The American Spectator

Bob| 12.30.08 @ 5:13PM

I worked in the insurance industry for a number of years in the area of group insurance. Group insurance is the segment that contains health insurance.

Insurance works on the basis of adverse selection. The greatest risk will seek the lowest cost. In order for insurance companies to make money, they must try to exclude the most expensive customers. These tend to be older customers, customers with a family history of terminal illnesses like cancer, and poorer populations who tend to be more overweight and under greater stress. "Market based" solutions try to force these people out of the structure because private companies must serve their shareholders and make greater profits. If you mandate these companies to cover more of the population and not charge exorbitant rates for these people, the less risky populations must be charged more to increase/maintain profitability.

In other words, the market based insurance system tends to restrict coverage to people who don't need it except for emergencies. A claims representative is also incentivised to limit payouts so will argue against claims when possible.

Incremental increases in risk, therefore, are very costly to both the companies and customers. That is the real problem to expanding healthcare.

The two places where insurance companies do a great job is in price negotiation and claims fraud. Most private insurance companies that I know would like to get rid of the risk and earn money on their ability to do the things they do well. I think you'll see insurance companies push more towards single payer alternatives as government requires greater coverages. It is far better for them to work out a system where they do the processing. There would be no more sales commissions, advertising, and losses due to high cost segments. If they fight a single payer system, they may end up with nothing. In other words, they want to become vendors to the federal government much like Halliburton. That is a profitable change.

So, if the industry handles it right, they will not be crowded out, but they will reduce risk and have consistent profits with a single payer system. The best companies at price negotiation and claims processing with make the greatest profits.

It is obvious that the ideologues here do not understand the insurance industry and try to simplify this into government run and market based. My guess is that it will end up somewhere in the middle.

Jindal will not be able to reverse the process, but his ideas are smart and worth a try. If we don't have governors trying these types of solutions, the government will try and take over everything and, as we all know, the government is never good at running businesses.

Will| 12.30.08 @ 10:40PM

Mr. Cannon should probably read Governor Jindal and Secretary Levine's plan. They are proposing to expand the number of people covered by health insurance (private insurance) by using federally matched medicaid dollars. Everyone in Medicaid would choose a private insurance plan using their medicaid dollars as something of a defined contribution. This is a very conservative and market-based principle. Basically, each medicaid recipient gets a voucher, if you will, and they are then provided choice counseling to help them select an insurance plan appropriate for their needs. This is absolutely the right model. Government should get out of the business of being insurers and deep pockets, and move public health programs to a defined contribution. Then let the power of the market place work.

As for the "expansion" of Medicaid Mr. Cannon points to, he needs to gain a better understanding of Louisiana's history with the public hospitals. Louisiana currently spends more than $1 billion per year on their public "charity" hospitals. That's more than 47 other states, including Florida, Virginia, Pennsylvania and other much larger states. All the uninsured are supposed to go to these "charity" hospitals. This is the ultimate socialized system where they ration care. At the same time they spend all this public (matched with our federal dollars) money just to fund the charity hospital system, Louisiana has one of the lowest eligiblity levels for medicaid, with adult eligibility only being 12 percent of the federal poverty level. That's shameful. By expanding financing under medicaid (paid for by the savings from moving to private insurance coverage), the state will rely less on the funding for hte charity hospital system. The state's federal funding for the charity hospitals is capped, and Louisiana is about to hit the cap. So the expansion of Medicaid is a brilliant move to keep the state from hitting its federal cap for the charity hospitals. And all the people in Medicaid will have private insurance, so they will no longer be treated like cattle and forced to use a government hospital system.

And the writer properly points out that Jindal and Levine proposed privatizing the Charity hospital in New Orleans. That, by itself, is a breathtaking move away from the Huey P. Long and Edwin Edwards model of corruption and government controls. They have announced they are closing one public hospital in Baton Rouge; closing the inpatient beds at another public hospital in Lake Charles; closing a public hospital in Pineville and they are privatizing Big Charity in New Orleans.

I'd call these sweeping changes worthy of any bold Governor. Congratulations Bobby Jindal! I hope your legislature gets behind you on this. These are great moves.

John| 12.31.08 @ 7:57AM

Let me see, what if...

You go to the grocery store, pick out your food items, load them in the cart, push the cart out to the car, load the groceries into the car, take them home... eat them... and then the grocery store sends you a bill for the groceries? The grocery store gets to charge you what it wants, and the laws are set up to allow it to charge you extra for items for which other shoppers cannot pay.

Humm...

It doesn't sound like a rational functioning market to me. It sounds like a formula for fraud and financial ruin.

It is why "market based" solutions for Medical Care/Medical Coverage/Medical Insurance will never work. It is the fundamental flaw in the medical industry as a whole.

No one knows ahead of time, what they are going to be charged for what consumer item (treatment course). Everything is handled after the fact.

Add to that mess, the insurance mess gets worse. You can't get the insurance company to tell you what amount they will pay for what service, and how they derive their "reasonable and customary" deal. If you go to Doctor A for treatment, and he bills from the tony zip zone across the tracks, you owe more than if Doctor B was smart enough to bill for the same service from the less ego stroking building on the edge of the industrial park.... or is that the other way around? If you go to A... and pay big bucks the insurance company will pay big bucks... but if you go to B and get charged the same as by A... then the insurance company pays B less because B is saving money by .... AAARRRRGGGG!!!!

The entire thing is nuts. Until there is pricing transparency, published prices for procedures, treatments, hospital fees, etc.. Until the insurance industry is forced to publish exactly why they charge what they charge... and what they will cover in a readable understandable format... Stupid stuff like covering a bridge that destroys two good teeth to replace a lost tooth between them to the tune of $1,500 will be done... but not so much as a dime will be paid for an implant that costs $3000 because the 20 year old technology is still not standard treatment...

Until there is real market reform, and real transparency... nothing will ever be done to fix the problems... because nothing can be done.

The system is insane. Throwing more money, less money... more rules... fewer rules... or even the kitchen sink at it won't make it better.

r/John