option (and other rules) has destroyed the private market place to claim "lack of competition" without including the public plan as part of the equation.

If in fact we want competition in the insurance marketplace here's a novel idea. Make a level federal playing field for insurance companies, and get rid of the laws that prevent sales of policies across state lines. Then see what happens. My guess would that Maine would no longer have it's insurance problems.

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Public Option is Back

Is the "public option" back, or did it never go away? Is it negotiable, or something that won't be coming off the table any time soon?

To figure out the answer to those, and other burning health care questions you'll need a Ouija board, some dead chickens to toss blood on and chant over, and possibly two or three dozen glasses of scotch.

As seems to be the norm with the current administration one member goes on the Sunday talk shows and floats an idea. Depending on the reaction, others(or the President) come out and say "Yeah, what (name here) said!", or as is the case with the public option, "our cabinent member either misspoke, was confused, or was misunderstood"

This is what happens when your strategy sessions aren't predicated on doing what you think is the right thing, but instead what will get the numbers to track the right way. Say what you will about George Bush, but he at least spent more of his time trying to explain why something was right, instead of backtracking and covering his ass.

The other problem with sessions like that is you have to decide which tracking poll is the one that matters. In Obama's case dropping the public option hasn't moved the right towards accepting the other reforms, but might help with center. However, it's pissing off his base on the left.

The administration's reaction shows that it's more worried about keeping the base happy, by claiming that the public option is still a big part of the plan, even though that will move the center away from them.

Here's my suggestion for the President. Decide what YOU want. Tell your leaders in Congress what you want, instead of letting them put together the legislation. Then explain exactly what you sent up. You'll look more Presidential, and more like you care about doing the right thing, instead of the thing that will do the best for your poll numbers

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The Next Angry Mob

If you are looking for the next angry mob in the health care debate they are easy to find, head over to BenGoshi's page at DailyKos. With word coming out that Team Obama might be ready to dump the public option, the netroots are moving back to nutroots mode rather quickly.

Folks from Obama's team were all over the Sunday talk shows doing damage control on the President's signature domestic program. Since I've had a lot of damage control training in my life, I could tell by the efforts that they are at the stage of either save the ship soon, or abandon it. Right now I'd still give abandonment a 50/50 chance.

The folks at Kos are livid, taking the public option off the table and having them replaced by the Co-Ops the Senate has suggested makes getting to single payer a longer road. In fact, the Co-Ops might be the death knell for single payer.

Once the public see's that Co-Ops, operating under the rules the administration would like, are lead zeppelins that can't stay aloft they'll wonder how the government would make single payer work and not bankrupt us.

So what is the Co-Op that the left fears so much? It's basically an insurance pool, where groups or individuals can buy insurance, but with their combined buying power. They work great in many other areas of the economy, like agriculture, where farmers combine to buy seed, fuel and other commodities with group buying power. You can even look at Wal-Mart as a co-op, since the combined buying power of their thousands of stores gets the company lower prices than if they negotiated prices for each store.

Co-Ops can work, and the idea of funding them with a few billion to get them off the ground is a good idea. The problem will come if they are hamstrung with the pre-existing rules, instant coverage rules, etc. that Democrats would like to impose on all insurers. Under those rules they won't be able to break even, and keep premiums lower than buying individual policies.

The plus side to them is they do become a large insurance pool, helping to offset some of those loses by giving smaller employers and individuals the option of being in a group. But they can't offset all of the loses if they use the New York and Massachusetts rules.

How can they help the uninsured? Easy, use a refundable tax credit, based on adjusted gross income level, to help people pay their premium to the co-op if they don't get employer based insurance. Or, if employers wish to provide coverage to their employees through the co-op they would get the same tax write off that other employers do for what they pay for insurance.

Watch the blogs in the next few days, and get your laughs watching the left have fits over the idea of co-ops,

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The Guise of Consumer Protection

The AP has a story today about how the health care arguement is focusing too much on government control and reach, not enough on the consumer protections built into legislation in various parts of congress.

The protection that's talked about the most is the one most likely to drive your private insurer to drop health insurance, or jack up everyone's rates. That's the idea that you can't deny insurance based on pre-existing conditions, or charge higher rates based on them.

For those who don't realize it, and by listening to people argue about this for years, many don't, insurance is a risk pool. That means that the company's are trying to take in clients where the risk of paying more than they collect in premiums is low. The more risk factors you have, the higher your premium is, to hedge their bet. At a certain point you aren't worth insuring because the company won't be able to charge enough to not lose money.

The idea in HR 3200 (the big one in the House) and other bills is that the company would only be able to charge premiums based on age, not pre-existing conditions, which is insanity at it's finest. It basically requires companies to either raise all rates to a point where they don't lose their shirts, or quit offering health insurance. My guess is that point wasn't missed by Congress, in fact it's one they probably love especially with a "public option" plan out there.

If you look at insurance from a different angle, it's easier to see my point. Think of insurance companies as investment houses. Both are risk based businesses. Now, suppose your investment broker decided that instead of going with low to medium risk investments, he publicly said that the company was going to start putting large amounts of money into a group of investments that were sure to lose money, with no hope of ever returning your original investment, much less make a profit.

The SEC would investigate them for fraud, the Elliot Spitzers of the world would be filing suits, and the entire board of directors would most likely be fired by the shareholders.

Yet for some reason that same scenario sounds not only good, but somehow "fair" when it comes to health insurance companies. We now want to demand that they operate at a loss for a segment of their clients, when any other business would be investigated for it.

While Nancy Pelosi and others rail about the "obscene profits" of insurance companies, they really aren't that high. Aetna will make about $640 in profit from each of it's 19 million policies this year. That's in the area of one month's premiums for most folks, about an 8% profit.

Compare that to your mortgage. For the first twenty years of a 200,000 loan you'd pay more than that in interest PER MONTH! In fact, if the mortgage industry were to operate like Congress wants the health insurance one to work, our housing crisis would probably be even worse. I'm sorry, Barny Frank liked exactly that scenario, then held hearings when mortgage writers went belly up.

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