Patterico's Pontifications

10/12/2009

ObamaCare: Health insurers balk at Baucus vapor bill

Filed under: General — Karl @ 10:08 am

[Posted by Karl]

The Washington Post’s Ceci Connolly actually provides the revealing lede:

After months of collaboration on President Obama’s attempt to overhaul the nation’s health-care system, the insurance industry plans to strike out against the effort on Monday with a report warning that the typical family premium in 2019 could cost $4,000 more than projected. (Emphasis added.)

Connolly’s story buries the reason for this turn of events:

Early in his quest, Obama wooed industry leaders in the hopes of neutralizing many of the players who helped defeat a similar effort by President Bill Clinton. Yet as the process has moved from high-minded concepts to legislative details, the tension has mounted. Hospitals and doctors have increasingly grumbled that the administration is not keeping bargains it struck over how many Americans would be covered under reform and what payment changes would be made. (Emphasis added.)

To be fair, however, Connolly did a story Friday that gets closer to the heart of the matter:

The industry heavyweights President Obama neutralized through the summer are agitating that the health-care bills in Congress violate agreements they made with the White House, leave 25 million Americans uninsured and have the potential to increase medical costs.

***

Many lobbyists and independent analysts underlined what they called major flaws in the Finance Committee’s bill, saying it probably would draw the sickest, most expensive patients into the health coverage system without balancing the insurance risk with more young, healthy people. The result, they predicted, would be ever-rising premiums for the people, businesses and governments that pay for medical care.

“The consequences of this would be an upward spiral; rate shock to everyone who stays in,” said Karen Ignagni, president of the industry group America’s Health Insurance Plans. “This legislation will fail the test of affordability for individuals.”

Connolly’s Friday piece also makes clear that the opposition to the Baucus vapor bill extends beyond health insurers to include the AMA and the Federation of American Hospitals.

The New Republic’s Jonathan Cohn predictably questions aspects the health insurers’ study, mostly its treatments of the subsidies (ultimately paid for by taxpayers) to help people buy insurance. However, the health insurers respond that those subsidies will not stop premiums from increasing:

The chief reason, said the report, is a decision by lawmakers to weaken proposed penalties for failing to get health insurance. The bill would require insurers to take all applicants, doing away with denials for pre-existing health problems. In return, all Americans would be required to carry coverage, either through an employer or a government program, or by buying it themselves.

But the CBO estimated that even with new federal subsidies, some 17 million Americans would still be unable to afford health insurance. Faced with that affordability problem, senators opted to ease the fines for going without coverage from the levels Baucus originally proposed. The industry says that will only let people postpone getting coverage until they get sick.

This may represent the unraveling of a Faustian bargain. The essential terms of the deal were that insurers woul be forced to accept everyone (“guaranteed issue”) and charge the same rates (“community rating”) — causing insurance premiums to skyrocket — but this would be offset by the individual mandate, which would force the young and healthy to fork new money over to the insurers. Without those mandates — and hefty fines to enforce them — the insurers will balk at the rest of ObamaCare.

At National Review, Benjamin Zycher explains why the political pressures to weaken the individual mandate, supposedly the quid pro quo for nonexclusion of insurance applicants with pre-existing conditions, are and will remain irresistible. And Zycher is right to mock the lobbyists for entering into the deal at the outset. Poll after poll — including the most recent one from Quinnipiac — shows the American people think ObamaCare will not live up to its promises.

–Karl

37 Responses to “ObamaCare: Health insurers balk at Baucus vapor bill”

  1. The free fall into confusion continues. When in doubt don’t. (or something like that)

    The nice thing is the number of experts springing up which may help the unemployment figures.

    JerryT (b585a2)

  2. The left has decided Price Waterhouse Cooper is the enemy now. So has the White House, I suppose.

    MayBee (34a54a)

  3. I wonder how many people understand the term “vaporware” and how it applies to this bill? It was a well-known tactic of some software companies to announce a new operating system, or new application, to foreclose the competition from developing an alternative. They would think to themselves, and the public would likewise think, that a “killer app” had already been developed. The competitors would quit work and the public would anticipate something that might or might not arrive. I think this is a very apt comparison.

    The Democrats keep complaining that Republicans have no alternative while they try very hard to prevent just such a possibility. This is politics and not governing but we should not be surprised.

    Mike K (abed77)

  4. I went and had my blood drawn for three routine tests. There were four people at the front desk and one phlebotomist in the back. My person at the front desk spent fifteen minutes playing with the computer. The phlebotomist took one minute to draw my blood. The bill is $760.00. It should have been $80.00.

    nk (df76d4)

  5. When you dance with the Devil, don’t be surprised at the eventual outcome. Faustian bargain indeed.

    Dmac (5ddc52)

  6. “I really don’t think it’s worth the paper it’s written on,” AARP Executive Vice President John Rother told reporters Monday. “If anyone believes it, that’s a problem.”

    AARP .. neutral through disbelief

    Neo (7830e6)

  7. “I really don’t think it’s worth the paper it’s written on…”

    Easy statement to make when you’re talking about “vapor-ware”.

    AD - RtR/OS! (f793c7)

  8. The best part of dirty socialist health care is gonna be watching our pompous neurotic doctor class become unglorified state health workers.

    happyfeet (71f55e)

  9. silver linings being all what a little pikachu has left anymore

    happyfeet (71f55e)

  10. Wow. I’ve got absolutely nothing against doctors. The ones I know are pretty amazing people. They do things like donate their time to underprivileged people here and abroad.

    MayBee (34a54a)

  11. I actually think that most doctors still get into medicine for the right reasons, feets. The Hippocratic oath is alive and well, or at least from what I’ve witnessed through interactions with some of the latest interns doing their rounds at the local hospitals here.

    If potential doctors start migrating to other fields because they can actually make some decent money, that will cause irreparable harm to our country in the long run, I think. And do you have any idea what the loan obligations are for most graduates these days? Try a figure upwards of at least half a million, easy. Try to service that debt under a restrictive pay structure.

    Dmac (5ddc52)

  12. I should add that I can’t be completely objective about this, since the primary reason why I’m alive today is due to incredible talent and efforts in the oncology and medical research fields, as well as on the Pharma side.

    Dmac (5ddc52)

  13. To be fair to Ceci, she’s done a whole series of Op pieces on HC reform. There’s one thread seen clearly throughout – she picks her sources carefully to advance ObamaCare. In one piece she goes after “waste”, unnecessary procedures, etc, but never links/connects any of them to defensive medicine/tort reform. An oversight or blatant advocacy?

    In Rationing Health Care, More Not Always Better, Experts Say (September 29, 2009)

    MDr (fd1f4b)

  14. RE – the White House statement about the “self-serving” statements of insurers who will supposedly see their profits decrease – adding 25 million new customers, even at a lower margin, will certainly INCREASE profits.

    RE – Subsidies – Subsidies ALWAYS increase prices, ask a farmer

    zehc (c39d96)

  15. So now insurance is a civil right? If you ask me, the “guaranteed issue” provision is just as noxious as the “personal mandate”. I HAVE to sell you insurance, regardless of ANYTHING else, if I want to do business in your state?

    Uh, no. No, I don’t think so.

    mojo (8096f2)

  16. I think opposition from the insurers and providers comes too late. Fair or not, the public perception is they got on board the reform train last summer, and it’s too late now to say they don’t like Obama’s train and want a different one. ObamaCare will be decided by moderate Democrats and their constituents, and at this point I suspect their constituents have far less influence than the White House.

    DRJ (7fbae6)

  17. DRJ,

    I respectfully disagree with that assessment, but I’ll make it the subject of tomorrow’s post, for a full explanation.

    Karl (246941)

  18. Ceci Connolly wrote another story for The Washington Post, which ought to give anyone who supports ObamaCare pause:

    Medicare Drug Benefit May Cost $1.2 Trillion
    Estimate Dwarfs Bush’s Original Price Tag

    By Ceci Connolly and Mike Allen
    Washington Post Staff Writers
    Wednesday, February 9, 2005; Page A01

    The White House released budget figures yesterday indicating that the new Medicare prescription drug benefit will cost more than $1.2 trillion in the coming decade, a much higher price tag than President Bush suggested when he narrowly won passage of the law in late 2003.

    The projections represent the most complete picture to date of how much the program will cost after it begins next year. The expense of the new drug benefit has been a source of much controversy since the day Congress approved it, with Democrats and some Republicans complaining that the White House has consistently low-balled the expected cost to the government.

    As recently as September (2004), Medicare chief Mark B. McClellan said the new drug package would cost $534 billion over 10 years. Last night, he acknowledged that the cumulative cost of the program between 2006 and 2015 will reach $1.2 trillion, but he cited several major savings and offsets that he said will reduce the federal government’s bottom-line cost to $720 billion.

    Medicare Part D went from $422 billion before it was passed, to $534 billion just a little while after it was passed, to $720 billion to $1.2 trillion half a year later.

    Now, why ought I to believe the Democrats’ version of what nationalized health care coverage would cost, given that our government has been so crappy about its cost estimates in the past — especially before they get things passed.

    Can someone name for me one, just one, program that the federal government took over that saved money?

    The cynical Dana (474dfc)

  19. Correct me if I’m wrong, but didn’t Part-D eventually save Seniors money on their meds?
    And, it is running lower, cost-wise, than was predicted?

    AD - RtR/OS! (f793c7)

  20. Karl,

    I hope I’m wrong, and I look forward to your post.

    DRJ (7fbae6)

  21. Karl and DRJ, I’m very interested in doctors’ response to the health reform activity and the trend in Medicare reimbursement, which are connected. They are dropping out and practicing for cash. How big a trend this is may not be known for a while but I think it is significant. I’m partly interested because I’m getting involved in geriatrics and may go that way myself. I think this whole movement is beneath the radar of the “reformers” in Washington.

    Mike K (abed77)

  22. DRJ: On your No. 16, you are correct.

    I think Big Insurance made a strategic blunder going after the weakest bill of the lot, all for a few customers (dollars) more. This is a classic, politically tone-deaf move.

    For Dems to fail on health care would wreck the party and the president. A few weeks ago, it became clear to even the thickest-headed Blue Dog the less-risky move for the party is to pass some kind of reform than come away with nothing. Ask the Republicans about the joys of being in total war with the base. Not pretty!

    Into this environment comes Big Insurance with a low-down move. They have put themselves in a position where they can now be beat up freely by the pols on grounds of naked greed, playing into the hands of the left wing. Not surprisingly, Dems are rushing to the nearest microphone to take their shots. This move also got backs up at the White House, which had been health insurers’ best Democratic ally. The “deal” is (supposedly) dead; bets are off.

    My hope is that this apparent divorce between Big Insurance and the Dems will lead to a public option to help contain the costs of premiums, which the health insurers will raise regardless of whatever bill passes. In other words, if the insurance companies won’t back even the finance bill, maybe the Dems will conclude they might as well go mostly with the health committee bill. And if insurers see the health committee winning, what credibility will they have to lurch again and throw support behind Baucus’s thing? None. In fact, one wonders if strategically they should have held their fire for the combined bill. They seemed to assume Baucus’ version would win on the floor.

    From the house side, Nancy is bringing a public option to the table. That’s done. That’s rock solid. Since she doesn’t need even the fig-leaf of GOP support that she wouldn’t get anyway, she won’t truck with playing footsy with the Party of No.

    Lastly, I agree with the insurance companies only in this: More people should be included in coverage, like 100 percent. And I include illegals. There’s no advantages to having a bunch of sick people running around.

    Baucus’ 94 percent was not what anyone was promised.

    Myron (712b1e)

  23. “Not surprisingly, Dems are rushing to the nearest microphone to take their shots.”

    “My hope is that this apparent divorce between Big Insurance and the Dems will lead to a public option to help contain the costs of premiums, which the health insurers will raise regardless of whatever bill passes.”

    Myron – Getting the study out the door focuses needed attention on the side of the bill that you and you allies have been trying to keep in the dark all along – what happens to insurance prices after reform passes. Obama mouths platitudes about choice and lowering costs, but we have examples of reform in many states to look at where this has proved not to be the case and those examples should be rubbed in the faces of the Democrats until their skin peels off. Releasing this study helps achieve that purpose and gets everybody away from the unicorns and pixie dust that Obama has been peddling.

    Having a public option doesn’t improve the situation, it just potentially changes who is taking pipe on the funding, insurance companies, taxpayers, etc. Try to think that one through! If the government is mandating minimum coverage standards, it doesn’t matter whether they are met through a public option or through a private insurance company, although my bet is the private sector can do it more efficiently. Overall patient loss costs would be the same. The only difference is who is paying the health care providers, the government or private companies.

    daleyrocks (718861)

  24. Daley: I don’t think the Dems and reform backers, from their perspective, will give the study much credence. Witness the strong language against it. There is no mealy-mouthed moderation out of any fear the study might have an impact.

    AARP’s exec. vice president said it’s not worth the paper it’s printed on. Sen. Baucus’ office is calling it a “hatchet job.” Basically, it won’t stand up to the CBO report, not in the public eye. The nonpartisan CBO report is hardly unicorns and pixie dust, though those images are always appreciated to lighten a discussion. :)

    A lot of the punditry will look at the study with a deeply skeptical eye, too. Fair or not, the insurance companies have no credibility. The 11th hour nature of this move does not help with that credibility.

    But to return to DRJ’s point, I think it is too late for insurance companies to try to get off the train. They are simply playing into the worst narrative of themselves.

    Further, I think if the private insurers can do things more efficiently or better than the government, they should have nothing to fear from a public option. The U.S. Postal Service does not exactly have Fedex, UPS and the gang shaking in their boots.

    Myron (712b1e)

  25. Myron:

    You’re right about one thing:

    From the house side, Nancy is bringing a public option to the table. That’s done. That’s rock solid. Since she doesn’t need even the fig-leaf of GOP support that she wouldn’t get anyway, she won’t truck with playing footsy with the Party of No.

    She’ll never be un-elected in her district. For good reason: she’s doing exactly what her constituents want.

    Also, she won’t have to roll her eyes and squirm away from Harry Reid at future photo-ops. In 2010, he gets to escape the hell-hole of trying to be a Dem from the most capitalist state in the nation.

    As for the “Party of No,” they may become the “Party of Told You So.” Not because they deserve it, God knows. They have as many clowns as your party of choice.

    I’ll also agree with you on another thing: I’m really looking forward to Congress pushing through a health-care bill with the public option. I hope the Dems do it without Republican support. And, I’m looking forward to the day the President signs it.

    Ag80 (2a7a2a)

  26. Note how in all that word vomit, there was nothing even close to a substantive refutation of the points in the study released. Myron effectively slaughtered the messenger, and an army of strawmen, but not the conclusions of the study. All that he did was outline how they will discredit the study withouþ actually addressing the study. And the MSM will let them.

    JD (e64f1a)

  27. Myron – I do notice how the Democrat reform backers, who generally won’t give any Republic reform ideas the time of day, attempted to discredit the study with such great sweeping generalizations as “misleading” or “not credible” pretty much as soon as the press release announcing the results was out. A skeptical person might venture that they were criticizing something without even reading it, such was the timing and lack of substance of their comments. I have not seen any credible criticisms, although Ezra Klein did a fair job in between all the smoke he threw up, but the basic points still stood.

    You in particular have not addressed issues of premiums, Myron, other than to say sort of like funding issues, they need to be worked out. The Baucus vaporware studied by the CBO includes 10 years of revenues but only seven years of costs. Has anybody on your side focused on that bit of sleight of hand, Myron? Guess what happens when the inflows and outflows are evenly matched timing wise?

    daleyrocks (718861)

  28. I personally think Obama doesn’t care if a half-baked doomed version of reform like the Baucus vaporware gets passed. With the inevitable failure down the road it sets up the perfect scenario for a 100% government takeover of the sector. I think that’s one of the reasons they are refusing to listen to more reasonable private market Republican solutions for reform. The Democrats do not care if this effort succeeds.

    daleyrocks (718861)

  29. [...] am following up on yesterday’s story about the health insurers’ revolt against the Baucus vapor bill because I — like a lot of people — may have undersold [...]

    The Greenroom » Forum Archive » ObamaCare: Shot Across the Bow (e2f069)

  30. I don’t know what is so hard to understand…. if you insurer 10/20/30/40 million people and cap prices on the rest for insurers — the amount of health care spending will go much much higher unless you drastically cut service levels.

    To simply think more taxes solves the problem ignores the concept of increasing inflation b/c you don’t create more Health Care Capacity by screwing down margins.

    To argue this is nuts. Liberals are nuts.

    HeavenSent (01a566)

  31. I agree with daleyrocks. All Obama wants from this legislation is to get a foot in the door.

    DRJ (7fbae6)

  32. other than to say sort of like funding issues, they need to be worked out.

    And we all know how that funding issue will work out, don’t we?

    Dmac (5ddc52)

  33. All Obama wants from this legislation is to get a foot in the door.

    DRJ: Not just Obama. As I’ve written before, it’s all some Democrats want, too. The belief is that the goal should be to get something passed and tweak later.

    My point is that the move by Big Insurance makes a broader bill possible, one that includes a decent public option. A “no” vote today by Olympia Snowe would do the same.

    JD: Tell me what numbers you would have to see for me to convince you that a public option is needed? Conversely, what numbers do you think you could show me to convince me to leave things the way they are with health insurance?

    The hard truth is that we don’t know how some of these proposals will play out until we try them. The difference is that I want to try something, you want to try nothing. That’s what they call an unbridgeable gap.

    Myron (712b1e)

  34. [...] am following up on yesterday’s story about the health insurers’ revolt against the Baucus vapor bill because I — like a lot of people — may have undersold [...]

    Patterico’s Pontifications » ObamaCare: Shot Across the Bow (e4ab32)

  35. The public option will add 12+ million uninsured (illegals) whose cost will primarily fall on either the taxpayer through subsidies or the better healed insured via still higher premiums. Equal Protection clause will ensure that if a public option is included, illegals can not be denied.

    MDr (fd1f4b)

  36. That is a BS response, Myron. As you are the ones that want radical change, it is incumbent upon you to present the facts. Show how the pubic option will decrease costs, increase access, increase quality. Show how it will be “deficit neutral”. You continue to savage the messenger while ignoring the message. It is fundamentally dishonest. But you want change, and that makes you good and pure.

    JD (5308da)

  37. [...] av premien. Bransjen har godtatt dette, mot at alle amerikanere pålegges å tegne forsikring. De to tingene henger naturlig sammen: Uten et slikt pålegg vil de som har lav risiko, særlig unge og friske amerikanere – [...]

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