A McKinsey study shows Obamacare insurers lost money in 2014 and the losses doubled in 2015.
Amazingly, the study concludes there’s nothing to worry about because “30 percent of insurers nationwide were profitable.”
Meanwhile, outright refusals to accept Obamacare mount. “Sorry, We Don’t Take Obamacare” is now a frequent response.
Losses Pile Up
The Hill reports Study Shows ObamaCare Insurers’ Losses Grew in 2015.
The study from McKinsey & Company finds that in 2014, insurers had a margin of minus-4.8 percent, translating to an overall loss of $2.7 billion on the individual health insurance market, which includes ObamaCare’s marketplaces.
The study finds those losses roughly doubled in 2015 to between minus-9 and -11 percent margins, based on preliminary data.
Still, the study finds that not all insurers lost money. In 45 states, there was at least one profitable insurer in the market in 2014, and 30 percent of insurers nationwide were profitable.
“The individual market has little risk of entering a classic insurance ‘death spiral’ as long as the federal government continues to offer subsidies,” the study states, adding that “there will likely continue to be a large, viable individual market.”
Second Class Patients
The New York Times tells the sad tale of an increasing number of “Sorry, We Don’t Take Obamacare” responses to those seeking medical assistance.
AMY MOSES and her circle of self-employed small-business owners were supporters of President Obama and the Affordable Care Act. They bought policies on the newly created New York State exchange. But when they called doctors and hospitals in Manhattan to schedule appointments, they were dismayed to be turned away again and again with a common refrain: “We don’t take Obamacare,” the umbrella epithet for the hundreds of plans offered through the president’s signature health legislation.
Though their insurance cards look the same as everyone else’s — with names like Liberty and Freedom from insurers like Anthem or United Health — the plans are often very different from those provided to most Americans by their employers. Many say they feel as if they have become second-class patients.
Compared with the insurance that companies offer their employees, plans provide less coverage away from patients’ home states, require higher patient outlays for medicines and include a more limited number of doctors and hospitals, referred to as a narrow network policy. And while employers tend to offer their workers at least one plan that allows them coverage to visit doctors not in their network, patients buying insurance through A.C.A. exchanges in some states do not have that option, even if they’re willing to pay higher premiums.
Some of the problems may have been predictable. When designing the new plans, for-profit insurers naturally tended to exclude high-cost, high-end hospitals with whom they had little clout to negotiate discounts. That means, for example, that as of late last year none of the plans available in New York had Memorial Sloan Kettering Cancer Center in their network — an absence that would be unacceptable to many New York-based employers buying policies for their employees. Another issue is out-of-state coverage, which many A.C.A. plans don’t offer aside from emergencies, and which is routinely offered in policies from companies — especially large ones — with workers in more than one state.
As a result, many parents who were excited that they would be able to keep their children on their policies until age 26 have discovered that this promise has gone unfulfilled. When Sara Hamilton of New York was shopping on the exchange for a plan to cover her and her two young-adult children — who live in distant states — she discovered that none of the plans covered doctor visits in those places.
In 2013, Angie Purtell of Tega Cay, S.C., bought a gold plan offered by Coventry Health Care. When notified that the plan would double its monthly premium the following year, to nearly $1,000, she went shopping again on the state exchange and chose a Blue Cross silver plan for $500. It was branded “Choice.”
But when she tried to visit her longtime doctor using the new plan, she found she could not. The doctor’s practice, while in South Carolina, was not covered because it is affiliated with the Carolina Medical Center, a few miles over the border in Charlotte, N.C.
Service Refused
Hey! We don’t serve their kind here. They’ve got Obamacards.
Related Posts
- Obamacare Death Spiral: Insurers to Drop Plans Unless Premiums Rocket, “Something’s Got to Give”
- United Health Will Dump Obamacare Offerings in 29 of 34 States: Death of Obamacare?
Mike “Mish” Shedlock
What this Zionist loving congress has done to the poor USA citizens is a crime. We have billions to give to Israel but none to help our country. The congress is just protecting their own interests… The lobbies and the monies they get. This is Bolshevish redux 2016.
“uh, uh… IT WAS THE JEWS.”
Really!!?!
Really?
REALLY!!?!???
Come on, surely you have better than that. Surely you ARE better than that.
That TIRED old witch-doctor-economics refrain has gotten nobody nowhere, because it looks not at all at reality, neither to view the symptoms, nor to diagnose the problems, nor to determine a corrective action.
This is an economics blog, Tapp. Show some respect.
Really. Choo Choo Choo !
He didn’t say Jews. He said Zionists. Big difference that Zionists try to gloss over
The train is fine.
Good grief. Mish, can you please initiate a downvote button so that the reasonable, non-racist majority can help you hide these kinds of ridiculous comments?
Here it is…PROOF…Israel was least partially behind 9-11. So, I don’t think that Israel had the power to order NORAD to stand downnor do I believe Israel had the power to order the US air Force fighter interceptors to haul ass out over into the Atlantic Ocean while the Threat came from the other direction…..It is obvious Israelis played a pivotal role in the events of 9-11…. Ignore them at you and your families very own peril. Ignorance and Silence is Complicity.
My girlfriend went on COBRA this spring; a continuation of employee based health insurance, but at full premium. She received a letter indicating premiums would be increasing 20% in August. Insurance companies are in really bad shape when they have to raise rates THAT much.
When government messes with anything it goes to hell, even medicine.
Mish, the NYtimes article is dishonest to blame this on obama care. I’ve seen doctors opting out of insurance for decades. My previous doctor even warned me ahead of time and recommended someone who took insurance.
Also, it’s pretty silly to make an issue of insurance not covering across state lines, or people not checking that their doctor is in network before signing up. That is just due to ignorance on the part of the shopper.
The red team and the blue team both lied to us about the costs. Insurance companies were surviving and containing costs by excluding sick people. That may have been unethical, but costs had to sky rocket once everyone could buy insurance for the same price.
My health insurance costs have gone from $8’600 a year for a family of 7 the year Obama was elected, to $36’000 including a $5’000 HSA now, for the 5 remaining at home. I don’t have issues with doctors or out of state coverage – but THAT is why the bill is so high, so we could keep our doctors and our coverage.
Don’t you dare think I will EVER vote for a Democrat.
My sympathies, but…Democrat or Republican – there’s really not much difference these days, with a few notable exceptions.
A “Family of 7” LOL!!.. Can none of the six (or at least the mother) help out with the cost ?? why did you decide to have 5 children anyway?
Why do you think it’s even a little of your business how many children he has? Newsflash…it’s not.
because if you are going to make 5 children (or have a family of seven) you would think how you are going to afford it should be something considered right?? Is there a reason any of the other six cannot contribute? Is there a reason this sole provider cannot get a real full time job that offers full benefits ?
Nick, stop. you know nothing of his planning or means or choices, or economic ability.
His post however very clearly shows that the ECA was anything but affordable.
Nick, imagine if he had 2 kids and his wife passed away. Then he marries a widow with 3 kids.
Happens.
And with divorce, it happens even more frequently.
Now, I happen to have 5 kids of my own, all with the same woman. And I STILL think it’s legitimate to complain about these egregious costs.
How is it possible to budget for a takeover of the medical system by the government, where they force one to buy insurance, take away your other choices, and fine you if you elect to go without? And then costs double or triple, while the deductible goes sky-high?
In a world where most first world nations are struggling with birth rates below the replacement rate (including the USA), I have no problem with someone having 5 kids.
Yes, one needs to be aware of the associated costs with such a choice. But, paying more than 4X more in a matter of 8 years is unreasonable. Tell me how many other “necessities” have increased that much. Also, this is likely a cost that he reasonably did not plan for when he chose his family size, as one would not reasonably expect such a dramatic increase.
Yo, Nick! I hope you are contributing to the downfall of civilization by not having children. Please leave the world to those of us that procreate cishetamerican children.
Oh, and afford? It’s .gov that made it “unaffordable.” Point your indignation that some white guy should have 5 kids elsewhere.
While you’re at it, let me point out that if there’s a choice between more Americans and more Third-worlders, I’ll take more Americans every time, as we care more about this planet and have the means to do so.
“…because if you are going to make 5 children (or have a family of seven) you would think how you are going to afford it should be something considered right??”
Who would expect to have to plan for a 4 FOLD increase in the cost of something in less than 8 years? Have you planned for the cost of a new car to quadruple from say $25,000 to $100,000 over the next 7 years? The cost of an apartment from $1,400 a month, to $5,600 a month, 7 years from now? I would think not.
The original plan called for the taxpayers to reimburse these companies for their losses but it died in congress. Just like medicare and even worse medicaid doctors can choose not to take Obamacare.
I know there are some greedy doctors but when talking to my friends they would take the plans if it wads not for the mountains of paperwork to just get reimbursed for care they provide. Bob told me he had to hire another lady to submit the new paperwork and it takes about 4 to 6 months to get his money and the lady spent 4 months trying to file. She is very good at filing but regulations change al the time. Now Bob no longer takes Obamacare or Medicaid. Paperwork is killing the host as well.
That’s what happens when regulations are written, such that every useful/productive person (nurse, doctor) in a service providing organization, must also provide jobs and incomes for 10 bureaucrats, lawyers, paper pushers, administrators and other riffraff.
Works out well for the apparatchiks (and politicians), who can, via connections, hook their useless (read “college educated” with a degree in applied uselessness) offspring (and key supporters) up with secure for life government jobs. With a “Cadillac health plan included, of course. On other people’s dime)
But for everyone else, the game is never anything but pay more and more, receive less and less.
When presented with three different scenarios for the future of the Affordable Care Act (ACA), based on the candidates’ positions, 58 percent of U.S. adults favored Sen. Bernie Sanders’ idea of replacing the law with a single-payer, federally-funded healthcare system that provides insurance for all Americans.
http://abcnews.go.com/Politics/poll-shows-majority-americans-prefer-medicare-health-care/story?id=39148652
Unfortunately the AMA, AHA, and insurance companies are big contributors to Congressional election campaigns. 58% of Americans are not. America doesn’t work that way.
And when presented with “flat” or “round”, more than half of medieval respondents favored “flat” for the shape of the earth…..
The same “majority” you’re talking about favored Obamacare as well. Because, you know, the man on TV that their Facebook friends said was the hippest, said so and stuff.
Ask veterans how their single payer plan is working for them.
Most I know love it. At least in comparison with what the rest of us have to live with.
The uninsured can treated in emergency rooms, which we all know is not only first class treatment, but certainly the most affordable.Preserve complete, permanent health insurance for those who make the rules, our beloved elected politicians.
So, do we still believe all of this is simply unintended consequence? They claimed there was a healthcare crisis and then created one. They claimed there was a humanitarian crisis in Libya and now there is one. They claimed there was a humanitarian crisis in Syria….and now there is one.
Are we really going to believe and accept that these are all from ignorance or stupidity?
Their goals have been well established prior to these actions, even if not part of the official record.
Countless people in power on the left openly stated (including Obama) that they wanted a single payer government run healthcare system, and many as well admitted that the Affordable Healthcare would eventually lead us there….and here we are.
Costs are ramping quickly beyond most peoples ability to afford, and THIS will again be blamed on the insurance companies and those same insurance companies will be effectively nationalized and their functions will be rolled into a government program similar to any other government contractor. Heath care will become another massive cost rolled into the opaque government expenditures package. And millions of people will applaud, as they care not how anything is paid for, only that their perception is that it is all FREE.
Cloward and Piven.
Everywhere always!
We tear down the old.
Then the new magically creates itself because …it must …since all we know how to do is tear down.
You could add in low rates hammering the insurance industry also:
http://www.ft.com/cms/s/0/c25a41d4-dc9a-11e5-827d-4dfbe0213e07.html#axzz48vMVtwXp
http://www.marketwatch.com/story/low-rates-threaten-solvency-of-pension-funds-insurers-2015-06-24
“So, do we still believe all of this is simply unintended consequence? They claimed there was a healthcare crisis and then created one. They claimed there was a humanitarian crisis in Libya and now there is one. They claimed there was a humanitarian crisis in Syria….and now there is one. Are we really going to believe and accept that these are all from ignorance or stupidity?”
As Jonathan Gruber said, the stupidity of the American voter.
Congress gets a 13% approval rating and voters re-elect 90%+ of them anyway.
Congressman X: “The average man on the street actually thinks he influences how I vote. Unless it’s a hot-button issue, his thoughts are generally meaningless. I’ll politely listen, but I follow the money.”
Yes, many ARE stupid, or more accurately ignorant, but deliberately. We are preached to everyday of our imminent peril to something or person, of which only our benevolent and loving government can provide security….at a cost. People are not nearly a stupid as they would have us believe. Grow us like mushrooms in the dark and then denigrate our lack of complexion, but it is THEY who seek to keep us dumb and in the dark as to our REAL threats and our REAL solutions. Limit our options and then feed us continual bird feces and then pretend that our difficulties lie in our intelligence. Undoubtedly, our only path is to stand for liberty and independence from the protective hand. Our education will be expensive as always, but is the one thing they cannot take away from you.
ACA=Trainwreck by design in order to force single-payer system. We’ve all be “Grubered”. All part of the plan and the end justifies the means. This will end well of course. Just ask good ole Nic Maduro in Venezuela. How’s that Socialism workin’ out for ya? Just ask any Socialist after the money runs out… Adam Smith: Where are you when we need you?
http://www.political-humor.org/socialism-where-you-wait-on-breadlines-capitalism-where-breadlines-wait-on-you.shtml
“The enduring lesson of the 20th century is that socialism is a failure, and free markets are a success. But the politicians keep advocating just a little more socialism.” – Milton Friedman, Nobel Laureate Economist
“One of the great mistakes is to judge policies and programs by their intentions rather than their results.” – Milton Friedman, Nobel Laureate Economist
“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand” – Milton Friedman, Nobel Laureate Economist
“The problem with socialism is that eventually you run out of other people’s money [to spend].” – Margaret Thatcher
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” – Winston Churchill
Socialism is working great in Denmark, Sweden and Norway.
Next time someone you know with a serious ailment, receive a treatment invented since bloodletting by Viking sword, look into in which of the above socialist Utopias, the treatment was developed…. Not that Scandinavia (particularly Sweden) doesn’t have a medical or pharmaceutical industry, but by far most of the, particularly more complex and expensive, research is done stateside.
Also, look at where Oil Sheikhs and others of similar freedom from the vagaries of being told where to go for treatment, goes when someone in their own family gets sick. The biggies are Switzerland (no larger than Scandinavian countries, and with a government safety net, but a much more multifaceted and diverse provider industry), and the US.
Doesn’t it seem a bit strange that in every single field where the outcomes of central planning, can be compared to those where people have some relative degree of individual freedom, the former is found seriously wanting. Yet magically, central planning, the more the merrier, is somehow “known” to be the ultimate solution in the one field where noone has ever bothered with a freedom alternative?
Heck, even within the areas of the healthcare field that the central planners have managed to stay somewhat away from (lazik, cosmetics…), costs are dropping, quality improving by leaps and bounds, access (by rich and poor alike) is improving……. Just like in EVERY OTHER single area of human existence where government dictate has been replaced by some degree of choice.
Yet, for healthcare, the problem is Obamacare isn’t socialistic enough! “We” need “our elected representatives” to create a five year plan for every American’s health….. It’s lunacy. Of the most macabre kind.
So you’re defining socialism as central planning. Then the Nordic countries are not by definition socialist. So the point is moot.
Yes, working great!
Their populations will be majority Islamic in 25 years. Their infrastructure is crap. Their economies are declining. They don’t breed. They could not fight their way out of a paper bag, nor have they desire to do so.
When Sharia is adopted all that socialism is going right in the trashcan. They will deserve everything that happens to them, because they made the mistake of believing their own propaganda.
I suggest going back to the ivory tower, because you’d not exist long in any third world country.
https://danieljmitchell.wordpress.com/2016/05/15/everything-you-wanted-to-know-about-the-economics-of-redistribution-in-one-image/
http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/05/12/20160512_soc.jpg
“Incentives matter.
Sometimes that can be explained with wonky discussions of marginal tax rates or welfare traps.
But that may not be the best approach when trying to convince someone with no aptitude for economics. So what’s the best way of introducing such concepts to, say, a Bernie Sanders supporter?
You can point to the economic chaos in places such as Greece and Venezuela and explain that Margaret Thatcher was right when she warned that socialists eventually run out of other people’s money.
But that’s probably not too effective because they’ll simply point to Sweden and Denmark and you’ll have a hard time educating them that those countries became successful when government was small and that they’ve been falling behind ever since big welfare states were imposed.”
Margaret Thatcher, in a television interview for Thames TV This Week on February 5, 1976. Prime Minister Thatcher said, “…and Socialist governments traditionally do make a financial mess. They [socialists] always run out of other people’s money. It’s quite a characteristic of them.”
“There is no free lunch”, or “you can’t get something for nothing.” I know, life’s a bitch ain’t it?
“I will sign a universal health care bill into law by the end of my first term as president that will cover every American and cut the cost of a typical family’s premium by up to $2,500 a year.”
— obama (D), June 23, 2007
““But we have to pass the [health care] bill so that you can find out what’s in it….”
— Nancy Pelosi (D), Speaker of the House, March 2010
“The stupidity of the American voter would have killed the law if more people knew what was in it.”
— Jonathan Gruber, “architect” of Obamacare
obama went on to pass without s SINGLE republican vote.
Yet we have a democrat favored to win the presidential election.
Why are these people not shamed into exile? Why are they not in jail? Why are they not publicly humiliated and laughed at?
The Free Sh*t Army votes.
So many can’ts and only one can-do’s. Insurance can not pay for care and still make a profit. Doctors can not honor insurance because of paperwork. Government can not fix because that would block access to medical industry bribes. But there is a big can-do for all to continue to take my premiums, copays, and taxes.
You know there’s an incoherence in your post that you don’t ever seem to get because if you did, you’d address it.
There’s a big contradiction between an insurance company making a loss versus a provider not accepting that insurance. Think about it, just the basics. Why would a company make a loss? Because they spend more money than they collect. If an insurance company is making a loss, they are giving doctors, hospitals and other providers more money than they are getting. In that equation, the people who are winning are the providers and the patients. If you could push a button and transform that company into a profitable one what would happen is less money would be going to providers and more money would be coming from patients in the form of premiums.
Could rising cost be attributable to those who get Obamacare for free are using it in far greater amounts than anticipated? And could those increased payments to doctors and hospitals be consumed by ever increasing overhead? And is it possible that as we see more and more mergers and growth in major hospitals, that the real cream is be skimmed off by these large corporations and NOT going to doctors, nurses and other MEDICAL practitioners? AS we see today in school systems where half of the education employment is in management, NOT teaching, I suspect that most dollars are consumed by the IMPLEMENTATION and MANAGEMENT rather than the act of actually providing service.
No problem. Insurance companies will find lower cost providers in the free market and pay them instead. The free market fixes everything.
A market does not exist when the insurance company acts as a buffer between consumer and provider. A market would allow consumers to work directly with doctors and hospitals to negotiate price and services….and maybe even performance guarantees! Insurance companies do eventually reflect market costs but far too late to be functional in the market place. Once we have paid our outrageous premium we feel well entitled to the best and most expensive healthcare we can find…something that most of us would not do if paying out of pocket….but you know that already…
@Brian E Considine – Mish isn’t incoherent. You’re ignoring the frictional costs of the insurance company’s business model.
Put some numbers to it, even for discussion’s sake:
Insurance pays out $1.00.
Insurance collects $0.90.
Insurance employees and infrastructure costs: $0.20.
10% loss.
Not a bargain or benefit, really, to anybody.
As a physician I can testify to this phenomenon. I get several calls per week from people who have a policy but there are no providers who accept it. They are offering to pay cash.
One patient had Humana HMO, which I accept. However, it turned out that this was an ObamaCare exchange HMO so I was NOT in-network. I looked into getting a contract with this plan and found out why there were no available doctors: the plan paid 50% of Medicare rates.
In a practical sense it might not make much difference. Most of these plans have deductibles of $5,000 or more, and even when the deductible is met they still have “coinsurance” to pay. So in the absence of a complete medical disaster you’re functionally uninsured with these policies. If you need a knee arthroscopy I hope you’ve saved up several thousand dollars for it.
How exactly does a plan that takes in premiums but would almost never actually pay out anything because of high copays, deductibles and reimbursement rates lower than Medicare loose money?
That is what I just don’t understand. $20,000 annual premiums for the family should pay for a lot if medical care. We get maybe $300 worth of vaccinations. With $10,000 deductible only a major illness would require any insurance payout. So $19,700 profit to the insurance from us for typical year. Who is using so much medical care and why. If your medical problem is not fixed with $30,000 from premiums and deductible each year maybe it would be better to go to some kind of discount witch doctor.
It’s a game of musical chairs. People who aren’t sick just want to be covered without too much cost and be able to go to the doctor for $20. People who are sick want insurance that pays and doesn’t tell them they can’t go to the best hospital or doctors.
Insurance companies want the best pool of customers possible. They would love to get all young, healthy people. Hence you see ads for their policies with people doing things like yoga as opposed to eating a burger while smoking a big fat cigar.
Pre-ACA, some states let insurance companies select their customers by looking at their health history and excluding them or charging them premiums so high they’d scare them off. Hence you had horror stories like the girl who saw a psychologist one or two times after breaking up with her bf who is then told she cannot get health insurance because she is a ‘risk’. Inside the ACA plans have to charge the same premium with only some variance for age and smoking so in a perfect world every plan has its share of sick people and companies can compete on trying to negotiate the best prices possible for care and making sure overbilling doesn’t happen. Unfortunately the easier way to make profits is to have fewer sick people on your rolls and more non-sick.
What happens is what happened before the ACA. An endless game of musical chairs where every few years lots of policies are declared ‘money losing’ and then are replaced with new policies with the companies hoping that in the churn the next ‘hand’ of patients they get will have fewer sick people.
What critics of the ACA form the right seem to miss is that this seems to be a fundamental issue with using private insurance. How do you avoid wasting a lot of time and energy put into churning around the pools (and BTW, a good way to do that is to make policies very confusing with all types of networks, copays, coinsurances and deductibles that kick on and off in convoluted ways)?
Insurance is wealth redistribution. It functions by taking money from healthy people to pay for the sick, while pretending that all are secure. It, like socialism itself, is a something for nothing scheme that ultimately depends on money from heaven. The system distorts reality and as such is destructive to longer term interests. Health insurance, like socialism, encourages consumption by non contributors, forcing contributors into insolvency and ultimately to become yet another non contributing consumer.
There is only one sustainable method and that is a non system approach…freedom and responsibility for one’s self. The answer to healthcare is that we must each pay for what we consume, and for those who cannot, rely solely upon VOLUNTARY contributions for assistance. The idea that we can impose on others for charity is NOT sustainable. The idea that we can get a $200k medical procedure for $5k is NOT sustainable.
The ONLY reason ANYONE buys insurance is because they believe it will cost them less than paying for the actual service. A rational society (one from our past) would be one that actually SAVED for life crisis’s be they medical, unemployment or retirement. Instead we rely on a “plan”. We buy insurance. WE buy stocks and bonds. We by politicians who will promise us security at a nominal cost with all overages taken care of by “others”.
Further, I contend that this notion of purchased security leads to bad outcomes simply from a false sense of security. We take risks, lead life styles that we KNOW are risky, yet rationalize that we have insurance. It is no different from the financial industry where the goal is to become large enough that our government cannot afford for them to fail. Our stock prices reflect this reality right now with a hugely overvalued market that is suspended by the notion that government will continue any and all backstops to prevent its failure. We are locked into a delusional security mindset that threatens our very existence. We are involved in wars today that are rationalized by many as creating security that we also realize has only gotten worse. Can we have the same realization about healthcare? Can we accept that pursuing something for nothing LEADS us to disaster? The promise of security from others only makes us less secure. Independence and liberty are our only security.
“Insurance is wealth redistribution. It functions by taking money from healthy people to pay for the sick, while pretending that all are secure”
In other amazing insights, auto insurance takes money from those who didn’t get into accidents and gives it to those who did.
Police departments take tax money from those who never call the cops and spend it on those that do.
Extended warranties takes money from those who buy devices that don’t break and gives it to those that do.
yes, and follow the cost curves for all of these insurances. Costs continue to climb as these insurances reflect our actual behaviors. People drive differently when insured rather than not, just as they drive a rental differently than their own. How many are that careful with their electronic devices if they know all they have to do is drop it to get a new one. All of these insurances start out affordable as the risks and behaviors are beneficial.Time and our behaviors change in response to the perceived reduced risk.
Look at the home warranty business as a model. It started out cheap and covered a lot. As time has passed it has become less encompassing and more expensive. We finally dropped ours as the quality of the repair people was getting horrible, response time stunk, and rates were constantly rising. The worst part was that we could not choose who did the repairs, like we are increasingly finding we can’t choose our doctors.
In a truly competitive market, prices fall. In an ensured market, be it health, auto or stocks and financial instruments, prices RISE. Think about it.
Our most valuable asset is the accurate perception of risk, and insurance and especially the big insurance company we refer to as GOVERNMENT do everything they can to exaggerate risk while claiming to be able to diminish it. Only WE can diminish risk through our behaviors, our actions and choices.
What would our healthcare cost be if we all lead healthy lives?
What would our auto insurance costs be if we all drove safely and courteously? Or do you believe in faultless accidents? The vast majority of our problems derive from our own actions and the more we pretend they don’t…that everything is simply bad luck of which we have no part in, then things will only get worse. But there will always be plenty of people willing to take actions to save you from yourself…at a price that as we know constantly is rising.
“How exactly does a plan that takes in premiums but would almost never actually pay out anything because of high copays, deductibles and reimbursement rates lower than Medicare loose money?”
Because those one in a hundred “almost never” cases, costs $5million over the life of a disabled kid.
And that’s the kind of stuff you need insurance for. Medical outlays less than an annual salary, are much, much more efficiently handled by pushing decisions and costs out to the people who knows the details of the individual case. Meaning the doctor and the patient.
Dragging in a plethora of useless “administrators” and other rabble, to push paper to “determine” who “are obliged” to do what, just so that some moron can pretend that it makes sense for him to pay a doctor one tenth of what the doctor gets paid to look down his throat and say “penicillin”, is about as inefficient as things can possibly get.
Instead, what you want, assuming you want a “safety net”, is more akin to what is in place for ocean going boats. Fishing and otherwise. People buy and maintain their own boat. Some more diligently than others, and some pay extra for additional convenience and perceived safety features. No third party involvement. Yet, if a boat gets in serious trouble, there are some resources set aside, some public some private, to aid in their rescue.
Also note this sounds like exactly the type of plan free market types say we should have. High deductibles means that the consumer is using his own cash for most or all ‘routine’ costs with the insurance policy there only for a “complete medical disaster”.
As I said the incoherence of the ACA critics is a major problem. On one hand they talk like Ayn Rand clones, on the other hand they bash the ACA for not providing some type of Medicare for everyone. What they don’t realize is anyone who bothers to think about this issue realizes there will be trade offs and costs. If you want libertarian orientated systems be prepared for high deductibles and trying to negotiate cash prices with all your docs. If you want your parents’ Medicare you’re going to end up advocating a single payer type system.
What you’re never going to see, though, is the Tump/GOP delusion of Medicare for everyone with infinite consumer choice in insurance at the same time.
Precisely – with a little thought on the issue the congress could have been debating the trade offs and costs producing something with a chance of improving the system rather than breaking it..
Nothing wrong with high deductibles IF they were not accompanied by massive premium increases. HSA plans (which I have for myself and employees) is ideal as it encourages consumers to purchase healthcare wisely while still having coverage for health crisis. While I admit I do not like high deductibles, I also do not like being sick. With any luck both are survivable. A $7k deductible is painful but well within the reach of most people’s lines of credit. And for those who do not….why is it that we can provide government loans for students…and risky green energy startups, but not for those needing short term credit for health emergencies. I would support that long before simply handing out healthcare to the “needy”. Each and every one of us needs to participate in the entire market process if we are to have a market that works. Simply handing out benefits has never solved anything except short term problems that lead to longer term dependencies.
I agree, but this returns me to my original question about coherence.
If the health plan is charging a huge premium AND it almost never pays out anything due to huge deductibles HOW exactly is it losing money for the company offering it?
@Brian:
“If the health plan is charging a huge premium AND it almost never pays out anything due to huge deductibles HOW exactly is it losing money for the company offering it?
Because what it does pay out is enormous. I worked for a company with 3000 employees that was self-insured. 6 of those 3000 employees accounted for 52% of expenditures. All had medical bills of over a million dollars in a single year.
The question is what could possibly cost a million dollars in the health care market such that it is used on a single individual in just one year? Solve that problem, and you’ve solved the problem of health care in the United States. This simply does not happen outside the USA.
A corrupt system forces the deficits of one area to be shifted as costs to another. I recently had a colonoscopy and was quote for the procedure at a local hospital and a local clinic using the same doctor. The hospital charge (aside of doctor and other expenses) was four thousand dollars, whereas the clinic was $650.
I had a lithotripsy done on my kidneys last year for stones, and as an outpatient procedure done in a hospital taking approximately two hours cost $22k Hospital only, doctor charges $1200.00, never broke the skin. From my experience the costs lie in the hospitals, NOT the doctors. And hospitals routinely claim that they have massive unpaid expenses that they must roll into OUR costs…expenses MANDATED by government. Healthcare in most other countries is provided by GOVERNMENT owned hospitals, who’s costs are rolled into their overall budgets. There is no way to account for the relative costing anymore than Venezuela’s 20 cent per gallon gasoline. Government intervention in markets ensures that “market values” are specious. When our healthcare is “free” and provided in full by government, how will we calculate its costs then? The same as we do unemployment, inflation and GDP?
“The question is what could possibly cost a million dollars in the health care market such that it is used on a single individual in just one year? ”
So 6 employees with $1M in costs but 3000 total employees. That works out to $2K per employee per year. You said those 6 employees accounted for half the total costs so add in another $2K for all the people with more modest costs and you get $4K per year. Not quite insane.
As for what could cost $1M? Well my wife has ovarian cancer and based on our EOB’s the costs are probably $200K per year. That includes chemo, a drug called Avastin, periodic PET scans. A major operation would perhaps add another $100K to that mess but $200K is a year in year out cost. How to achieve $1M? Well a very premature birth coupled with extensive operations and round the clock care in the hospital for the first few months of life might do it.
Let’s say a nurse with bennies makes $40/hour. 24×7 care for 1 week would cost $6720. 3 months (13 weeks) would cost $87,360. How much overhead does there have to be to get to a million bucks?
So when a prospective patient offers to pay you cash (not credit or debit but cash which is just under the table income) do you still turn them away because of a stigma that goes with not having full employer sponsored medical benefits??
If one is reasonably healthy it pays to just pay the obamacare penalty and then just pay cash when you need to see a doctor but you never answer the question about if you accept cash or do you tell the front desk person (or who ever answers the phone) that if they say they have obamacare, medicaid or offer to pay cash to hang up the phone & block any further calls?
The ACA is actually pretty flexible and it has the potential to evolve in many different directions. For example, younger healthy people might simply pay the penalty thereby providing the tax revenue to subsidize the sicker people who will need to have coverage.
What’s that I hear from the GOP? Healthy people hate paying for sick people?! Explain to me how you create a health system where the sick people pay for the health care? Every GOP ‘alternative’ proposed at the end of the day does that. For example, creating ‘risk pools’ where the state governments provide insurance subsidies for those who are sick and cannot afford insurance premiums…well that’s paid for by taxpayers…who are often those healthy enough to have jobs.
Mr. Leeds,
My cash fees are published at directpaypain.com. Very few doctors will provide this info publicly. The Surgery Center of Oklahoma has received a lot of press over the years for publishing their prices but those prices aren’t really a bargain. There are very few pain specialists out there who can beat my pricing.
Note that I initially geared my fees to Medicare 2013 rates and they have not changed since then.
Until we recognize that healthcare is but one part of a failing system, all solutions are in vain. People in poverty will never be able to pay for healthcare, so we decide simply to subsidize them rather than trying to get them out of poverty. WE are attempting to resolve poverty through forced charity and income sharing, rather than looking at root causes of poverty. WE are spending our healthcare dollars on bandaids rather than looking at the cause of the injury.
When parks discover the the wildlife is starving, do they implore all visitors to share from their picnic baskets? NO. They look for root causes, as they understand to simply “feed the bears” will lead to worse outcomes. But the rest of us evidently do not understand this, which is why they post “do not feed the bears”, because kind hearted people have great empathy for hungry bears and simply want to do the right thing.
We must use our BRAIN rather than our HEARTS.
The main reason for the expense of US healthcare is the separation of the customer from the person delivering the service. Most people do not pay directly for their health services — a third party (Medicare, Medicaid, Commercial insurer) pays the bills. There are hundreds of companies, and many thousands of people, involved in consulting/administrative work between those third parties and the patients/doctors — claiming they are helping utilization costs or improving quality. The reality is that for every patient-physician encounter, you are literally paying for thousands of administrative encounters in the background. Obamacare legitimized that system and then bolstered it with government subsidies.
But you have to have this system because medical care providers refuse to publish their rates. It is impossible to comparison shop between providers and that is something you really don’t want to do when you are extremely sick. How else could it be done?
Doctors tell me that the AMA prohibits publishing rates for procedures, even though to be part of a “group” they must agree to preset pricing. If we were allowed to have prices know before hand, it would go a long way towards allowing markets to work. Doctors claim they can’t set prices before hand as they don’t know for certain what they will run into. I say BUNK!
As a custom furniture manufacturer for thirty years I can say I also never know for sure what I will run into, what things were missed and what mistakes we might make in the process, but you can BET that my customers insist on a set price before hand. We lose on some and win on others, but it is the average that defines our ultimate profitability. For doctors to insist on a profit on each and every procedure is anti competitive and unfair to consumers who, in a time of great need, are forced to sign papers that promise to pay WHATEVER CHARGES they deem appropriate, long before having any clue what the charges will be. Even with my recent colonoscopy, i was asked to prepay the services, yet afterwards I still received additional bills for drugs, tests and anesthesia.
If we want a truly efficient and cost effective system, it must allow markets to work. Everything else is smoke and mirrors illusion, hiding and shifting costs for the next person to worry with.
But this is a free country. Physicians have a right to exercise their liberty to peaceably associate with each other and decide how to price their services. They also have a right to force you into a contract with unknowable costs if you are willing to sign it.
Of course this is anti-capitalist behavior, but America is about freedom, not capitalism or markets.
“Publishing rates” misses what a lot of healthcare is these days, management. You can get rates easily for a general office visit or for very specific procedures (like plastic surgery). But a lot of costs these days come from managing chronic conditions like auto-immune diseases, diabetes, heart problems, and cancer. The idea of using ‘rates’ precludes the managed care model where providers are paid for patients under their care and then balance costs with benefits.
Is there anyone out there actually using the managed care model? If so, is there any evidence it is showing improved results.
As I pointed out my wife has cancer and we are spending probably around $100K per year via insurance. How exactly would I use ‘rate cards’ to lower that cost? Keep in mind that providers are probably giving discounts for having multiple patients with the same policy coming to the hospital and treatment centers.
Granted it isn’t strictly a managed care model but the cost management is not at all like a ‘rate card’ model where you’re buying discreet services. I don’t think you can make this work in the way that, say, the market for auto parts works.
Is this not the exact path needed for single payer the admin ultimately wants?
Refusal of Obamacare will be legislated away. Book it.
Eventually, as designed, the ACA will morph into single payer, which will destroy what’s left of the system.
Of all the lies Obama told to sell this program; the lie that it would reduce costs was probably the biggest. How could anyone believe that covering millions of additional people and paying for all the bureaucrats to run the program could possibly reduce costs? Programs like this are only possible because of the dumbing down of America. Only stupid, gullible liberals can believe in stuff like this; but unfortunately for the country, there too many of them voting these days.
Lies and destructive policies are OK as long as they were done for the right reasons. I has to FEEL right, and cannot be about money. Any evil creature who would suggest that costs and negative effects should be considered are heartless, uncaring people who simply want others to die.
Does that sound about right??
“Only stupid, gullible liberals can believe in stuff like this; but unfortunately for the country, there too many of them voting these days.”
Stuff like this. “They hate us for our freedoms”. “The Iraq war will pay for itself”.
As Gruber said, the American voter is stupid. That includes voters of both parties and both wings. Both political parties depend on the stupidity of the voters.
The difference is that when conservatives screw up they are lynched for it in the public press, whereas you can have a secretary of state GUILTY of espionage for using unsecured servers, running for President and the press claims there is no evidence of a crime. There is no difference in politicians, but the IS a difference in accountability.
Liberals have imposed public policy that has created a mass dependency of initially minorities and now people of every stripe, in poverty and dependent upon government assistance, but they did it out of love. Let us hear someone from the left condemn LBJ for his not so “Great Society”.
“As Insurance Losses Mount So Do Refusals: “Sorry, We Don’t Take Obamacare”
So is single payer ahead of schedule?
Remember, Obamacare is a TAX. The healthcare ideal for the government perspective is that it will be provided by government and funded by taxpayers in a method that ensures that “For of those to whom much is given, much is required” as we all know that nothing we perceive as our property or wealth was earned…it was all “given”.
Or “From each according to his ability, to each according to his needs” as our abilities belong not to ourselves, but to the collective. We are imperfect creatures requiring a certain level of tyranny to bring out our best…as Marx, or any good government loving progressive liberal… will tell you.
probably
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I am currently on Kentucky’s version of Obamacare – as an individual contractor, it is the most ‘affordable’ option for my wife and myself (3 grown kids out, just us now). It costs me approx. $700/month which keeps varying as the slide it higher as your income increases – I was on subsidies last year as my start-up year for my consulting business and they helped and I’m grateful as we were living month to month on a very geared-down lifestyle as anyone who starts a new business can attest to.
Now that business is good, I’m realizing the costs, which I don’t mind sharing, but boy are they high. I purposely purchased a plan that is essentially a ‘catastrophe insurance’ policy as with $6500 household deductibles (not counting co-pays for meds/dr. visits) it doesn’t cover anything less than a major operation (except the once per year checkups) as we’ll never spend that much, God willing. we both eat smart, exercise, keep the weight off and stay out of the dr’s office. I’ve set up a barter agreement with my chiropractor for my wife and myself whereas I help with consulting advice/work and the visits are written off.
My premium went up 28% on last year’s plan prompting me to switch insur companies this year which then forced me to switch doctors – fortunately, the practice I moved into has very good doctors however I’ll be forced to go to (a good) hospital 20 miles away (in adjoining state) instead of an excellent one 5 miles away if I need it – because of in-network/out of network policies – insane.
I’ve definitely thought about ‘opting out’ as I’m effectively now paying over $8000/yr in catastrophe insurance…money that I could be saving on my own for unexpected medical emergencies – but, it only takes one unlucky fall, spot on an MRI or another unexpected trip to the ER that makes it worthwhile. Will that happen? Very unlikely, but I feel like I’m playing Russian roulette if I don’t have it.
I feel blessed I can afford this right now, but realize it’s so crazy and out of control.
Will not any politician of note ignore the lobbyists and question/urge investigation of underlying medical costs and practices that drive ‘medical costs’ and thus insurance rates higher and higher? Others may disagree with me here.
“Will not any politician of note ignore the lobbyists and question/urge investigation of underlying medical costs and practices that drive ‘medical costs’ and thus insurance rates higher and higher?”
Congressman X: “The average man on the street actually thinks he influences how I vote. Unless it’s a hot-button issue, his thoughts are generally meaningless. I’ll politely listen, but I follow the money.”
I’d be curious to hear what you remember of coverage before the ACA, esp. if you were still a contractor back then buying coverage directly from the market rather than through an employer.
Brian – prior to starting up my own business I was on the corporate side. Interestingly, those were not large companies (100-200 ppl) and never saw a year where insurance didn’t go up 10-20%. Premium as I recall was still very steep (even when shared by company) however the big difference was in the deductibles. Those were typically 2000-2500.
That’s the way I believe all of the Obamacare insur companies get past – they set ‘market rates’ for premiums but then have very high deductibles, discouraging any doctor visit beyond vital – maybe a good thing, but as I said, it becomes very expensive ‘catastrophe insurance’.
I do recall as a kid going to very good doctor (practice of two doctors) and my mom paying $25-$35 cash for the visits. No insurance coverage for basic doctor visits, etc.
What kind of healthcare system do they have in countries like Germany or Norway and is it possible to have that here?
Not really
Price controls in Europe, free education so doctors do not come out of school with so much debt, everything is controlled every step of the way in many countries.
The US in many respects has the worst or both worlds – we subsidize prescription costs – limit accreditations, and refuse to let anyone die. The latter is one huge issue. Prolonging lives for a month or so at great expense is absurd.
Mish
Much like a giant, same for all with no choice, US HMO. An (semi)assigned General Practitioner serving as a gatekeeper to the system. Keeping costs down by rationing access to more expensive services, by way of delays and hassles and outright denials. Not really any different than US HMOs.
They can run cheaper, because every actor in the whole system is captive. The government runs the hospitals (directly in Scandinavia, more indirectly via requirements in Germany), so personnel salaries are largely fixed. There are VERY stringent requirements, that must be followed by all doctors, wrt when it is permissible to prescribe non-generics vs generics. No “ask your doctor about latest $10K/year feel-good pill” over there.
Perversely causing a hefty chunk of their already meager (by US standards) research budgets to be of the “run a study to ‘prove’ non-generic drug manufactured by the Pharma that sponsors the study, is more effective than a generic”-kind. As well as money spent on hobnobbing with, and greasing, various “research ethics’ committees, who are tasked with preventing doctors and researchers from being swayed by Pharma money. Which will never work, since the only way an ambitious researcher is ever going to get enough funding to halfway compete with his US peers in the publication and presentation race, is to obtain money from deep pocketed Pharmas. Who are barred from spending their marketing budgets on anything else, unlike in “TV-ads-for-drugs” US.
“Never let a good crisis go to waste.” — Rahm Emanuel
Of course this is all part of the road to single-payer. How could it be otherwise?
The main area that generates all the headlines is the exchange driven plans. These plans are essentially the market for people who buy their own health insurance directly. This is something like 20% of the population at best and of all the types of coverage you could have in the US, it has always been the worst of all worlds. Premiums have always been high, plans were constantly churned and changed and before the ACA wherever possible people would be kicked off at the slightest evidence of illness.
But the problem with the “this is all a grand scheme for single payer” theory is that very few people buy plans off the exchange. Most people are covered by their job or they are covered by one of the US’s two single payer systems…Medicare for those who are older and Medicaid for those who are poor.
This would make any plausible move to single payer because the exchanges aren’t great unlikely. It also makes the hysterical headlines about Obamacare something to take with a grain of salt. For the vast majority of Americans, coverage either stayed the same or improved since the ACA.
first thought that comes to mind is that the people mentioned in the article are very ignorant about insurance. they could have discovered that their doctor or hospital of choice was not covered before they purchased the coverage. not every doctor takes every insurance plan. it has been that way for a long time. worse yet, all this was known before obamacare was passed, even though we hand’t yet seen all of the legislation.
the word moron comes to mind concerning the lady who thought her adult children who live in different states would be able to effectively use her coverage.
Andre, you are so, so wrong. It is very hard indeed – often actually impossible – to find out in advance if particular doctors are part of your plan: http://ww2.kqed.org/stateofhealth/2014/02/11/youre-enrolled-in-an-obamacare-plan-will-your-doctor-accept-your-insurance/. You can go online, find a list of doctors who purportedly accept it, and it will turn out that they don’t. That is extraordinarily common. Please read the article I linked – the gross inaccuracy of the databases is staggering.
No one turns away MONEY. If your doctor (or the twit who answers the phone who loves to say “we don’t accept that insurance/plan) doesn’t “take your insurance” offer to pay cash. not credit or debit but cash. You know that 3 -6 month emergency fund you are supposed to have??
remember you can pay now or pay later. A visit to the doctor or specialist that may cost several hundred or even in the low thousands is much better than facing a bill in the five or six figures later on
There are numerous reasons why prices aren’t transparent. First let me disabuse anyone of the role of the AMA. The AMA doesn’t control medicine. Less than 20% of doctors are even members. The AMA is a government captive because the vast majority of its income is from the government-granted monopoly on coding for diseases and procedures (ICD and CPT). They wouldn’t dare cross the government. The doctor part is just for show.
The AMA does not, and can not, regulate physician advertising. I can advertise my cash fees but my insurance contracts prohibit disclosing my contracted rates with them. However, the insurers have a huge database of pretty much every contract and they can fish around in there and see my contracted rates. If doctors did that the FTC would be all over us for price-fixing.
It’s possible for just about any provider – doctor, hospital, PT, etc – to give you an estimate. If you give my staff your insurance info we can go online and check your benefits and provide you an estimate of what your out of pocket cost will be. In fact, we routinely do this for any procedure. We have a worksheet that lays it all out.
If you call a hospital to get a price most likely you’ll get a ridiculous number that nobody really pays. That’s their chargemaster rate, which is why if you look at an explanation of benefits on your bills you’ll see silly things like a bill for $20,000 with a $19,000 contractual write-off (what the insurer negotiated with the hospital) and a final charge of $1,000. Then there will be whatever the insurer picked up (probably zero) and then there’s the part that says “patient owes this amount”.
Now, that’s what might happen for an emergency. For an elective procedure, these folks who couldn’t give you a price before suddenly know exactly what your out of pocket is on the day of the procedure. So you show up, took the day off work, maybe a friend also took the day off to transport you, and they need $750 before you can have the procedure done. Because they were able to find this info and do the calculation all along.
Why not tell you that in advance? Because then you could cancel and shop around. Instead, you’re faced with these sunk costs in terms of time off, fasting, etc.
There are a lot of other angles, but these are the big ones.
Here’s a question to ponder: If I do a procedure in my office I might get paid $220. That includes everything – my service, the supplies, etc. At an ambulatory center it will run maybe $530. Same doctor, same patient, same procedure, same supplies. At a hospital outpatient department it might run $825. Once again, same doctor, same patient, same procedure, same supplies. The doctor gets a lower fee for using a facility so these increased charges are purely facility-related.
Why is there such a price differential? Some people would argue that hospitals have to be open 24/7 and take uninsured emergencies and so on. What’s the ambulatory center’s excuse? They’re open 5 days/week and just do elective cases.
People will argue for the hospital’s higher price because of the hospital’s extra cost burdens, but really they are merely arguing for cost-shifting. They want my elective spine injection patient to subsidize the E.R, the the ICU, and so on. The ER should charge what it costs to run it, not dump the cost somewhere else.
Thank you for describing how this works; it is really helpful information.
This is a problem that needs to be solved and can be solved as demonstrated by countries around the world with much better health care for all at half the price. Sadly our government is totally unable to productively focus on this issue. Long term our most capable citizens will move to where they can get modern healthcare services without going through bankruptcy afterwards. The USA will be a place only for government employees with their bloated healthcare benefit plan to continue working.
Interesting how the US becomes more and more like a banana republic. In South America, there is a bifurcated medical system. There’s a government plan, which is basically worthless, and a private plan. The same will happen in the US over time. The Obamacare plans will be next to worthless, and you’ll have to pay extra if you really want to be treated. All Obamacare is a tax, that’s it.