The Right Prescription
The Bad Road to Baucus
Everything you’ll wish you had known about healthcare after the Baucus bill passes.
Without any idea what it is doing, Congress is about to pulverize the American medical system, put the health insurance companies out of business, and set the federal budget on a runaway course that may end up wrecking the entire economy.
So if you’d like to know why all this is happening, here’s a brief review:
The “crisis” in health insurance exists because the government is already mismanaging the system. The problem began in 1945 when Congress passed the McCarran-Ferguson Act. Even though insurance had long been sold across state lines, the states were allowed to regulate, with the benign neglect of the federal government, under the fiction that insurance was not “commerce.” This ended with a 1943 Supreme Court decision that ruled insurance was indeed “commerce.” The Court said Congress could delegate its interstate commerce powers to the states, however, and Congress did just that, exempting insurance from federal anti-trust law and giving the states precedence. As a result, there is no national insurance market, only 50 state markets, each with its own licensing and regulatory procedures.
Now there is plenty of reason to regulate insurance. One of the most common scams is for a company to come into a neighborhood, start selling insurance, pay the first claims on a Ponzi basis, and then skip town when the real claims start coming in. It happened again just last month on Long Island. Someone must carefully monitor reserves and make sure companies are capable of backing up their responsibilities.
Given this authority, however, the states have reverted to the old game of favoring big players by setting up barriers to competition. In many states, Blue Cross/Blue Shield holds 80 percent of the market and can set prices pretty much at will. Aggravating the situation is the enthusiasm of state legislatures for writing their own insurance policies through mandates. Health providers of practices such as chiropractic, nutritional therapy and pastoral counseling pressure the legislature to require coverage in all policies, even when consumers don’t want it. By the time the lawmakers are through, insurance usually costs anywhere from 20 to 40 percent more than without mandates.
Thus, the “insurance crisis” would have emerged long ago except that a large portion of the population — more than 60 percent, in fact — has been able to get around the restrictions. Nearly all the major corporations and their unionized employees have done this through the Employee Retirement Income Security Act of 1973 — “ERISA.”
ERISA says that if large employers self-insure, they are exempt from state regulations. This is only possible for corporations with 300 or more employees, since you need a large pool to spread health risks. ERISA plans grew rapidly during the 1970s and 1980s, encouraged by an IRS decision that such benefits should be tax-free. Pumping up benefits became a much more efficient way of compensating employees than raising wages.
As a result, the healthcare system was soon flooded with union members carrying “first-dollar” coverage from their employers and wildly spending other people’s money. This drove up demand. On the other hand, ERISA plans had an easy time in kicking people out if they got really sick. Their responsibility, the law said, was to the plan, not to individuals.
Hillary Clinton got word of all this and declared a “healthcare crisis” but never really diagnosed the problem. She told ERISA horror stories to convince people the insurance companies were acting irresponsibly. But insurance companies were prevented from acting arbitrarily by state laws. ERISA plans could be highhanded because they were exempt from state laws.
The ERISA system, however, created other problems:
1. You couldn’t take your insurance with you if you left your job.
2. Smaller companies couldn’t self-insure because they didn’t have enough employees to spread the risk.
Misinterpreting all this, Clinton nevertheless decided to “solve” the problem by mandating that smaller companies also provide insurance for their employees. When told that many small businesses and start-ups couldn’t afford this, she responded, “I don’t have time to be concerned about every underfunded entrepreneur in America.” That was indeed the problem.
Clinton’s effort failed from public opposition. In the meantime, many smaller companies began buying insurance for their employees anyway, swallowing the costs. This created a secondary market for private insurance, although employers assume much of the cost. According to experts, the market for the 85 percent of people now covered by insurance or health benefits is now evenly split in three parts:
• One-third are in ERISA plans.
Letter to the Editor View all comments (27) | Leave a comment
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Pingback| 10.20.09 @ 6:51AM
Twitter Trackbacks for The American Spectator : The Bad Road to Baucus [spectator.or links to this page. Here’s an excerpt:
Robert Rosencrans| 10.20.09 @ 8:09AM
This health care farce has also turned into a "screw the elderly" extravaganza with higher premiums and cuts in service for Medicare/Medicaid and allowing the insurance companies to charge 4 to 6 times as much to the elderly in premiums. I'm convinced that something happens to people's minds once inside the beltway, separating them from the rest of society.
http://news.yahoo.com/s/mcclat.....hy/3336609
"As you get older, you start consume more health care," explained House Education and Labor Committee Chairman George Miller , D- Calif. "Age rating is a common practice in insurance underwriting," added Sen. Jeff Bingaman , D- N.M. , a member of the Senate Health and Finance Committees
So are gender differentials, he was told. Why are they being eliminated?
"I don't know all the answers," Bingaman said. "You'll have to ask someone else," said Miller.
Senate staffers explained one reason for the difference this way: Age-based premiums can be justified by consumers' experience, while gender-based differentials relying somewhat on potential pregnancy has the look of being blatantly discriminatory.
Experts have determined that age-based premiums can be justified as six to seven times as high as those charged the lowest risks.
owyheewine| 10.20.09 @ 9:21AM
The Baucus bill is over 1500 pages. How could that be realistically looked at as anothing but a government take over?
I like the proposal in the article.
I would also propose a KISS constitutional amendment that would prohibit any law or Federal regulation from exceeding the length of the Constitution, and repeal all of those that do.
Tim| 10.20.09 @ 10:30AM
Anyone that really believes that these characters in charge won't pull the plug on Grandma are using way too much of California's "Medical Pot"
These guys are into population control as well as Media control. They are devotees of what we were warned about in the book 1984.
Former Chairman Mao would be proud of some of these Neo Communists currently working in DC.
Yet these charaters never learn. People want Freedom and while millions have been wiped out through the years fighting for it, at the end of the day, Freedom rules because it is a God given right that won't be contained....
that is something that you can't teach at Harvard or in any other brick building it is something that every human is born with....it's in the DNA.
trying to control freedom is more than wrong, it's futile!
RC| 10.20.09 @ 11:02AM
I like where you are going with your Neo Communist comment. It fits exactly in one phrase what these people are "Neo Coms".
Bruce | 10.20.09 @ 6:54PM
Think "Soylent Green."
Old(er) age is a time when health issues are more important than ever, and here we go getting screwed again. The only way to prevent this kind of crap is to make members of Congress and the President subject to the same plans as the rest of us shmucks who pay the bills - not allow them to contaminate the hallowed ground of our military heros by getting treatment at Walter Reed.
Robert Rosencrans| 10.20.09 @ 10:40AM
Here's Robert Reich with the Democrat "Throw Grandma/Grandpa Under the Bus" plan.
http://newsbusters.org/blogs/p.....oresPaging Congressman Alan Grayson! Here is a quote that validates what you said about those EVIL Republicans: "We're going to have to, if you're very old, we're not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It's too expensive…so we're going to let you die." Aha! So it turns out that Grayson was right when he said "Republicans want you to die quickly." Only one "little" problem here. That quote did not come from a Republican. In fact it came from the very liberal former Labor Secretary Robert Reich who is now an economics adviser for Barack Obama.
Bruce | 10.20.09 @ 7:06PM
Thanks for the link to that story, Robert - but the link as given was incorrect. After a search I found the correct page (assuming it wasn't screwed up by length), which I have shortened via Tiny URL as follows:
http://tinyurl.com/yj2pdpj
Ken (Old Texican)| 10.20.09 @ 11:29AM
I'm sending Rush a new buzz-word phrase as soon as I finish this post To Congress " You Are Fired!"
Rush follows TEAM AMERICA on twitter.
www.myteamusa.org now free admission to membership.
Richard Johnston | 10.20.09 @ 1:07PM
Mr. Tucker, your article states: "She told ERISA horror stories to convince people the insurance companies were acting irresponsibly. But insurance companies were prevented from acting arbitrarily by state laws. ERISA plans could be highhanded because they were exempt from state laws."
I believe this is a bit misleading, although I am certain not intentionally. Insured and self-insured plans alike are immune from any meaningful civil liability for anything from breach of contract up to and including fraud or wrongful death. This unavoidably has a deleterious impact on their behavior and in fact encourages arbitrary and wrongful behavior.
It is of course true that state regulations do apply to insurers, but ERISA nonetheless unduly curtails the ability to take an insurance company OR a self-insured plan to court. It makes it unduly difficult to win a case and it provides wholly insufficient remedies if you are able to win.
See generally http://problemiserisa.blogspot.com
Thanks.
Jim O'Brien| 10.20.09 @ 8:41PM
We still have the best medical care in the world, and that is a result of free enterprise: 1) great doctors and hospitals; 2) a steady stream of new drugs and procedures developed with private risk capital; and 3) very competent private insurance companies. To the extent we have a health care "crisis", the problems are almost all the result of government legislation, regulation, and now major Congressional threats to both doctors and patients. Congress will cause a shortage of doctors and a drastic reduction in the quality of medical care for patients, while at the same time increasing the expense of insurance and medical care. It's the "perfect storm", or put more accurately, the "perfect screwup".
The socialists, Obama and his party in Congress, are about to destroy the great medical care we enjoy, while at the same time threatening our entire economy by dictating socialized medicine. Obama and his fellow travelers apparently learned nothing from the collapse of the former USSR and other socialist "paradises". They think the government can run a medical system for over 300 million people, when in fact the government can't even run Amtrak, or stop illegal immigrants from entering the U.S.
JBobs| 10.21.09 @ 9:10AM
The socialists promise utopia but instead ensure just the opposite. Honesty and integrity are merely words used by our leaders to deceive us. Morality is now the perversion. Our nation's future becomes increasingly dark with each passing day of this administration. As citizens we ultimately will be faced with a choice: Capitulate, and die meekly. Resist, and die fighting.
Jim O'Brien| 10.21.09 @ 3:12PM
"Live free or die." - State motto on NH license plates.
Dr. Gregory Garamoni | 10.21.09 @ 6:25PM
Mr. Tucker:
This is an excellent article that puts things in perspective.
You state: "the states have reverted to the old game of favoring big players by setting up barriers to competition. " I find this quite plausible, have seen similar assertions elsewhere, but have not yet seen any supporting evidence. Could you or any of your readers point to any studies? I am familiar with data on the costs of state mandates. I am looking for data on state barriers to competition.
Dr. Gregory Garamoni
Doctors on Strike for Freedom in Medicine
http://www.doctorsonstrike.com
Dr. Gregory Garamoni | 10.21.09 @ 6:42PM
Richard Johnson states, "ERISA nonetheless unduly curtails the ability to take an insurance company OR a self-insured plan to court. It makes it unduly difficult to win a case and it provides wholly insufficient remedies if you are able to win."
I have been following the health care debate for several months, and this is only the second time I've seen a call for ERISA reform. Why? Are there any legislators leading the charge on this important issue?
Dr. Gregory Garamoni
Doctors on Strike for Freedom in Medicine
http://www.doctorsonstrike.com
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