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My brother Crab just got his Obamacare rebate in the mail, and it got us thinking, like most things do.
You’ll probably get one too if you haven’t already.
My brother’s was only forty bucks, but many people will get back hundreds. Some businesses that hire and insure hundreds or thousands of employees should be getting back tens of thousands in insurance rebates. Nationwide, American ratepayers and businesses will be getting back $1.3 billion from their greedy insurers
This is all due to the “80/20 rule” in Obamacare that requires your insurance company to spend at least 80% of your premium dollars on health care, and no more than 20% on their administrative expenses, marketing, advertising, CEO pay and profits.
One of the first things we thought is that, any minute, Republicans will start squawking, “Obama purposely timed this to help his re-election!”
To which the correct response is … how do you spell that again? “Bwahahaha!!!!!!!”
Me and Crab think a lot, granted,
but most Americans think AT LEAST a little bit…
and…
They’re bound – even the ones who don’t generally vote Democrat – to think to themselves, “Wow, my insurance company was spending more than 20% of my money on administrative costs, marketing, advertising, CEO pay and profits?”
And a little later they might think to themselves, “Wait – why are they even allowed to spend TWENTY PERCENT of my money on administrative costs, marketing, advertising, CEO pay, profits? That’s actually a lot.”
And also, if they’ve been paying attention at all, “Doesn’t Medicare, the VA, etc, only spend THREE PERCENT on administrative costs, and NOTHING on marketing, advertising, CEO pay, or profits?” (And they’d be right, and doing themselves credit as thinking Americans, to think that.)
And then they might wonder HOW MUCH, counting profits, insurance companies have generally been spending out of their premium dollars that has nothing to do with their health. And there I can help them – I remember this figure from back when I used to agitate for single payer in California – 35% of the average private insurance company’s money went to administration, marketing, advertising and PROFITS, before Obamacare kicked in. 35%.
And they had a name for that other 65%, the money they wasted on getting you medical care when you needed it (if you were lucky.) They called that “medical losses.”
Yes, medical losses. That’s what they called it. In the bad old days before Obamacare.
Some other things thinking Americans will go on to think,
during this election season:
“Wow. And Mitt Romney swears he’ll get rid of this Obamacare on his first day in office? And we’ll be going right back to being unceremoniously reamed by the big insurance companies like we were before? Maybe Obama’s not all that bad after all.”
And if they think even just a little bit more, they’ll realize that, even though it’s called Obamacare, it was passed purely by Democrats in the Congress … In fact, BARELY passed by Democrats, over every possible howl, scream and tactic of the Republicans, during that TINY space in 2009 where Democrats actually had control of the Senate – the space between when Al Franken finally escaped from Recount Limbo and when Ted Kennedy died and got replaced by some Naked Guy With A Truck.
And they might remember, seeing on the teevee, that the Republican Asshats in Congress have just recently “repealed” Obamacare for the 33rd time, thinking their knuckle-dragging base will be real impressed by that. And over in the Senate, sad tortoise-like Mitch McConnell has been asking for permission to do his own little ceremonial Obamacare repeal too. And didn’t Obamacare just barely survive a Supreme Court challenge brought by the nation’s Republican Attorneys General? Yeah it did…
And they might start saying to themselves, if they’re thinking Americans who aren’t used to voting Democratic, “Damn, today’s Republicans REALLY DO like to see us all get swindled by big insurance companies. Honey, maybe we should think of NOT voting Republican this year.”
And now that they’re on that slippery slope,
they just might CONTINUE thinking…
Why do we need to be wasting 20% of our money on insurance companies’ profits and advertising anyway?
Didn’t I hear somewhere that Medicare spends only 3% on administrative costs, and all the rest on health care?
Didn’t I hear somewhere that every other civilized nation HAS Medicare For All its citizens?
What’s wrong with America? I want that here!
And once enough Americans start thinking that and insisting that, we can make that happen. Single-payer, now known as Medicare For All. Cut out the greedy parasitic middleman because our health and OUR wealth are more important. We can even get that started HERE in California first!
And on the other side of the argument . . .
I got my letter from my insurer stating I didn’t get a rebate because they spend more than 80% on healthcare, which made me wonder: How much did my insurance company have to spend to comply with a law that adds no value to the consumer? If they didn’t have to mail each of their subscribers to inform them that they already comply with the law, how many orphans in Bangladesh wouldn’t have died from disease that my insurance carrier would have been able to prevent by donating what it paid in stamps to the charity of their choosing?
Don’t get me wrong, I’m all for refunds, but clearly this was already being addressed by the market. Insurers who spend money on healthcare get better clients. Forcing them to mail (seriously– no email? Typical big government . . .) is a very small example of why Obamacare isn’t all what it’s cracked up to be.
In other words– if you don’t like that your insurer spends less than 80% on medical care, get a different one. I did and I didn’t need big brother to tell me to do it.
I suppose maybe YOU could switch from one insurer to another since you’re young and don’t have any pre-existing conditions – another thing that Obamacare addressed.
I’ve been thinking – your company sounds unusual, spending MORE than 80% on heathcare. Can you tell us who they are?
Also I wonder how much they spend on healthcare BEFORE 2012. The law in Obamacare went into effect this year, and the companies that send rebates are the ones who didn’t comply quickly enough, which (I think) is most of them. If your company started spending (more than) 80% on healthcare in order to comply with Obamacare … then it sure doesn’t negate the necessity of the reform as you want it to.
I have an HMO through United Heathcare (formerly Pacificare).
Great question on the spending profile pre-2012, but I don’t think it’s likely that health care reform impacted spending ratios.
To be clear, I have not (and will not) make a claim that healthcare reform isn’t necessary. I am stating that there are market solutions to the 80/20 rule and that a price floor and mandatory reporting to consumers on a company’s spending profile do not add as much value to the marketplace as it would appear on first glance. If anything, the 80/20 reporting rule indicates that there’s substantial waste and room for improvement in the legislation.
” If anything, the 80/20 reporting rule indicates that there’s substantial waste and room for improvement in the legislation.”
It’s also a legislative responsive to insurance industry abuse. SOMEBODY has to rein these greedy bastards in.
Market solutions? Yes, the market is SO good at policing itself and placing the health of the consumer above all else.
“Somebody has to reign these greedy bastards in.”
Ah, indeed. I believe that’s a quote from Lenin.
Unfortunately, that’s not what the 80/20 law does. It only places a preference as to what “greedy bastards” actually get the take (alternatively stated, some greedy bastards are more equal than others.)
There’s no 80/20 rule for doctors, pharmaceutical companies, health care administrators, or for health care union management. They’re welcome to charge and negotiate for contracts that benefit them as much as possible. These are the folks who get paid and the folks who are ultimately responsible for high health care costs. The reason that health care is so much cheaper in single-payer systems isn’t because of the decreased profit margin from the insurance company . . . it’s because they force doctors to work for significantly less.
So, while you’ve blamed those bourgeois bastards over at HealthCo for taking their 21% cut, you’re just fine with Dr. McBoobJob driving his $250,000 Ferrari between his office in Beverly HIlls and his $6MM beach house in Corona Del Mar.
Meanwhile, the government just provided a huge disincentive to negotiate billable rates with the aforementioned preferred greedy bastard club. Prior to the 80/20 rule, every dollar that they could negotiate away from doctors, unions, management, and pharmaceutical companies was either money in your pocket or money in their shareholder’s pockets. Now they get penalized on their balance sheets by issuing a refund. Do you think that’s going to sit well with shareholders? Absolutely not. Guess who gets to make up for it.
In the new world, the only way to make more money on the insurance side is to pay more out to health care providers (80/20 is a fixed ratio . . . they make $20 on each $100 collected. If they collect $150 instead of $100, they’ve made an extra $10.) So now, your doctor will get paid more, so the company gets more, which means YOU PAY MORE, because the market really does do a better job.
Look, the above conspiracy theory isn’t exactly reflective of reality– but let’s not operate under the delusion that we can mandate cheaper health care by demonizing the insurance industry.
Granted, the system is complicated and dysfunctional and there is plenty of blame to go around.
But you’re not willing to “demonize” the insurance industry? Seriously?
Why would I? I pay for a product, they provide it at a reasonable rate, the service they provide is excellent, and I’m happy.
What’s to demonize about that?
The fact of the matter is this: The insurance industry in the United States saves lives. Perhaps you (and others) would like them to save more lives for less money, which is a valid concern. To make them out as money-grubbing “greedy bastards” completely ignores the good work that many of them do on a daily basis.
They “save lives?”
They are unnecessary. Sometimes they save lives by not getting in the way. Sometimes they get in the way and cost lives.
And I understand the compassion aspect of not wanting to demonize a PERSON, but demonizing a corporation or an industry – that’s fair game for sure.
Private, profiteering insurers need to go the way of slaveowners and slavedrivers. Sure, they contributed – they helped keep the economy booming along. But who now can imagine sticking up for them and saying “some slaveowners are not as bad as others, and they shouldn’t all be tarred by the bad ones.”
Lots of people did.
They absolutely save lives. Again, it sounds like you’d (and others) prefer they’d save more and be a whole lot cheaper.
So, where do you draw the line Vern? Does a doctor who makes $450,000 a year qualify as a “greedy bastard”?
How about the equipment manufacturer that charges $120,000 for an operation necessary to save a cancer patient?
The pharmaceutical rep who demands $600 a month for those suffering from chronic pain?
Or the insurance rep who pays all those bills because of a contractual arrangement with their insured? They absorb these exorbitant costs and provide life saving/improving medicine.
I don’t see the correlation between a medical insurance provider, that I agree to pay, and a slave owner. That sounds like pretty ridiculous hyperbole to me. If you want to really stick with this comparison, label the slave owner properly, which would be on the medical providers themselves. Insurance providers would either be operating the market or owning the transport ships. Again, ridiculous, but stick the label where it belongs. I don’t think running around calling doctors and nurses slave owners is going to work too well for you.
Let’s see … those three greedy bastards? I’d say yes for sure on the equipment manufacturer and big pharma. They get much bigger profits than they need, and spend much more than they should ever have to on marketing and advertising, and we need to be able to bargain them down, a right the government constantly gives away, most recently as a compromise in Obamacare.
That $450 K doc I’m not sure, what he does exactly, how much his education cost. The OC’s single-payer champion Dr. Don McCanne has written “Some specialists will need to get used to having only two sports cars instead of three.”
I bring up the comparison between for-profit health insurance and slavery simply because both practices are so barbaric. We just don’t all see yet how barbaric and unnecessary for-profit health insurance is. It’s easy for us all to say NOW that we all would have opposed slavery, but back in the mid 19th century, it seemed pretty natural, and normal, and AMERICAN. Like for-profit health insurance seems now.
Also you sometimes hear folks fret about the jobs that will be lost in the for-profit health insurance industry, and I sometimes find myself responding, “Well, slave traders and slave drivers managed to find themselves a new line of work, so can they.”
That’s about as far as I take the comparison…
So Mr. Cantor receives health insurance at a “reasonable” rate, and he’s “happy” with the service they provide.
Well Mr. Cantor, in case you hadn’t noticed, there are many, many people (and those numbers are growing) who are unable to afford those so-called “reasonable rates” and they are far from “happy” with the service they get from insurance companies.
But this is the pattern I see…those who are most prone to supporting the private insurance market are those who have been least burned by it’s greed and perniciousness.
Oh and by the way, some of those people who can’t afford those insurance premiums are folks who have insurance through their employer but would like to strike out on their own, follow a dream and start their own business. But they can’t because of the exorbitant insurance premiums. Either that, or they know they’d simply be denied coverage due to a pre-existing condition.
Is the private healthcare insurance market stifling creativity and entrepreneurship? Nahhhhhhhhh.
Whoa whoa whoa, back the truck up.
I would also like a new car, but I can’t afford it. Does this mean that Ford is Satan?
I have not and will not argue that healthcare reform isn’t necessary; however, directing all the bile at insurance companies is not helpful. I’m also not saying that the current healthcare insurance system is the best thing since sliced bread.
For the record, I have not been burned by an insurance company be lit auto, home, rental, life, or health. I’m sure that certainly biases my opinion.
Desiring a new car wouldn’t give one pause when starting a new business.
The cost and availability of health insurance would.
Of course it would. A new car, office, office equipment, inventory, retail space, health care– whatever . . . they’re all costs. Some are fixed capital investments while others are variable expense.
The price of rice in China has just as much impact on small business start ups (or those attempting to stay in business) as much as healthcare costs . . . provided you’re selling rice.
We are not getting this across to you obviously.
If you’ve got a choice between changing jobs and risking LOSING YOUR LIFE through lack of insurance … that is absolutely NOT the same kind of choice as whether or not to make an unwise investment in a new vehicle when your new job might not pan out.
OK, Vern, let’s assume that like MOST physicians, the cost of his or her education was subsidized by the state. Is the doctor only entitled to a 20% markup on his or her services? If his or her education isn’t subsidized, are only graduates of Harvard entitled to three sport cars instead of one Prius like the nurse that went to night school?
YOu’re going beyond my pay grade there. And I don’t have to go beyond my pay grade. All I know is that for-profit insurance is unnecessary, wasteful, and costs lives.
I also want to save money throughout the gigantic complicated inter-related health care system any way we can.
Vern, you’re shifting the goal posts on me.
Cutting the argument short, you’re not adequately exposing the liabilities of a single payer system. That 3% number you’re throwing around for Medicare is a misnomer. A doctor providing care to a patient on Medicare only receives a fraction of what she or he would otherwise take from a cash or patient with standard insurance.
Rather than highlighting the evils private healthcare insurance, you should be highlighting the real beneficiaries of the US Healthcare system– Doctors, healthcare workers, pharmaceutical companies, and equipment manufactures.
The reason that public insurance works where it does has very little do to with their administrative burden and everything to do with their ability to force medical providers to accept what they’re willing to pay. To compare the viability of United Health Care to Medicare when it only costs Medicare 30% (mandated by LAW) for the same services is outrageous.
If you want doctors to take a 70% pay cut in order to facilitate public health insurance, fine– but be transparent about it. Chalking it up to 3% administrative costs versus 20% in the private sector is misleading and just untrue.
I wouldn’t think doctors would need to take a 70% pay cut, in order to make our system affordable and universal. A much more modest cut, along with savings in all the other areas you and I have mentioned, should be enough.
Alright, looks like we can agree on this!
My 33 year old daughter couldn’t get insurance for her Hodgkin’s disease and was thankful when charities offered to step in so she could save her life. Now after chemo and radiation she is in remission. Never will she be cured, but remission is really good. Now our family pulls together to pay back the medical bills because even charity isn’t truly free, at least in this case. Those who can must pay back the debt to their best ability.
We were strong supporters for single payer years ago, not suspecting it would hit home so closely. We continue to support legislation that crushes through the heavy ice of the insurance mafia! It is shameful that this great nation is so enamored of corporations and so disdainful of thinking patriotic voters
Vern, I just read your “Obamacare Insurance Rebates start appearing in the mail. Bwahahaha.” Both a fine job on the substance of your thinking, and very entertaining writing too (I smiled at your many visual adjectival phrases, like “knuckle-dragging”). Also a good reply to Ryan Cantor. I agree that thinking logically about the ins. companies’ rebates leads on a straight line to Medicare-for-All.
Let me also throw out this: From the moment I heard the 80%-20% rule (for individual plans; 85%-15% for group plans), then realized nothing in PPACA nor in most states’ insurance regs imposed any premium price control, it occurred to me that b/c the “medical loss” (i.e., as you say, $$ paid out for actual healthcare) minimum in stated only as a % of cost of premiums meant this: If an ins. co. isn’t spending a high enuf % on healthcare, and wants to keep skimming off the same number of dollars for ads, backroom admin. costs, exec bonuses, dividends, etc., all it has to do is raise its premiums’ cost, so that same # of $$ suddenly becomes a lower %. The only thing restraining their doing so would be competitive market forces, which ain’t that strong.
For example: Take an ins. co., spending only 75% on actual health care, that needs to hit the 80% mark (for its individual plans): Say its premium costs a given family $8,000/yr. It’s paying out $2,000 for admin. costs, ads, exec. salaries & bonuses, dividends, etc., and wants to keep doing so. All it has to do to comply is jack up premiums by 25%, to $10k/year, and, bingo!, that same $2,000 now drops to 20% of premium cost, and “medical loss” moves up from 75% to 80%. If “competitive market forces” let the ins. co. get away with such a premium hike, it’s now complying.
You’ve hit on the glaring weakness of Obamacare…the lack of any meaningful policy that will lead to cost control.
It’s no wonder the insurance companies were huge fans of the outcome.
There is more to this than the medical loss ratios of private insurers. The insurers under the Affordable Care Act are allowed to keep 15% (large group) or 20% (small group and individual) for administrative costs and profits. Medicare’s administrative cost is truly only about 3%. The administrative costs for third party payers in other nations are also much lower than in the U.S, even in those nations that use private insurers in their social insurance programs.
What is often left out of these discussions is that private insurers place a tremendous administrative burden on physicians and hospitals. Of private insurance payments made to physicians, 14% goes to billing and insurance related functions (bir), and for hospitals it is between 7% & 11%. Including the 8% used by the insurers for bir, 20% to 22% of private insurance spending goes to billing and insurance related functions alone. This does not count other administrative costs for insurers (an additional 9.9%), physicians (27%), and hospitals (21%).
It is this profound administrative waste that is found only in the United States. If we were to switch to a single payer national health program, about half of the administrative costs would be recovered – roughly $400 billion – enough to expand coverage to everyone.
It is not that the insurers are evil people. They are simply businessmen, trying to obtain as much money as they can for their primary product – administrative services, plus as much profit as the market will bear. It’s just that we don’t need them. Their product is far too expensive, mostly totally unnecessary, and often results in a net negative because of their intrusion into the patient/physician relationship.
Yeah. What Don said.
I agree with all of that, except…
you don’t think that an insurance executive that would green light the practice of recision and offer incentives to employees who can find policies to cancel is an evil person? I do.
Definitely. Anyone resembling the CEO from _The Rainmaker_ fits squarely into the dead center of evil.
That said, ever look at a statement of benefit for a hospital stay? The hospital and doctors billed my insurance $14,000 for the _routine_ birth of my son. Due to agreements in place, my insurance paid out $5200.
The greatest benefit of a single payer system isn’t elimination of administrative burden– it’s forcing doctors and hospital to accept significantly lower rates. Everything else is just smoke and mirrors. That $4billion number thrown around above has just as much to do with hospital administrators trying to game their buck as it does insurance boards trying to get theirs.
If you’re going to advocate for it, fine– but be clear you’re demanding the doctors and nurses take a pay cut. That’s the bottom line and where all the savings and unintended consequences truly reside.
” The hospital and doctors billed my insurance $14,000 for the _routine_ birth of my son.”
Do you know how much of that the doctor got, and how much the hospital got?
You say that cutting the pay of doctors and nurses is where “all” the savings are…but isn’t that an overstatement? All? Really?
How about we do away with for-profit hospitals? Any savings there?
No, I don’t.
Replace all with significant majority. You’re welcome to look up physician salary scales yourself. Start with the US vs. Britain. Perhaps I’m outdated, but it was shocking the first time I saw it.
Don’t get me wrong– I’m all for reform and I think that making money off of someone’s illness or injury is well . . . questionable– but that’s economics. If I’m sick or injured, I want the best and I expect I will have to pay for it (which sucks, right?) I think if we’re going to get rid of for profit hospitals, we ought to be willing to pay the associated costs OR to reform how we select, train, and compensate our health care providers. The current system is not conducive to providing unlimited healthcare to everyone. Absent total reform, half measures like closing for-profit hospitals have too many unintended consequences.
Greg, sounds like you have a feeling for where I’m coming from. Thanks.
Well, you keep harping on doctors, and suggest we compare their salaries with those of doctors in Britain.
Fair enough, but then you seem to downplay the profit motive in many hospitals. I’m not for half measures either…and if you’re really not favor or them, then the emphasis on doctors seems to me to be contradictory to that perspective.
Much about our system is rotten…and the percentage of GDP we spend on healthcare keeps growing. To say the path we’re on is unsustainable would be the understatement of the century.
Oh, and I’m not suggesting we close for-profit hospitals…I’m suggesting we remove the profit motive from them.
Ryan, here’s the truth: Obamacare barely passed as it was. If he had taken on doctors, hospitals, and Big Pharma at the same time (as I’d have preferred), it would have failed miserably.
Think of it as a base camp that will be used to scale the summit of achieving true health care reform that includes cost-cutting. Let’s see how much reducing the administrative burden increases doctors’ quality of life. For many, perhaps most, that trade might well be worth it. I do believe that most of them got into medicine to cure people, not to wrassle with insurers.
“The greatest benefit of a single payer system isn’t elimination of administrative burden– it’s forcing doctors and hospital to accept significantly lower rates.”
Compared to what we now have, eliminating administrative waste actually is one of the greatest benefits of single payer. That said, prices are also a major problem in the United States. However, the greatest benefit of the managed care revolution was the introduction of contracting for rates with physicians, hospitals and other services. The problem is that the private insurers have been very weak negotiators on prices. Check the S&P Healthcare Economic Indices and the commercial curve (private insurance) follows a much higher trajectory that the Medicare curve. Thus we already have price controls, and we can improve them on them through single payer, but we will not be able to introduce significant administrative efficiencies until we replace our current fragmented financing system with a single payer system, or some other similar model of highly-regulated social insurance.
Regarding physician incomes under single payer, we really don’t have to be concerned. Single payer is designed around the patient, but part of that design is to be certain that health care professionals will be there when needed. We can look at the experience in Canada. The brief article at this link will show that with the introduction of single payer in Canada, not only was physician income not harmed, they remain the top earners in Canada.
http://www.pnhp.org/news/2011/july/impact-of-single-payer-on-physician-income-in-canada
Ahhhhhh Good ole Americans…. Specially Democrats….hating those who make more $ or have nore than them….(there are a lot of super rich Democrats folks…shock!!) and rich is always those with more than me but I don’t want to share with those having less than me….. Everyone is rich to someone else. Thats called free enterprise!!
Since there are so many economic experts on here knowing how to run very efficient companies .. I’m wondering why THEY aren’t starting their own companies?