The Fatal Flaw in Healthcare Reform

In their urge to have everyone covered by health insurance, Democrats have made sure to include a provision in their healthcare reform bills that would prevent insurance companies from denying coverage to those with preexisting conditions. Wisely, they realized that smart consumers might take advantage of this feature and wait until they came down with a serious illness before signing up for an insurance policy, so they mandated that everyone must buy health insurance from day one. To enforce that mandate, they added penalties for those who refused to cooperate.

But as Martin Feldstein explains, the penalties won't be enough to keep rational consumers from deciding it is in their best interest to be uninsured.

Consider: 27 million people are covered by health insurance purchased directly, i.e. outside employer-based plans. The average cost of an insurance policy with family coverage in 2009 is $13,375. A married couple with a median family income of $75,000 who choose not to insure would be subject to a fine of 2.5 percent of that $75,000, or $1,875. So the family would save a net $11,500 by not insuring. If a serious illness occurs--a chronic condition or a condition that requires surgery--they could then buy insurance. Since fewer than one family in four has annual health-care costs that exceed $10,000, the decision to drop coverage looks like a good bet. For a lower-income family, the fine is smaller, and the incentive to be uninsured is even greater.

And as Mark Perry notes, "What would make this choice to drop insurance and pay the penalty even more rational is the convenient, low-cost availability of basic health care from 1,200 retail clinics around the country, or through pre-paid plans like the No Insurance Club, or concierge medicine."

Ok, Congress, bring on your healthcare reform, if you dare! I'm looking forward to saving lots of money by dropping my own plan since I'm pretty healthy these days.

Comments

[Steve in Gr...:]

Thanks, Mr. Grannis, for pointing out one of the bigger flaws among the many in the Obama-Pelosi House bill.

But is it a flaw? I'm not sure. I think it is part of the overall plan to run private health insurers out of business.

Like you, I will go uninsured until I need real catastrophic coverage, and then sign up. But we won't sign up with the government's plan which will be a giant, dysfunctional, deadly HMO. Seattle had one of the first HMOs. Its real name was "Group Health", but everybody in Seattle called it "Group Death". We will sign up with one of the private insurers where we will be able to get good treatment.

Since the private insurers won't be able to recover their costs from me, they will go bankrupt and we will be forced into the Federal Group Death HMO.

Nov 09 05:06 PM

[Atypical:]

Nope.

This requirement is due to the "loyalty" that politicians have to the healthcare industry - read FINANCIAL CONTRIBUTIONS.

Run them out of business. A joke, right? You obviously care more for corporations than individuals. Why should there be a middleman when people need healthcare? Why not make it cheaper for people and more efficient without an unnecessary profit making entity? What do they really add except 20-30% overhead?

Disfunctional govt plan? Like Medicare? Another joke- oh sorry- I meant ideological remark.

Good treatment from private insurers? You mean the companies that pay people to refuse to pay for treatment? And give bonuses for high rejection rates? Those companies?
Ever hear of Wendell Potter?

This bill is bullshit because politicians only do what's right for corporations. $$$$$ rule.


On Nov 09 05:06 PM Steve in Greensboro wrote:

> Thanks, Mr. Grannis, for pointing out one of the bigger flaws among
> the many in the Obama-Pelosi House bill.
>
> But is it a flaw? I'm not sure. I think it is part of the overall
> plan to run private health insurers out of business.
>
> Like you, I will go uninsured until I need real catastrophic coverage,
> and then sign up. But we won't sign up with the government's plan
> which will be a giant, dysfunctional, deadly HMO. Seattle had one
> of the first HMOs. Its real name was "Group Health", but everybody
> in Seattle called it "Group Death". We will sign up with one of the
> private insurers where we will be able to get good treatment. <br/>
>
> Since the private insurers won't be able to recover their costs from
> me, they will go bankrupt and we will be forced into the Federal
> Group Death HMO.

Nov 09 06:05 PM

[fletchbiz:]

Funny you should say that about Group Health, Steve. I lived in Seattle for 12 years, and two of my five children were born at their Capitol Hill hospital. Out of the four hospital births my wife and I experienced, the GHC ones were the very best. Caring doctors and staff, no trouble getting our birthing plans cleared, nice facilities. My wife also had eye surgery there, and the experience was excellent. At other hospitals outside of GHC and on difference healthcare coverage, we had terrible experiences. We've had one hassle after another over the years with coverage from Cigna, United Healthcare, Blue Cross, etc.

I've always considered GHC to be the ultimate example of how healthcare should work. I currently have coverage from United Healthcare through my employer, but have often wished I could go back to GHC. My son and daughter-in-law use GHC in Spokane, Wash., and love the care they receive there.

On Nov 09 05:06 PM Steve in Greensboro wrote:

> Thanks, Mr. Grannis, for pointing out one of the bigger flaws among
> the many in the Obama-Pelosi House bill.
>
> But is it a flaw? I'm not sure. I think it is part of the overall
> plan to run private health insurers out of business.
>
> Like you, I will go uninsured until I need real catastrophic coverage,
> and then sign up. But we won't sign up with the government's plan
> which will be a giant, dysfunctional, deadly HMO. Seattle had one
> of the first HMOs. Its real name was "Group Health", but everybody
> in Seattle called it "Group Death". We will sign up with one of
> the private insurers where we will be able to get good treatment.
>
>
> Since the private insurers won't be able to recover their costs from
> me, they will go bankrupt and we will be forced into the Federal
> Group Death HMO.

Nov 09 06:30 PM

[Lincolnpark:]

In Massachusetts, which has put in place a model of health insurance reform similar to those being discussed in Congress, insurers are not allowed to deny coverage due to pre-existing conditions. To prevent the practice you describe, they can impose up to a twelve-month waiting period before treating a pre-existing condition unless the person was previously insured. Bottom line, if you stay insured, you are covered for anything, even if you change insurers. Your strategy won't work if the national plans being discussed have a similar provision.

The results in Massachusetts have been quite good--4% uninsured rate, very competitive market for policies with a state-managed marketplace to rank and compare them, and it continues to be one of the highest-quality health care regions in the country.

Nov 10 08:17 AM

[john s. gordon:]

atypical -
how do you know that the overhead of the health care monopoly cartel corporations is only 30%? these entities are enormously profitable & intend to keep it that way.
> jack

Nov 10 08:53 AM

[bigduke:]

We have coverage under Kaiser. Best of both worlds. Pension is billed for the monthly fixed fee.

Advantage is that almost all needs are in house. Others are paid when needed.

Eight million members use this system. It started in War II to keep shipyards workers healthy. Prevention kept the yards working, rather than waiting until the person was ill. It still works.

It is not available in all states, but where it is look into coverage for your health care. And not all employers will offer it.

And the whole system is on computer records. So any treatment is recorded in a way that the primary MD can review specialists treatments. Each exam room has a terminal where data is entered or reviewed.

No unreadable paper scribbles for medical records. Rx can be sent direct to the pharmacy. Any system pharmacy can refill same. Copay for refills can be done on line at less cost than the live person dispensing. This saving is now two dollars each refill. Not much, but saves gas by a phone or on line refill that arrives in a few days.

We would not consider living where this or a similar system is not available. Prevention pays!

Nov 10 09:14 AM

[YoYoMama:]

The fact that you quoted Mark Perry on the issues shows me that you haven't put much research into your article. Mr. Perry has provided some of the most comical, lame-brained posts on the issue of health care that this forum has seen, mainly because his "research" is sponsored by the health insurance industry.

Likewise, this post, which slams Group Health - which frankly is a model for what SHOULD be done, as agreed to by both Republicans and many Democrats - and offers no proposal for a solution, shows me this is just another autopilot knee-jerk negative response to an issue that deserved a more thoughtful discussion by posters on SA.

I would agree that we are not currently getting out of Congress what we need to fix the situation. That doesn't mean our system is necessarily working to the benefit of all and that the issues shouldn't be addressed.

Nov 10 10:00 AM

[retfldoc:]

Even young healthy people can develop serious illnesses. If you have a stroke and are admitted to the ICU the expenses could run to six figures before your insurance application is approved. So this strategy is only for those with the financial means to pay unexpected medical costs. Even non emergency illnesses pose a dilemma. A woman notes a lump in her breast. Does she pay for the imaging tests, consultations, biopsy and pathology and then if the biopsy is positive wait for her health insurance application to be approved before starting treatment?

Nov 11 04:46 AM

[WayneS:]

The bottom line is that we are going to pay $1.2 trillion to supply/force health insurance to 8% of our population.

Nov 17 11:11 AM

[mughi312:]

As the premiums for employer purchased health care increase 6-9% per year, the number of employees covered by private employer plans is decreasing by 1-1/2 % per year. In the near future, less than half of private company employees will be offered health insurance benefits due to the overwhelming cost. It is currently just 53%. The cost of benefits, including payroll taxes, is approaching 10-12 $/hr for an average wage earner. If your employer must continue to pay premiums for health insurance in the current inflationary spiral, how much money do you think he will have to leftover for you in the form of raises? The cost of health insurance and healthcare in this country is a cancer, lowering inflation-adjusted real wages and making US workers less competitive in the global market for labor. No reform is not an option. The current system is irreparably broken. If you start by accepting these facts, then we can start to have substantive discussions about reform. If you want to stick your head in the sand and pretend everything is OK, just as long as I still get mine, then we are bound for more of the same. IMHO.

Nov 18 09:04 PM

[Jeff Riley:]

"health care monopoly cartel corporations" making 30%!! If that were true why have carriers exited the medical market in droves? We're down to 4 national carriers (UHC, Aetna, Cigna, Blues). If I had a profitable lemonade stand, wouldn't potential competitors see this and try to emulate? If my lemonade stand went out of business, would that bode well for the stand on the next block? With extensive malpractice reform, the cost of coverage would drop so far overnight, we wouldn't need national healthcare. Obama and the democrats won't even discuss it.

Nov 19 01:39 PM

[WayneS:]

"Health Care" is broad and ambiguous.
What needs to be done is to break it down into individual units, define the subject, decide if it needs reform/fixing or not.
I have noticed in Congressional bills,state amendments, etc, what it says and what it does rarely are the same.

Nov 20 10:18 AM