ncalmd's  Instablog

     As I hope to be continue practice solo for the next 20 years or so, I have a significant interest in "healthcare reform".   I am somewhat puzzled by the bill passed by the House, although admittedly I have not studied the bill in detail and have relied on summaries from those claiming to have analyzed the bill.  In case your inclined to view this in some way as disguised political ideology, if I had my choice we'd scrap our system and move to a national health insurance system very similar to the Dutch.  Whether you are opposed or in favor of national health insurance, I'd urge you to spend a couple hours reading about how the Dutch system is financed.  It is run by private insurers.  However, moving to this type of system would require dramatic  legal and regulatory changes, and I don't see either party as willing to take this on.  So we have what we have, and hopefully I can stimulate some thought that may translate into some insights into medical markets for those of you that are interested, and stimulate your interest in an area of our economy that is consuming around 5% more of our GDP than necessary. 

Although we'll have to wait on the Senate to know what health insurance reform will look like, the following two area's will be addressed and will prove consequential to those purchasing private health insurance.

1)  Expansion of Medi-caid eligibility:  

Although we will only know how many people will obtain insurance coverage through this method when the final bill is signed, depending on income guideline, this could provide insurance coverage for a large portion of those currently uninsured..  Although it varies from state to state, Medi-caid programs pay less and often far less than Medicare and private insurance for the same services.  This underpayment translates to overpayment by Medicare and private insurance.  Given the financial difficulties being faced by most state governments,  It is certain that the percentage of the subsidy being provided by Medicare and private insurers is certain to rise. 

2)  Pre-existing illness:

This is truly the wild card for those currently covered, as well as those hoping  to obtain coverage from a private insurer.   The question is what form will this issue end up taking.   If insurers are prohibited from charging an increased rate to those with pre-existing illness without any other constraints, it will significantly increase the cost of insurance for those that are healthy, and significantly decrease the cost for those that are unhealthy.  This will also decrease the numbers of the unhealthy who would otherwise end up on Medi-caid plans when they exhausted their resources.  If there is no waiting period other than the time it takes to process applications, this would serve as a significant disincentive to obtain insurance coverage unless you have assets that would be depleted by hospitalization before being covered. Thus the longer the period for exclusion of pre existing illness, the less overall rates will rise.  Unless the "government option" underprices the private insurers, it is a certainty that rates for subscribers will rise, and less people in the older age ranges, say 45-65 will be able to afford coverage.  And it is precisely this group that is struggling the most with current premiums.