A recent blog post by Sarah Kliff on Ezra Klein's Workblog sets forth the strategy and plan of the nation's insurance companies to lobby Congress after the election. The purpose:
Moving into a potential debate over deficit reduction, health insurers want to carve out a different role in Washington. Namely, they don’t want to be the bad guys anymore. To that end, they’ll soon start arming their lobbyists with data that argues that other health care sectors are actually the ones to blame.
Check out the charts. You will be pleased to know that the rate of growth in insurance premiums lovingly tracks the rate of growth in medical costs in the country. In the 2010s, for example, medical costs rose 54.61% and premiums rose 56.09%. What that is supposed to tell us, I don't know.
Is it meant to tell us that insurance costs as a percentage of overall health care costs have stayed roughly constant? I guess so, as seen in this chart:
So, let's think this through. As health care costs have soared over the decades, the insurance companies' share of the costs have stayed about the same. That means that they have been unable to implement the kind of technological and operational efficiencies of other sectors in the financial services industries. Such is certainly the case in Massachusetts, something I noted a couple of years ago:
Golly, we see an average annual increase in the administrative costs of Massachusetts insurers of 9.3%. How can this be the case? In other financial services industries, unit costs of transactions have gone down, not up. What is it about health care that suggests the opposite should be the case?
But let's go further. The lobbyists plan to use a chart showing the overall growth in US health care expenditures. Here it is:
I don't know the purpose of this. I think it shows that those in the industry are tacitly admitting their failure to contain prices--if one accepts that is part of their function. But is it? Actually--as I have just noted--if their share of the health care budget has stayed constant, they have had an interest in watching the total number of dollars go up.
What's the next phase? Well, if the Massachusetts experience is prologue, the insurance companies will next want to shift risk as much as possible from them to the providers, doctors and hospitals. As I have noted about Blue Cross Blue Shield of MA:
Think of it. The firm, in the face of little or no empirical proof, has persuaded an entire state to adopt a rate-making approach whose main value is to shift risk from it, the dominant insurance company. Now, risk does not disappear. Usually in society, we pay people to assume more risk. Also, people from whom risk is shifted usually expect a lower return. Here, the risk is shifted, but the insurance company gives up nothing. Indeed, it is secure in pricing its product because it knows exactly how much money it will pay out in medical claims. Meanwhile, the percent of premiums it collects to cover administrative costs remains remarkably constant, even as revenue grows. The capital reserves that it has accumulated over the years to cover actuarial risk remain untouched, even though the degree of risk assigned to it has fallen.
There may be an odd result from this lobbying campaign: Insurance companies will have destroyed every argument for them to exist. They will have demonstrated that they have had no impact on overall health costs. They will have demonstrated that they are a constant tax on the growing health care budget. Meanwhile, they will no longer be insurers, having shifted risk away from them and on to other parts of the sector.
In short, they will have done everything possible to justify a single payer health system.
Moving into a potential debate over deficit reduction, health insurers want to carve out a different role in Washington. Namely, they don’t want to be the bad guys anymore. To that end, they’ll soon start arming their lobbyists with data that argues that other health care sectors are actually the ones to blame.
Check out the charts. You will be pleased to know that the rate of growth in insurance premiums lovingly tracks the rate of growth in medical costs in the country. In the 2010s, for example, medical costs rose 54.61% and premiums rose 56.09%. What that is supposed to tell us, I don't know.
Is it meant to tell us that insurance costs as a percentage of overall health care costs have stayed roughly constant? I guess so, as seen in this chart:
So, let's think this through. As health care costs have soared over the decades, the insurance companies' share of the costs have stayed about the same. That means that they have been unable to implement the kind of technological and operational efficiencies of other sectors in the financial services industries. Such is certainly the case in Massachusetts, something I noted a couple of years ago:
Golly, we see an average annual increase in the administrative costs of Massachusetts insurers of 9.3%. How can this be the case? In other financial services industries, unit costs of transactions have gone down, not up. What is it about health care that suggests the opposite should be the case?
But let's go further. The lobbyists plan to use a chart showing the overall growth in US health care expenditures. Here it is:
I don't know the purpose of this. I think it shows that those in the industry are tacitly admitting their failure to contain prices--if one accepts that is part of their function. But is it? Actually--as I have just noted--if their share of the health care budget has stayed constant, they have had an interest in watching the total number of dollars go up.
What's the next phase? Well, if the Massachusetts experience is prologue, the insurance companies will next want to shift risk as much as possible from them to the providers, doctors and hospitals. As I have noted about Blue Cross Blue Shield of MA:
Think of it. The firm, in the face of little or no empirical proof, has persuaded an entire state to adopt a rate-making approach whose main value is to shift risk from it, the dominant insurance company. Now, risk does not disappear. Usually in society, we pay people to assume more risk. Also, people from whom risk is shifted usually expect a lower return. Here, the risk is shifted, but the insurance company gives up nothing. Indeed, it is secure in pricing its product because it knows exactly how much money it will pay out in medical claims. Meanwhile, the percent of premiums it collects to cover administrative costs remains remarkably constant, even as revenue grows. The capital reserves that it has accumulated over the years to cover actuarial risk remain untouched, even though the degree of risk assigned to it has fallen.
There may be an odd result from this lobbying campaign: Insurance companies will have destroyed every argument for them to exist. They will have demonstrated that they have had no impact on overall health costs. They will have demonstrated that they are a constant tax on the growing health care budget. Meanwhile, they will no longer be insurers, having shifted risk away from them and on to other parts of the sector.
In short, they will have done everything possible to justify a single payer health system.