Tim: ‘The greatest expense in health insurance is administration in the private sector, about 11% in this state and up to 30% elsewhere.
I have heard this argument a lot from people in favor of nationalized health-care, but the numbers don’t really add up. If 11-30% (and I think your 30% figure is way too high) of the health-care dollars go to administration, then isn’t it fair to say the vast majority (70-90%) is going to pay for actual medical claims / services?
OETKB: What insurance companies pay for actual services is called the benefit loss ration. For private insurers it ranges from 70%(for profits) to 89%(for non profits). For Medicare it is 97% and this covers 50% of the health care bill in this country. The private insurers account for 15%. The rest is out of pocket.
Tim: I also question your logic on the following:
‘The choice to have a national insurance actually encourages a more robust free market since companies, state, and municipal institutions would be free to use this money for something else. ‘
How will insuring 50 million people who were previously uninsured actually bring down costs for anyone? I think this is especially true given the ideas floated around for how to finance this expansion of coverage (ie taxes on employers, taxes on the wealthy, taxes on insurance companies that would be passed along to employers).
and the fact that the vast majority of the health care cost trend is driven by provider payments rather than administration.
OETKB: We already pay for the uninsured when they show up in ERs, doctor's offices, or are hospitalized. A large part of the funding comes from state coffers called FREE CARE POOLS. By the way, private insurers kick in 3% from premiums as an obligation to help pay for the Free Care Pool. So we are already paying for this group of people. By giving them health insurance and also having them be responsible for some payment through a global tax system it has been estimated that this would be less expensive and far more humane and efficient.
It is true that the health cost trend is upward because health care is a growth industry. Insurance will not solve this problem. It will take fair appraisal of what should be covered and to work on redundant care. Hospitals compete by "market share" and duplicate things like mammography, outpatient surgery, and radiation therapy. Each of these units is a cost sink for hospitals because when there are several in an area, the only way they can pay for the service is to raise the unit cost since they are all under utilized. It will take regional planning and cooperation to deal with this. These are dirty words to the hospitals involved who regard each other as the enemy. Under a central payment system and quite frankly being rolled out by the major insurers, there would be a global budget. The theory here is there would be no reason to keep up with the Jones's since payment is already given to you monthly for the services you provide. This is an automatic under single payer and with one payment source this would do away with the current billing mess we now have. Just ask your doctor or someone in the hospital billing department what they go through to get paid.
To pay for all this there would have to be some fair tax that would max out at 6% of a household income. This could come from an expanded Medicare tax to cover an additional 25% of health care expense, the rest being out of pocket. Any amount chosen for this tax would be far less than anyone is paying in now for insurance. At a maximum of 6%, ahousehold with a $75,000 income would be paying $4500 for a comprehensive plan with no co-payments or deductible. This comes about because there is a $400 billion dollar a year savings by eliminating the expense around billing and marketing mentioned above. Employers would then have extra funds to give productive employees and fund other things such as pensions. Maybe even create new jobs. GM imploded because of their ballooning medical expense to current and retired employees. Governments, local and state, would have more funds available since this is a major expense. You might even see your property taxes lowered!
Tim: One thing we do seem to agree on is that everyone should have access to quality, affordable health care. However, by saying people should have ‘access’ I’m not also saying that the government should be in charge / pay for it for everyone. I think the U.S government is wasteful, inefficient and already in way too much debt. Nationalizing health care could be the straw that breaks our backs.
OETKB: It is understandable that there is this distrust in government. However it is really dependent on who is in charge. Also there are many programs that work well: Social Security, Medicare(see below), Our National Parks, other service agencies. There are hard working dedicated people who want to do a good job. I think it does a disservice to them by painting all of government as corrupt or inefficient. It will however always be a work in progress.
Medicare was born in the 60s by an act of Congress and so were HMOs in the 70s. The latter was suppose to curb costs by emphasizing preventive care and having your PCP be a gate keeper. They forgot to tell the insurance plans not to do this with an ever ballooning bureacracy. Over the past 25 years private health insurance administration has grown a wopping 1500%, not so with actual medical services .
Medicare is the most successful program as assessed by its users, has the lowest administrative costs, has the most covered services, and again picks up 50% of the health care bill, the largest share any single insurance and, in fact, more than all of them combined. So which American invention are we going to go with. One has certainly seen more success than the other. It has lifted many seniors out of poverty and avoided medical bankruptcy, not a legacy of private health insurers.
If you don't trust government, why trust insurance companies who trying not to pay the bill when you are sick. As for end of life care I have been in sessions where private insurers(Medicare HMOs-Medicare Advantage Plans) try to push hospice care to help the bottom line, instead of relying on the judgment of a doctor and his patient.
Thanks again, Tim for your civil inquiries.
Update: Here's an article outlining "waste" in our health care system. Notice the $200+ billion for streamlining billing. This doubles if it goes away under Single Payer: http://money.cnn.com/2009/08/10/news/economy/healthcare_money_wasters/index.htm?section=money_news_eco
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