Should We Spend $1 trillion on Health Insurance Reform to Save $7 trillion?

(Remember, the original "Deconstruction of the RW Health Care lies is still here. Either click on the link at the top right of this blog, or go here…)


Oscar Wilde once said,
"The cynic knows the price of everything and the value of nothing."


We are up against
cynics, folks…


The opponents of
health care reform keep asking this question;


"How do we pay
for enacting health care reform?"


Unfortunately, that's the absolute wrong question to be asking right now.


The more apt question


"How do we pay
for NOT enacting health care reform?"


Let's be clear; we already pay for health care; and I mean ALL of
it. But we keep paying for last year's unpaid bills, along with a hefty
penalty, which private insurance calls "profit." If you actually stop
and think about how our health care financing system works, it has to make you
mad, because you are essentially being charged hundreds of billions of dollars
every year for nothing.  Let me explain
what I mean. And if the explanation doesn't make you mad, you're not thinking.


Private insurance
companies, whether for-profit or technically "non-profit," have  to make money. Don't let the
"non-profit" angle fool you; even those companies must have money
left over at the end of the fiscal year, and they all have far too many useless
executives that pay themselves millions of dollars for denying as much coverage
as possible. And that's their main mission; 
to  collect as much money in
premiums as possible, to place that money into a pool, and then work as hard as
they can to pay out as little of that pool as possible.  That's not unusual; the goal of every
insurance company is to maximize premiums and limit payout. But health
insurance is different from every other type of insurance in one key way; what
health insurance is supposed to pay for is something that everyone technically
has a right to at some point, whether 
they have insurance or not.  You
do have a right to health care when it becomes absolutely necessary; don't let
the far right tell you otherwise.


But strangely enough,
private insurance has built a business model around that concept.  Their profitability model is based on
refusing to sell policies to people who might need it, and deflecting the costs
to others. Of course, we are "the others." But you knew that, right?


I know what some of
you are thinking; they couldn't possibly be doing that; aren't they missing out
on all the potential premiums? Well, no. 
Premiums have doubled in the last ten years. They cover fewer people,
but they take in more money. I'm sure you've noticed this. And the people they
are refusing to take money from are those who would end up costing the most,


But when the insurance
company decides not to cover someone, and they end up going to the hospital and
incurring a $20,000 bill that they simply cannot pay, that bill still gets
paid. When a private insurance company refuses a claim for a $10,000 operation,
and the insured person can't afford to pay, that bill still gets paid. And WE
are ALL paying it.  It's just that it
gets put off until next year. Which is good for the insurance company, and bad
for us.


Insurance companies
and health care delivery companies both work in fiscal quarters and fiscal
years. It doesn't matter to insurance companies that health care delivery
companies won't get paid by the people to whom they refused to sell insurance,
because that happens THIS year, and they won't have to pay until NEXT
year.  Actually, let me correct that;
someone ELSE will pay that next year.


Insurance companies
have the best of all possible worlds, profit-wise. They deny people insurance
based on the possibility that they might actually use it, and they refuse to
pay for expensive procedures that might cost them money. They drop people from their
insurance programs who actually dare to use it. And then, when hospitals have
to raise prices to recover the money they didn't get paid the year before,
because the health insurance companies refused coverage, the insurance
companies use that as a rationale for raising premiums a significant amount,
and for raising deductibles and co-pays.


But there's a huge
disconnect here, if you really think about it. They're charging more for
premiums, ostensibly to cover their increased costs, right? The problem is, at
the same time they're raising premiums, they're denying more people coverage,
they're refusing to cover anything they think is "too expensive," and
they're paying less and less every year. Most of the premium increases go to
profits and executive salaries and bonuses; they're not going to increased
costs for procedures.


Do you know who's
paying those increased costs? Who would you think?


Do you know why
Medicare and Medicaid always seem to be in trouble? It's because, while private
insurance companies facing health care inflation raise premiums as high as they
want, and deny coverage to anyone who might actually get sick and cost them money,
Medicare and Medicaid are seeing the same inflation that private health
insurance companies, only they can't just raise premiums every year, and they
have to cover everyone. Funny thing about government insurance; they're
actually accountable to us. Imagine that.  


Let's recap. In our
system, an increasing number of people are uninsured right now and can't pay
their bills if they get sick. Hospitals and doctors have to get paid, so they
have to raise their prices to make up the shortfall, which makes it even less likely
that the uninsured will be able to pay their bills. Everyone who actually pays
the bills sees hefty increases in prices every year, but private health
insurance companies don't see as much of it as the public insurance system,
because they'll just raise their prices, cut more people off and refuse to pay
for more procedures.


Can you see what's
wrong with this picture? Private insurance companies are essentially raising
their prices by 12-20% a year, to cover nothing.  Based on their track record, they will cover
fewer people and pay for fewer procedures; does it really matter that prices go
up in the hospitals, if the insurance companies are doing their damnedest to
NOT pay them , anyway?


We're already paying
for health care for the uninsured. Here are a few things to think about.
Without health insurance reform:


  • Health care spending for 2009
    is expected to be $2.5 trillion, or 17.6% of our GDP. What that means is,
    each one of us is spending an average of nearly $7900 per person for
    health care this year, whether we realize it or not. 
  • By 2018, under our current
    system, spending on health care could rise to $4.4 trillion, with Medicare
    and Medicaid making up just over half of all health care spending.
  • By 2019, total employer
    spending on health care could reach $850 billion, with individual and
    family spending reaching $550 billion by then. That's $1.4 TRILLION in
    insurance premiums, folks.
  • According to the CBO,
    employer-based health insurance could DOUBLE in the next ten years, with
    the average   premium being at least
    $25,000 per year.


 (The first two figures are from  Siska, A, et
al, Health Spending Projections Through
2018: Recession Effects Add Uncertainty to The Outlook, Health Affairs,
March/April 2009; 28(2). The third figure is from  "Health Reform: The Cost of
Failure,"  The Robert Wood Johnson Foundation, May 2009, available here. The CBO report on which
the fourth one is based can be found here.)


Think about what this
means. Twenty years ago, Medicare and Medicaid constituted less than
20% of all health care spending. Currently, they make up approximately
one-third of all health care spending. In ten years, half of all health care
spending in the United States will fall on taxpayers, ON TOP of the $25,000 per
year in insurance premiums. In other words, with no changes, we're looking at
$2.2 trillion of our tax dollars going to health care in 2018 alone. But it's
going to go from about $800 billion now to $2.2 trillion gradually, over the
course of ten years. Therefore, over the next ten years, we will spend upwards
of — are you ready for this number? — 
$15 trillion in tax dollars for health care. That's FIFTEEN TRILLION
DOLLARS!  And that's ON TOP of the
$25,000 each we'll be paying for insurance.


Under the current
plan, without a modest tax hike on
people making over $350,000, we're looking at about $300 billion in deficits
over the next ten years to pay for HR 3200, according to the CBO. But if we
don't reform health insurance, how are we supposed to pay for the $15 trillion for
the government's share of health care costs over the next tenyears?  Last I looked, $15 trillion was significantly more than
$300 billion. How are we supposed to come up with that, without significant tax increase or doubling the national debt once again?


That $1 trillion
figure the right wing is using to scare you away from health insurance reform
doesn't sound so bad anymore, does it? And that's the cost of HR 3200 over
TEN YEARS. That's the estimated cost of DOING something to insure everyone, and
that cost is dwarfed by the cost of NOT doing anything. If we could halt the
inflation in the health care industry to something approaching zero, we would
save as much as $7 trillion over ten years. But we will probably do much better
than that. Imagine what will happen to the cost of health care when more people
can see a doctor.  Fewer emergency room
visits for minor injuries and illness will drop the cost quite a bit. Fewer
people who wait until they're about to die before they get care should reduce
the overall cost. People able to go to the doctor when they feel a lump, so
they don't have to wait until they're about to die for care will save billions.
People will be able to take their kids to a physician for a sniffle, rather
than an emergency room or urgent care, and that will probably save a hell of a
lot of money. And that's before we enact specific regulations and cost controls.


But the first step is
to get everyone covered. And when someone comes up to you and asks you how
we're going to pay for health insurance reform, show them the numbers, and ask
them how we're going to pay to NOT reform health insurance.  Ask them a simple follow up question;  do you think it's worth $1 trillion to save
at least $7 trillion from the cost of health care?


The key to health
insurance reform right now is to get everyone covered.  I happen to think expanding Medicare, as Thom
Hartmann suggested
, would be the best option, with the  public option proposed by HR 3200 and
being bandied about in Congress a close second. But let's not get so hung up on
our preferred method of covering everyone that we forget the goal is to cover
everyone at this stage.


We have to get this
done, because people are dying, and because our kids are looking at a hell of a
financial burden if we don't do anything. Reform is not only a moral imperative
because reform will save lives; it's a moral imperative  because it will save us money, and make our
nation competitive again.

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