Fisking the Gray Lady

Several years ago, I had the pleasure of being interviewed by the New York Times' Reed Abelson. For whatever reason, that interview was never published, but she struck me as a very nice lady, hindered only by some major blinders.

I was reminded of this today, when FoIB Holly R sent along the link to Ms Abelson's latest opus:

"With a court decision on Monday declaring the health care law unconstitutional and Republicans intent on repealing at least parts of it, thousands of Americans with major illnesses are facing the renewed prospect of losing their health insurance coverage."

Sounds pretty urgent, doesn't it?

But when one reads past that attention-grabbing intro, there's a lot less here than meets the eye. Her primary focus is on the lifetime caps. Now, I'm on record as having no real problem with lifting the lifetime maximum on policies: for one thing, the number of people who'd be affected is vanishingly small (as we’ll see in a moment); for another, the actual cost of this "benefit" is negligible. But that doesn't mitigate the fact that the bill itself is so rotten that it is unsalvageable. If the lifetime cap needs to go, then it needs to go, and this can be addressed when it's repealed and (perhaps) replaced.

In support of her position, Ms Abelson dredges up an old canard:

"The legislation put an end to lifetime limits on coverage for the first time, erasing the financial burdens, including personal bankruptcy, that had affected many ailing Americans."

Ahem:

"Credit-card debt, which went from $4,800 to $7,300 per household. Another factor is that it's often beneficial, given the alternatives, to declare bankruptcy. At most, 29% of bankruptcies are caused by medical bills, and even that's likely an overstatement."

She then abruptly changes course, declaring that "even Republicans concede that a full repeal is unlikely." I challenge her to name one current Republican congressperson who's stated this. In fact, every single Republican Senator has signed onto S. 192 (The ObamaRepeal© Bill).

Project much, Reed?

Earlier, I opined that the number of people affected by the lifetime caps was "vanishingly small." Any idea just how small? Try "an estimated 20,000 insured Americans reached the lifetime limits of their coverage each year." Now, in the blog world, we have something called "fact-checking," which pretty much requires that one back up statements like this with a citation or link. One supposes that the NYT imprimatur is proof enough, because documentation certainly isn't forthcoming.

Finally, it's all about the narrative: Ms Abelson uses the sad story of cancer patient Hillary St. Pierre, whose coverage was slated to run out under her plan's lifetime max. Buried many, many paragraphs in, we learn that, even if her plan bailed, she "also now qualifies for Medicare." Way to bury the lede, Reed.

As I mentioned, removing the lifetime caps may well be a good, workable idea. But to paraphrase Judge Vinson, "it's not the Removal of Lifetime Caps and Pay for Preventive Care bill."

I doubt we'll see that story in the Gray Lady.

Clue for the Gray Lady: D'Uh!!

Full disclosure: several years ago, I had the privilege of being interviewed by the NY Times' Reed Abelson, a very nice lady. She apparently has (or shares) the "health beat" for the "Paper of Record," and seems at least interested in what the blogosphere has to offer.

That said, I really wish reporters like Ms Abelson would spend at least an hour or so boning up on simple economics:

"Instead of sharing the pain, as they have generally done in the past, employers chose to keep their costs steady by passing the higher costs onto workers."

Here's that clue, Reed & Co:

Employers don't pay any premiums. They don't share in them, they don't "pass them along."

Once more: Employers. Don't. Pay. Premiums.

They collect them and send them along to the insurer(s).

Of course, reporters aren't the only folks guilty of this ignorance: President Obama (and others) are currently touting a "tax break" for businesses, which is based on another false assumption; as with premiums, businesses don't pay taxes, they (you guessed it!) collect them.

By way of analogy:

A few years ago, I was treated to lunch at a fairly nice restaurant. As I was chewing my salad, I felt something cold, hard and metallic clatter against my teeth. Spitting it out, I saw that - along with the croutons - I had been served a nut (as in "nuts-and-bolts" nut). When I pointed out this faux pas to our server, she offered to take the cost of the meal off the check. Which was nice but, seeing as how it wasn't my check (but they were my teeth!), I failed to see how this helped me.

Just like me and my "free" lunch, businesses don't pay the tax tab, so offering them a "freebie" is of dubious value. What would be beneficial would be a "regulations" break; a respite, as it were, from the onerous new rules encompassed in Obamacare©. Now that would be a break worth chewing on.

I Spine

A while back, Bob blogged on the phenomenon of physicians "expanding" their practices with non-traditional "extras" in an effort to bolster revenue. For example, one physician added botox injections and hair removal to the list of services she offers, which apparently help to offset decreases in other areas of her practice.

According to the NYT's Reed Abelson, this idea is catching on in other medical specialties, as well:

"Spinal-fusion surgery is one of the most lucrative areas of medicine...But there have been serious questions about how much the surgery actually helps patients with back pain and whether surgeons’ generous fees might motivate them to overuse the procedure."

And that's not all; apparently, these same surgeons invest in the companies which make the "hardware" (screws and plates, for example) which are used in the surgery.

I'm not sure I have a real problem with the latter: is it unethical for me to invest in insurance companies? Or my mechanic to buy some shares in Pennzoil? I didn't think so.

But the "non-story" has legs: "Federal regulators have voiced concerns about the growing popularity of the investment arrangements, which would potentially violate antikickback laws if doctors receive stock or are otherwise compensated to use or recommend certain devices."

This sounds to me a bit more damaging than simply buying stock in a company with which one does business. I suppose it would be akin to me only selling policies from companies whose stock I own, or that mechanic only using Pennzoil when servicing my car. I just don't believe that any one carrier (and/or its products) is always right for every client. In the same way, it's difficult for me to believe that XYZ Corporation's spinal products are always the best choice for every patient.

According to Ms Abelson, many of the almost 100 companies in the spinal devices field are owned (to some degree) by physicians. On the one hand, I'm still not convinced that this is as a priori conflict of interest. On the other hand, though, it does look like there may be a problem.

So what does this have to do with insurance? Well, it seems to me that if this is increasing the cost of health care, then it is increasing the cost of insurance, as well. After all, at least some of the funds being so directed come from insurance (and/or Medicare) reimbursements. If the prices are inflated, or if there's no effort made to hold down costs, then this doesn't bode well.

Chasing Profits

The New York Times' Reed Abelson is a good writer, but (as with so many in the MSM), she seems unable to distinguish between "profits" and "profit margins." What's the diff, you ask?

Here's a good example:

"ABC Widgets builds 100 widgets, and sells them for $1 each. First they have to buy the materials for about 60c, then assemble and market, for about 15c. Then they sell for $1 and give the govt 18c in taxes per widget. That means each widget costs 93c to make, leaving ABC with a 7c profit margin per widget. If they sell all 100, they make $7 in profit.

Next year, material and assembly costs a little more, so they raise the price of the widgets to $1.50. Costs end up at $1.43, which leaves a profit margin of 7c again. But widgets are popular this year, so they sell 200!

ABC Posts Record Profits of $14! Congress to investigate!"

Now, let's contrast that with Ms Abelson's intellectually vapid take:

"The nation’s major health insurers are barreling into a third year of record profits ... The nation’s major health insurers are barreling into a third year of record profits"

There's more, but that's the gist. The problem is that the cost of health care keeps increasing, and carriers can't go back and assess insureds (or previously insured folks) for their losses. They have to price for what may come, and there's no sign that the rising cost of health care delivery will abate any time soon (or at all).

Still, one is tempted to say "that's all well and good, Henry, but these profiteers are making obscene amounts of money on the backs of their insureds."

Uh-hunh.

Let's go back to the widgets: how much money should ABC be allowed to make? Remember, ABC provides employment (and thus an income) to those who make the product. Their employees count on those paychecks; if ABC doesn't make enough money to stay in business, well...

So they need to make a profit, and they have to decide the scope of that profit. So, another question: is 5% enough? 10? How much would you be willing to settle for?

It's an important question because this chart, which our own Mike Feehan graciously sent along, shows exactly what other related players in the health care delivery and financing consider "reasonable:"

[Click graphic to embiggen]

Is 4.4% a "reasonable" return on investment? In this economy, perhaps so (take a look at your 401 201k); but it's a fraction of that claimed by some others. As an aside: how long do you think doctors will settle for sub-2% returns? And what does that bode for future availability of health care?

Now, if only the MSM would take a remedial econ class.

[Hat Tip: FoIB Holly R]

Cause & Effect (or Bye-Bye Choice): George Hamilton edition

Back in Aught '11, Bob noted that the ACA's "tanning bed tax" was slated to bring in some $200 million per year. Even 5 years ago, the reality fell far short:

"The first 9 months of 2011 has generated only $54 million which means the expected revenue will be less than half what was expected."

But that was then, and this is now:

"Tanning industry blames 10,000 salon closings on ObamaCare"

Naturally, shuttering over half of these businesses is going to further reduce the numbers projected by O'care enthusiasts. And tan-seekers aren't the only folks losing choice:

[Map Courtesy of New York Times - click to embiggen]

 "In many parts of the country, Obamacare customers will be down to one insurer when they go to sign up for coverage next year on the public exchanges."

As FoIB Reed Abelson reports, almost one-in-five victims O'Care participants will have (at most) one carrier from which to "choose." Kind of like Model T color choices, no?

Adding insult to injury, a handful of entire states will likely be down to a single carrier. So much for competition and bending the cost curve down. And so much for "choice."

PCIP v2.0?

We were long-time fans of the PCIP (Pre-Existing Condition Insurance Plan), the one part of ObamaCare that actually seemed to make sense. So of course it was designed to sunset after a time, leaving a lot of folks with few choices and less care.

Now, FoIB Dr Val Jones writes about "stability funds," part of the ill-fated AHCA, funded at (gulp) $100 billion over the next 10 years, and which was designed to allow "states to start to repair their individual insurance markets ... With better policy choices, states can make coverage cheaper and more attractive for consumers and coax insurers back into the market, and the stability fund is a powerful tool."

On its face, the idea has merit: the gummint (thee and me) serve as reinsurers, backstopping major claims. This was tried in Maine back in 2011, where an "invisible high risk pool ...  picked up the total cost of claims above $10,000." This seems to me to be a legitimate role of the state (although I could be persuaded, for example, that $10k is too low). If it were included as part of a total reformulation - and of course after O'Care was totally repealed - then I think the concept has merit.

I recently had a conversation with NYT reporter Reed Abelson, and mentioned that I was a fan of PCIP, and that I'd like to see something like it incorporated into whatever new scheme our congresscritters managed to cook up. The idea is that it encourages carriers to take on some additional risk without breaking the bank. I'd also like to see it coupled with some kind of assessment, so that that carriers are incentivized to spread that risk amongst themselves.

I know: Wishes in one hand....