Open thread October 4, 2016 Dan Crawford | October 4, 2016 8:47 am Tags: open thread Comments (25) | Digg Facebook Twitter |
There’s been something stuck in my craw for awhile and I’d like to spit it out.
Like most people, I believe in taking responsibility for oneself, at least as much as is possible. I pump my own gas, bag my own groceries. I dutifully press “1” or “2” or “O” for a customer service representative that usually isn’t.
Business has trained me to take on more an more of what used to be seen as either their responsibility, or at least a shared one. And I’ve learned to live with not having a friendly fellow ask if my oil needs checking, or who washes my windshield.
But health insurance costs, a part of (so I read) 85% of people’s total compensation, have been increasingly falling on the insured, both in premiums and out of pocket costs. At some point, there must be a limit, but where? Most of us can’t afford to go without coverage, and yet it’s harder to meet ‘our responsibility’ for coverage.
My home owners policy has gone up nearly $200/yr for each of the last two years. (Meanwhile, the average price of real estate in my area has gone up 1% since 2007. Even though premiums are not based on replacement costs, it’s hard to understand the numbers quoted when I know that, if I had to rebuild at those prices, I’d never recoup the money invested if I sold.) I have cut coverage when possible, and now am shopping for a new carrier. Some financial advice columnists suggest we should all ‘shop around’ every few years, to avoid this premium creep.
I’m not looking for advice. And I’m pretty sure I’m not alone in my frustration. But I do wonder home much longer this system is sustainable? If there is slackening of demand from 70% of the population now, what happens when we’re all working for the insurance companies and the pharmaceutical industry?
If you’re feeling like a fish out of water, wait 15 years, self-driving cars the majority on the roads, and probably automated ER triage and routine doctor visits instead of an NP or doctor (a computer takes your verbal description of symptoms, orders tests, analyzes the results, and places a recommendation for medication or treatment that is confirmed by an offsite doctor doing the same job for dozens of sites, like many radio stations are now run (it is not unusual for a radio host to be hosting album oriented or singles oriented stations in multiple markets at the same time now, they swap from one city to the next with local color and weather while the computer runs a queue of commercials and songs on each of their managed stations)).
The system isn’t particularly sustainable though, that’s why people have been arguing for single-payer, to wring out some of the easy targets like massive executive compensation and profit taking at insurers, and to negotiate from a position of strength with providers and drug companies (again hoping to push out some of the profits and compensation there).
In 1999 I was already auditing small companies that were changing healthcare insurers every year and doing anything possible to manage plans because every year they were getting +25% premium increases. Why do they eventually push it on the worker? Because otherwise it comes out of their profits and their stock price tanks and their CEOs don’t get to exercise their stock options that “keep their interests aligned with investors.”
Correction: I meant ‘premiums ARE based on replacement costs.”
J.Goodwin, you are exactly right –
Why do they eventually push it on the worker? Because otherwise it comes out of their profits and their stock price tanks and their CEOs don’t get to exercise their stock options that “keep their interests aligned with investors.”
The money sloshing around in our political system may have already made it irredeemable, with Citizens United being the coup de grâce to our great experiment.
First, Sandi, read this book:
It’s exactly what you’re talking about.
As for costs, it is a reflection of the fact that we do not buy the insurance and control what it covers. If my insurer paid 50% of my car insurance, I would want it to cover inspections, tire rotations, and oil changes. That would, of course, drive up the cost, but if it drives up the cost 25% and my employer pays 50%, it’s all good!
And if the government dictated coverage, it would cover radiator flushing (even if you have an air-cooled car, you would still be forced to buy it) and carburetor cleaning (and even if you have fuel injectors, you would still be forced to buy that coverage).
And so we have employer-sponsored health insurance covering check-ups and birth control. We expect to pay less to take the kids to the doctor than to take them to McDonald’s.
If America had normal, modern economy labor union density, none of this would be happening. Just saying.
about 3 years ago, a 80 foot tall 4 ft diameter sugar maple fell on my house…Allstate’s appaiser offered me ~8500, less 2000 for depreciation, which i accepted while the tree was still sitting on the house (my first claim in 41 years)…a year later, after having the trre removed, the chimney repaired, & the roof repaired, i was out about $17,000…i appealed the settlement and Allstate reopened my case and ended up covering $15,000 of my costs…they then cancelled my policy at the end of that year and i’ve been uninsured since…
You can just say all you want, Denis, but it does not make it so.
The fact is, the IS no such thing as a “normal, modern economy labor union density.” The halcyon days of the post-war era were a fluke brought on by two world wars with a depression in between.
I guess that’s why Western Europe and French Canada have (enjoy) high union density — or the equivalent (heard France has 7.5% unionized workers, but 98% collective bargaining agreements; whatever that’s about). I guess they don’t know WWII is over.
Actually, in post-war (after the way) Europe they came up with centralized bargaining — where everybody doing the same job (e.g., retail clerk) works under one common contract with all firms. The idea right after the war was to keep labor from going on a race to the top — in order to conserve funds for rebuilding. Today (the halcyon days of the post-war era — long since rebuilt) it works to avoid the race-to-the-wage-and-benefit-bottom.
many years ago insurance was handled mostly by your agent who worked for an independent broker or was an independent broker. The broker enlisted clients who stayed with them.. they visited you, they kept in touch with our changing life-style family situation, and provided you with a genuine insurance service.
Most brokers would sign up with a carrier or two or three depending and bring their clients with them… and so the carriers depended on brokers and this force carriers compete with one another since the brokers weren’t captive… the result being that the broker’s client list was the leverage used with the carriers.
Somewhere along the line that changed.. with carriers deciding to move the middle man (independent brokers) out and go to direct to consumer sales via captive agents… exclusive contracts. The carriers had to spend a bundle to do this… i.e. pay the independent brokers more for the exclusive contracts, but it was a clear cut way to increase profits for the long run.
Today the competitive forces that once drove prices down and benefits up are no longer there…. most brokers are just employees of the carriers… who are now also squeezed and they have no leverage since the clients now belong to the carrier. The agents can move around but not with as many clients following them…. virtually none.
So that’s what happened. And here we are, with virtually no differences between carriers…. rates and benefits are within pennies on the dollar. The only thing I’ve been able to do is threaten to take all my insurance to another carrier… and to make the threat real, I have to go the trouble of getting another carrier to give me a contract quote on my policies.. which I tell them up front I’ll use if my current carrier raises rates. Since they both want my business, my present carrier always cuts back the rate increases .. they have more latitude than you think.
But I carry 4 automobiles and two houses, including earthquake with one carrier. Life insurance is whole life that I bought a zillion years ago when our first child was born.. and it’s now cost me nothing… i.e. the total I paid into it less that what my account value is and in fact the account value, after I subtract all prior premiums , is still huge so use it to either pay the premiums or pretty soon I’ll just withdraw it all and let the policy lapse. At some point in life you really don’t need any life insurance… if you’re lucky.
My auto insurance broker flat out told me that if [major direct insurance seller in my region] would offer coverage, then just take it because their rate would be lower than anything they could provide.
They can do a great job helping you keep increases down by shopping your around every year, but at some point there is only so much they can do once one of the profit layers is stripped out of the equation.
It’s the common problem for all sorts of people who used to provide services (like travel agents). Going vertical reduces certain sorts of incremental costs, or at least provides the ability to convert those costs into profits while keeping prices stable. The current tax regime also really reinforces those tendencies for multinationals whose “tax home” is the US, as it was intended to do, but probably not to the point it has reached (companies borrowing billions of dollars to buy their own stock back). Unintended consequences abound. The travel agents that are still successful are the ones who have also gone semi-vertical, chartering weekly direct flights and cutting deals with resorts. Some agencies have even become airlines themselves (one of the Iceland based carriers was the largest Iceland travel agency before that).
i rather doubt you can blame the government for all of this. though i tend to think you can blame it for not enforcing price controls.
to take your two examples… i would be very surprised if the cost of routine exams and even birth control is a significant part of the premium, but if you were the government and you looked at the cost-benefit of routine exams (saves money in the long run by finding and treating problems before they become really really expensive) and birth control (cheaper than paying welfare for unwanted children)… you might feel that you were saving the taxpayer money by paying for “oil changes and tire rotations.”
that said, for the benefit of anyone who cares: i think medical costs are way too high, and the reasons are first, the”pay or die” provider-customer price equation, the existence of insurance unregulated by government (the only entity with the power and knowledge to do so) which encourages people to accept overtreatment on the one hand, and then forces them to pay higher premiums to have any chance at all to pay the higher costs, and the failure of the american democracy to provide any means for the people to force their government to control coats (i know that medicare routinely cuts what a doctor charges by about half, which is good, but ignores the over-treatment and largely bogus charges where the doctors more than make up for the money medicare does not pay… and leaves the customer withtout about the same after-medicare bill as they had ten years ago before medicare.
not sure this would all hold up to careful analysis, but i guess that’s a good reason to put it out there.
that should have been “with” not “without”
thank you for reassuring me that i was not the only one to feel this way.
the cause is that there is no competition and no government regulation and the country has fallen into a predatory business model. i don’t think it can last… if you are paying all of your money to insurance companies, and having your home stolen by the banks, you won’t be able to afford to buy what other businesses would like to sell.
but america won’t be the first country that died from greed.
i’d like to think that a group of honest people could start an insurance company- cooperative that would give people an honest deal and grow strong enough to leverage costs. but that’s way beyond my business expertise, and seemingly beyond the ability of ordinary people to cooperate and monitor their own cooperative to keep it from becoming just another predator.
another thought on using auto insurance to pay for oil changes:
if you did, your premium would rise about a hundred dollars per year (the cost of two oil changes). instead of directly paying the garage you would pay the insurance company but your yearly costs would not change. so it’s only a question of what’s the most convenient way to pay.
but, if you we bought cars that were designed to last 80 years… as long as you changed the oil twice a year… and engine overhauls (if you didn’t change the oil) cost a hundred thousand dollars… you might want to include the cost of engine overhauls in your insurance, and the insurance companies might want to include the cost of oil changes and require you to change the oil twice a year to keep your insurance.
you see, your analogy fails once you take even a slightly deeper look at what the actual real-world facts are (no, we don’t have lifetime-cars… but then health insurance has different facts to contend with than auto insurance). so beware of superficial analogies.
and try to keep in mind that i am paying for your health insurance because your unhealthy habits will result in much higher medical bills than my healthy habits. since i have not been able to find an insurance company willing to make a significant cut in rates in recognition of my better behavior, nor an automobile insurance company that makes a significant ut in rates in recognition of my superior record and very low exposure to accidents… i have to resign myself to all of the injustices of sharing a world with those with bad habits. on the other hand i am willing to bet that government regulated insurance… given honest government, which we have not got… would be significantl cheaper than private — what the traffic will bear — insurance.
it’s a matter of convenience: some things are more efficiently handled by government. ayn rand was wrong.
When I winnow all this down, a few kernels stand out.
Before health insurance became widespread, our family doc was a one man office, and his wife was his nurse and office manager. Now doctors have whole staffs devoted to handling the insurance paperwork. And costs to us go up. Same thing happened with dental insurance.
Before “shareholder value” became the be-all and end-all and the financialization and commoditization (is that a word?) took over our lives, companies actually cared about providing a product or service at a reasonable profit, and their share prices, if publicly traded, often didn’t move much for months or years.
Warren may be right about the years after WWII being a golden age in the US; I’ve thought the same, but for different reasons. The focus on share price, with the resulting demand for higher profits quarter to quarter, lead to cost cutting at all costs. We hit the slippery slope that has been a race to the bottom ever since.
I wouldn’t mind as much seeing my premiums go up every year, if it weren’t for the CEO’s and top tier execs, and dividend payouts, also going up year over year, often totally decoupled from any increase in service provided. TTying CEO compensation to increased profits, paid via stock options, has come back to bite us all on the tush.
One thing Trump’s tax returns may, hopefully, do, is begin a conversation on how out of whack both the tax code and the compensation schemes for top management have become. I’m not holding my breath……………..
Hey Longttooth: If you withdraw your basis from a life policy and the policy eventually lapses, you’re going to get a 1099 for any gain the policy had. Poor strategy.
Independent agents are alive and well. Go find one.
when i offered the same thought about Trumps tax return I was told.. by lefties… that i was “off topic.”
and i think… can’t prove… that the last time i had my skin treated to remove “pre cancerous” lesions, the bottle of liquid nitrogen used had been out of the freezer too long. save money for them, you know.
i don’t think that sort of thing would happen with a doctor who expected to see you again.
as for the “golden age”, warren forgot to add it was the age of “the liberal consensus.” i think WW2 and the depression had convinced enough people that they didn’t want that sort of thing. it only took about 40 years for them to forget… or discover they had lost the power to keep government out of the hands of the predators.
meanwhile the people… if they had the power… have been safely neutered by turning them against each other.
little john, I know that. Whether I let it lapse or not depends on my outlook for remaining alive. e.g. use the balance (after tax) while I’m alive or let my wife use the proceeds of the insurance after I’m dead.
The reason for the whole life policy n the first place was to cover several years of income for my wife and kids while they were dependents, and pay off the mortgage and any sundry other indebtedness should I meet my demise prematurely.. i.e. hedge the risk.
Now that my kids have long since been on their own, and successful, and both mortgages have long since been paid in full, with rental income from one of them, my pension benefits and 401k’s & other long term safe investments transferring to my wife if I should now kick the bucket, the life insurance policies reason d’etre has long since ceased.
So it’s about whether we can enjoy life more while we still have it and can or let somebody else enjoy the proceeds from my endeavors while I lived, but after I don’t.. I’m still debating this with myself.
I don’t begrudge the fed and state getting the taxes due if I should decide to let the policy lapse. I’m not a poor man, and certainly far from being rich.. but just comfortable. If after my wife and I both pass there’s something left over for the kiddies and grand-kiddies then so much the better for them.
I feel on obligation to improve the already high spending life-styles of my kids by passing them an inheritance… and there will be some no matter what my wife and I decide to do so whatever it ends up being for them is just dandy.. call it their good luck. Of all those in my extended family (and it’s large) who are in my generation, none of us received a penny of inheritance . maybe my younger brother got what was left over in my Dads bank account.. like in the sub $10k range… and I’m not even sure of that… it was my Dad’s business of what he had in savings and how it was to be disposed of .. not mine. I just made sure he (& my mom) were not wanting for anything, living a good life in their elder years. and my brother was not able to help in that regard without jeopardizing his own family’s well being and kids futures. If he got some inheritance I’m glad for him..
My simple point is that an inheritance isn’t a birth right. If your kids are struggling despite doing “all the right things”, then it’s a familial relationships thing to help them along more if you can. But if they’re not, then there’s no good reason to leave them an inheritance when there are far more people in our own nation and others in much greater need and who can benefit far more.
I always wondered how many people and families I’d give a several million dollar lottery win to if that occurred… and since I don’t buy lottery tickets it’s just a thought process. And what it comes down to is who needs the most to improve their and their children’s lives and futures. who needs a bit more luck in their lives.
Incorrect, Coberly. The insurance company would have to track all those oil changes, to be sure that I was not getting them too often. That would require more employees and all the attendant costs. Add at least another 10%.
the work you go to to say something inconsequential is truly amazing.
that is pretty good southsider-White Sox-fan.
Just a bit more on insurance companies………..this came over my virtual transom from a friend this a.m.
…….Earning a fatter paycheck may make more of a difference, according to new research by the Consumer Federation of America, a consumer advocacy organization.
The group requested insurance quotes in 10 major cities for two hypothetical drivers. One person had a higher-paying job but had either caused a bad accident or been in trouble for driving under the influence. The other profile had a more moderate financial situation and a clean driving record. In 20 out of the 38 cases where the researchers received quotes for both drivers, the higher-income driver with the troubled driving record was charged less for car insurance than the moderate-income driver with the better driving history……..
“Now doctors have whole staffs devoted to handling the insurance paperwork.”
And you know this how?
Today I will see my orthopedist. He will do the exam and make notes and entries on his lap top. The result will be a bill which is sent to the insurance company before I get into my car.
There are seven doctors in this practice. They have two billing clerks, who also serve as receptionists part time.
Meanwhile, across town I have a dentist who is simply great. But his practice is stuck in the past, with a couple of people(including his wife) doing billing that suffer through the insurance inanity because he refuses to update his billing system. The result is simply a mess(his own words).
I think you need to update to the 21st century.
I’ll admit my statement was perhaps overly broad, but I ” know this how” because I’ve seen it in the small town practices where I live. Now I am in the UNC Health Care System and you’re right – in this large, teaching hospital setting, everything is entered into the system in real time, and I assume that it is filed, as you say, electronically to the insurers.
Small towns like mine, in largely rural areas, are becoming desperate for general practitioners. They no longer even dream of specialists – those are referred to regional centers, much like UNC. We are lucky in this part of NC to have Wake Forest, UNC System, Duke and Wake Med all within about 100 miles. But the counties in the far west of the state, or in the northeastern corner, have no such advantages.
Also, the rural parts of this state are woefully behind on building a high speed internet backbone. The big carriers, who have the monopoly, aren’t interested in doing it, and the legislature has quashed attempts of municipalities to develop their own.
i am not sure i even understand your comment. but in the last few years i have found it impossible to even find a doctor who does not have a front office structured more like a bank than what i used to think of as a doctor’s office. meanwhile prices have gone up four to ten-fold for routine visits. now maybe different people have different experiences, but mine at least suggests that medical care has become corporatized and the emphasis is on the bottom line… how much we can squeeze out of the client… rather than on simple medical care. i imagine doctors… or their financial advisors… attend seminars on how to extract the most from Medicare.