Just a quick reminder when we think about insurance over the long term:
Premiums are (roughly) EQUAL TO the sum of claims costs PLUS admin/overhead PLUS profits PLUS reserves and variance management costs.
If you want to reduce premiums, there is some space to squeeze on profits if there are exceptional profits that fund hookers and blow.
There might be some space to squeeze on admin and overhead. Single payer advocatates will correctly note that Medicare pays 4% to 5% of total costs in admin while private insurance companies have 10% to 15% administrative loads AND substantial clinical administrative burden too. But there is only so much to squeeze here.
The big factor in premiums is claims. Reducing premiums means reducing the cost of claims by either not covering as much because deductibles have expanded or certain categories of losses are not covered or payments are reduced.
There is nothing magical about reducing premiums. Those are the basic options.
On The Road – frosty – Key West Part 1
Baud
You can reduce premiums with subsidies. You can’t reduce costs that way.
Cervantes
What you are leaving out is that profits, and payments to executives and some clinicians, are outrageous. When a hospital buys, say, a dermatology or ophthalmology practice or whatever it may be, they get to charge a “facility fee” on top of the usual fee for a service such as Mohs or cataract surgery. This can be many thousands of dollars. Dialysis clinics save on expenses buy speeding up the process, which is bad for patients but lets them squeeze in more per day for the same reimbursement. Primary care practices are incentivized to make referrals to their vertically integrated owners for unnecessary services, and don’t allow them to refer to other providers that may charge less. And so on. Executives of vertically and horizontally consolidated “health care” corporations are paid seven figures. They also loot the companies by selling off real estate and leasing it back, paying out dividends, and so on. The profit motive creates all sorts of ways of squeezing out money that are of no benefit to patients. I’m rather surprised you seem to want to minimize this.
Baud
@Cervantes:
He’s talking about insurance company profits, not medical practice profits.
is about medical practice profits.
Sister Machine Gun of Quiet Harmony
@Cervantes:
That is illegal. They can’t offer incentives.
Another Scott
As we learned from you and that Mayhew guy and others, there are smart ways to reduce payments and horrible ways to reduce payments.
Doing the work to make people healthier, quicker to heal, create better and more efficient treatments, create a culture where people don’t over consume bad stuff (food, and health quackery, and …), and reduce administrative friction are smart ways. Delaying and denying legitimate claims, and the stuff Cervantes talks about are the horrible ways.
The insurance and medical system in the US does far too much of the latter.
Grr…,
Scott.
Ohio Mom
I dunno, cutting admin costs by (stops to do math before coffee, may be wrong) anywhere from 5% to 11% sounds like a nice chunk of change to me.
As the old saying goes, every little bit helps.
superdestroyer
In the end, the only way to lower healthcare cost is either employ fewer people who cut the pay of those providing care (or a mix of both). What progressives refuse to do is to say that there long term plans means that healthcare providers might lose their jobs and might be paid less.
Mousebumples
At my work (*PBM) we’ve been talking about how CVS and Cordavis (*and others I don’t remember off hand) are working together to repackage biosimilars (eg adalimumab, aka Humira) to hide profits. If the government passes laws related to spread (eg rebates from pharma as profits for PBMs), they can hide/keep some of the profits that way.
My PBM doesn’t take spread and it’s one of those transparent ones that passes all rebates received back to clients. But we’re in the minority…
Cervantes
@Sister Machine Gun of Quiet Harmony:
Oh well, if it’s illegal obviously it doesn’t happen.
Cervantes
@Baud:
If costs are lower, insurance payments will be lower, and so will premiums. Insurance companies don’t mind paying more as long as their competitors do — because of regulations on medical loss ratios, they actually get to pocket higher profits when costs are higher. Read An American Sickness, by Elisabeth Rosenthal. I can’t believe Anderson hasn’t read it and doesn’t understand this.
David Anderson
Jackals — take a look at the other hash tag this is filed under, PLEASE!
Another Scott
@David Anderson: “Everything’s connected!!”
;-)
Cheers,
Scott.
Cervantes
It’s filed under “Anderson on health insurance,” and, for some reason, “climate change.” And?
David Anderson
@Cervantes: We’re going to see massive claims from Milton and Helene and shockingly we should expect insurers to file for rate increases AND/OR run like hell from coastal southern areas.
Starfish
I remind you that a lot of computer security falls under “admin costs” as I throw away the piece of paper from some health entity that I do not know the name of that says my private data has been compromised.
Cervantes
@David Anderson:
Well okay but the health insurance analogy doesn’t work in this case. It’s completely unlike casualty insurance for several reasons. This is probably too long and complicated a discussion for a comment, but you of all people must understand that. I’ll make a couple of points.
Health insurance, even in the indemnity form, is different from casualty insurance. We can estimate in advance the cost to rebuild our houses and replace the contents, and buy insurance for that amount and no more. For obvious reasons, insurance companies won’t let us insure our houses for far more than they are worth. But there’s no meaningful limit to the medical costs someone might confront. Once you’ve rebuilt your house, you’re done. But medical expenses may be ongoing for the rest of your life. Which creates another problem. You can’t hold off on buying fire insurance until your house catches fire; it will only pay for costs incurred after the policy is in effect. But in principle, you could wait until you were diagnosed with cancer to buy health insurance, since most of your costs will be in the future. Obviously, if people could do this, nobody would sell health insurance. The problem that people who are likely to need more medicine would be more likely to purchase insurance is called “adverse selection.”
Another difference is that it won’t do the contractor who rebuilds your house any good to make your new house twice as big, unless you ask for it and pay out of your own pocket, because that won’t increase the insurance settlement. But if doctors know they will be paid more to do more, guess what they’ll do? This is called “moral hazard.” It’s often blamed on patients, who are presumed to go out and get more health care than they really need if it doesn’t cost them the full price. This is quite dubious. Medical interventions are usually unpleasant and in fact dangerous. I’m not going to rush out and get brain surgery just because it’s paid for. The only reason I’ll get it is because a doctor tells me I need it. Either way, however, it is a legitimate problem for insurers.
And this is where the points I made earlier come in.
Barbara
@Cervantes: In a market where there are both dominant insurers and dominant providers, this is indeed what happens. It’s basically the sharing of monopoly rents. In markets that are more competitive, the results will be different.
In the U.S., we pay far more per unit cost for everything, but especially drugs and specialty physician services. It’s just too big of a subject for technocratic solutions.
But here is my shot across the bow: we would probably derive more social benefit from funding of housing and food than from subsidizing drug development or the cost of training specialty physicians. We are positively fixated on medical spending — and medicine overall — in large part because we can’t or won’t see medical problems (especially chronic diseases) as a manifestation of social deficits that could and should be ameliorated regardless of how they affect medical spending.
We should care about homelessness because we care about homeless people, not just because homeless people disproportionately seek medical care from expensive venues like emergency rooms.
Starfish
@Cervantes: Was David comparing health insurance to homeowners’ insurance or was he talking about increased health expenses due to the storm?
There are going to be health costs from this event. People who were walking through flood waters with wounds are going to have infections. There are going to be injuries or deaths during rebuilding.
The Red Pen
@superdestroyer:
You’re assuming here that labor costs are the biggest line item. Maybe they are, but I’d like to see data on that. Having looked at a bunch of medical bills lately, I think costs like using radiology equipment, OR fees, medication, and the like are massively inflated, and could be an effective source of cost reduction if they could be decreased.
I’m thinking about an article I read about a US Physician who emigrated to Australia where they have a national system called “Medicare.” Under the Australian Medicare, the physician made the same money he was making in the US, but the cost of the whole system was much lower. I think it’s a single-payer system like Canada.
Cervantes
@Barbara:
Absolutely, we underinvest in the social goods and public health measures that would give us a healthier population. You can read my book when it comes out.
Cervantes
@The Red Pen:
Well, if by labor you include specialist physicians that is a big part of it. But facility fees are just embezzlement, as far as I’m concerned.
superdestroyer
@The Red Pen: If one is spending less on radiology equipment that means few xrays and that results in fewer techs and less reimbursements for radiologist. If the U.S. had single payer either the government lowers reimbursements to save costs or the costing setting bureaucracy is captured by the providers and costs go up.
And maybe the physican makes the same but everyone else involved in the system from nurses to xray techs to lab techs are paid less. The same is true in Canada. That is why so many nurses who work as agency nurses come from Canada.
The Red Pen
@superdestroyer:
I didn’t say spend less on radiology equipment, I meant charge less for using it. I haven’t seen any data that demonstrates that “this is what we need to charge just to afford the machine in the first place,” but I strongly suspect that this kind of facility is a profit generator, not an at-cost service.
Prescott Cactus
@Starfish:
The physiological stress and strain of this and the continuing weather events that are coming down the road.
dnfree
I am using the Medicare Part D plan comparison on their website. It is WAY off this year on the numbers. It first shows me ridiculously low amounts for my ridiculously expensive name-brand drugs that you see advertised on TV with dancing happy diabetics, then you go into plan details and it changes to something more realistic, and then I go back to the summary page and the numbers change again. I am going to sign up with one of those Medicare insurance representatives to compare plans, because they have a better system for comparison. The Medicare site worked relatively accurately for the past two years, but it is seriously hosed this year.
And why does the SAME drug plan (my husband and I both just happen to have the same plan in 2024) show me different deductible amounts for us? The Medicare site says his deductible would be $590 and mine would be $545 for the same plan number for 2025. Is that possible or probable?
billcinsd
@superdestroyer: There is also remove the profit motive
billcinsd
@Sister Machine Gun of Quiet Harmony: They aren’t offering incentives. The incentive is to keep the money in house
Russ
Premiums also factor in speed of claim payout and investment income. Admin can impact speed and amount of payout.