the salt makers

According to the American Medical Association’s National Health Insurer Report Card for 2008, the government’s health plan, Medicare, denied medical claims at nearly double the average for private insurers: Medicare denied 6.85% of claims. The highest private insurance denier was Aetna @ 6.8%, followed by Anthem Blue Cross @ 3.44, with an average denial rate of medical claims by private insurers of 3.88%

In its 2009 National Health Insurer Report Card, the AMA reports that Medicare denied only 4% of claims—a big improvement, but outpaced better still by the private insurers. The prior year’s high private denier, Aetna, reduced denials to 1.81%—an astounding 75% improvement—with similar declines by all other private insurers, to average only 2.79%.

Maybe there’s something to be said for the need to keep your customers satisfied in order to make that profit after all.

It has been shown that the so-called "public option" for low-premium health insurance is sure to significantly crowd out, and perhaps even eliminate, the private provision of health insurance. Thanks to Senator Joseph Lieberman's courageous stand, it appears that the public option will not be a part of any bill that passes the Senate. Unfortunately, HR 3962 includes regulations that will destroy the ability of private firms to provide marketable insurance, with or without a public option.

To understand the devastation that will be wrought by this bill, one must understand how health insurance functions on a free market to transfer individuals' financial risk to large "risk pools" with less variation across time. Consumers who are risk averse pay "premiums" to insurers each month for the removal of that risk, and in turn insurers assign their clients to different pools according to their risk of large claims.

An Already-Regulated Industry

Insurance companies have already been strictly limited in their ability to assign individuals to different risk pools and charge them varying premiums. By forcing high-risk and low-risk groups into the same pool, existing regulations increase premiums for low-risk consumers and decrease premiums for high-risk consumers. This is nothing more than a coerced subsidy to the less healthy, and it drives low-risk consumers away from purchasing health insurance. This is why the majority of the uninsured are not poor and dying, but in fact healthy young people who are at almost no risk of unanticipated healthcare costs.

To cope with their inability to partition along risk levels, profit-seeking insurance companies must cut costs by excluding the highest-risk patients from insurance. In a free market, these individuals would be offered insurance at a higher premium aligned with their high risk of major claims. In human terms, this leads to the exclusion of people with preexisting conditions and those with significant claims on past insurance plans. Once again, we see how leftist economic policy harms the very class of society that its supporters desire to help.

Obamacare is a Welfare Program

Not oblivious to the exclusion of these unfortunate citizens, on page 95 of the bill, House Democrats have proposed to completely outlaw the exclusion of any customer on any of the following grounds: "health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability, disability, or source of injury (including conditions arising out of acts of domestic violence) or any similar factors."

Thus, it will become illegal to refuse to insure any consumer on any grounds, including evidence of insurability. In addition to being unable to exclude future enrollees, insurers will be prevented by page 29 from legally dropping any consumers from their plans on any grounds other than "clear and convincing evidence of fraud."

The effect on the structure of insurance is obvious; this new law will turn health insurance into a legally-enforced entitlement program, and the new entitlement will be used by those who are too costly to be insured under the current restrictions on risk-pool partitioning. Again, it is important to remember that these patients would have the option to buy insurance on a free market, but that their plans would carry premiums that actually reflect their personal health risk.

While risk-pool separation is considerably limited by national and state regulations, the little separation that is allowed would still be able to mitigate the heavy costs of forcing insurers to cover literally every customer who wishes to buy insurance. While the high-risk individuals would not pay as much in premiums as they would on a free market, insurance companies would still be able to use slightly lower premiums to attract low-risk customers.

However, this inequality in premiums is offensive to politicians hell-bent on equality. Therefore, in the very next page of the bill, House Democrats propose to outlaw all variations in premiums except according to geographical area, age group, and whether the plan in question covers an individual or a family.

These provisions will be catastrophic to the insurance market. The bill only allows for premium variation across age by a ratio of two to one between the highest and lowest premiums. In real terms, elderly patients who cost several times as much to insure can only be charged twice as much as 20-somethings who often go entire years without claims. That this is a subsidy for the elderly hardly needs to be explicitly stated.

The bill leaves the determination of the maximum difference between individual and family plans at the discretion of the "health choices" commissioner, who is likely to find himself bombarded with visits and letters from family-centered lobbying organizations seeking subsidized health insurance paid for by singles and nonparents. This rent seeking will inevitably end up in subsidies handed out according to political objectives, whether the goal is to attract more young, single voters or more parents of children.

Turning any transaction into a subsidy both induces the subsidized class to enter the transaction and induces the subsidizing class to attempt to avoid it. In this case, it means that an even greater number of young and healthy individuals (and, most likely, nonparents) will drop their increasingly expensive insurance plans and attempt to prepare for healthcare risks on their own. This terrible result of coercive price-fixing decreases the benefit of the subsidy to high-risk consumers and decreases the ability of the insurance companies to control and reduce average payouts.

Democrats are aware of this effect of their policy, and have legislated accordingly. Pages 296–300 amend federal tax law to create a new tax on all citizens who fail to purchase health insurance. Depriving these individuals of the ability to opt out of the new, undifferentiated insurance pool is an atrocious affront to individual choice, and requires the threat of imprisonment. This new tax will help achieve the statistical goal of universal coverage, but it will do so at an incredible cost to the income and liberty of the relatively young and healthy, most of whom, ironically, voted for Obama and Democratic congressional candidates.

Soaring Costs

Not only will high-risk individuals who are now forced out of the market by regulation be legally entitled to purchase the bill's minimum standard of coverage, but both these excluded consumers and those who are now in high-risk pools will have financial incentives to buy higher levels of insurance. Facing new, subsidized prices, high-risk individuals will purchase plans with lower deductibles. Paying for a higher percentage of the price of more claims will massively increase the cost of insuring the new general pool of clients.

One of the only remaining ways for insurers to cut their costs, then, is to limit the amount that individuals are able to receive in claims. Indeed, insurance companies already use lifetime claims limits to cope with risk-partition laws and deliver lower-price packages to low-risk consumers. Predictably, page 50 of the House bill prohibits insurance companies from imposing any such limits on lifetime benefits.

Outlawing lifetime limits guarantees that all consumers will have the incentive to undergo drastically more treatments in their lifetimes, because the bill ensures that they will not be moved into a higher premium group until they enter a different age group or move to a different area. For the already-subsidized elderly, this creates incentives to undergo many more life-extending treatments in the final year of their lives. Such treatments are several times more expensive than general care for other elderly patients.

Astute readers will correctly object that while the Democrats' healthcare proposal will drastically increase the costs facing every insurance provider, the bill also requires all individuals to buy the minimum package of insurance, or to enroll in the public option. Especially because in the current discussion we are ignoring the effects of the public option, it is possible to argue that if there were no public option this bill would actually be a boon to private insurers, who are virtually guaranteed that every American will buy their plans. To survive this bill, then, insurance companies will simply increase the premiums of the packages that are forced onto every citizen.

This would indeed be true, were it not for further regulations effectively barring premium increases. Page 31 of the bill would require insurance companies to "submit a justification" for any projected future increase in premiums for any group to the secretary of Health and Human Services as well as state-level authorities.

The secretary of HHS and the state "health czars" would then annually review and approve or deny any increase in premiums. In various sections of the bill, the health choices commissioner is given power to determine the cost-accounting and other ratings methods that will determine whether a price increase is "justified" in the eyes of the DHHS Secretary.

Public officials operating under a Congressional mandate to achieve universal coverage are hardly likely to approve price increases, even though that means slowly bankrupting private insurers. Even if they are not made to "compete with" and be strangled by a public option that consumers have already funded with their tax dollars, private insurers will be absolutely ruined by restrictions on their ability to control and separate costs and to increase prices to account for their ever-rising costs.

Conclusion

While a public option would certainly hasten the death of the private-insurance market in America, it is not a necessary means to that end. By destroying the economic structure of insurance, House Resolution 3962 would convert an already-overregulated industry into a pseudo-private welfare program. Even without a public option, insurance companies would be kept from controlling costs or adjusting their prices. The inevitable result will be the complete dissolution of the private health-insurance market.

This is disgusting. For all the flak being given to insurance companies 'making a profit off of sick people,' the same individuals spewing this nonsensical platitude fail to see that the institution they seek to remediate the problem is no better. As our citizens condemn the 'abuses of the free-market' they cannot see the government swelling under their feet. Rather than reduce financial liabilities during a recession, something most private businesses are doing right now, the government continues to increase their lavish salaries on mid-level jobs. It gives one an excellent demonstration of the disconnect between how private businesses run and how government bureaucracies run. All of those who are fighting for more government control have been duped into a fool's errand, trading one set of problems for another that is far more permanent. Meanwhile, the bureaucrats feast on the wealth of the American people as we sit and watch without recourse.

The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession's first 18 months — and that's before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector.

The highest-paid federal employees are doing best of all on salary increases. Defense Department civilian employees earning $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available.

When the recession started, the Transportation Department had only one person earning a salary of $170,000 or more. Eighteen months later, 1,690 employees had salaries above $170,000.

The trend to six-figure salaries is occurring throughout the federal government, in agencies big and small, high-tech and low-tech. The primary cause: substantial pay raises and new salary rules.

"There's no way to justify this to the American people. It's ridiculous," says Rep. Jason Chaffetz, R-Utah, a first-term lawmaker who is on the House's federal workforce subcommittee.

Jessica Klement, government affairs director for the Federal Managers Association, says the federal workforce is highly paid because the government employs skilled people such as scientists, physicians and lawyers. She says federal employees make 26% less than private workers for comparable jobs.

The growth in six-figure salaries has pushed the average federal worker's pay to $71,206, compared with $40,331 in the private sector.

Before Thanksgiving, the Senate voted to opening debate on President Obama's health-care bill, and that debate has begun in earnest this week.

Well, if they want a debate, let's let them have it. But let's not get distracted by the sideshows Senate Majority Leader Harry Reid has planned for us.

Forget about abortion. Of course the left will accept restrictions on funding for abortion, because they want to keep moderate Democrats on board for the goal they know is really important: giving the government a dominant role in health care. Everything else is just details, and funding for abortions is an issue to which the left can return at leisure later on-once government is firmly in charge of everything.

And don't bother debating the "public option," either, because it's already dead; enough Democratic senators have come out against it. But Harry Reid is all too happy to have a debate over the public option so he can make a show of "compromising" and giving it up. And while we're having that fake debate, he's hoping that we won't be challenging everything else in the bill.

So let's get straight what the real essentials of the bill are-and how disastrous they are.

Three provisions constitute the vicious heart of the Democrats' health-care overhaul.

The first is "guaranteed issue" and "community rating." This is the requirement that insurance companies have to offer coverage to people who are already sick, and that they be limited in their ability to charge higher rates for customer who pose a higher risk. The extra expense to the insurance companies of covering people with pre-existing conditions will get passed on to existing customers in the form of higher premiums. But why spend years paying these inflated premiums for insurance you're not using, when you can get exactly the same benefits by waiting until you actually fall ill? The obvious result is that million of people, especially healthy young people, will quickly realize that there is no reason to buy health insurance until they get sick.

Rather than increasing the number of insured by making health insurance more affordable, this bill makes health insurance more expensive and increases the incentive to simply drop your insurance until you need someone to pay for your medical bills. It is an attempt to turn health insurance into what the left really wants: another welfare program in which everyone is entitled to free benefits, mandated by the government. But this would wreck private health insurance, making the whole industrial financially unsustainable.

Following the usual pattern of government intervention, the health-care bill offers another intervention as the solution for the problem created by the first. The "individual mandate" requires everyone to buy health insurance and subjects us to a tax if we fail to do so. But this is an especially onerous new tax, the first tax not tied to any kind of income or activity. It's not a tax on stock-market profits, say, or a tax on buying cigarettes. It's just a tax for existing.

So fearing a public backlash, Congress didn't have the guts to make this new tax very large-only $750. Yet actual insurance can cost more than $3,000 per year-and as we shall see, this legislation goes out of its way to drive up those rates by mandating more lavish coverage. So we end up getting the worst of both worlds. This provision won't actually drive anyone to buy health insurance and prop up the risk pools for those who are insured. All it will accomplish is to create a brand new form of tax.

But the biggest power-grab in the bill is the government takeover of the entire market for health insurance. The bill requires all new policies to be sold on a government-controlled exchange run by a commissioner who is empowered to dictate what kinds of insurance policies can be offered, what they must cover, and what they can charge.

Right now, your best option for reducing the cost of your health insurance is to buy a policy with a high deductible, which leaves you to pay for routine checkups and minor injuries (preferably from savings held in a tax-free Health Savings Account) but which covers your needs in catastrophic circumstances-a bad car accident, say, or expensive treatment for cancer. This is the kind of coverage I have.

But the health-insurance exchange is intended to eliminate precisely this kind of low-cost catastrophic coverage. Its purpose is to force health-insurance companies to offer comprehensive coverage that pays for all of your routine bills-which in turn comes at a higher price. So under the guise of making health insurance more affordable, this bill will restrict your menu of choices to include only the most expensive options.

So there we have the real essence of this bill. It restricts our choice of which insurance to buy and pushes us into more expensive plans. At the same time, it destroys the economic incentive to purchase insurance in the first place and replaces insurance with a free-floating tax on one's very existence.

By all means, let's debate some of that in the Senate.

When you understand what this bill does, you can see why the Democrats would be happy to compromise and drop the public option-for now. This bill so comprehensively wrecks private health insurance that pretty soon a "public option" will seem like the only alternative, and they will already have put into place one of the new taxes needed to pay for it. If the left's goal is to impose socialized medicine in America, this bill does it in the most callous and destructive way possible. It smashes private health care-then leaves us stranded in the rubble, at which point we will be expected to come crawling back to the same people who caused the disaster and ask them to save us.

That is the final and perhaps most compelling reason to kill this bill: the sheer arrogance of the whole enterprise. It is the arrogance of stampeding an unwilling public toward a monstrous 2,000-page piece of legislation while admitting that it still has huge problems, but promising that it will all somehow be fixed later on. It's the arrogance of selling us a bill that expands government spending by hundreds of billions of dollars while telling us that it will reduce the deficit. It is the sheer unmitigated gall of appointing a bureaucrat to run a government-controlled insurance market that takes away all of our health choices-and then calling this bureaucrat the Health Choices Commissioner.

That's the kind of government arrogance that has to be smacked down hard, and that alone is reason to demand that your senator reject this vicious bill in its entirety.

I guess that whole 'constitution' thing was all for naught...

From our dear leader, Nancy Pelosi:

MYTH:"Health insurance reform could be unconstitutional…or violate the 10th amendment."

FACT: As with Medicare and Medicaid, the federal government has the Constitutional power to reform our health care system.

The 10th amendment to the U.S. Constitution states that the powers not delegated to the federal government by the Constitution, nor prohibited by it to the states, are reserved to the states … or to the people. But the Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce. Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the heath care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited. [Emphasis mine]