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#370291 - 12/26/09 01:27 PM Re: What to do about healthcare? Can it be fixed? [Re: Timo]
Sue22 Offline

Registered: 01/13/08
Posts: 21346
Loc: Upstate NY
hi tim,

this may help explain it a little:

The unraveling of employer-based insurance

In 2003 only 16 percent of health care spending consisted of out-of-pocket expenditures by consumers. The rest was paid for by insurance, public or private. As we'll see, this heavy reliance on insurance disturbs some economists, who believe that doctors and patients fail to make rational decisions about spending because third parties bear the costs of medical treatment. But it's no use wishing that health care were sold like ordinary consumer goods, with individuals paying out of pocket for what they need. By its very nature, most health spending must be covered by insurance.

The reason is simple: in any given year, most people have small medical bills, while a few people have very large bills. In 2003, health spending roughly followed the "80–20 rule": 20 percent of the population accounted for 80 percent of expenses. Half the population had virtually no medical expenses; a mere 1 percent of the population accounted for 22 percent of expenses.

Here's how Henry Aaron and his coauthors summarize the implication of these numbers in their book Can We Say No?: "Most health costs are incurred by a small proportion of the population whose expenses greatly exceed plausible limits on out-of-pocket spending." In other words, if people had to pay for medical care the way they pay for groceries, they would have to forego most of what modern medicine has to offer, because they would quickly run out of funds in the face of medical emergencies.

So the only way modern medical care can be made available to anyone other than the very rich is through health insurance. Yet it's very difficult for the private sector to provide such insurance, because health insurance suffers from a particularly acute case of a well-known economic problem known as adverse selection. Here's how it works: imagine an insurer who offered policies to anyone, with the annual premium set to cover the average person's health care expenses, plus the administrative costs of running the insurance company. Who would sign up? The answer, unfortunately, is that the insurer's customers wouldn't be a representative sample of the population. Healthy people, with little reason to expect high medical bills, would probably shun policies priced to reflect the average person's health costs. On the other hand, unhealthy people would find the policies very attractive.

ou can see where this is going. The insurance company would quickly find that because its clientele was tilted toward those with high medical costs, its actual costs per customer were much higher than those of the average member of the population. So it would have to raise premiums to cover those higher costs. However, this would disproportionately drive off its healthier customers, leaving it with an even less healthy customer base, requiring a further rise in premiums, and so on.

Insurance companies deal with these problems, to some extent, by carefully screening applicants to identify those with a high risk of needing expensive treatment, and either rejecting such applicants or charging them higher premiums. But such screening is itself expensive. Furthermore, it tends to screen out exactly those who most need insurance.

Most advanced countries have dealt with the defects of private health insurance in a straightforward way, by making health insurance a government service. Through Medicare, the United States has in effect done the same thing for its seniors. We also have Medicaid, a means-tested program that provides health insurance to many of the poor and near poor. But nonelderly, nonpoor Americans are on their own. In practice, only a tiny fraction of nonelderly Americans (5.3 percent in 2003) buy private insurance for themselves. The rest of those not covered by Medicare or Medicaid get insurance, if at all, through their employers.

Employer-based insurance is a peculiarly American institution. As Julius Richmond and Rashi Fein tell us in The Health Care Mess, the dominant role of such insurance is the result of historical accident rather than deliberate policy. World War II caused a labor shortage, but employers were subject to controls that prevented them from attracting workers by offering higher wages. Health benefits, however, weren't controlled, and so became a way for employers to compete for workers. Once employers began offering medical benefits, they also realized that it was a form of compensation workers valued highly because it protected them from risk. Moreover, the tax law favored employer-based insurance, because employers' contributions weren't considered part of workers' taxable income. Today, the value of the tax subsidy for employer-based insurance is estimated at around $150 billion a year.

Employer-based insurance has historically offered a partial solution to the problem of adverse selection. In principle, adverse selection can still occur even if health insurance comes with a job rather than as a stand-alone policy. This would occur if workers with health problems flocked to companies that offered health insurance, while healthy workers took jobs at companies that didn't offer insurance and offered higher wages instead. But until recently health insurance was a sufficiently small consideration in job choice that large corporations offering good health benefits, like General Motors, could safely assume that the health status of their employees was representative of the population at large and that adverse selection wasn't inflating the cost of health insurance.

In 2004, according to census estimates, 63.1 percent of Americans under sixty-five received health insurance through their employers or family members' employers. Given the inherent difficulties of providing health insurance through the private sector, that's an impressive number. But it left more than a third of nonelderly Americans out of the system. Moreover, the number of outsiders is growing: the share of nonelderly Americans with employment-based health insurance was 67.7 percent as recently as 2000. And this trend seems certain to continue, even accelerate, because the whole system of employer-based health care is under severe strain.

We can identify several reasons for that strain, but mainly it comes down to the issue of costs. Providing health insurance looked like a good way for employers to reward their employees when it was a small part of the pay package. Today, however, the annual cost of coverage for a family of four is estimated by the Kaiser Family Foundation at more than $10,000. One way to look at it is to say that that's roughly what a worker earning minimum wage and working full time earns in a year. It's more than half the annual earnings of the average Wal-Mart employee.

Health care costs at current levels override the incentives that have historically supported employer-based health insurance. Now that health costs loom so large, companies that provide generous benefits are in effect paying some of their workers much more than the going wage—or, more to the point, more than competitors pay similar workers. Inevitably, this creates pressure to reduce or eliminate health benefits. And companies that can't cut benefits enough to stay competitive—such as GM—find their very existence at risk.

Rising health costs have also ended the ability of employer-based insurance plans to avoid the problem of adverse selection. Anecdotal evidence suggests that workers who know they have health problems actively seek out jobs with companies that still offer generous benefits. On the other side, employers are starting to make hiring decisions based on likely health costs. For example, an internal Wal-Mart memo, reported by The New York Times in October, suggested adding tasks requiring physical exertion to jobs that don't really require it as a way to screen out individuals with potential health risks.

So rising health care costs are undermining the institution of employer-based coverage. We'd suggest that the drop in the number of insured so far only hints at the scale of the problem: we may well be seeing the whole institution unraveling.

Notice that this unraveling is the byproduct of what should be a good thing: advances in medical technology, which lead doctors to spend more on their patients. This leads to higher insurance costs, which causes employers to stop providing health coverage. The result is that many people are thrown into the world of the uninsured, where even basic care is often hard to get. As we said, we rob Peter of basic care in order to provide Paul with state-of-the-art treatment.

Fortunately, some of the adverse consequences of the decline in employer-based coverage have been muted by a crucial government program, Medicaid. But Medicaid is facing its own pressures.



Spondyloarthropathy, HLAB27 negative
Humira (still methylprednisone for flares, just not as often. Aleve if needed, rarely.)
LDN/zanaflex/flector patches over SI/ice
vits C, D. probiotics. hyaluronic acid. CoQ, Mg, Ca, K.
walk, bike
no dairy (casein sensitivity), limited eggs, limited yeast (bread)

#370293 - 12/26/09 01:33 PM Re: What to do about healthcare? Can it be fixed? [Re: Sue22]
WendyR Offline

Registered: 12/23/08
Posts: 5231
Loc: BC, Canada
Good clear article, Sue. Thanks for that.

Rheumatoid Arthritis
Methotrexate, Celebrex, Plaquenil

#370298 - 12/26/09 05:55 PM Re: What to do about healthcare? Can it be fixed? [Re: WendyR]
moosekick Offline

Registered: 02/26/08
Posts: 484
Are people relegated to a predestined way of life that they can never rise above?


350 million people in North America. 400 Wealthiest people (probably in the world). Thats about a 1 in 1 million chance to be there (after you factor out corruption and aristocracy). Also, you say half didn't go to College, then that just shows how our society pushes higher learning to raise quality of life, but life for whom? Probably some of those same 400, considering people are left with a great amount of debt after they get out of school.

Mathematically, Foreclosure and Bankruptcy are necessary parts of our great system and must happen to some people, kinda like musical chairs.

Edited by moosekick (12/26/09 06:00 PM)
Hey, somebody stole my quote! - Me

#370299 - 12/26/09 06:27 PM Re: What to do about healthcare? Can it be fixed? [Re: moosekick]
Timo Offline

Registered: 07/16/01
Posts: 3333
Loc: BC, Canada
North America Population: 528,720,588 (July 2008 est.)

#370300 - 12/26/09 06:56 PM Re: What to do about healthcare? Can it be fixed? [Re: Timo]
moosekick Offline

Registered: 02/26/08
Posts: 484
Sorry, forgot Mexico and others. WHOOPS!

Edited by moosekick (12/26/09 06:58 PM)
Hey, somebody stole my quote! - Me

#370461 - 12/28/09 02:46 PM Re: What to do about healthcare? Can it be fixed? [Re: moosekick]
SueNP Offline

Registered: 12/15/09
Posts: 4
Here is Max Baucus who is the Senator from Montana that heads the committee that wrote much of the Senate Bill on Health Care. He is speaking on the Senate floor [edited]. I have no faith in the government running health care when they can't even keep a known terrorist off an airplane. Link to You Tube video showing [*] Senator. George Washington just turned over in his grave. BTW, I'm an Independent and have equal distain for both major political parties. There is no such thing as a free lunch.

Edited by Administration (12/30/09 06:56 PM)
Edit Reason: Edits [*] have been made to remove any remarks of a defamatory nature.

#370492 - 12/28/09 05:43 PM Re: What to do about healthcare? Can it be fixed? [Re: SueNP]
Dow Offline

Registered: 03/11/08
Posts: 3233
Loc: Valley Cottage, NY
Hi SueNP, and welcome to KickAS!

(you do have a ways to go if you are going to make as many posts as our other Sue yes )

That is pretty shameful, must find out the whole story on Baucus, whether he was [*], or [*], or something else

Not to defend the Democrats or anything, but he is one of the Blue Dog Democrats, almost another party unto themselves.

I do agree with you that there abundant evidence to have disgust for people in both parties, but there are also honorable politicians, too

and I think that because they are human, just like you and me, that is even more reason, not less, for us to be involved as citizens, to be a part of the process that will shape our lives

and we citizens are the ones that elected those representatives, so they are a statement about us as well

BTW, I also thought about becoming an Independent, because it fit my idealogy better. But then I learned that they can't vote in the primaries in New York state, so I didn't change, not wanting to lose that privilege

Edited by Administration (12/30/09 06:58 PM)
Edit Reason: (same as above)

#370556 - 12/29/09 07:42 AM Re: What to do about healthcare? Can it be fixed? [Re: Dow]
SueNP Offline

Registered: 12/15/09
Posts: 4
Dow quote--"BTW, I also thought about becoming an Independent, because it fit my idealogy better. But then I learned that they can't vote in the primaries in New York state, so I didn't change, not wanting to lose that privilege "
Yes, and this is how they keep Independents out of power by NOT LETTING us vote. How Democratic of them.
Yes, he was [..*]

Edited by Administration (12/30/09 06:59 PM)

#370565 - 12/29/09 10:05 AM Re: What to do about healthcare? Can it be fixed? [Re: SueNP]
drizzit Offline

Registered: 02/25/06
Posts: 1483
Loc: Montana
Max Baucus was NOT [*].

I have met him personally several times. He has a fairly severe speech impediment that is well documented and also stutters at times. People who know him are really laughing at this attack by the far right. It is a lame attack by the conservatives on a man with a physical disability.

shame on them

Edited by Administration (12/30/09 06:59 PM)
No families take so little medicine as those of doctors, except those of apothecaries.

Oliver Wendell Holmes

#370575 - 12/29/09 11:47 AM Re: What to do about healthcare? Can it be fixed? [Re: drizzit]
30yrvet Offline

Registered: 09/10/07
Posts: 2074
Loc: Massachusetts
Happy New Year everyone...

It's amazing that this thread is still going on??? It was a good discussion with good points on both sides, but the damage is done. The Dem's have had it their way, and have mortgaged our grandchildren's and great grandchildren's future to the hilt.

The US national debt today is 12 trillion and counting, so why not add another trillion to the debt for the healthcare bill. Oh yeah and let's add another trillion for yet another meaningless economic stimulus package. Who knows where the limit is going to end up. Today, without the healthcare bill, the interest alone on the national debt is at least $480,000,000,000.00 per year. That is conservatively $15,000.00 every second of the day for interest only!!!

I'm 61 years old. I'll never live to see the national debt paid off, but my grandchildren, great grandchildren, and great great grandchildren, etc... will be paying for it in higher taxes for their entire lives. Not that anyone really wants to pay off the national debt. The last president that was even remotely interested in paying off the debt was Andrew Jackson, and he was obsessed with paying it off, and he did it. Of course that was clear back in 1835. It's amazing how smart we are now compared to those old fogies.

Please forgive me for my rant. I mean no disrespect for any of my brothers or sisters on KickAS, or anywhere for that matter. I just wanted to put my 2 cents worth in. And, as it turns out, 2 cents isn't worth a lot these days.

Thanks and I wish you all a great New Year with NO PAIN.
Keep the Faith!

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