Monday, August 24, 2009

Maine Points of Obamacare

Proponents of health care reform say one reason for a public option is that it will introduce competition in the market place which will result in lower premiums.

On the surface, the argument seems to have merit. More companies offering more plans means more choice and lower pricing.

The problem is, they picked Maine to make their point.
Several studies show that in lots of places, one or two companies dominate the market. Critics say monopolistic conditions drive up premiums paid by employers and individuals.

Wellpoint Inc. accounted for 71 percent of the Maine market, while runner-up Aetna had a 12 percent share, according to a 2008 report by the American Medical Association.
Wow! One carrier has 71% of the market.

Wonder how that happens?
"There is a serious problem with the lack of competition among insurers," said Republican Sen. Olympia Snowe of Maine, one of the highest-cost states. "The impact on the consumer is significant."
Could it be because the legislature in Maine decreed that health insurance companies would not be allowed to refuse coverage to anyone at any time due to pre-existing health conditions? In other words, if you apply for health insurance the company must issue a policy and cover your conditions, no matter how sick you are or how expensive it is to treat your condition.

Any health insurance company who wishes to write health insurance in Maine must "guarantee issue" all plans to all people at all times.

Maine is also a community rating state, which means there are upper limits on how much a health insurance company can charge for coverage.

Both guaranteed issue and community rating are key points of HR 3200, commonly known as Obamacare.

Both provisions drive up the cost of health insurance for everyone and drive away carriers who may want to compete in a free market.

Don't you find it disturbing that Olympia Snowe has no clue why there are so few health insurance competitors in her home state of Maine? Not only does it have very few competitors, but also has some of the highest premiums in the country.

And the linked article mis-states the problem. Maine is not a high cost area for health care. There is nothing to indicate doctors and hospitals in Maine charge any more than in neighboring states.

But the repressive health insurance regulations result in some of the highest premiums in the country.
Proponents of a government plan say it could restore a competitive balance and lead to lower costs. For one thing, it wouldn't have to turn a profit.
This is true.

A public plan, like Social Security, Medicare, Medicaid, Cars for Clunkers, etc. are never required to turn a profit. In fact, they can lose money month after month, year after year, and never worry about turning a profit or even breaking even. They can run a deficit year after year until the taxpayers run out of money to fund these plans.
"Right now, there's no incentive for insurers or big hospital groups to negotiate with each other, because they can pass higher payments on through premiums," said economist Linda Blumberg, co-author of the report. "A public plan would have the leverage to set lower payment rates and get providers to participate at those rates."
Where did Linda Blumberg study economics? It appears she did not earn a passing grade in her studies.

The incentive for carriers to negotiate lower provider fee structures is to lessen the amount they pay for health care. When you can get health care at a lower price than your competitors, you can pass those savings along in the form of lower premiums.

What part of that is lost on Ms. Blumberg?

A public plan, such as Medicaid, does have leverage. When you have 39,000,000 individuals on a health insurance plan paid for by taxpayers you have leverage. So much leverage that you can name your price and providers have to take it if they want your plan participants.

Of course medical providers lose so much money on Medicaid and Medicare patients that they cost shift those losses to private pay patients . . . those who have health insurance. But if the public plan eliminates the private health insurance market will health care providers abandon their profession? How much money do they have to lose before they say "enough"?

Smaller cars, bigger health insurance, Poppa Washington.
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