My Thoughts on Health Care, Part IV

In Part III I wrote about my concern that the Senate health care bill was becoming similar to the Medicare prescription drug law in the sense that it appeared to provide new benefits, but contained a number of poison pills that made the legislation a step backward in many respects.


I discussed my fears to a political friend of mine who also opposed the Medicare law but seems to support the current bill, and he pointed out two differences that made this bill worthwhile: the fact that it’s paid for and doesn’t add to the deficit, and the so-called medical loss ratio rule, a rule requiring insurance companies to spend a certain percentage (I believe it’s 85% in the Senate bill and maybe the House bill as well) on actual health care and not administrative costs, advertising, executive pay, etc.


The bill’s funding mechanism and that it doesn’t add to the deficit (in fact, it reduces the deficit) are good things, to be sure.  I also find it curious that the same Republicans who complain about the deficit going up now weren’t responsible enough to speak out about the same things back then when they were busy passing the unfunded Medicare drug benefit into law.  But by itself the issue is not enough to win me over, for the same reasons that I don’t share conservatives’ concern about running up deficits in the short term to help people in need.  As Conservative Hero Dick Cheney put it, deficits don’t matter.  And I’d rather have a bill that gets everything else right but adds to the deficit in the short term than what we have right now, a pro-corporate bill that’s scrupulous about the deficit.


The medical loss ratio rule is more important to me because it represents an actual attempt by the government to really clamp down on exorbitant rates and take control of our health insurance system.  But I’m skeptical about how effective the rule can be.  For one thing, I trust government to do the job itself a lot more than I trust government to try to make private, profit-motivated businesses to do the right thing.  For another, even if the rule can be enforced, it doesn’t stop businesses from raising premiums – and thus, their own salaries – in absolute dollar amounts, as long as they make sure to spend some of that extra money on health care, which could be spent on totally useless or wasteful procedures (who cares, the government is paying them for it through subsidies anyway).


So I’m still undecided.  I’m gonna need to hear some more arguments and see some more indication that this bill is moving in a more liberal, pro-government direction before I get on board.

DECEMBER 26 2009 UPDATE: On December 24 the Senate passed the health care bill both in cloture and in final passage by the same margin, 60-39-1, and with the same people voting the same way.  To me, this feels like a missed opportunity for liberal Senators like Roland Burris (D-Ill.), Bernie Sanders (I-Vt.) and Sherrod Brown (D-Ohio) to vote against the bill from the left on final passage.


If I had been a U.S. Senator, I would’ve voted for the bill in cloture to get the bill out of the Senate, but (assuming I knew it would pass regardless of my vote) I would’ve voted against the bill on final passage for the reasons I’ve discussed before.  If my vote had been the deciding vote for final passage I would’ve voted for it for the same reason, to get it out of the Senate and move the process forward.


However, for the final post-conference bill, I am still undecided, though I’m starting to see more and more weight toward the “kill the bill” viewpoint.  I would not be motivated by the same desire to move what will most likely be something I see as a seriously flawed bill into law.  For that bill, I would have to seriously evaluate it on the merits before I support it – on both the cloture vote AND on final passage.

JANUARY 25 2010 UPDATE: Quick thought experiment regarding medical loss ratios.


Let’s say an insurance company gets $1.00 in total revenue a year, and spends 70% of it – $0.70 on actual health care.  They take home $0.30 for themselves.


In comes Big Government saying they have to spend 85% of it on health care now, and can only pay themselves with 15% of their costs.  So if they keep revenue the same, they have to spend $0.85 on health care, and only keep $0.15 now.


But let’s say they double their premiums so they now bring in $2.00 a year.  15% of $2.00 is $0.30 – or what they were making before the new rule set in.  Voila, they’re back to where they were to begin with, except now they also have all these new captive customers to exploit.  In fact, with these new captive customers, they probably wouldn’t even need to double their premiums to make back what they lost with the medical loss ratio rule.


Let’s say they triple their premiums, making income $3.00 a year.  15% of $3.00 = $0.45.  Hey, they’re making even more now!


Of course, it’d be more helpful if I had the actual numbers to play with, but I don’t feel like digging for them right now.  Suffice to say that it might be more complicated but the same principles apply, just with a whole lot more zeros.

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