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Tuesday, April 9, 2013

The huge Obamacare problem almost everyone missed...

Those who haven't taken the time to read the  new site page on why medical prices rise  missed seeing this huge problem that hasn't gotten media attention:

Obamacare gave insurers reason to want medical prices to *increase*

The public was told  insurers spent too much on overhead and profit so the government needed to ensure that most of their revenue went to paying medical claims.  Obamacare requires insurers to meet a "Medical Loss Ratio" (MLR) which compares their spending on medical claims to the amount they receive in premiums. If they don't spend at least 80% of their premiums on  medical claims in the small&individual markets and 85% in the large group market they need to issue rebates to customers to meet that standard.  This provides incentive to restrict overhead&profit, but it also provides incentive for many to increase, or at least NOT decrease medical costs

 Another way of looking at it is they need to spend at least 4 or 5.7 times as much on medical costs as they spend on overhead&profit, otherwise they are breaking the rules and will lose money by needing to give a rebate. They are able to increase profit if they increase medical spending and raise premiums. They can't reduce medical spending much or they'll be punished by needing to give customers a rebate.  It is in their interest to applaud healthcare providers who raise prices, rather than trying to negotiate lower rates to gain customers through lower premiums and increase profit.

The Obamacare site brags there were "$1.1 billion in rebates" this year, which is around 0.1% of total premiums. That was in exchange for an approach which takes away  incentive to control medical costs, i.e.  "penny wise and pound foolish".  Challenge those who support Obamacare to explain whether those who passed it either don't know much about business, or were trying to help healthcare prices rise. The new page detailing the problems in healthcare is long, but challenge Obamacare supporters to read it and see if they can justify   Obamacare afterwards. The page includes some issues few if any  healthcare pundits have mentioned.

The claimed concern over health insurance profits is doubtful since they are one of the least profitable parts of healthcare. In 2008 its profit ranked "35th out of 53 top industries" and by another measure  "the profit margin for health insurance companies was [...] 87th out of 215 industries". A government report notes the "net cost of health insurance" (administration&profit) was the only part of the cost of premiums to  decrease between 2005 and 2009.

Note: the new healthcare page has been polished/updated slightly since its release last week.
See the  page  for details on how government limits competition and drives up prices.

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