Don't fall for the health insurance mandate/cost-shift trap

The most pervasive misinformation underpinning the framing of healthcare reform has hardly been challenged at all. Special interests stand to make trillions of dollars if they succeed in fooling us into thinking the uninsured are the problem, and insurance is the solution or will save money.

The claim that the uninsured increase the premiums of the insured by $1,000 [senat1] is false. According to the Congressional Budget Office, uncompensated care incurred by the uninsured is $28 billion, of which half is paid by government leaving $14 billion, of which less than half is shifted to premiums [cbo2], which comes out to under $35 per privately insured person [cens1].

The claim that the uninsured cost each of the insured $1,000 in total [obama1] is also false. $28 billion in uninsured uncompensated care [cbo2] comes out to $112 per insured person [cens1]. This is a deceptively inflated number, because many uninsured do pay their medical bills and do pay taxes and thus are also chipping in, so the denominator should include them.

This number is a red herring, since it's unlikely to change much with reform. By definition it's what they can't afford to pay. If they can't afford the doctor or hospital, they won't be able to pay both that and insurance administrative costs, so it would likely be subsidized by taxes rather than premiums [hahca Sec. 243 p135, Sec. 1701(a) p740]. Since the cost-shift will still happen, it's not a valid reason for insurance.

The reformers say they can cut $465 billion in waste from Medicaid and Medicare over 10 years [house2]. Thus if the uninsured had been put into insurance, the amount of waste for them would have been 46.5 / 81M (on Medicare + Medicaid [cens2]) x 47M uninsured = $27 billion per year, which is almost identical to the amount of the uncompensated cost-shift. In other words, according to the reformers' own numbers, insuring the uninsured doubles the cost to the public over the current cost-shift, as we're not only paying for the healthcare through insurance but also paying for the waste, and even if the previously uninsured paid for all of their healthcare through insurance, which would not happen because they can't afford it, the cost-shift to the rest of the insured due to the waste would be nearly the same as now.

But actually, the $28 billion may be wrong, and the true number could be zero. The uninsured have been charged 3, 4, 5, and even 10 times as much as the insured for the same treatment [critc]. For example a provider prices a service at $10,000 but cuts a deal with insurers to pay $2,500. Then an uninsured person walks in and is treated and billed $10,000 but can't afford that, ending up paying $6,000. So the provider profited by $6,000-2,500 = $3,500 from gouging the uninsured but then claims they lost $10,000-6,000 = $4,000 in "uncompensated care". The Families USA study that claimed $922 per family says their data is from asking providers to use insured rates, but gives no indication that any auditing was done to verify they did that, much less whether they did it accurately.

This phenomenon is so prevalent that an analysis of actual payment records - a more authoritative source than the voluntary survey used by Families USA - found that excess revenue doctors made from the uninsured who could pay more than made up for losses from those who couldn't [nber1]. In other words, it may be that not only are the uninsured not costing the insured, but they could be subsidizing the insured.

Moreover, the tax deductibility of insurance only benefits the insured, so the uninsured pay higher taxes and thus subsidize the insured.

Even if they weren't being gouged by paying more than the insured, the uninsured who pay their medical bills are already paying their share of the cost-shift, which is built into the medical fees not into insurance, so it's unfair to require them to pay for insurance in addition.

CBO points to actual examples where hospitals experiencing reduced income from low-income patients _decreased_ their rates to others to get more business in the short term, and CBO noted that another response to uncompensated care is to put more effort into reducing costs, which puts them in a stronger competitive position to make it up in more business and/or more profit over the long run [cbo2]. This exposes the falsity of the premise that uncompensated care is necessarily shifted in the first place.

Trying to pin the blame on the uninsured is a clever trick to distract attention from the fact that insurance shifts costs from one group to another on a vastly grander scale. One half of the population consumes 97% of healthcare costs; the other half consumes the remaining 3% [haffa2 Exhibit 1]. Thus if everyone is required to pay the same amount through insurance toward the total $2.5 trillion healthcare bill, then this constitutes a $2.5 x 47% = $1.2 trillion cost-shift from one group to another. This is 42 times bigger than the alleged $28 billion uninsured cost-shift [cbo2].

Thus it's absurd to use cost-shifting as a reason to impose insurance. If cost-shifting is wrong, then insurance must be outlawed. The insurance and medical industries have spent millions on this kind of PR to fool us into accepting policies that would give them billions in additional revenue per year.

Another ploy is the line that medical insurance should be required because car insurance is. But the reason for needing car insurance is that driving can maim or kill others. Being a living human being is no threat to anyone else, and medical insurance is about what happens to yourself not others, so the analogy is another trick non-sequitur. Where is there a mandate requiring everyone purchase car insurance that must cover every tune up, every oil change, and every tire change? Where is there a mandate requiring that everyone buy home imsurance that must pay for every repainting, every reroofing, and every remodel? Yet we are told to accept this kind of nonsense when it comes to medicine.

It's unjust to cost-shift through taxes, including the de facto tax of forcing people to buy insurance, because that violates the rights of those who do not subscribe to orthodox medicine. There are hundreds of alternative healing systems, including indigenous, herbal, ayurvedic, naturopathic, clinical ecology, orthomolecular, Christian Scientist, and faith healers. It's unfair to force those who will never use orthodox medicine to pay for what they do not believe in. It's much fairer for the cost-shift to be done through provider fees and premiums, so it only affects those who subscribe to the same system of medicine.

Among the uninsured, half of them only incur 1% of total uninsured healthcare spending [haffa2 Exhibit 3], so it doesn't make sense to impose insurance on all uninsured; to reduce costs, or cost-shifting, only those in the half that account for 99% of costs are relevant. Note that this is a more skewed distribution than for the insured - in other words, putting the uninsured into insurance increases the amount of cost-shifting from one group to another - the diametric opposite of what proponents of universal coverage claim as their rationale.

The top 5% of privately insured healthcare spenders averaged $17,871; the top 5% of uninsured averaged $6,651 [haffa2 Exhibit 3]. Since the uninsured are 15% of the population, this means that there is 85x17871 / 15x6651 = 15 times more cost-saving potential in addressing cost reduction of the sickest insured than going after the sickest uninsured. This would do more to reduce cost-shifting than targeting the uninsured.

The real problem is not that they're uninsured, it's that they're too poor to afford some types of medical care, the prices of medical care are too high, and possibly that they're getting sick because of such things as the stresses of poverty and poor lifestyle choices. The real solutions are thus to alleviate the poverty - not only so they can afford care but also to reduce the stresses so they don't get sick in the first place, reduce the prices of medical care, and improve the lifestyle, none of which are solved by insurance. Indeed, all three may be exacerbated by insurance, which adds the additional costs of a middleman thus increasing poverty, and adds deep pockets able to pay higher prices, and bails out the consequences of the lifestyle thus reducing the need to change it.

A common fallacy to justify insurance is the claim that the uninsured don't get screenings. But in fact 65% of uninsured american women over 40 had a mammogram within the last 5 years, the same rate as women under Canada's universal health coverage, and uninsured american men had twice as many PSA tests as canadian men [oneil p21]. This begs the question of whether universal mammogram screening is desirable. The apparent benefit of mammography disappears when corrected for bias in lead time and in ductal carcinoma in situ which is usually benign, so most would probably have been better off without mammograms anyway, which would have freed the money for something else that provided a greater benefit [lee] [lancet1].

Another claim is that the uninsured don't get primary care but rely on hospital emergency rooms, the most expensive care of all, so we are told to believe that insuring everyone will cut costs. But the insured do this much more than the uninsured: the truth is that communities with high levels of uninsured have half the rate of hospital emergency department use per person than communities with few uninsured [haffa1] [hsch1]. It's the insured who drive hospital demand.

The Massachusetts reform mandated that everyone buy insurance. The results? Emergency room visits rose 7%, emergency room costs increased 17%, and the portion of hospital visits that were not emergencies was unchanged [bglobe1].

In short, we are told the problem is lack of insurance and the solution is more insurance, when actually the opposite is true: mandated insurance increases costs for everyone. After the Massachusetts reform passed, government health care costs increased 42% [nyt1] and are projected to go up an additional 100% over 3 years [bglobe2].

In other words, forcing the uninsured to get insurance is likely to cost us more than the current cost-shifting arrangement, impoverishing the public while the medical and insurance industries laugh all the way to the bank reaping trillions of dollars [uprem] on their $4 billion investment [crp1] in fooling us and buying influence with Washington politicians.

That's why, while they quibble over details, the medical and insurance industries have been behind a reform which does virtually nothing to reduce costs due to specialist $300K incomes or insurance CEO $million bonuses or drug company profits, but is aggressively heavy-handed in forcing ordinary people making as little as $15K to pay money to those special interests.

Uninsured uncompensated care is about 1% of total health care costs, which are increasing at the rate of 6.1% per year [cms1], so it is inconsequential if the goal was reducing total costs.

The freedom to choose opting out of third-party insurance by self-insuring helps curb costs for everyone, as it means insurance companies must pay attention to affordability or risk losing business. That's why they are pushing to deny anyone that right and engineer themselves a monopoly, by hijacking the healthcare reform bandwagon to insert clauses mandating that everyone buy insurance. That's also why there has been a well-orchestrated campaign to demonize the uninsured and plant the idea that lack of insurance is the cause of all the problems in healthcare.

The fixation on finding the most extreme opponent claims to debunk serves the interests of the special interests behind the reform, as it discredits opposition, distracts attention away from the genuine serious problems with the reform, and distracts attention from the flaws in the most widespread misinformation which is from those special interests and their supporters.

The reasons being given to justify the individual mandate are fallacious and are not the real reasons for reform. The real effect of reform that contains insurance mandates is to engineer a cost-shift from the public, primarily the middle class, to the medical and insurance industries which are already wealthy. Much of it would be done not through taxes but premiums, which are not accounted for by the Congressional Budget Office, since it does not look at the cost to the public, only the cost to the federal government, so we can be sure that the true cost to you and me will be much higher than what Obama or the CBO say. If it continues for many decades it would exceed the Wall Street bailout [uprem].

When people want insurance but are refused, that's unfair. But that can be fixed in a one-page bill, and it makes no sense to create a new injustice by violating the rights of those who do not want insurance or orthodox medicine. A plan adhering to american values will respect diversity in healing choices and not institutionalize discrimination against those who choose to take full responsibility for their health.

In a poll separately asking about reform policy components, one had the strongest consensus: by a 68% to 26% margin the public opposes compelling anyone to buy insurance [quin1]. So the public has not bought into this despite winning axiomatic status with a high percentage of politicians and pundits. Obama campaigned against mandates but now is apparently caving in to the insurance industry. If this reform is to serve the public interest and not special interests, we need to speak more forcefully to get the point across: the reform must be amended to remove mandates to buy insurance.

If a plan is worthy then people will voluntarily sign up. When it has to be forced on everyone, then we know even the advocates themselves do not believe it can stand on its merits, and do not believe it is really in the interest of ordinary people.

Please spread the word.

references:

[bglobe1] ER visits, costs in Mass. climb, Boston Globe 24 April 2009 www.boston.com/news/local/massachusetts/articles/2009/04/24/er_visits_costs_in_mass_climb/

[bglobe2] Healthcare Cost Increases Dominate Mass. Budget Debate, Boston Globe, 26 March 2008 www.boston.com/news/health/articles/2008/03/26/healthcare_cost_increases_dominate_mass_budget_debate/

[cbo2] Key Issues in Analyzing Major Health Insurance Proposals: Factors Affecting the Supply and Prices of Health Care, Congressional Budget Office, www.cbo.gov/ftpdocs/99xx/doc9924/Chapter5.9.1.shtml

[cbo3] An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act, 30 Nov 2009, cbo.gov/ftpdocs/107xx/doc10781/11-30-Premiums.pdf

[cens1] 202 million privately insured, 250 million insured:
Health Insurance Coverage Status By Selected Characteristics, US Census, www.census.gov/compendia/statab/tables/09s0146.pdf

[cens2] Income, Poverty, and Health Insurance Coverage in the United States:
2007 p21, US Census, www.census.gov/prod/2008pubs/p60-235.pdf

[cms1] $2.4 trillion total healthcare cost in 2008:
National Health Expenditure Projections 2008-2018, p1, accessed 20 Sept 2009, HHS Centers for Medicare & Medicaid Services, www.cms.hhs.gov/NationalHealthExpendData/downloads/proj2008.pdf

[critc] Critical Condition: how health care in America became big business & bad medicine by Donald Barlett, James Steele 2004 p15-18

[crp1] Center for Responsive Politics:
$213 million 2008 election cycle campaign contributions:
Health: Long-Term Contribution Trends, www.opensecrets.org/industries/indus.php?ind=H
Insurance: Long-Term Contribution Trends, www.opensecrets.org/industries/indus.php?ind=F09
over $4 billion lobbying:
Lobbying Top Spenders, www.opensecrets.org/lobby/top.php?indexType=i

[haffa1] Hospital Emergency Department Use Varies Greatly Across the United States, Peter J. Cunningham, Health Affairs July/August 2006, content.healthaffairs.org/cgi/reprint/hlthaff.25.w324v1?ijkey=ufo2ov5OC4Q4s&keytype=ref&siteid=healthaff

[haffa2] The concentration of health care expenditures revisited, Berk ML, Monheit AC, Health Affairs 20(2):9-18 2001 content.healthaffairs.org/cgi/reprint/20/2/9.pdf

[hahca] House Affordable Health Choices Act, waysandmeans.house.gov/media/pdf/111/AAHCA09001xml.pdf

[house2] CBO Scores Confirms Deficit Neutrality of Health Reform Bill, House Committee on Ways and Means news release July 18, 2009, waysandmeans.house.gov/news.asp?FormMode=release&id=919

[hsch1] Center for Studying Health System Change Press Release 18 July 2006, www.hschange.com/CONTENT/861/

[kff1] Kaiser Family Foundation Employee Health Benefits 2008 Annual Survey, Exhibit 1.9, ehbs.kff.org/pdf/7790.pdf

[lancet1] Screening mammography and public health policy: the need for perspective, Wright CJ, Mueller CB, the Lancet 346:29 Jul 1995, www.ncbi.nlm.nih.gov/pubmed/7603143

[lee] What Your Doctor May Not Tell You About Breast Cancer by John Lee, David Zava, Virginia Hopkins 2002 p5-6,11-12,15,58-60

[nber1] How Much Uncompensated Care do Doctors Provide? by Jonathan Gruber, David Rodriguez, National Bureau of Economic Research Working Paper No. 13585 November 2007, www.nber.org/papers/w13585

[nyt1] "Massachusetts Faces Costs of Big Health Plan", NY Times 16 March 2009, www.nytimes.com/2009/03/16/health/policy/16mass.html?_r=1

[obama1] Barack Obama speech to Congress 9 Sept 2009, www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-a-Joint-Session-of-Congress-on-Health-Care/

[oneil] Who are the Uninsured? An Analysis of America's Uninsured Population, Their Characteristics and Their Health, June O'Neill, Dave O'Neill, Baruch College, City University of New York, June 2009, www.epionline.org/studies/oneil_09-1993.pdf

[quin1] Quinnipiac University National Poll, 5 Aug 2009, www.quinnipiac.edu/x1295.xml?ReleaseID=1357

[senat1] Baucus, Grassley release policy options for expanding health care coverage, Senate Finance Committee press release 11 May 2009, finance.senate.gov/press/Bpress/2009press/prb051109.pdf

[uprem] Not counting the increases in premiums for those who already have insurance due to mandates on coverage (no pre-existing conditions, denying citizens the choice of saving costs by getting policies with annual or lifetime caps even if they have a living will opposing expensive measures and desire a guarantee they will never incur a huge bill, denying the choice of saving costs by getting policies without substance abuse or maternity coverage they'll never want, etc), a mandate forcing all uninsured to buy insurance by itself comes to $1.95 trillion over 10 years. Per year it's

 $195 billion = nu x ( spercent x spremium + fpercent x fpremium )
 nu = 47 million uninsured
 x = multiplied by
 spercent = 63.3% uninsured without children [oneil Table 7]
 fpercent = 36.7% uninsured with children [oneil Table 7]
 spremium = $4,704 single premium [kff1]
 fpremium = $12,680 family premium / 4 = $3,170/person [kff1]
Note these numbers are conservative; for example, CBO estimates the costs in the non-group market, where many uninsured would be required to get their insurance, to be $7,100 for single and $19,100 for family [cbo3].


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